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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
February 2, 1999
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(Date of Report--Date of Earliest Event Reported)
D.R. Horton, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-14112 75-2386963
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1901 Ascension Boulevard, Suite 100, Arlington, Texas 76006
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(Address of Principal Executive Offices)
(817) 856-8200
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
Exhibit 1.1 hereto is the Underwriting Agreement, dated as of February
1, 1999 among D.R. Horton , Inc., the Guarantors named therein, Donaldson,
Lufkin & Jenrette Securities Corporation, Salomon Smith Barney Inc. and BT
Alex. Brown Incorporated.
Exhibit 4.1 hereto is the Sixth Supplemental Indenture, dated as of
February 4, 1999, to be executed by D.R. Horton, Inc., the Guarantors named
therein and American Stock Transfer and Trust Company, as Trustee, relating to
the 8% Senior Notes due in 2009 of D.R. Horton, Inc.
Exhibit 12.1 hereto is the statement of computation of ratios of
earnings to fixed charges.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
Exhibits
1.1 Underwriting Agreement, dated as of February 1, 1999, among D.R. Horton,
Inc., the Guarantors named therein, Donaldson, Lufkin & Jenrette
Securities Corporation, Salomon Smith Barney Inc. and BT Alex. Brown
Incorporated.
4.1 Sixth Supplemental Indenture, dated as of February 4, 1999, to be
executed by D.R. Horton, Inc., the Guarantors named therein and American
Stock Transfer and Trust Company, as Trustee, relating to the 8% Senior
Notes due 2009 of D.R. Horton, Inc.
12.1 Statement of computation of ratios of earnings to fixed charges.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 2, 1999
D.R. Horton, Inc.
Registrant
By: /s/ David T. Keller
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David T. Keller
Executive Vice President and
Chief Financial Officer
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EXHIBIT 1.1
$385,000,000
D.R. HORTON, INC.
8% Senior Notes due 2009
UNDERWRITING AGREEMENT
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February 1, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON SMITH BARNEY INC.
BT ALEX. BROWN INCORPORATED
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
D.R. Horton, Inc., a Delaware corporation (the "Company"), proposes to
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issue and sell $385,000,000 aggregate principal amount of its 8% Senior Notes
due 2009 (the "Notes") to Donaldson, Lufkin & Jenrette Securities Corporation,
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Salomon Smith Barney Inc. and BT Alex. Brown Incorporated (collectively, the
"Underwriters"). The Notes are to be issued pursuant to the provisions of an
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Indenture dated as of June 9, 1997, as supplemented the ("Indenture"), among the
Company, the subsidiaries of the Company listed on the signature pages hereof
(the "Guarantors") and the American Stock Transfer and Trust Company, as Trustee
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(the "Trustee"). The Company's obligations under the Indenture and the Notes
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will be unconditionally guaranteed (the "Guarantees"), jointly and severally, by
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each of the Guarantors. The Company and the Guarantors are collectively
referred to herein as the "Issuers" and the Notes and the Guarantees are
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collectively referred to herein as the "Securities."
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1. Registration Statement and Prospectus. The Company has prepared
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and filed with the Securities and Exchange Commission (the "Commission") in
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accordance with the provisions of the Securities Act of 1933, as amended, and
the published rules and regulations of the Commission thereunder (collectively,
the "Act"), a registration statement on Form S-3
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(No 333-57193), including a base prospectus relating to the Securities. The
registration statement as amended at the time it became effective on July 1,
1998, including information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the Act, is
hereinafter referred to as the "Registration Statement"; and the base prospectus
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dated July 1, 1998 (the "Base Prospectus"), as supplemented by the prospectus
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supplement relating to the Securities in the form first used to confirm sales of
Notes (the "Prospectus Supplement"), is hereinafter referred to as the
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"Prospectus." Any reference herein to the Registration Statement, a preliminary
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prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Act, as of the effective date of the Registration Statement or the
date of such preliminary prospectus or the Prospectus (the "Incorporated
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Documents"), and, except as otherwise indicated, when reference is made to
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information "in" (including by use of the terms "set forth in," "described in"
and similar terms) the Prospectus or the Registration Statement, such reference
shall be deemed to include information incorporated by reference in the
Prospectus or the Registration Statement, as the case may be.
2. Agreements To Sell and Purchase. The Company agrees to issue and
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sell, and, on the basis of the representations and warranties contained in this
Underwriting Agreement (the "Agreement") and subject to its terms and
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conditions, each Underwriter, severally and not jointly, agrees to purchase from
the Company, the principal amount of Notes set forth after such Underwriter's
name on Schedule A hereto, at 97.957% of the principal amount thereof (the
"Purchase Price").
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3. Terms of Public Offering. The Company is advised by you that the
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Underwriters propose (i) to make a public offering of their respective portions
of the Securities as soon after the execution and delivery of this Agreement as
in your judgment is advisable and (ii) initially to offer the Securities upon
the terms set forth in the Prospectus Supplement.
4. Delivery and Payment. Delivery to the Underwriters of and
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payment for the Notes shall be made at 10:00 A.M., New York City time, on
February 4, 1999 (the "Closing Date"), at such place as you shall designate. The
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Closing Date and the location of delivery of and the form of payment for the
Notes may be varied by agreement between you and the Company.
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Certificates for the Notes shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date. Such certificates shall be made
available to you for inspection not later than 9:30 A.M., New York City time, on
the business day next preceding the Closing Date. Certificates in definitive
form evidencing the Notes shall be delivered to you on the Closing Date with any
transfer taxes thereon duly paid by the Company, for the account of the
Underwriters, against payment of the Purchase Price therefor by wire or
certified or official bank checks payable in Federal funds to the order of the
Company. If the Notes will be issued in book-entry form, the Company shall
deposit the global certificate(s) representing the Notes with the Depository
Trust Company ("DTC"), or its designated custodian, at the Closing Date, and the
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Company will deliver such global certificate(s) to the Underwriters by causing
DTC to credit the Notes to the account of the Underwriters at DTC against
payment therefor as set forth above.
5. Agreements of the Issuers. The Issuers, jointly and severally,
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agree with the Underwriters as follows:
(a) The Issuers will, if necessary or required by law, file an
amendment to the Registration Statement or, if necessary pursuant to Rule
430A under the Act, a post-effective amendment to the Registration
Statement, as soon as practicable after the execution and delivery of this
Agreement, and will use their best efforts to cause the Registration
Statement or such post-effective amendment to become effective at the
earliest possible time. The Company will comply fully and in a timely
manner with the applicable provisions of Rule 424 and Rule 430A under the
Act.
(b) The Issuers will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of the effectiveness of any
amendment to the Registration Statement; (ii) of the transmission to the
Commission for filing of any supplement to the Prospectus (including any
document that would as a result of such filing become an Incorporated
Document) and to furnish you with copies thereof; (iii) of the receipt of
any comments from the Commission that relate to the Registration Statement
or of any request by the Commission for amendment of or a supplement to the
Registration Statement or the Prospectus or for additional information;
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness
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of the Registration Statement or any order preventing or suspending the use
of the Prospectus or of the suspension of qualification of the Securities
for offering or sale in any jurisdiction or the initiation or the
threatening of any proceeding for such purpose; and (v) within the period
of time referred to in paragraph (e) below, of any change in the Company's
condition (financial or other), business, prospects, properties, net worth
or results of operations, or of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the
making of any additions to or changes in the Registration Statement or the
Prospectus (as then amended or supplemented) in order to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with
the Act or any other law. If at any time any stop order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Prospectus or suspending any such qualification
shall be issued, the Issuers will promptly use their best efforts to obtain
the withdrawal of such order at the earliest possible time.
(c) The Issuers will furnish to you, without charge, (i) five copies
of the registration statement as originally filed with the Commission and
of each amendment thereto, including all exhibits thereto, (ii) the
Prospectus and any amendment or supplement thereto, (iii) such number of
copies of the registration statement as originally filed and of each
amendment thereto, but without exhibits, as you may request, (iv) such
number of copies of the Incorporated Documents, without exhibits, as you
may request, and (v) five copies of the exhibits to the Incorporated
Documents.
(d) The Issuers will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus or, prior
to the end of the period of time referred to in paragraph (e) below, file
any document which, upon filing becomes an Incorporated Document, of which
you shall not previously have been advised or to which, after you shall
have received a copy of the document proposed to be filed, you shall
reasonably object.
(e) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for
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such period as in the opinion of counsel for the Underwriters a prospectus
is required by the Act to be delivered in connection with sales by the
Underwriters or any dealer, the Issuers will expeditiously deliver to the
Underwriters and each dealer, without charge, as many copies of the
Prospectus (and of any amendment or supplement thereto) as you may
reasonably request. The Issuers consent to the use of the Prospectus (and
of any amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Securities are offered by the Underwriters and by all dealers to
whom Securities may be sold, both in connection with the offering and sale
of the Securities and for such period of time thereafter as the Prospectus
is required by the Act to be delivered in connection with sales by the
Underwriters or any dealer.
(f) If during the period of time referred to in paragraph (e) above
any event shall occur as a result of which, in the judgment of the Issuers
or in the opinion of counsel for the Underwriters, it becomes necessary to
amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement the
Prospectus to comply with the Act or any other law, the Issuers will
forthwith prepare and, subject to the provisions of paragraph (d) above,
file with the Commission an appropriate amendment or supplement to the
Prospectus so that the statements in the Prospectus, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law,
and to furnish to the Underwriters and to such dealers as you shall specify
such number of copies thereof as the Underwriters or such dealers may
reasonably request. In the event that the Issuers and you agree that the
Prospectus should be amended or supplemented, the Issuers, if requested by
you, will promptly issue a press release announcing or disclosing the
matters to be covered by the proposed amendment or supplement.
(g) The Issuers will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the
Securities for offering and sale by the Underwriters and by dealers under
the securities or Blue Sky laws of such jurisdictions as you may designate
and will file such consents to service of process or other documents
necessary or appropriate in order
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to effect such registration or qualification; provided, however, that in no
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event shall any Issuer be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which
would subject it to service of process in suits, other than those arising
out of the offering or sale of the Securities, in any jurisdiction where it
is not now so subject.
(h) The Issuers will make generally available to its security
holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing after the date the Registration
Statement is declared effective by the Commission (the "Effective
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Date") and ending not later than 15 months thereafter, as soon as
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practicable after the end of such period, which consolidated earnings
statement shall satisfy the provisions of Section 11(a) of the Act and Rule
158 thereunder, and to advise you in writing when such statement has been
made available.
(i) During the period of five years hereafter, the Issuers will
furnish to you as soon as available, a copy of all public materials
furnished by the Company to its stockholders and all public reports and
financial statements furnished by the Company to the principal national
securities exchange upon which the Common Stock may be listed pursuant to
requirements of or agreements with such exchange or to the Commission.
(j) The Company will apply the net proceeds from the sale of the
Notes in accordance with the description set forth in the Prospectus under
the caption "Use of Proceeds."
(k) Neither the Company nor any of its subsidiaries has taken, or
will take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation
of the price of the Notes to facilitate the sale or resale of the Notes.
(l) The Issuers will pay all costs, expenses, fees and taxes
incident to (i) the preparation, printing, filing and distribution under
the Act of the Registration Statement (including financial statements and
exhibits), and all amendments and supplements thereto prior to or during
the period specified in paragraph (e) above, (ii) the printing and delivery
of the Prospectus and all
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amendments or supplements thereto during the period specified in paragraph
(e) above, (iii) the printing and delivery of this Agreement, the
Preliminary and Supplemental Blue Sky Memoranda and all other agreements,
memoranda, correspondence and other documents printed and delivered in
connection with the offering of the Securities (including in each case any
disbursements of counsel for the Underwriters relating to such printing and
delivery), (iv) the registration or qualification of the Securities for
offer and sale under the securities or Blue Sky laws of the several states
(including in each case the reasonable fees and disbursements of counsel
for the Underwriters relating to such registration or qualification and
memoranda relating thereto), (v) filings and clearance with the National
Association of Securities Dealers, Inc. in connection with the offering,
(vi) the listing, if any, of the Securities on any national securities
exchange, and (vii) furnishing such copies of the Registration Statement,
the Prospectus and all amendments and supplements thereto as may be
requested for use in connection with the offering or sale of the Securities
by the Underwriters or by dealers to whom Securities may be sold.
(m) The Issuers will not during the period beginning on the date
hereof and continuing to and including the Closing Date, offer, sell,
contract to sell or otherwise dispose of any debt securities of the Company
or any warrants, options or other rights to purchase or acquire debt
securities of the Company or any securities convertible into or
exchangeable for debt securities of the Company (other than (i) the
Securities and (ii) commercial paper issued in the ordinary course of
business), without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation.
(n) The Issuers will use their best efforts to do and perform all
things required or necessary to be done and performed under this Agreement
by the Issuers prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Notes.
6. Representations and Warranties of the Issuers. The Issuers,
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jointly and severally, represent and warrant to the Underwriters that:
(a) Each preliminary prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement
thereto, or filed pursuant
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to Rule 424 under the Act, complied when so filed in all material respects
with the provisions of the Act. The Commission has not issued any order
preventing or suspending the use of any preliminary prospectus.
(b) The Registration statement has become effective and at the date
of the Prospectus (if different), including at the date of any post-
effective amendment or supplement, the Registration Statement will comply
in all material respects with the provisions of the Act, and will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; the Prospectus (and any supplements or
amendments thereto) will at all such times comply in all material respects
with the provisions of the Act and will not at any such time contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
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however, that no representation or warranty is made as to information
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contained in or omitted from the Registration Statement or the Prospectus
in reliance upon and in conformity with written information furnished to
the Issuers with respect to the Underwriters specifically for inclusion
therein.
(c) The Incorporated Documents, at the time they were filed with the
Commission or, to the extent such documents were subsequently amended prior
to the date hereof, at the time so amended, complied in all material
respects with the requirements of the Act or the Securities Exchange Act of
1934, as amended, and the published rules and regulations of the Commission
thereunder (collectively, the "Exchange Act"), as applicable, and such
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documents do not on the date hereof and will not on the Closing Date
contain an untrue statement of a material fact and do not on the date
hereof and will not on the Closing Date omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(d) The financial statements (including the related notes and
supporting schedules) in the Registration Statement or the Prospectus
present fairly the consolidated financial position and results of
operations of the entities purported to be shown thereby, at the dates and
for the
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periods indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
(e) Each of Ernst & Young, LLP and Arthur Andersen LLP who have
reported on the financial statements of the Company, are independent public
accountants with respect to the Company and its subsidiaries as required by
the Act.
(f) The material assumptions used in the preparation of the pro
forma financial statements and other pro forma information in the
Prospectus are set forth therein and were reasonable when made, and the
adjustments used therein are appropriate to give pro forma effect to the
transactions or circumstances referred to therein.
(g) The Company and each of its subsidiaries have been duly formed
and are validly existing in good standing under the laws of their
respective jurisdictions of organization, are duly qualified to do business
and are in good standing in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification except where the failure to so
qualify, singly or in the aggregate, would not have a material adverse
effect on the financial condition, results of operations, business or
prospects of the Company and its subsidiaries taken as a whole (a "Material
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Adverse Effect"), and have all power and authority necessary to own or hold
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their respective properties and to conduct the businesses in which they are
engaged.
(h) The Company has an authorized capitalization as set forth in the
Prospectus; and all of the issued equity interests of each subsidiary of
the Company have been duly authorized and validly issued and, as to shares
of capital stock of any corporation constituting a subsidiary, are fully
paid and non-assessable and (except for directors' qualifying shares) are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims other than restrictions on transfer
imposed by applicable securities laws.
(i) The execution, delivery and performance of this Agreement, the
Indenture and the Securities by the issuers, compliance by the Issuers of
all the provisions hereof and thereof and the consummation of the transac-
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tions contemplated hereby will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such actions result in any violation
of the provisions of the organizational documents of the Company or any of
its subsidiaries or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their property or assets; and except
for such consents, approvals, authorizations, registrations or
qualifications as may be required under the Act or applicable state or
foreign securities laws in connection with the purchase and distribution of
the Securities by the Underwriters, no consent, approval, authorization or
order of, or filing or registration with, any such court or governmental
agency or body is required for the execution, delivery and performance of
this Agreement, the Indenture and the Securities by the Issuers, compliance
by the Issuers of all the provisions hereof and thereof and the
consummation of the transactions contemplated hereby.
(j) This Agreement has been duly authorized, executed and delivered
by the Issuers and is a valid and binding agreement of the Issuers
enforceable in accordance with its terms (except as rights to indemnity and
contribution hereunder may be limited by applicable law).
(k) The Indenture has been duly qualified under the Trust Indenture
Act of 1939, as amended (the "TIA"), and has been duly authorized, executed
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and delivered by the Issuers and is a valid and binding agreement of the
Issuers, enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability.
(l) The Notes have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to the Underwriters against payment therefor as provided by this
Agreement,
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will be entitled to the benefits of the Indenture, and will be valid and
binding obligations of the Company, enforceable in accordance with their
terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(m) The Guarantees have been duly authorized and, upon endorsement
on the Notes by the Guarantors, execution and authentication of the Notes
in accordance with the provisions of the Indenture and delivery of the
Notes to the Underwriters against payment therefor as provided by this
Agreement, will be entitled to the benefits of the Indenture, and will be
valid and binding obligations of the Guarantors, enforceable in accordance
with their terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(n) The Securities and the Indenture conform to the description
thereof in the Prospectus.
(o) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements in the
Prospectus, any loss or interference with the business of the Company and
its subsidiaries taken as a whole from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, resulting in a Material Adverse Effect;
and, since such date, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Prospectus.
(p) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a regis-
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tration statement under the Act with respect to any securities of the
Company owned or to be owned by such person or to require the Company to
include such securities in the securities registered pursuant to the
Registration Statement or in any securities being registered pursuant to
any other registration statement filed by the Company under the Act.
(q) The Company and its subsidiaries own the items of real property
and personal property purported to be owned by them which are material to
the conduct of the business of the Company and its subsidiaries taken as a
whole, free and clear of all liens, encumbrances and defects, except such
as are described in the Prospectus or such as would not have a Material
Adverse Effect. All real property held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases, with such exceptions as are described in the Prospectus or such as
would not have a Material Adverse Effect.
(r) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the Company
or any of its subsidiaries is the subject which are reasonably likely to
have a Material Adverse Effect; and to the Issuers' knowledge, no such
proceedings are threatened by governmental authorities or by others.
(s) The conditions for use of Form S-3, as set forth in the General
Instructions thereto, have been satisfied.
(t) To the Issuers' knowledge, all real property owned (either
presently or at any time in the past) or presently leased by the Company
and its subsidiaries in connection with the operation of their business,
including, without limitation, any subsurface soils and ground water
(collectively, the "Realty"), is free of contamination from any substance
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or material presently known to be toxic or hazardous, including, without
limitation, any radioactive substance, methane, volatile hydrocarbons or
industrial solvents (each, a "Hazardous Substance"), which could reasonably
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be expected to materially impair the beneficial use thereof by the Company
and its subsidiaries or constitute or cause a significant health, safety or
other environmental hazard to occupants or users (except for contaminations
which would not have a Material Adverse
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Effect); and to the Issuers' knowledge, the Realty does not contain any
underground storage or treatment tanks, active or abandoned water, gas or
oil wells, or any other underground improvements or structures, other than
the foundations, footings or other supports for the improvements located
thereon, the presence of which would have a Material Adverse Effect.
Notwithstanding the foregoing, Hazardous Substances shall be deemed not to
include any supplies or substances maintained, used, stored or held on the
Realty which are (i) naturally occurring, (ii) installed by public
utilities or (iii) used in the ordinary course of the Company's or its
subsidiaries' business, provided that such supplies or substances are
stored, used, maintained and held in all material respects in accordance
with any applicable governmental requirements and with restrictions,
conditions and standards suggested by the manufacturer and the Company's
insurance carriers.
(u) The Company and its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses.
(v) The Company and its subsidiaries own or possess adequate rights
to use all material patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service mark registrations,
copyrights and licenses necessary for the conduct of their respective
businesses the absence of which would have a Material Adverse Effect and
have no reason to believe that the conduct of their respective businesses
will conflict with, and have not received any notice of any claim of
conflict with, any such rights of others.
(w) There are no contracts or other documents which are required to
be described in the Prospectus or filed as exhibits to the Registration
Statement by the Act which have not been described in the Prospectus or
filed as exhibits to the Registration Statement or incorporated therein by
reference as permitted by the Act.
(x) No labor disturbance by the employees of the Company or any of
its subsidiaries exists or, to the Issuers' knowledge, is imminent which
could reasonably be expected to have a Material Adverse Effect.
(y) The Company and its subsidiaries have filed all federal, state
and local income and franchise tax returns
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required to be filed through the date hereof and has paid all taxes due
thereon, and no tax deficiency has been determined adversely to the Company
or any of its subsidiaries which has had (nor does any Issuer have any
knowledge of any tax deficiency which would reasonably likely have) a
Material Adverse Effect.
(z) Since the date as of which information is given in the
Prospectus, and except as may otherwise be disclosed in the Prospectus,
neither the Company nor any of its subsidiaries has (i) entered into any
material transaction not in the ordinary course of business or (ii) except
for the dividend of $.03 per share declared in January 1999, declared or
paid any dividend on its capital stock from the date of the Prospectus,
neither the Company nor any of its subsidiaries has incurred any material
liability other than in the ordinary course of business.
(aa) The Company is in full compliance with Section 13(b)(2) of the
Exchange Act.
(bb) Neither the Company nor any of its subsidiaries (i) is in
violation of its organizational documents, (ii) is in default in any
material respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which it is a party or by which it is bound or to which any
of its properties or assets is subject as a result of which default there
would be a Material Adverse Effect or (iii) is in violation of any law,
ordinance, governmental rule, regulation or court decree to which it or its
property or assets may be subject or has failed to obtain any license,
permit, certificate, franchise or other governmental authorization or
permit necessary to the ownership of its property or to the conduct of its
business which violation or failure would have a Material Adverse Effect.
(cc) Neither the Company nor any of its subsidiaries is an
"investment company" or an entity "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, and
the rules and regulations of the Commission thereunder.
7. Indemnification. (a) The Issuers, jointly and severally, agree
---------------
to indemnify and hold harmless the Underwrit-
<PAGE>
-15-
ers and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to the Underwriters furnished in writing to the Issuers by or on behalf of the
Underwriters expressly for use therein; provided, however, that the foregoing
-------- -------
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter or any person controlling such Underwriter
asserted by a person with respect to any such losses, claims, damages and
liabilities and judgments, if a copy of the Prospectus (as then amended or
supplemented if the Issuers shall have furnished such amendment or supplement
thereto in the requisite quantity on a timely basis to permit such sending or
giving) was not sent or given by or on behalf of the Underwriters to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of Notes to such person, and if the Prospectus (as so
amended and supplemented) would have cured the defect giving rise to such loss,
claim, damage, liability or judgment. Notwithstanding anything to the contrary
herein, the Underwriters shall not be obligated to send or give any Incorporated
Document, or any amendment or supplement thereto, to any person in order to
benefit from the indemnity provisions herein or otherwise. The foregoing
indemnity agreement shall be in addition to any liability that the Issuers may
otherwise have.
(b) In case any action shall be brought against any Underwriter or any
person controlling any Underwriter, based upon any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto
and with respect to which indemnity may be sought against the Issuers, such
Underwriter shall promptly notify the Issuers in writing and the Issuers shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses. The
Underwriters or any such controlling person shall have the right to employ
separate counsel in any such action and participate in
<PAGE>
-16-
the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Underwriter or such controlling person unless (i) the
employment of such counsel shall have been specifically authorized in
writing by the Issuers, (ii) the Issuers shall have failed to assume the
defense and employ counsel or (iii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the Issuers and such Underwriter or such controlling
person shall have been advised by such counsel that there may be one or
more legal defenses available to it which are different from or additional
to those available to the Issuers (in which case the Issuers shall not have
the right to assume the defense of such action on behalf of such
Underwriter or such controlling person, it being understood, however, that
the Issuers shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for the Underwriters and all such
controlling persons, which firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation and that all such fees
and expenses shall be reimbursed as they are incurred). The Issuers shall
not be liable for any settlement of any such action effected without the
Company's written consent but if settled with the written consent of the
Company, the Issuers agree to indemnify and hold harmless the Underwriters
and any such controlling person from and against any loss or liability by
reason of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Issuers, their directors, their officers who sign the
Registration Statement and any person controlling the Issuers within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Issuers to the Underwriters
but only with reference to information relating to such Underwriter
furnished in writing by or on behalf of the Underwriter expressly for use
in the Registration Statement, the Prospectus or any preliminary
prospectus. In case any ac-
<PAGE>
-17-
tion shall be brought against the Issuers, any of its directors, any such
officer or any person controlling the Issuers based on the Registration
Statement, the Prospectus or any preliminary prospectus and in respect of which
indemnity may be sought against the Underwriters, the Underwriters shall have
the rights and duties given to the Issuers (except that if the Issuers shall
have assumed the defense thereof, the Underwriters shall not be required to do
so, but may employ separate counsel therein and participate in the defense
thereof but the fees and expenses of such counsel shall be at the expense of the
Underwriters), and the Issuers, their directors, any such officers and any
person controlling the Issuers shall have the rights and duties given to the
Underwriters, by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Issuers on the one hand and the
Underwriters on the other hand from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuers and
the Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the Issuers
and the Underwriters shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) received by the
Company, and the compensation received by the Underwriters (based on discount to
investors on resale), bear to the sum of such total net proceeds and such
compensation. The relative fault of the Issuers and the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Issuers or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Issuers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Sec-
<PAGE>
-18-
tion 7(d) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
judgments referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, the Underwriters shall not be required to contribute any amount in
excess of the amount by which the total price at which the Notes underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The Underwriters confirm and the Issuers acknowledge that the
statements with respect to the public offering of the Securities by the
Underwriters set forth in the third paragraph of the section entitled
"Underwriting" in the Prospectus Supplement are correct and constitute the only
information concerning such Underwriter furnished in writing to the Issuers by
or on behalf of the Underwriters specifically for inclusion in the Registration
Statement and the Prospectus.
8. Conditions of Underwriters' Obligation. The obligation of the
--------------------------------------
Underwriters to purchase the Securities under this Agreement is subject to the
satisfaction of each of the following conditions:
(a) All the representations and warranties of the Issuers contained
in this Agreement shall be true and correct on the Closing Date with the
same force and effect as if made on and as of the Closing Date. The Issuers
shall have performed or complied with all of their agreements herein
contained and required to be performed or complied with by them at or prior
to the Closing Date.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or threatened
by the Commis-
<PAGE>
-19-
sion, (ii) every request for additional information on the part of the
Commission shall have been complied with in all material respects, and
(iii) no stop order suspending the sale of the Securities in any
jurisdiction referred to in Section 6(g) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending
or threatened which would, in your reasonable judgment, make it
impracticable or inadvisable to market the Securities or to enforce
contracts for the sale of the Securities.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have been any downgrading, nor
shall any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any Issuer's debt by any
"nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Act.
(d) (i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, affairs or business prospects, whether or not arising in the
ordinary course of business, of the Company and its subsidiaries taken as a
whole, (ii) since the date of the latest balance sheet included in the
Registration Statement and the Prospectus there shall not have been any
change, or any development involving a prospective material adverse change,
in the capital stock or in the long-term debt of the Company or any of its
subsidiaries from that set forth in the Registration Statement and
Prospectus and (iii) the Company and its subsidiaries shall have no
liability or obligation, direct or contingent, which is material to the
Company and its subsidiaries, taken as a whole, other than those reflected
in the Registration Statement and the Prospectus.
(e) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by Donald R. Horton, Donald J. Tomnitz or Richard
Beckwitt and David J. Keller, in their capacities as the Chairman of the
Board, Chief Executive Officer or President and Chief Financial Officer of
the Company, respectively, confirming the mat-
<PAGE>
-20-
ters set forth in paragraphs (a), (b), (c) and (d) of this Section 8.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Gibson Dunn & Crutcher LLP, special counsel for the Company, to
the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which its ownership
or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a
whole, and has all corporate power and authority necessary to own or
hold its properties and conduct its business as described in the
Prospectus.
(ii) To such counsel's knowledge and other than as described
in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or
of which any property or assets of the Company or any of its
subsidiaries is the subject which is of a character which is required
to be disclosed in the Prospectus; and, to such counsel's knowledge,
no such proceedings are threatened by governmental authorities or by
others.
(iii) The Registration Statement was declared effective under
the Act as of the date and time specified in such opinion, the
Prospectus was filed with the Commission pursuant to the subparagraph
of Rule 424(b) under the Act on the date specified therein, and, to
such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceeding for
that purpose is pending or threatened by the Commission.
(iv) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior to
the Closing Date
<PAGE>
-21-
(other than the financial and pro forma data (and the related notes
thereto) and statistical data and the financial statements and related
schedules therein, as to which such counsel need express no opinion)
appear on their face to comply as to form in all material respects
with the requirements of the Act; the documents incorporated by
reference in the Prospectus and any further amendment or supplement to
any such incorporated document made by the Company prior to the
Closing Date (other than the financial and pro forma data (and the
related notes thereto) and statistical data and the financial
statements, and related schedules therein, as to which such counsel
need express no opinion), when they were filed with the Commission
appear on their face to have been appropriately responsive in all
material respects to the requirements of the Act and the Exchange Act.
(v) To such counsel's knowledge, there are no contracts or
other documents of a character which are required to be described in
the Prospectus or filed as exhibits to the Registration Statement by
the Act which have not been described or filed as exhibits to the
Registration Statement or incorporated therein by reference as
permitted by the Act.
(vi) This Agreement has been duly authorized, executed and
delivered by the Issuers.
(vii) The execution, delivery and performance of this
Agreement, the Indenture and the Securities by the Issuers and the
compliance by the Issuers with all of the provisions of this Agreement
and the consummation by the Issuers of the transactions contemplated
hereby and thereby will not, to such counsel's knowledge, conflict
with or result in a material breach or violation of any of the terms
or provisions of, or constitute a material default under, any
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument listed as an exhibit to its Annual Report on
Form 10-K for the fiscal year ended September 30, 1998 or to any
subsequent filing under the Exchange Act, nor will such actions result
in any violation of the provisions of the charter or by-laws of any
Issuer or any statute or, to such counsel's knowledge, any order, rule
or regulation known to such counsel of any court or governmental
agency or body having jurisdiction over any
<PAGE>
-22-
Issuer or any of their property or assets; and, except for such
consents, approvals, authorizations, registrations or qualifications
as may be required under the Act and applicable state or foreign
securities laws in connection with the purchase and distribution of
the Securities by the Underwriters, no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution,
delivery and performance of this Agreement, the Indenture and the
Securities by the Issuers and the valid issuance and sale of the
Securities by the Issuers.
(viii) The Indenture has been duly qualified under the TIA and
has been duly authorized, executed and delivered by the Issuers and is
a valid and binding agreement of the Issuers, enforceable in
accordance with its terms except as (a) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors, rights generally and (b) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability.
(ix) The Notes have been duly authorized and executed by the
Company and, when authenticated in accordance with the provisions of
the Indenture and delivered to the Underwriters against payment
therefor as provided by this Agreement, will be entitled to the
benefits of the Indenture, and will be valid and binding obligations
of the Company, enforceable in accordance with their terms except as
(i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies
may be limited by equitable principles of general applicability.
(x) The Guarantees have been duly authorized and endorsed on
the Notes by the Guarantors, and, upon execution and authentication of
the Notes in accordance with the provisions of the Indenture and
delivery thereof to the Underwriters against payment therefor as
provided by this Agreement, will be entitled to the benefits of the
Indenture, and will be valid and binding obligations of the
Guarantors, enforceable in accordance with their terms except as (i)
the enforceability thereof may be limited by
<PAGE>
-23-
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(xi) The Securities and the Indenture conform in all material
respects to the descriptions thereof in the Prospectus.
In rendering such opinion, such counsel may state that its opinion is
limited to the Federal laws of the United States of America, the laws of the
States of Texas and New York and the General Corporation Law of the State of
Delaware. Such counsel shall also have furnished to the Underwriters a written
statement, addressed to the Underwriters and dated the Closing Date, in form and
substance satisfactory to the Underwriters and counsel for the Underwriters, to
the effect that (x) such counsel has acted as special counsel to the Company in
connection with the preparation of the Registration Statement and during the
course of the preparation of the Registration Statement and Prospectus, such
counsel participated in conferences with representatives of the Company, the
Company's internal counsel, and its accountants and the representatives of the
Underwriters and at which conferences the contents of the Registration Statement
and the Prospectus and related matters were discussed, and (y) based on the
foregoing, no facts have come to the attention of such counsel which lead it to
believe that (I) the Registration Statement (except as to financial and pro
forma data (and related notes thereto) and statistical data and the financial
statements and related schedules contained or incorporated by reference
therein), as of the date the Registration Statement became effective, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, or that the Prospectus (except as to financial and pro
forma data (and related notes thereto) and statistical data and the financial
statements and
<PAGE>
-24-
related schedules contained or incorporated by reference therein) contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading or (II)
any Incorporated Document or any amendment or supplement thereto made by the
Company prior to such Closing Date, when they were filed with the Commission, as
the case may be, contained (except as to financial and pro forma data (and
related notes thereto) and statistical data and the financial statements and
related schedules contained or incorporated by reference therein) an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The foregoing opinion and statement may be
qualified by a statement to the effect that such counsel has not independently
verified the accuracy, completeness or fairness of the statements contained in
the Registration Statement or Prospectus or incorporated by reference therein,
and such counsel is not passing upon and such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus.
(g) You shall have received on the Closing Date, an opinion of
Charles N. Warren, Esq., General Counsel of the Company, dated the Closing
Date and addressed to you, to the effect that:
(i) The issue and sale of the Securities by the Issuers and
the compliance by the Issuers with all of the provisions of this
Agreement and the consummation by the Issuers of the transactions
contemplated hereby will not, to such counsel's knowledge, conflict
with or result in a material breach or violation of any of the terms
or provisions of, or constitute a material default under, any
indenture, mortgage, deed or trust, loan agreement or other material
agreement or instrument known to such counsel to which the Company or
any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will such
actions result in any violation of the provisions of the charter or
by-laws of any Issuer or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over any Issuer or any of their property or assets.
(ii) Each Guarantor that is a corporation has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its state of incorporation, is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which its ownership or lease of its property or the
conduct of its business requires such qualification, except where the
failure
<PAGE>
-25-
to be so qualified would not have a material adverse effect on the
business, operations or financial condition of the Company and its
subsidiaries taken as a whole, and has all corporate power and
authority necessary to own or hold its properties and conduct its
business as described in the Prospectus. The outstanding shares of
capital stock of each such Guarantor is duly authorized, validly
issued, fully paid and nonassessable and (except for directors'
qualifying shares) are owned of record, directly or indirectly by the
Company. Each Guarantor that is a limited partnership has been duly
formed and is validly existing as a limited partnership in good
standing under the laws of the state of its organization, is duly
qualified to do business and is in good standing as a foreign limited
partnership in each jurisdiction in which its ownership or lease of-
its property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the business, operation or financial
condition of the Company and its subsidiaries taken as a whole, and
has all partnership power and authority necessary to own or hold its
properties and conduct its business as described in the Prospectus.
(h) You shall have received on the Closing Date an opinion, dated
the Closing Date, of Cahill Gordon and Reindel, counsel for the
Underwriters, in form and substance satisfactory to the Underwriters.
(i) You shall have received a letter on and as of the Closing Date,
in form and substance satisfactory to you, from Ernst & Young, LLP,
independent public accountants, with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus and substantially in the form and substance of the
letter delivered to you by Ernst & Young, LLP, on the date of this
Agreement.
(j) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus or (ii) since such date
there
<PAGE>
-26-
shall not have been any change in the capital stock, net revenues, per
share or total amounts of income before extraordinary income or of net
income or long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus, the effect of which,
in any such case described in clause (i) or (ii), is, in the judgment of
the Underwriters, so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Securities being delivered on the Closing Date on the terms and in the
manner contemplated in the Prospectus.
(k) The Issuers shall have furnished to you such other documents and
certificates as to the accuracy and completeness of any statement in the
Registration Statement or the Prospectus as you reasonably may request.
(l) You shall have been furnished with such additional documents and
certificates as you or counsel for the Underwriters may reasonably request.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Issuers and
delivered to you or to your counsel shall be deemed a representation and
warranty by the Issuers to each Underwriter as to the statements made therein.
9. Termination.
-----------
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Issuers if any of the following has occurred:
(i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or
development involving a prospective material adverse change in the condition,
financial or otherwise, of the Issuers and its subsidiaries or the earnings,
affairs, or business prospects of the Issuers or any of its subsidiaries taken
as a whole, whether or not arising in the ordinary course of business, which
would, in your judgment, make it impracticable to market the Securities
<PAGE>
-27-
on the terms and in the manner contemplated in the Prospectus, (ii) any outbreak
or escalation of hostilities or other national or international calamity or
crisis or change in economic conditions or in the financial markets of the
United States or elsewhere that, in your judgment, is material and adverse and
would, in your judgment, make it impracticable to market the Shares on the terms
and in the manner contemplated in the Prospectus, (iii) the suspension or
material limitation of trading in securities on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market or limitation on prices
for securities on any such exchange, (iv) the enactment, publication, decree or
other promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business or
operations of the Company and its subsidiaries taken as a whole, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
10. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (a) if to the Issuers, to D.R. Horton,
1901 Ascension Blvd., Suite 100 Arlington, Texas 76006, and (b) if to the
Underwriters, to Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10172, Attention: Syndicate Department, or in any
case to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, its officers and directors (in
their capacities as such) and of the Underwriters set forth in or made pursuant
to this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Notes, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any Underwriter or by or on behalf of the Company, the officers or directors of
the Company or any controlling person of the Company (in their capacities as
such), (ii) acceptance of the Notes and payment for them hereunder and (iii)
termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of
any failure or refusal on the part of any Issuer to perform any of its
agreements in this Agreement or to
<PAGE>
-28-
fulfill any of the conditions of Section 8 of this Agreement, the Issuers,
jointly and severally, agree to reimburse the Underwriters for all out-of-pocket
expenses (including the fees and disbursements of counsel) reasonably incurred
by it.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Issuers, the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Notes from the Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
<PAGE>
-29-
Please confirm that the foregoing correctly sets forth the agreement
between the Issuers and the Underwriters.
Very truly yours,
D.R. HORTON, INC.
By:
---------------------------------
Name: David J. Keller
Title: Treasurer
GUARANTORS:
DRHI, Inc.
Meadows I, Ltd.
Meadows II, Ltd.
Meadows IX, Inc.
Meadows X, Inc.
D.R. Horton, Inc.-Birmingham
D.R. Horton, Inc.-Denver
D.R. Horton, Inc.-Greensboro
D.R. Horton, Inc.-Louisville
D.R. Horton, Inc.-Minnesota
D.R. Horton, Inc.-New Jersey
D.R. Horton, Inc.-Portland
D.R. Horton, Inc.-Sacramento
D.R. Horton, Inc.-Torrey
D.R. Horton San Diego Holding Company, Inc.
D.R. Horton Los Angeles Holding Company, Inc.
D.R. Horton Los Angeles Management Company, Inc.
D.R. Horton San Diego Management Company, Inc.
DRH Construction, Inc.
S. G. Torrey Atlanta, Ltd.
DRH Cambridge Homes, Inc. (formerly D.R. Horton Sacramento
Management Company, Inc.)
C. Richard Dobson Builders, Inc.
Land Development, Inc.
DRH Tucson Construction, Inc.
Continental Homes, Inc.
KDB Homes, Inc.
L&W Investments, Inc.
Continental Ranch, Inc.
Continental Homes of Florida, Inc.
CHI Construction Company
<PAGE>
-30-
CHTEX of Texas, Inc.
CH Investments of Texas, Inc.
By:
---------------------------------
Name: David J. Keller
Title: Treasurer
SGS COMMUNITIES AT GRANDE QUAY, LLC
By: Meadows IX, Inc., a member
By:
----------------------------
Name: David J. Keller
Title: Treasurer
and
By: Meadows X, Inc., a member
By:
----------------------------
Name: David J. Keller
Title: Treasurer
D.R. HORTON MANAGEMENT COMPANY, LTD.
D.R. HORTON - TEXAS, LTD.
By: Meadows I, Ltd.,
its general partner
By:
----------------------------
Name: David J. Keller
Title: Treasurer
<PAGE>
-31-
CONTINENTAL HOMES OF TEXAS, L.P.
By: CHTEX of Texas, Inc.,
its general partner
By:
----------------------------
Name: David J. Keller
Title: Treasurer
<PAGE>
-32-
Agreed and accepted as of the
date first written above:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON SMITH BARNEY INC.
BT ALEX. BROWN INCORPORATED
By:
----------------------------
Name:
Title:
<PAGE>
-33-
Schedule A
<TABLE>
<CAPTION>
Principal Amount
Underwriter of Notes
----------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation...... $154,000,000
Salomon Smith Barney Inc...... 154,000,000
BT Alex. Brown Incorporated... 77,000,000
------------
Total............... $385,000,000
============
</TABLE>
<PAGE>
EXHIBIT 4.1
================================================================================
D.R. HORTON, INC. AND THE GUARANTORS PARTY HERETO
8% Senior Notes due 2009
______________________
Sixth Supplemental Indenture
Dated as of February 4, 1999
______________________
AMERICAN STOCK TRANSFER & TRUST COMPANY,
Trustee
================================================================================
<PAGE>
SIXTH SUPPLEMENTAL INDENTURE dated as of February 4, 1999
("Supplemental Indenture"), to the Indenture dated as of June 9, 1997 (as
- ------------------------
amended, modified or supplemented from time to time in accordance therewith, the
"Indenture"), by and among D.R. HORTON, INC., a Delaware corporation (the
---------
"Company"), each of the Guarantors (as defined herein) and AMERICAN STOCK
-------
TRANSFER & TRUST COMPANY, as trustee (the "Trustee").
-------
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders of Notes (as defined herein):
WHEREAS, the Company, the Guarantors and the Trustee have duly
authorized the execution and delivery of the Indenture to provide for the
issuance from time to time of senior debt securities (the "Securities") to be
----------
issued in one or more series as in the Indenture provided;
WHEREAS, the Company and the Guarantors desire and have requested the
Trustee to join them in the execution and delivery of this Supplemental
Indenture in order to establish and provide for the issuance by the Company of a
series of Securities designated as its 8% Senior Notes due 2009 in the aggregate
principal amount of up to $400,000,000, substantially in the form attached
hereto as Exhibit A (the "Notes"), guaranteed by the Guarantors, on the terms
-----
set forth herein;
WHEREAS, Section 2.01 of the Indenture provides that a supplemental
indenture may be entered into by the Company, the Guarantors and the Trustee for
such purpose provided certain conditions are met;
WHEREAS, the conditions set forth in the Indenture for the execution
and delivery of this Supplemental Indenture have been complied with; and
WHEREAS, all things necessary to make this Supplemental Indenture a
valid agreement of the Company, the Guarantors and the Trustee, in accordance
with its terms, and a valid amendment of, and supplement to, the Indenture have
been done;
NOW, THEREFORE:
In consideration of the premises and the purchase and acceptance of
the Notes by the holders thereof the Company and the Guarantors mutually
covenant and agree with the Trustee, for the equal and ratable benefit of the
holders, that the In-
<PAGE>
-2-
denture is supplemented and amended, to the extent expressed herein, as follows:
ARTICLE ONE
Scope of Supplemental Indenture; General
The changes, modifications and supplements to the Indenture effected
by this Supplemental Indenture shall be applicable only with respect to, and
govern the terms of, the Notes, which shall be limited in aggregate principal
amount to $400,000,000 in one or more series, and shall not apply to any other
Securities that may be issued under the Indenture unless a supplemental
indenture with respect to such other Securities specifically incorporates such
changes, modifications and supplements. Pursuant to this Supplemental
Indenture, there is hereby created and designated a series of Securities under
the Indenture entitled "8% Senior Notes due 2009." The Notes shall be in the
form of Exhibit A hereto. The Notes shall be guaranteed by the Guarantors as
---------
provided in such form and the Indenture. If required, the Notes may bear an
appropriate legend regarding original issue discount for federal income tax
purposes.
In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Supplemental Indenture subsequent to
the Issue Date (such Notes, "Additional Securities"), the Company shall use its
---------------------
best efforts to obtain the same "CUSIP" number for such Notes as is printed on
the Notes outstanding at such time; provided, however, that if any series of
-------- -------
Notes issued under this Supplemental Indenture subsequent to the Issue Date is
determined, pursuant to an Opinion of Counsel of the Company in a form
reasonably satisfactory to the Trustee, to be a different class of security than
the Notes outstanding at such time for federal income tax purposes, the Company
may obtain a "CUSIP" number for such Notes that is different than the "CUSIP"
number printed on the Notes then outstanding. Notwithstanding the foregoing,
all Notes issued under this Supplemental Indenture shall vote and consent
together on all matters as one class and no series of Notes will have the right
to vote or consent as a separate class on any matter.
<PAGE>
-3-
ARTICLE TWO
Certain Definitions
The following terms have the meanings set forth below in this
Supplemental Indenture. Capitalized terms used but not defined herein have the
meanings ascribed to such terms in the Indenture. To the extent terms defined
herein differ from the Indenture the terms defined herein will govern.
"Acquired Indebtedness" means (i) with respect to any Person that
---------------------
becomes a Restricted Subsidiary (or is merged into the Company or any Restricted
Subsidiary) after the Issue Date, Indebtedness of such Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
(or is merged into the Company or any Restricted Subsidiary) that was not
incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary (or being merged into the Company or any Restricted
Subsidiary) and (ii) with respect to the Company or any Restricted Subsidiary,
any Indebtedness expressly assumed by the Company or any Restricted Subsidiary
in connection with the acquisition of any assets from another Person (other than
the Company or any Restricted Subsidiary), which Indebtedness was not incurred
by such other Person in connection with or in contemplation of such acquisition.
Indebtedness incurred in connection with or in contemplation of any transaction
described in clause (i) or (ii) of the preceding sentence shall be deemed to
have been incurred by the Company or a Restricted Subsidiary, as the case may
be, at the time such Person becomes a Restricted Subsidiary (or is merged into
the Company or any Restricted Subsidiary) in the case of clause (i) or at the
time of the acquisition of such assets in the case of clause (ii), but shall not
be deemed Acquired Indebtedness.
"Affiliate" means, when used with reference to a specified Person, any
---------
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Person specified.
"Asset Acquisition" means (i) an Investment by the Company or any
-----------------
Restricted Subsidiary in any other Person if, as a result of such Investment,
such Person shall become a Restricted Subsidiary or shall be consolidated or
merged with or into the Company or any Restricted Subsidiary or (ii) the
acquisition by the Company or any Restricted Subsidiary of the assets of any
Person, which constitute all or substantially all of the assets or of an
operating unit or line of business of
<PAGE>
-4-
such Person or which is otherwise outside the ordinary course of business.
"Asset Disposition" means any sale, transfer, conveyance, lease or
-----------------
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback or sale of shares of Capital Stock in any
Subsidiary) (each, a "transaction") by the Company or any Restricted Subsidiary
-----------
to any Person of any Property having a fair market value in any transaction or
series of related transactions of at least $10 million. The term "Asset
-----
Disposition" shall not include (i) a transaction between the Company and any
- -----------
Restricted Subsidiary or a transaction between Restricted Subsidiaries, (ii) a
transaction in the ordinary course of business, including, without limitation,
sales (directly or indirectly), dedications and other donations to governmental
authorities, leases and sales and leasebacks of (A) homes, improved land and
unimproved land and (B) real estate (including related amenities and
improvements), (iii) a transaction involving the sale of Capital Stock of, or
the disposition of assets in, an Unrestricted Subsidiary, (iv) any exchange or
swap of assets of the Company or any Restricted Subsidiary for assets that (x)
are to be used by the Company or any Restricted Subsidiary in the ordinary
course of its Real Estate Business and (y) have a Fair Market Value not less
than the Fair Market Value of the assets exchanged or swapped, (v) any sale,
transfer, conveyance, lease or other disposition of assets and properties of the
Company that is governed by Section 3.08 hereof, or (iv) dispositions of
mortgage loans and related assets and mortgage-backed securities in the ordinary
course of a mortgage lending business.
"Attributable Debt" means, with respect to any Capitalized Lease
-----------------
Obligations, the capitalized amount thereof determined in accordance with GAAP.
"Bankruptcy Law" means title 11 of the United States Code, as amended,
--------------
or any similar federal or state law for the relief of debtors.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participations or other equivalents (however designated) of or in
such Person's capital stock or other equity interests, and options, rights or
warrants to purchase such capital stock or other equity interests, whether now
outstanding or issued after the Issue Date, including, without limitation, all
Disqualified Stock and Preferred Stock.
<PAGE>
-5-
"Capitalized Lease Obligations" of any Person means the obligations of
-----------------------------
such Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligations will be the capitalized amount thereof determined in
accordance with GAAP.
"Cash Equivalents" means: (a) U.S. dollars; (b) securities issued or
----------------
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of one year or less from the date of
acquisition; (c) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million; (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) entered into with any financial institution meeting the
qualifications specified in clause (c) above; (e) commercial paper rated P-1, A-
1 or the equivalent thereof by Moody's Investors Service, Inc. or Standard &
Poor's Ratings Group, respectively, and in each case maturing within six months
after the date of acquisition; and (f) investments in money market funds
substantially all of the assets of which consist of securities described in the
foregoing clauses (a) through (e).
"Change of Control" means (i) any sale, lease or other transfer (in
-----------------
one transaction or a series of transactions) of all or substantially all of the
consolidated assets of the Company and its Restricted Subsidiaries to any Person
(other than a Restricted Subsidiary); provided, however, that a transaction
-------- -------
where the holders of all classes of Common Equity of the Company immediately
prior to such transaction own, directly or indirectly, more than 50% of all
classes of Common Equity of such Person immediately after such transaction shall
not be a Change of Control; (ii) a "person" or "group" (within the meaning of
Section 13(d) of the Exchange Act (other than (x) the Company or (y) Donald R.
Horton, Terrill J. Horton, or their respective wives, children, grandchildren
and other descendants, or any trust or other entity formed or controlled by any
of such individuals)) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of Common Equity of the Company representing more than
50% of the voting power of the Common Equity of the Company; (iii) Continuing
Directors cease to constitute at least a majority of the Board of Directors of
the Company; or (iv) the stockholders of the Company
<PAGE>
-6-
approve any plan or proposal for the liquidation or dissolution of the Company;
provided, however, that a liquidation or dissolution of the Company which is
- -------- -------
part of a transaction that does not constitute a Change of Control under the
proviso contained in clause (i) above shall not constitute a Change of Control.
"Common Equity" of any Person means Capital Stock of such Person that
-------------
is generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management or policies of such Person.
"Consolidated Adjusted Tangible Assets" of the Company as of any date
-------------------------------------
means the Consolidated Tangible Assets of the Company and the Restricted
Subsidiaries at the end of the fiscal quarter immediately preceding the date
less any assets securing any Non-Recourse Indebtedness, as determined in
accordance with GAAP.
"Consolidated Cash Flow Available for Fixed Charges" means, for any
--------------------------------------------------
period, on a consolidated basis for the Company and the Restricted Subsidiaries,
Consolidated Net Income for such period plus (each to the extent deducted in
calculating such Consolidated Net Income and determined in accordance with GAAP)
(a) the sum for such period, without duplication, of (i) income taxes, (ii)
Consolidated Interest Expense, (iii) depreciation and amortization expenses and
other non-cash charges to earnings and (iv) interest and financing fees and
expenses which were previously capitalized and which are amortized to cost of
sales, minus (b) all other non-cash items (other than the receipt of notes
receivable) increasing such Consolidated Net Income.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
----------------------------------------
determination date, the ratio of (x) Consolidated Cash Flow Available for Fixed
Charges for the prior four full fiscal quarters (the "Four Quarter Period") for
-------------------
which financial results have been reported immediately preceding the
determination date (the "Transaction Date"), to (y) the aggregate Consolidated
----------------
Interest Incurred for the Four Quarter Period. For purposes of this definition,
"Consolidated Cash Flow Available for Fixed Charges" and "Consolidated Interest
Incurred" shall be calculated after giving effect on a pro forma basis for the
--- -----
period of such calculation to (i) the incurrence or the repayment, repurchase,
defeasance or other discharge or the assumption by another Person that is not an
Affiliate (collectively, "repayment") of any Indebtedness of the Company or
---------
<PAGE>
-7-
an Restricted Subsidiary (and the application of the proceeds thereof) giving
rise to the need to make such calculation, and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), at any time on
or after the first day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period, except that Indebtedness under revolving credit facilities shall
be deemed to be the average daily balance of such Indebtedness during the Four
Quarter Period (as reduced on such pro forma basis by the application of any
--- -----
proceeds of the incurrence of Indebtedness giving rise to the need to make such
calculation); (ii) any Asset Disposition or Asset Acquisition (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or any Restricted Subsidiary (including
any Person that becomes a Restricted Subsidiary as a result of any such Asset
Acquisition) incurring Acquired Indebtedness at any time on or after the first
day of the Four Quarter Period and on or prior to the Transaction Date), as if
such Asset Disposition or Asset Acquisition (including the incurrence or
repayment of any such Indebtedness) and the inclusion, notwithstanding clause
(ii) of the definition of "Consolidated Net Income," of any Consolidated Cash
Flow Available for Fixed Charges associated with such Asset Acquisition as if it
occurred on the first day of the Four Quarter Period; provided, however, that
-------- -------
the Consolidated Cash Flow Available for Fixed Charges associated with any Asset
Acquisition shall not be included to the extent the net income so associated
would be excluded pursuant to the definition of "Consolidated Net Income," other
than clause (ii) thereof, as if it applied to the Person or assets involved
before they were acquired; and (iii) the Consolidated Cash Flow Available for
Fixed Charges and the Consolidated Interest Incurred attributable to
discontinued operations, as determined in accordance with GAAP, shall be
excluded. Furthermore, in calculating "Consolidated Cash Flow Available for
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
Indebtedness in respect of which a pro forma calculation is required that is
--- -----
determined on a fluctuating basis as of the Transaction Date (including
Indebtedness actually incurred on the Transaction Date) and which will continue
to be so determined thereafter shall be deemed to have accrued at a fixed rate
per annum equal to the rate of interest on such Indebtedness in effect on the
- --- -----
Transaction Date; and (2) notwithstanding clause (1) above, interest on such
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by
<PAGE>
-8-
agreements relating to Interest Protection Agreements, shall be deemed to accrue
at the rate per annum resulting after giving effect to the operation of such
--- -----
agreements.
"Consolidated Interest Expense" of the Company for any period means
-----------------------------
the Interest Expense of the Company and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Incurred" for any period means the Interest
------------------------------
Incurred of the Company and the Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" for any period means the aggregate net
-----------------------
income (or loss) of the Company and its Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP; provided that there will be
--------
excluded from such net income (loss) (to the extent otherwise included therein),
without duplication: (i) the net income (or loss) of (x) any Unrestricted
Subsidiary (other than a Mortgage Subsidiary) or (y) any Person (other than a
Restricted Subsidiary) in which any Person other than the Company or any
Restricted Subsidiary has an ownership interest, except, in each case, to the
extent that any such income has actually been received by the Company or any
Restricted Subsidiary in the form of cash dividends or similar cash
distributions during such period, which dividends or distributions are not in
excess of the Company's or such Restricted Subsidiary's (as applicable) pro rata
share of such Unrestricted Subsidiary's or such other Person's net income earned
during such period, (ii) except to the extent includable in Consolidated Net
Income pursuant to the foregoing clause (i), the net income (or loss) of any
Person that accrued prior to the date that (a) such Person becomes a Restricted
Subsidiary or is merged with or into or consolidated with the Company or any of
its Restricted Subsidiaries (except, in the case of an Unrestricted Subsidiary
that is redesignated a Restricted Subsidiary during such period, to the extent
of its retained earnings from the beginning of such period to the date of such
redesignation) or (b) the assets of such Person are acquired by the Company or
any Restricted Subsidiary, (iii) the net income of any Restricted Subsidiary to
the extent that (but only so long as) the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary of that income is not
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary during such period, (iv) the gains or losses,
to-
<PAGE>
-9-
gether with any related provision for taxes, realized during such period by
the Company or any Restricted Subsidiary resulting from (a) the acquisition of
securities, or extinguishment of Indebtedness, of the Company or any Restricted
Subsidiary or (b) any Asset Disposition by the Company or any Restricted
Subsidiary, (v) any extraordinary gain or loss together with any related
provision for taxes, realized by the Company or any Restricted Subsidiary, (vi)
any non-recurring expense recorded by the Company or any Restricted Subsidiary
in connection with a merger accounted for as a "pooling-of-interests"
transaction; provided, further, that for purposes of calculating Consolidated
-------- -------
Net Income solely as it relates to clause (iii) of Section 3.03(a) hereof,
clause (iv)(b) above shall not be applicable.
"Consolidated Net Worth" of any Person as of any date means the
----------------------
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Restricted
Subsidiaries on a consolidated basis at the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less any
amount attributable to Unrestricted Subsidiaries.
"Consolidated Tangible Assets" of the Company as of any date means the
----------------------------
total amount of assets of the Company and its Restricted Subsidiaries (less
applicable reserves) on a consolidated basis at the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less:
(i) Intangible Assets and (ii) appropriate adjustments on account of minority
interests of other Persons holding equity investments in Restricted
Subsidiaries.
"Continuing Director" means a director who either was a member of the
-------------------
Board of Directors of the Company on the date of this Indenture or who became a
director of the Company subsequent to such date and whose election, or
nomination for election by the Company's stockholders, was duly approved by a
majority of the Continuing Directors on the Board of Directors of the Company at
the time of such approval, either by a specific vote or by approval of the proxy
statement issued by the Company on behalf of the entire Board of Directors of
the Company in which such individual is named as nominee for director.
"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
<PAGE>
-10-
"controlling" and "controlled" have meanings correlative to the foregoing.
----------- ----------
"Credit Facilities" means, collectively, each of the credit facilities
-----------------
and guidance lines of credit of the Company or one or more Restricted
Subsidiaries in existence on the date of this Supplemental Indenture and one or
more other facilities or guidance lines of credit among or between the Company
or one or more Restricted Subsidiaries and one or more lenders pursuant to which
the Company or any Restricted Subsidiary may incur indebtedness for working
capital and general corporate purposes (including acquisitions), as any such
facility or line of credit may amended, restated, supplemented or otherwise
modified from time to time, and includes any agreement extending the maturity
of, increasing the amount of, or restructuring, all or any portion of the
Indebtedness under such facility or line of credit or any successor facilities
or lines of credit and includes any facility or line of credit with one or more
lenders refinancing or replacing all or any portion of the Indebtedness under
such facility or line of credit or any successor facility or line of credit.
"Currency Agreement" of any Person means any foreign exchange
------------------
contract, currency swap agreement or other similar agreement or arrangement
designed to protect such Person or any of its Subsidiaries against fluctuations
in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator or
---------
similar official under any Bankruptcy Law.
"Default" means any event, act or condition that is, or after notice
-------
or the passage of time or both would be, an Event of Default.
"Designation Amount" has the meaning provided in the definition of
------------------
Unrestricted Subsidiary.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
------------------
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Notes or (ii) is convertible into or exchangeable or
exercisable for (whether at the option of the issuer or the holder thereof) (a)
debt securities or (b) any Capital Stock referred to in (i) above, in each case,
at any time prior to the final maturity
<PAGE>
-11-
date of the Notes provided, however, that any Capital Stock that would not
-------- -------
constitute Disqualified Stock but for provisions thereof giving holders thereof
(or the holders of any security into or for which such Capital Stock is
convertible, exchangeable or exercisable) the right to require the Company to
repurchase or redeem such Capital Stock upon the occurrence of a change in
control occurring prior to the final maturity date of the Notes shall not
constitute Disqualified Stock if the change in control provisions applicable to
such Capital Stock are no more favorable to such holders than Section 3.01
hereof and such Capital Stock specifically provides that the Company will not
repurchase or redeem any such Capital Stock pursuant to such provisions prior to
the Company's repurchase of the Notes as are required pursuant to Section 3.01
hereof.
"Dollars" and "$" mean United States Dollars.
------- -
"Event of Default" means:
----------------
(1) the failure by the Company to pay interest on any Note when the
same becomes due and payable and the continuance of any such failure for a
period of 30 days;
(2) the failure by the Company to pay the principal or premium of any
Note when the same becomes due and payable at maturity, upon acceleration
or otherwise;
(3) the failure by the Company or any Restricted Subsidiary to comply
with any of its agreements or covenants in, or provisions of, the Notes,
the Guarantees or the Indenture and such failure continues for the period
and after the notice specified below (except in the case of a default under
Section 3.01 or 3.08, which will constitute Events of Default with notice
but without passage of time);
(4) the acceleration of any Indebtedness (other than Non-Recourse
Indebtedness) of the Company or any Restricted Subsidiary that has an
outstanding principal amount of $25 million or more, individually or in the
aggregate, and such acceleration does not cease to exist, or such
Indebtedness is not satisfied, in either case within 30 days after such
acceleration;
(5) the failure by the Company or any Restricted Subsidiary to make
any principal or interest payment in an amount of $25 million or more,
individually or in the aggregate, in respect of Indebtedness (other than
Non-
<PAGE>
-12-
Recourse Indebtedness) of the Company or any Restricted Subsidiary within
30 days of such principal or interest becoming due and payable (after
giving effect to any applicable grace period set forth in the documents
governing such Indebtedness);
(6) a final judgment or judgments that exceed $25 million or more,
individually or in the aggregate, for the payment of money having been
entered by a court or courts of competent jurisdiction against the Company
or any of its Restricted Subsidiaries and such judgment or judgments is not
satisfied, stayed, annulled or rescinded within 60 days of being entered;
(7) the Company or any Restricted Subsidiary that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary that is a Significant Subsidiary as debtor in an
involuntary case,
(B) appoints a Custodian of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or a Custodian for all or
substantially all of the property of the Company or any Restricted
Subsidiary that is a Significant Subsidiary, or
(C) orders the liquidation of the Company or any Restricted
Subsidiary that is a Significant Subsidiary,
<PAGE>
-13-
and the order or decree remains unstayed and in effect for 60 days;
or
(9) any Guarantee of a Guarantor which is a Significant
Subsidiary ceases to be in full force and effect (other than in
accordance with the terms of such Guarantee and the Indenture) or is
declared null and void and unenforceable or found to be invalid or
any Guarantor denies its liability under its Guarantee (other than by
reason of release of a Guarantor from its Guarantee in accordance
with the terms of the Indenture and the Guarantee).
"Fair Market Value" means, with respect to any asset, the price
-----------------
(after taking into account any liabilities relating to such assets) that would
be negotiated in an arm's-length transaction for cash between a willing seller
and a willing and able buyer, neither of which is under any compulsion to
complete the transaction, as such price is determined in good faith by the Board
of Directors of the Company or a duly authorized committee thereof, as evidenced
by a resolution of such Board or committee.
"GAAP" means generally accepted accounting principles set forth
----
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect on the date of this
Supplemental Indenture.
"Guarantors" means (i) initially, each of:
----------
DRHI, Inc., a Delaware corporation; Meadows I, Ltd., a Delaware corporation;
Meadows II, Ltd., a Delaware corporation; Meadows IX, Inc., a New Jersey
corporation; Meadows X, Inc., a New Jersey corporation; D.R. Horton, Inc.-
Minnesota, a Delaware corporation; D.R. Horton, Inc. - Greensboro, a Delaware
corporation; D.R. Horton, Inc. - Birmingham, an Alabama corporation; D.R.
Horton, Inc. - New Jersey, a Delaware corporation; D.R. Horton, Inc. - Torrey, a
Delaware corporation; DRH Construction, Inc., a Delaware corporation; D.R.
Horton, Inc. - Louisville, a Delaware corporation; D.R. Horton, Inc. - Denver, a
Delaware corporation; D.R. Horton Denver Management Company, Inc., a Colorado
corporation; D.R. Horton San Diego Holding Company, Inc., a California
corporation; D.R. Horton Los Angeles Holding Company, Inc., a California
corporation; D.R. Horton Los Angeles Management Company, Inc., a California
corporation; D.R. Horton
<PAGE>
-14-
San Diego Management Company, Inc., a California corporation; S. G. Torrey
Atlanta, Ltd., a Georgia corporation; SGS Communities at Grande Quay, L.L.C., a
New Jersey limited liability company; D.R. Horton Management Company, Ltd., a
Texas limited partnership; D.R. Horton-Texas, Ltd., a Texas limited partnership;
D.R. Horton, Inc. - Sacramento, a California corporation; DRH Cambridge Homes,
Inc., a California corporation (formerly D.R. Horton Sacramento Management
Company, Inc.); C. Richard Dobson Builders, Inc., a Virginia corporation; Land
Development, Inc., a Virginia corporation; DRH Tucson Construction, Inc., a
Delaware corporation; Continental Homes, Inc., a Delaware corporation; KDB
Homes, Inc., a Delaware corporation; L&W Investments, Inc., a California
corporation; Continental Ranch, Inc., a Delaware corporation; Continental Homes
of Florida, Inc., a Florida corporation; CHI Construction Company, an Arizona
corporation; CHTEX of Texas, Inc., a Delaware corporation; CH Investments of
Texas, Inc., a Delaware corporation; Continental Homes of Texas, L.P., a Texas
limited partnership (formerly Continental Homes of Austin, L.P., a Texas limited
partnership) and D.R. Horton, Inc. - Portland, a Delaware corporation; and (ii)
each of the Company's Subsidiaries which becomes a guarantor of the Notes
pursuant to the provisions of the Indenture. An Unrestricted Subsidiary may
become a Guarantor if it (x) is so designated by resolution of the Board of
Directors of the Company and (y) executes a supplemental indenture satisfactory
to the Trustee.
"Holder" means the Person in whose name a Note is registered in the
------
books of the Registrar for the Notes.
"Indebtedness" of any Person means, without duplication, (i) any
------------
liability of such Person (a) for borrowed money or under any reimbursement
obligation relating to a letter of credit or other similar instruments (other
than standby letters of credit or similar instrument issued for the benefit of
or surety, performance, completion or payment bonds, earnest money notes or
similar purpose undertakings or indemnifications issued by, such Person in the
ordinary course of business), (b) evidenced by a bond, note, debenture or
similar instrument (including a purchase money obligation) given in connection
with the acquisition of any businesses, properties or assets of any kind or with
services incurred in connection with capital expenditures (other than any
obligation to pay a contingent purchase price which, as of the date of
incurrence thereof is not required to be recorded as a liability in accordance
with GAAP), or (c) in respect of Capitalized Lease Obligations (to the extent of
the Attributable Debt in respect thereof), (ii) any Indebtedness of others that
such Person has guaranteed to
<PAGE>
-15-
the extent of the guarantee, (iii) to the extent not otherwise included, the
obligations of such Person under Currency Agreements or Interest Protection
Agreements to the extent recorded as liabilities not constituting Interest
Incurred, net of amounts recorded as assets in respect of such agreements, in
accordance with GAAP, and (iv) all Indebtedness of others secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, that Indebtedness shall not include accounts payable,
--------
liabilities to trade creditors of such Person or other accrued expenses arising
in the ordinary course of business. The amount of Indebtedness of any Person at
any date shall be (a) the outstanding balance at such date of all unconditional
obligations as described above, net of any unamortized discount to be accounted
for as Interest Expense, in accordance with GAAP, (b) the maximum liability of
such Person for any contingent obligations under clause (ii) above at such date,
net of, any unamortized discount to be accounted for as Interest Expense in
accordance with GAAP and (c) in the case of clause (iv) above, the lesser of (1)
the fair market value of any asset subject to a Lien securing the Indebtedness
of others on the date that the Lien attaches and (2) the amount of the
Indebtedness secured.
"Intangible Assets" of the Company means all unamortized debt discount
-----------------
and expense, unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, writeups of assets over their prior
carrying value (other than write-ups which occurred prior to the Issue Date and
other than, in connection with the acquisition of an asset, the write-up of the
value of such asset (within one year of its acquisition) to its fair market
value in accordance with GAAP) and all other items which would be treated as
intangibles on the consolidated balance sheet of the Company and the Restricted
Subsidiaries prepared in accordance with GAAP.
"Interest Expense" of any Person for any period means, without
----------------
duplication, the aggregate amount of (i) interest which, in conformity with
GAAP, would be set opposite the caption "interest expense" or any like caption
on an income statement for such Person (including, without limitation, imputed
interest included in 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 (but reduced by net gains) associated with
Currency Agreements and Interest Protection Agreements, 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 noncash
interest expense other
<PAGE>
-16-
than interest and other charges amortized to cost of sales), and (ii) all
interest actually paid by the Company or a Restricted Subsidiary under any
guarantee of Indebtedness (including, without limitation, a guarantee of
principal, interest or any combination thereof) of any Person other than the
Company or any Restricted Subsidiary during such period; provided, that Interest
--------
Expense shall exclude any expense associated with the complete write-off of
financing fees and expenses in connection with the repayment of any
Indebtedness.
"Interest Incurred" of any Person for any period means, without
-----------------
duplication, the aggregate amount of (i) Interest Expense and (ii) all
capitalized interest and amortized debt issuance costs.
"Interest Protection Agreement" of any Person means any interest rate
-----------------------------
swap agreement, interest rate collar agreement, option or futures contract or
other similar agreement or arrangement designed to protect such Person or any of
its Subsidiaries against fluctuations in interest rates with respect to Debt
permitted to be incurred under this Supplemental Indenture.
"Investment Grade" shall mean BBB or higher by S&P or Baa3 or higher
----------------
by Moody's or the equivalent of such ratings by S&P or Moody's.
"Investments" of any Person means (i) all investments by such Person
-----------
in any other Person in the form of loans, advances or capital contributions,
(ii) all guarantees of Indebtedness or other obligations of any other Person by
such Person, (iii) all purchases (or other acquisitions for consideration) by
such Person of Indebtedness, Capital Stock or other securities of any other
Person and (iv) all other items that would be classified as investments in any
other Person (including, without limitation, purchases of assets outside the
ordinary course of business) on a balance sheet of such Person prepared in
accordance with GAAP.
"Issue Date" means the date on which the Notes are originally issued
----------
under this Supplemental Indenture.
"Lien" means, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, a Person shall be deemed to own,
subject to a Lien, any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agree-
<PAGE>
-17-
ment, capital lease or other title retention agreement relating to such
Property.
"Marketable Securities" means (a) equity securities that are listed on
---------------------
the New York Stock Exchange, the American Stock Exchange or The Nasdaq National
Market and (b) debt securities that are rated by a nationally recognized rating
agency, listed on the New York Stock Exchange or the American Stock Exchange or
covered by at least two reputable market makers.
"Moody's" means Moody's Investors Service, Inc. or any successor to
its debt rating business.
"Mortgage Subsidiary" means any Subsidiary of the Company
substantially all of whose operations consist of the mortgage lending business.
"Net Cash Proceeds" means, with respect to an Asset Disposition, cash
-----------------
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
(including any cash received upon sale or disposition of such note or
receivable), but only as and when received), excluding any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to the Property disposed of in such Asset Disposition
or received in any other non-cash form unless and until such non-cash
consideration is converted into cash therefrom, in each case, net of all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state and local taxes required to be accrued as a
liability under GAAP as a consequence of such Asset Disposition, and in each
case net of a reasonable reserve for the after-tax cost of any indemnification
or other payments (fixed and contingent) attributable to the seller's
indemnities or other obligations to the purchaser undertaken by the Company or
any of its Restricted Subsidiaries in connection with such Asset Disposition,
and net of all payments made on any Indebtedness which is secured by or relates
to such Property, in accordance with the terms of any Lien or agreement upon or
with respect to such Property or which must by its terms or by applicable law be
repaid out of the proceeds from such Asset Disposition, and net of all
contractually required distributions and payments made to minority interest
holders in Restricted Subsidiaries or joint ventures as a result of such Asset
Disposition.
"Non-Recourse Indebtedness" with respect to any Person means
-------------------------
Indebtedness of such Person for which (i) the sole
<PAGE>
-18-
legal recourse for collection of principal and interest on such Indebtedness is
against the specific property identified in the instruments evidencing or
securing such Indebtedness and such property was acquired with the proceeds of
such Indebtedness or such Indebtedness was incurred within 90 days after the
acquisition of such property and (ii) no other assets of such Person may be
realized upon in collection of principal or interest on such Indebtedness.
Indebtedness which is otherwise Non-Recourse Indebtedness will not lose its
character as Non-Recourse Indebtedness because there is recourse to the
borrower, any guarantor or any other Person for (i) environmental warranties and
indemnities, or (ii) indemnities for and liabilities arising from fraud,
misrepresentation, misapplication or non-payment of rents, profits, insurance
and condemnation proceeds and other sums actually received by the borrower from
secured assets to be paid to the lender, waste and mechanics' liens.
"Permitted Indebtedness" means (i) Indebtedness under Credit
----------------------
Facilities which does not exceed $675 million principal amount outstanding at
any one time; (ii) Indebtedness in respect of obligations of the Company and its
Subsidiaries to the trustees under indentures for debt securities; (iii)
intercompany debt obligations of the Company to any Restricted Subsidiary and of
any Restricted Subsidiary to the Company or any other Restricted Subsidiary;
provided, however, that any Indebtedness of any Restricted Subsidiary or the
- -------- -------
Company owed to any Restricted Subsidiary or that ceases to be a Restricted
Subsidiary shall be deemed to be incurred and shall be treated as an incurrence
for purposes of the first paragraph of the covenant described under "Limitations
on Indebtedness" at the time the Restricted Subsidiary in question ceases to be
a Restricted Subsidiary; (iv) Indebtedness of the Company or any Restricted
Subsidiary under any Currency Agreements or Interest Protection Agreements in a
notional amount no greater than the payments due (at the time the related
Currency Agreement or Interest Protection Agreement is entered into) with
respect to the Indebtedness or currency being hedged; (v) Purchase Money
Indebtedness; (vi) Capitalized Lease Obligations; (vii) obligations for, pledge
of assets in respect of, and guaranties of, bond financings of political
subdivisions or enterprises thereof in the ordinary course of business; (viii)
Indebtedness secured only by office buildings owned or occupied by the Company
or any Restricted Subsidiary, which Indebtedness does not exceed $20 million
aggregate principal amount outstanding at any one time; (ix) Indebtedness under
wharehouse lines of credit, repurchase agreements and Indebtedness secured by
mortgage loans and related assets of mortgage lending Subsidiaries
<PAGE>
-19-
in the ordinary course of a mortgage lending business; and (x) Indebtedness of
the Company or any Restricted Subsidiary which, together with all other
Indebtedness under this clause (x), does not exceed $30 million aggregate
principal amount outstanding at any one time.
"Permitted Investment" means (i) Cash Equivalents; (ii) any Investment
--------------------
in the Company or any Restricted Subsidiary or any Person that becomes a
Restricted Subsidiary as a result of such Investment or that is consolidated or
merged with or into, or transfers all or substantially all of the assets of it
or an operating unit or line of business to, the Company or a Restricted
Subsidiary; (iii) any receivables, loans or other consideration taken by the
Company or any Restricted Subsidiary in connection with any asset sale otherwise
permitted by the Indenture; (iv) Investments received in connection with any
bankruptcy or reorganization proceeding, or as a result of foreclosure,
perfection or enforcement of any Lien or any judgment or settlement of any
Person in exchange for or satisfaction of Indebtedness or other obligations or
other property received from such Person, or for other liabilities or
obligations of such Person created, in accordance with the terms of the
Indenture; (v) Investments in Currency Agreements or Interest Protection
Agreements described in the definition of Permitted Indebtedness; (vi) any loan
or advance to an executive officer or director of the Company or any Restricted
Subsidiary made in the ordinary course of business; provided, however, that any
-------- -------
such loan or advance exceeding $1 million shall have been approved by the Board
of Directors of the Company or a committee thereof consisting of disinterested
members; (vii) Investments in joint ventures in a Real Estate Business with
unaffiliated third parties in an aggregate amount at any time outstanding not to
exceed 10% of Consolidated Tangible Assets at such time; (viii) Investments in
interests in issuances of collateralized mortgage obligations, mortgages,
mortgage loan securities or other mortgage related assets; and (ix) Investments
in an aggregate amount outstanding not to exceed $75 million.
"Permitted Liens" means (i) Liens for taxes, assessments or
---------------
governmental or quasi-government charges or claims that (a) are not yet
delinquent, (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 GAAP, if required, or (c) encumber solely property
abandoned or in the process of being abandoned, (ii) statutory Liens of
landlords and carriers', warehousemen's, mechanics', suppliers', materialmen's,
repairmen's or
<PAGE>
-20-
other Liens imposed by law and arising in the ordinary course of business and
with respect to amounts that, to the extent applicable, 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 GAAP, if required, (iii) Liens (other than any
Lien imposed by the Employer 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, (iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
development obligations, progress payments, government contacts, utility
services, developer's or other obligations to make on-site or off-site
improvements and other obligations of like nature (exclusive of obligations for
the payment of borrowed money but including the items referred to in the
parenthetical in clause (i)(a) of the definition of "Indebtedness"), in each
case incurred in the ordinary course of business of the Company and the
Restricted Subsidiaries, (v) attachment or judgment Liens not giving rise to a
Default or an Event of Default, (vi) easements, dedications, assessment district
or similar liens in connection with municipal or special district financing,
rights-of-way, restrictions, reservations, other similar charges, burdens, and
other similar charges or encumbrances not materially interfering with the
ordinary course of business of the Company and the Restricted Subsidiaries,
(vii) zoning restrictions, licenses, restrictions on the use of real property or
minor irregularities in title thereto, which do not materially impair the use of
such real property in the ordinary course of business of the Company and the
Restricted Subsidiaries, (viii) Liens securing Indebtedness incurred pursuant to
clause (viii) or (ix) of the definition of Permitted Indebtedness, (ix) Liens
securing Indebtedness of the Company or any Restricted Subsidiary permitted to
be incurred under the Indenture; provided, that the aggregate amount of all
--------
consolidated Indebtedness of the Company and the Restricted Subsidiaries
(including, with respect to Capitalized Lease Obligations, the Attributable Debt
in respect thereof) secured by Liens (other than Non-Recourse Indebtedness and
Indebtedness incurred pursuant to clause (ix) of the definition of Permitted
Indebtedness) shall not exceed 40% of Consolidated Adjusted Tangible Assets at
any one time outstanding (after giving effect to the incurrence of such
Indebtedness and the use of the proceeds thereof), (x) Liens securing Non-
Recourse Indebtedness of the Company or any Restricted Subsidiary; provided,
--------
that such Liens apply only to the property financed out of the net proceeds of
such Non-Recourse Indebted-
<PAGE>
-21-
ness within 90 days after the incurrence of such Non-Recourse Indebtedness, (xi)
Liens securing Purchase Money Indebtedness; provided that such Liens apply only
--------
to the property acquired, constructed or improved with the proceeds of such
Purchase Money Indebtedness within 90 days after the incurrence of such Purchase
Money Indebtedness, (xii) Liens on property or assets of the Company or any
Restricted Subsidiary securing Indebtedness of the Company or any Restricted
Subsidiary owing to the Company or one or more Restricted Subsidiaries, (xiii)
leases or subleases granted to others not materially interfering with the
ordinary course of business of the Company and the Restricted Subsidiaries,
(xiv) purchase money security interests (including, without limitation,
Capitalized Lease Obligations); provided, that such Liens apply only to the
--------
Property acquired and the related Indebtedness is incurred within 90 days after
the acquisition of such Property, (xv) any right of first refusal, right of
first offer, option, contract or other agreement to sell an asset; provided,
--------
that such sale is not otherwise prohibited under the Indenture, (xvi) any right
of a lender or lenders to which the Company or a Restricted Subsidiary may be
indebted to offset against, or appropriate and apply to the payment of such,
Indebtedness any and all balances, credits, deposits, accounts or money of the
Company or a Restricted Subsidiary with or held by such lender or lenders or its
Affiliates, (xvii) any pledge or deposit of cash or property in conjunction with
obtaining surety, performance, completion or payment bonds and letters of credit
or other similar instruments or providing earnest money obligations, escrows or
similar purpose undertakings or indemnifications in the ordinary course of
business of the Company and its Restricted Subsidiaries, (xviii) Liens for
homeowner and property owner association developments and assessments, (xix)
Liens securing Refinancing Indebtedness; provided, that such Liens extend only
--------
to the assets securing the Indebtedness being refinanced, and (xx) Liens
incurred in the ordinary course of business as security for the obligations of
the Company and its Restricted Subsidiaries with respect to indemnification in
respect of title insurance providers.
"Person" means any individual, corporation, partnership, limited
------
liability company, joint venture, incorporated or unincorporated association,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Preferred Stock" of any Person means all Capital Stock of such Person
---------------
which has a preference in liquidation or with respect to the payment of
dividends.
<PAGE>
-22-
"Property" of any Person means all types of real, personal, tangible,
--------
intangible or mixed property owned by such Person, whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"Public Equity Offering" means an underwritten public offering of
----------------------
Common Equity of the Company pursuant to an effective registration statement
filed under the Securities Act (excluding registration statements filed on Form
S-8 or any successor form).
"Purchase Money Indebtedness" means Indebtedness of the Company or any
---------------------------
Restricted Subsidiary incurred for the purpose of financing all or any part of
the purchase price, or the cost of construction or improvement, of any property
to be used in the ordinary course of business by the Company and the Restricted
Subsidiaries; provided, however, that (i) the aggregate principal amount of such
-------- -------
Indebtedness shall not exceed such purchase price or cost and (ii) such
Indebtedness shall be incurred no later than 90 days after the acquisition of
such property or completion of such construction or improvement.
"Qualified Stock" means Capital Stock of the Company other than
---------------
Disqualified Stock.
"Rating Agencies" shall mean (1) S&P and (2) Moody's.
---------------
"Real Estate Business" means homebuilding, housing construction, real
--------------------
estate development or construction and related real estate activities, including
the provision of mortgage financing or title insurance.
"Refinancing Indebtedness" means Indebtedness (to the extent not
------------------------
Permitted Indebtedness) that refunds, refinances or extends any Indebtedness of
the Company or any Restricted Subsidiary (to the extent not Permitted
Indebtedness) outstanding on the Issue Date or other Indebtedness (to the extent
not Permitted Indebtedness) permitted to be incurred by the Company or any
Restricted Subsidiary pursuant to the terms of this Indenture, but only to the
extent that (i) the Refinancing Indebtedness is subordinated to the Notes or the
Guarantees, as the case may be, to the same extent as the Indebtedness being
refunded, refinanced or extended, if at all, (ii) the Refinancing Indebtedness
is scheduled to mature either (a) no earlier than the Indebtedness being
refunded, refinanced or extended or (b) after the maturity date of the Notes,
(iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to
mature on or prior to the maturity date of the Notes has a
<PAGE>
-23-
Weighted Average Life to Maturity at the time such Refinancing Indebtedness is
incurred that is equal to or greater than the Weighted Average Life to Maturity
of the portion of the Indebtedness being refunded, refinanced or extended that
is scheduled to mature on or prior to the maturity date of the Notes, and (iv)
such Refinancing Indebtedness is in an aggregate principal amount that is equal
to or less than the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended.
"Restricted Payment" means any of the following: (i) the declaration
------------------
or payment of any dividend or any other distribution on Capital Stock of the
Company or any Restricted Subsidiary or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any Restricted Subsidiary (other than (a) dividends or distributions payable
solely in Qualified Stock and (b) in the case of Restricted Subsidiaries,
dividends or distributions payable to the Company or to a Restricted
Subsidiary); (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company or any Restricted Subsidiary
(other than a payment made to the Company or any Restricted Subsidiary); and
(iii) any Investment (other than any Permitted Investment), including any
Investment in an Unrestricted Subsidiary (including by the designation of a
Subsidiary of the Company as an Unrestricted Subsidiary).
"Restricted Subsidiary" means any Subsidiary of the Company which is
---------------------
not an Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group or any successor to its
---
debt rating business.
"Significant Subsidiary" means any Subsidiary of the Company which
----------------------
would constitute a "significant subsidiary" as defined in Rule 1-02 of
Regulation S-X under the Securities Act and the Exchange Act.
"Subsidiary" of any Person means any corporation or other 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 or controlled by such Person.
"Trustee" means the party named as such above until a successor
-------
replaces such party in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
<PAGE>
-24-
"Unrestricted Subsidiary" means any Subsidiary of the Company so
-----------------------
designated by a resolution adopted by the Board of Directors of the Company or a
duly authorized committee thereof as provided below; provided that (a) the
--------
holders of Indebtedness thereof do not have direct or indirect recourse against
the Company or any Restricted Subsidiary, and neither the Company nor any
Restricted Subsidiary otherwise has liability, for any payment obligations in
respect of such Indebtedness (including any undertaking, agreement or instrument
evidencing such Indebtedness), except, (i) in each case, to the extent that the
amount thereof constitutes a Restricted Payment permitted by the Indenture, (ii)
in the case of Non-Recourse Indebtedness, to the extent such recourse or
liability is for the matters discussed in the last sentence of the definition of
"Non-Recourse Indebtedness," or (iii) to the extent such Indebtedness is a
guarantee by such Subsidiary of Indebtedness of the Company or a Restricted
Subsidiary and (b) no holder of any Indebtedness of such Subsidiary shall have a
right to declare a default on such Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity as a result of a default
on any Indebtedness of the Company or any Restricted Subsidiary. Subject to the
foregoing, the Board of Directors of the Company or a duly authorized committee
thereof may designate any Subsidiary to be an Unrestricted Subsidiary; provided,
--------
however, that (i) the net amount (the "Designation Amount") then outstanding of
- ------- ------------------
all previous Investments by the Company and the Restricted Subsidiaries in such
Subsidiary will be deemed to be a Restricted Payment at the time of such
designation and will reduce the amount available for Restricted Payments under
Section 3.03 hereof, to the extent provided therein, (ii) the Company must be
permitted under Section 3.03 hereof to make the Restricted Payment deemed to
have been made pursuant to clause (i), and (iii) after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. In accordance with the foregoing, and not in limitation thereof,
Investments made by any Person in any Subsidiary of such Person prior to such
Person's merger with the Company or any Restricted Subsidiary (but not in
contemplation or anticipation of such merger) shall not be counted as an
Investment by the Company or such Restricted Subsidiary if such Subsidiary of
such Person is designated as an Unrestricted Subsidiary. The Board of Directors
of the Company or a duly authorized committee thereof may also redesignate an
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
-------- -------
(i) the Indebtedness of such Unrestricted Subsidiary as of the date of such
redesignation could then be incurred under Section 3.02 hereof and (ii)
immediately after giving effect to such redesignation and the incurrence of any
<PAGE>
-25-
such additional Indebtedness, the Company and the Restricted Subsidiaries could
incur $1.00 of additional Indebtedness under Section 3.02(a) hereof. Any such
designation or redesignation by the Board of Directors of the Company or a
committee thereof will be evidenced to the Trustee by the filing with the
Trustee of a certified copy of the resolution of the Board of Directors of the
Company or a committee thereof 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 of such Officers' Certificate. The designation of any
Person as an Unrestricted Subsidiary shall be deemed to include a designation of
all Subsidiaries of such Person as Unrestricted Subsidiaries; provided, however,
-------- -------
that the ownership of the general partnership interest (or a similar member's
interest in a limited liability company) by an Unrestricted Subsidiary shall not
cause a Subsidiary of the Company of which more than 95% of the equity interest
is held by the Company or one or more Restricted Subsidiaries to be deemed an
Unrestricted Subsidiary.
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness or portion thereof at any date, the number of years obtained by
dividing (i) 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, without limitation, 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 by
(ii) the sum of all such payments described in clause (i)(a) above.
ARTICLE THREE
Covenants
Section 3.01. Repurchase of Notes upon Change of Control
- --------
(a) In the event that there shall occur a Change of Control, each
Holder of Notes shall have the right, at such Holder's option, to require the
Company to purchase all or any part of such Holder's Notes on a date (the
"Repurchase Date") that is no later than 90 days after notice of the Change of
---------------
Control, at 101% of the principal amount thereof plus accrued interest to the
Repurchase Date.
(b) On or before the thirtieth day after any Change of Control, the
Company is obligated to mail, or cause to be
<PAGE>
-26-
mailed, to all Holders of record of Notes a notice regarding the Change of
Control and the repurchase right. The notice shall state the Repurchase Date,
the date by which the repurchase right must be exercised, the price for the
Notes and the procedure which the Holder must follow to exercise such right.
Substantially simultaneously with mailing of the notice, the Company shall cause
a copy of such notice to be published in a newspaper of general circulation in
the Borough of Manhattan, The City of New York. To exercise such right, the
Holder of such Note must deliver at least ten days prior to the Repurchase Date
written notice to the Company (or an agent designated by the Company for such
purpose) of the Holder's exercise of such right, together with the Note with
respect to which the right is being exercised, duly endorsed for transfer;
provided, however, that if mandated by applicable law, a Holder may be permitted
- -------- -------
to deliver such written notice nearer to the Repurchase Date than may be
specified by the Company.
(c) The Company will comply with applicable law, including Section
14(e) of the Exchange Act and Rule 14e-1 thereunder, if applicable, if the
Company is required to give a notice of right of repurchase as a result of a
Change of Control.
Section 3.02. Limitations on Indebtedness.
---------------------------
(a) Until the Notes are rated Investment Grade by both Rating
Agencies (after which time the following covenant will no longer be in effect),
the Company will not, and will not cause or permit any Restricted Subsidiary,
directly or indirectly, to, create, incur, assume, become liable for or
guarantee the payment of (collectively, an "incurrence") any Indebtedness
----------
(including Acquired Indebtedness) unless, after giving effect thereto and the
application of the proceeds therefrom, the Consolidated Fixed Charge Coverage
Ratio on the date thereof would be at least 2.0 to 1.0.
(b) Notwithstanding the foregoing, the provisions of this
Supplemental Indenture will not prevent the incurrence of: (i) Permitted
Indebtedness, (ii) Refinancing Indebtedness, (iii) Non-Recourse Indebtedness,
(iv) any Guarantee of Indebtedness of the Company represented by the Notes and
(v) any guarantee of Indebtedness incurred under Credit Facilities in compliance
with this Indenture.
(c) For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness may be incurred through the first paragraph
of this covenant or by meeting the criteria of one or more of the types of
Indebtedness
<PAGE>
-27-
described in the second paragraph of this covenant (or the definitions of the
terms used therein), the Company, in its sole discretion, (i) may classify such
item of Indebtedness under and comply with either of such paragraphs (or any of
such definitions), as applicable, (ii) may classify and divide such item of
Indebtedness into more than one of such paragraphs (or definitions), as
applicable, and (iii) may elect to comply with such paragraphs (or definitions),
as applicable, in any order.
(d) The Company will not, and will not cause or permit any Guarantor
to, directly or indirectly, in any event incur any Indebtedness that purports to
be by its terms (or by the terms of any agreement governing such Indebtedness)
subordinated to any other Indebtedness of the Company or of such Guarantor, as
the case may be, unless such Indebtedness is also by its terms (or by the terms
of any agreement governing such Indebtedness) made expressly subordinated to the
Notes or the Guarantee of such Guarantor, as the case may be, to the same extent
and in the same manner as such Indebtedness is subordinated to such other
Indebtedness of the Company or such Guarantor, as the case may be.
Section 3.03. Limitations on Restricted Payments.
----------------------------------
(a) Until the Notes are rated Investment Grade by both Rating
Agencies (after which time the following covenant will no longer be in effect),
the Company will not, and will not cause or permit any Restricted Subsidiary to,
directly or indirectly, make any Restricted Payment unless:
i) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such Restricted
Payment;
ii) immediately after giving effect to such Restricted Payment,
the Company could incur at least $1.00 of Indebtedness pursuant to Section
3.02(a) hereof; and
iii) immediately after giving effect to such Restricted Payment,
the aggregate amount of all Restricted Payments (including the Fair Market Value
of any non-cash Restricted Payment) declared or made after the Issue Date does
not exceed the sum of (a) 50% of the Consolidated Net Income of the Company on a
cumulative basis during the period (taken as one accounting period) from and
including February 1, 1999 and ending on the last day of the Company's fiscal
quarter immediately preceding the date of such Restricted Payment (or in the
event such Consolidated Net Income shall be a deficit, minus
<PAGE>
-28-
100% of such deficit), plus (b) 100% of the aggregate net cash proceeds of and
the fair market value of Property received by the Company from (1) any capital
contribution to the Company after June 9, 1997 or any issue or sale after June
9, 1997 of Qualified Stock (other than to any Subsidiary of the Company) and (2)
the issue or sale after June 9, 1997 of any Indebtedness or other securities of
the Company convertible into or exercisable for Qualified Stock of the Company
that have been so converted or exercised, as the case may be, plus (c) $86.0
million, which is equal to the aggregate principal amount of the Company's 6-
7/8% Convertible Subordinated Notes due 2002 that were converted into the
Company's Common Equity prior to the Issue Date, plus (d) in the case of the
disposition or repayment of any Investment constituting a Restricted Payment
made after the June 9, 1997, an amount (to the extent not included in the
calculation of the Consolidated Net Income referred to in (a)) equal to the
lesser of (x) the return of capital with respect to such Investment (including
by dividend, distribution or sale of Capital Stock) and (y) the amount of such
Investment that was treated as a Restricted Payment, in either case, less the
cost of the disposition or repayment of such Investment (to the extent not
included in the calculation of the Consolidated Net Income referred to in (a)),
plus (e) with respect to any Unrestricted Subsidiary that is redesignated as a
Restricted Subsidiary after June 9, 1997 in accordance with the definition of
Unrestricted Subsidiary (so long as the designation of such Subsidiary as an
Unrestricted Subsidiary was treated as a Restricted Payment made after June 9,
1997 and only to the extent not included in the calculation of the Consolidated
Net Income referred to in (a)), an amount equal to the lesser of (x) the
proportionate interest of the Company or a Restricted Subsidiary in an amount
equal to the excess of (I) the total assets of such Subsidiary, valued on an
aggregate basis at the lesser of book value and Fair Market Value thereof, over
(II) the total liabilities of such Subsidiary, determined in accordance with
GAAP, and (y) the Designation Amount at the time of such Subsidiary's
designation as an Unrestricted Subsidiary, plus (f) $25 million minus (g) the
aggregate amount of all Restricted Payments (other than Restricted Payments
referred to in clause (C) of the immediately succeeding paragraph) made after
June 9, 1997 through the Issue Date.
(b) Clauses (ii) and (iii) of paragraph (a) will not prohibit: (A)
the payment of any dividend within 60 days of its declaration if such dividend
could have been made on the date of its declaration without violation of the
provisions of this Indenture; (B) the repurchase, redemption or retirement of
any shares of Capital Stock of the Company in exchange for, or out
<PAGE>
-29-
of the net proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, other shares of Qualified Stock; and (C) the
purchase, redemption or other acquisition, cancellation or retirement for value
of Capital Stock, or options, warrants, equity appreciation rights or other
rights to purchase or acquire Capital Stock, of the Company or any Subsidiary
held by officers or employees or former officers or employees of the Company or
any Subsidiary (or their estates or beneficiaries under their estates) not to
exceed $20 million in the aggregate since the Issue Date; provided, however,
that each Restricted Payment described in clauses (A) and (B) of this sentence
shall be taken into account for purposes of computing the aggregate amount of
all Restricted Payments pursuant to clause (iii) of paragraph (a).
(c) For purposes of determining the aggregate and permitted amounts
of Restricted Payments made, the amount of any guarantee of any Investment in
any Person that was initially treated as a Restricted Payment and which was
subsequently terminated or expired, net of any amounts paid by the Company or
any Restricted Subsidiary in respect of such guarantee, shall be deducted.
(d) In determining the "fair market value of Property" for purposes
of clause (iii) of the paragraph (a), Property other than cash, Cash Equivalents
and Marketable Securities shall be deemed to be equal in value to the "equity
value" of the Capital Stock or other securities issued in exchange therefor.
The "equity value" of such Capital Stock or other securities shall be equal to
(i) the number of shares of Common Equity issued in the transaction (or issuable
upon conversion or exercise of the Capital Stock or other securities issued in
the transaction) multiplied by the closing sale price of the Common Equity on
its principal market on the date of the transaction (less, in the case of
Capital Stock or other securities which require the payment of consideration at
the time of conversion or exercise, the aggregate consideration payable
thereupon) or (ii) if the Common Equity is not then traded on the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market, or if the Capital
Stock or other securities issued in the transaction do not consist of Common
Equity (or Capital Stock or other securities convertible into or exercisable for
Common Equity), the value of such Capital Stock or other securities as
determined by a nationally recognized investment banking firm retained by the
Board of Directors of the Company.
<PAGE>
-30-
Section 3.04. Limitations on Transactions with Affiliates.
-------------------------------------------
(a) Until the Notes are rated Investment Grade by both Rating
Agencies (after which time the following covenant will no longer be in effect),
the Company will not, and will not cause or permit any Restricted Subsidiary to,
make any loan, advance, guarantee or capital contribution to, or for the benefit
of, or sell, lease, transfer or otherwise dispose of any property or assets to,
or for the benefit of, or purchase or lease any property or assets from, or
enter into or amend any contract, agreement or understanding with, or for the
benefit of, any Affiliate of the Company or any Affiliate of any of the
Company's Subsidiaries or any holder of 10% or more of the Common Equity of the
Company (including any Affiliates of such holders), in a single transaction or
series of related transactions (each, an "Affiliate Transaction"), except for
---------------------
any Affiliate Transaction the terms of which are at least as favorable as the
terms which could be obtained by the Company or such Restricted Subsidiary, as
the case may be, in a comparable transaction made on an arm's length basis with
Persons who are not such a holder, an Affiliate of such a holder or an Affiliate
of the Company or any of the Company's Subsidiaries.
(b) In addition, the Company will not, and will not cause or permit
any Restricted Subsidiary to, enter into an Affiliate Transaction unless (i)
with respect to any such Affiliate Transaction involving or having a value of
more than $5 million, the Company shall have (x) obtained the approval of a
majority of the Board of Directors of the Company and (y) either obtained the
approval of a majority of the Company's disinterested directors or obtained an
opinion of a qualified independent financial advisor to the effect that such
Affiliate Transaction is fair to the Company or such Restricted Subsidiary, as
the case may be, from a financial point of view and (ii) with respect to any
such Affiliate Transaction involving or having a value of more than $25 million,
the Company shall have (x) obtained the approval of a majority of the Board of
Directors of the Company and (y) delivered to the Trustee an opinion of a
qualified independent financial advisor to the effect that such Affiliate
Transaction is fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view.
(c) Notwithstanding the foregoing, an Affiliate Transaction will not
include (i) any contract, agreement or understanding with, or for the benefit
of, or plan for the benefit of employees of the Company or its Subsidiaries
generally
<PAGE>
-31-
(in their capacities as such) that has been approved by the Board of Directors
of the Company, (ii) Capital Stock issuances to directors, officers and
employees of the Company or its Subsidiaries pursuant to plans approved by the
stockholders of the Company, (iii) any Restricted Payment otherwise permitted
under the "Limitations on Restricted Payments" covenant, (iv) any transaction
between or among the Company and one or more Restricted Subsidiaries or between
or among Restricted Subsidiaries (provided, however, no such transaction shall
-------- -------
involve any other Affiliate of the Company (other than an Unrestricted
Subsidiary to the extent the applicable amount constitutes a Restricted Payment
permitted by this Indenture)) and (v) any transaction between one or more
Restricted Subsidiaries and one or more Unrestricted Subsidiaries where all of
the payments to, or other benefits conferred upon, such Unrestricted
Subsidiaries are substantially contemporaneously dividended, or otherwise
distributed or transferred without charge, to the Company or a Restricted
Subsidiary.
Section 3.05. Limitations on Dispositions of Assets.
-------------------------------------
Until the Notes are rated Investment Grade by both Rating Agencies
(after which time the following covenant will no longer be in effect), the
Company will not, and will not cause or permit any Restricted Subsidiary to,
make any Asset Disposition unless (x) the Company (or such Restricted
Subsidiary, as the case may be) receives consideration at the time of such Asset
Disposition at least equal to the Fair Market Value thereof, and (y) not less
than 70% of the consideration received by the Company (or such Restricted
Subsidiary, as the case may be) is in the form of cash, Cash Equivalents and
Marketable Securities. The amount of any Indebtedness (other than any
Indebtedness subordinated to the Notes) of the Company or any Restricted
Subsidiary that is actually assumed by the transferee in such Asset Disposition
shall be deemed to be consideration required by clause (y) above for purposes of
determining the percentage of such consideration received by the Company or the
Restricted Subsidiaries. The Net Cash Proceeds of an Asset Disposition shall,
within one year, at the Company's election, (a) be used by the Company or a
Restricted Subsidiary in the business of the construction and sale of homes
conducted by the Company and the Restricted Subsidiaries or any other business
of the Company or a Restricted Subsidiary existing at the time of such Asset
Disposition or (b) to the extent not so used, be applied to make a Net Cash
Proceeds Offer for the Notes and, if the Company or a Restricted Subsidiary
elects or is required to do so, repay, purchase or redeem any other
unsubordinated Indebtedness (on a pro rata basis if
<PAGE>
-32-
the amount available for such repayment, purchase or redemption is less than the
aggregate amount of (i) the principal amount of the Notes tendered in such Net
Cash Proceeds Offer and (ii) the lesser of the principal amount, or accreted
value, of such other unsubordinated Indebtedness, plus, in each case accrued
interest to the date of repayment, purchase or redemption) at 100% of the
principal amount or accreted value thereof, as the case may be, plus accrued
interest to the date of repurchase or repayment. Notwithstanding the foregoing,
(A) the Company will not be required to apply such Net Cash Proceeds to the
repurchase of Notes in accordance with clause (b) of the preceding sentence
except to the extent that such Net Cash Proceeds, together with the aggregate
Net Cash Proceeds of prior Asset Dispositions (other than those so used) which
have not been applied in accordance with this provision and as to which no prior
Net Cash Proceeds Offer shall have been made, exceed 5% of Consolidated Tangible
Assets and (B) in connection with any Asset Disposition, the Company and the
Restricted Subsidiaries will not be required to comply with the requirements of
clause (y) of the first sentence of this paragraph to the extent that the
aggregate non-cash consideration received in connection with such Asset
Disposition, together with the sum of all non-cash consideration received in
connection with all prior Asset Dispositions that has not yet been converted
into cash, does not exceed 5% of Consolidated Tangible Assets; provided,
--------
however, that when any non-cash consideration is converted into cash, such cash
- -------
shall constitute Net Cash Proceeds and be subject to the preceding sentence.
Section 3.06. Limitations on Liens.
--------------------
The Company will not, and will not cause or permit any Restricted
Subsidiary to, create, incur, assume or suffer to exist any Liens, other than
Permitted Liens, on any of its Property, or on any shares of Capital Stock or
Indebtedness of any Restricted Subsidiary, unless contemporaneously therewith or
prior thereto all payments due under this Indenture and the Notes are secured on
an equal and ratable basis with the obligation or liability so secured until
such time as such obligation or liability is no longer secured by a Lien.
Section 3.07. Limitations on Restrictions Affecting Restricted Subsidiaries.
-------------------------------------------------------------
The Company will not, and will not cause or permit any Restricted
Subsidiary to, create, assume or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction (other than encumbrances or
restrictions
<PAGE>
-33-
imposed by law or by judicial or regulatory action or by provisions of leases
and other agreements that restrict the assignability thereof) on the ability of
any Restricted Subsidiary to (i) pay dividends or make any other distributions
on its Capital Stock or any other interest or participation in, or measured by,
its profits, owned by the Company or any other Restricted Subsidiary, or pay
interest on or principal of any Indebtedness owed to the Company or any other
Restricted Subsidiary, (ii) make loans or advances to the Company or any other
Restricted Subsidiary, or (iii) transfer any of its properties or assets to the
Company or any other Restricted Subsidiary, except for (a) encumbrances or
restrictions existing under or by reason of applicable law, (b) covenants or
restrictions contained in Indebtedness in effect on the date of this Indenture
as such covenants or restrictions are in effect on such date, (c) any
restrictions or encumbrances arising under Acquired Indebtedness; provided, that
--------
such encumbrance or restriction applies only to either the assets that were
subject to the restriction or encumbrance at the time of the acquisition or the
obligor on such Indebtedness and its Subsidiaries, (d) any restrictions or
encumbrances arising in connection with Refinancing Indebtedness; provided,
--------
however, that any restrictions and encumbrances of the type described in this
- -------
clause (d) that arise under such Refinancing Indebtedness shall not be
materially more restrictive than those under the agreement creating or
evidencing the Indebtedness being refunded, refinanced, replaced or extended,
(e) any Permitted Lien, or any other agreement restricting the sale or other
disposition of property, securing Indebtedness permitted by this Indenture if
such Permitted Lien or agreement does not expressly restrict the ability of a
Subsidiary of the Company to pay dividends or make or repay loans or advances
prior to default thereunder, (f) reasonable and customary borrowing base
covenants set forth in agreements evidencing Indebtedness otherwise permitted by
this Indenture, (g) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Company or any Restricted
Subsidiary, and (h) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition.
Section 3.08. Limitations on Mergers, Consolidations and Sales of Assets.
----------------------------------------------------------
Neither the Company nor any Guarantor will consolidate or merge with
or into, or sell, lease, convey or otherwise
<PAGE>
-34-
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 this Indenture (as an entirety or
substantially in one transaction or in a series of related transactions), to any
Person (in each case other than in a transaction in which the Company or a
Restricted Subsidiary is the survivor of a consolidation or merger, or the
transferee in a sale, lease, conveyance or other disposition) unless: (i) the
Person formed by or surviving such consolidation or merger (if other than the
Company or the Guarantor, as the case may be), or to which such sale, lease,
conveyance or other disposition or assignment will be made (collectively, the
"Successor"), is a corporation or other legal entity organized and existing
---------
under the laws of the United States or any state thereof or the District of
Columbia, and the Successor assumes by supplemental indenture in a form
reasonably satisfactory to the Trustee all of the obligations of the Company or
the Guarantor, as the case may be, under the Notes or a Guarantee, as the case
may be, and the Indenture, (ii) immediately after giving effect to such
transaction, no Default or Event of Default has occurred and is continuing,
(iii) immediately after giving effect to such transaction and the use of any net
proceeds therefrom, on a pro forma basis, the Consolidated Net Worth of the
--- -----
Company or the Successor (in the case of a transaction involving the Company),
as the case may be, would be at least equal to the Consolidated Net Worth of the
Company immediately prior to such transaction (exclusive of any adjustments to
Consolidated Net Worth attributable to transaction costs) less any amount
treated as a Restricted Payment in connection with such transaction in
accordance with this Indenture and (iv) unless prior to such transaction the
Notes are rated Investment Grade by both Rating Agencies (after which this
clause (iv) shall not apply), immediately after giving effect to such
transaction, the Company could incur at least $1.00 of Indebtedness pursuant to
Section 3.02(a) hereof. The foregoing provisions shall not apply to (i) a
transaction involving the sale or disposition of Capital Stock of a Guarantor,
or the consolidation or merger of a Guarantor, or the sale, lease, conveyance or
other disposition of all or substantially all of the assets of a Guarantor, that
in any such case results in such Guarantor being released from its Guarantee
pursuant to the Indenture or (ii) a transaction the purpose of which is to
change the state of incorporation of the Company or any Guarantor.
<PAGE>
-35-
Section 3.09. Reports to Holders of Notes.
---------------------------
The Company will file with the Commission the annual reports and the
information, documents and other reports required to be filed pursuant to
Section 13 or 15(d) of the Exchange Act. The Company will file with the Trustee
and mail to each Holder of record of Notes such reports, information and
documents within 15 days after it files them with the Commission. In the event
that the Company is no longer subject to these periodic requirements of the
Exchange Act, it will nonetheless continue to file reports with the Commission
and the Trustee and mail such reports to each holder of Notes as if it were
subject to such reporting requirements. Regardless of whether the Company is
required to furnish such reports to its stockholders pursuant to the Exchange
Act, the Company will cause its consolidated financial statements and a
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" written report, similar to those that would have been required to
appear in annual or quarterly reports, to be delivered to Holders of Notes.
ARTICLE FOUR
Miscellaneous
Section 4.01. Governing Law.
-------------
The laws of the State of New York shall govern this Supplemental
Indenture, the Securities of each Series and the Guarantees.
Section 4.02. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Supplemental Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or a Subsidiary. Any such
indenture, loan or debt agreement may not be used to interpret this Supplemental
Indenture.
Section 4.03. No Recourse Against Others.
--------------------------
All liability described in paragraph 13 of the Notes of any director,
officer, employee or stockholder, as such, of the Company is waived and
released.
<PAGE>
-36-
Section 4.04. Successors and Assigns.
----------------------
All covenants and agreements of the Company and the Guarantors in this
Supplemental Indenture and the Notes shall bind its successors and assigns. All
agreements of the Trustee in this Supplemental Indenture shall bind its
successors and assigns.
Section 4.05. Duplicate Originals.
-------------------
The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
Section 4.06. Severability.
------------
In case any one or more of the provisions contained in this
Supplemental Indenture or in the Notes shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Supplemental
Indenture or of the Notes.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties have caused this Supplemental
Indenture to be duly executed, all as of the date first above written.
D.R. HORTON, INC.
By:
--------------------------------------
Name: David J. Keller
Title: Chief Financial Officer
GUARANTORS:
Meadows I, Ltd.
Meadows II, Ltd.
Meadows IX, Inc.
Meadows X, Inc.
D.R. Horton, Inc.-Birmingham
D.R. Horton, Inc.-Denver
D.R. Horton, Inc.-Greensboro
D.R. Horton, Inc.-Louisville
D.R. Horton, Inc.-Minnesota
D.R. Horton, Inc.-New Jersey
D.R. Horton, Inc.-Portland
D.R. Horton, Inc.-Sacramento
D.R. Horton, Inc.-Torrey
D.R. Horton San Diego Holding Company, Inc.
D.R. Horton Los Angeles Holding Company, Inc.
D.R. Horton Los Angeles Management Company, Inc.
D.R. Horton San Diego Management Company, Inc.
DRH Construction, Inc.
S. G. Torrey Atlanta, Ltd.
DRH Cambridge Homes, Inc. (formerly D.R. Horton
Sacramento Management Company, Inc.)
C. Richard Dobson Builders, Inc.
Land Development, Inc.
DRH Tucson Construction, Inc.
Continental Homes, Inc.
KDB Homes, Inc.
L&W Investments, Inc.
Continental Ranch, Inc.
Continental Homes of Florida, Inc.
CHI Construction Company
<PAGE>
CHTEX of Texas, Inc.
CH Investments of Texas, Inc.
By:
-------------------------------------------------
Name: David J. Keller
Title: Treasurer
SGS COMMUNITIES AT GRANDE QUAY, LLC
and
By: Meadows X, Inc., a member
By:
-------------------------------------------------
Name: David J. Keller
Title: Treasurer
D.R. HORTON MANAGEMENT COMPANY, LTD.
D.R. HORTON - TEXAS, LTD.
By: Meadows I, Ltd.,
its general partner
By:
-------------------------------------------------
Name: David J. Keller
Title: Treasurer
<PAGE>
CONTINENTAL HOMES OF TEXAS, L.P.
By: CHTEX of Texas, Inc.,
its general partner
By:
-------------------------------------------------
Name: David J. Keller
Title: Treasurer
<PAGE>
AMERICAN STOCK TRANSFER & TRUST
COMPANY, as Trustee
By: _____________________________
Name:
Title:
<PAGE>
Exhibit A
---------
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER
OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A-1
<PAGE>
No. CUSIP No.: 23331AAD1
8% Senior Notes due 2009
D.R. HORTON, INC.
a Delaware corporation
promises to pay to
or registered assigns
the principal sum of Dollars on February 1, 2009
Interest Payment Dates: February 1 and August 1, commencing August 1, 1999
Interest Record Dates: January 15 and July 15
Dated:
D.R. HORTON, INC.
[Seal]
By:
-----------------------------------
Title:
By:
-----------------------------------
Title:
American Stock Transfer & Trust
Company, as Trustee, certifies that
this is one of the Securities
referred to in the within mentioned
Indenture.
Date:
By:
------------------------------
Authorized Signatory
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<PAGE>
D.R. HORTON, INC.
8% Senior Notes due 2009
1. Interest.
--------
D.R. HORTON, INC. (the "Company"), a Delaware corporation, promises to
pay interest on the principal amount of this Security at the rate per annum
shown above. The Company will pay interest semiannually on February 1 and
August 1 of each year, commencing August 1, 1999, until the principal is paid or
made available for payment. Interest on the Securities will accrue from the
most recent date to which interest has been paid or duly provided for or, if no
interest has been paid, from the date of original issuance, provided that, if
there is no existing default in the payment of interest, and if this Security is
authenticated between a record date referred to on the face hereof and the next
succeeding interest payment date, interest shall accrue from such interest
payment date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment.
-----------------
The Company will pay interest on the Securities (except defaulted
interest, if any, which will be paid on such special payment date to Holders of
record on such special record date as may be fixed by the Company) to the
persons who are registered Holders of Securities at the close of business on the
January 15 and July 15 immediately preceding the interest payment date. Holders
must surrender Securities to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar.
--------------------------
Initially, American Stock Transfer & Trust Company (the "Trustee")
will act as Paying Agent and Registrar. The Company may change or appoint any
Paying Agent, Registrar or co-Registrar without notice. The Company or any of
its Subsidiaries may act as Paying Agent, Registrar or co-Registrar.
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<PAGE>
4. Indenture.
---------
The Company issued the Securities under an Indenture dated as of June
9, 1997 among the Company, the Guarantors and the Trustee, as supplemented (the
"Indenture"). The terms of the Securities and the Guarantees include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 ("TIA") as in effect on the date of the Indenture.
The Securities and the Guarantees are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
them. Capitalized terms not defined herein have the meanings given to those
terms in the Indenture.
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture and the applicable Authorizing
Resolution or supplemental indenture. Requests may be made to: D.R. Horton,
Inc., 1901 Ascension Blvd., Suite 100, Arlington, Texas 76006, Attention: Chief
Financial Officer.
5. Redemption.
----------
Except as set forth in the following sentence, the Securities will not
be redeemable. The Company may redeem Securities, at any time prior to February
1, 2002, with the net cash proceeds of one or more Public Equity Offerings by
the Company, at a redemption price equal to 108.0% of the principal amount of
such Securities, plus accrued and unpaid interest, if any, to the date of
redemption; provided, however, that after each such redemption not less than
-------- -------
$250,300,000 principal amount of Securities (including any Additional Securities
but excluding any Securities held by the Company or any of its Affiliates)
remains outstanding. Notice of any such redemption must be given within 60 days
after the date of the closing of the relevant Public Equity Offering.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may
be redeemed in part. On and after the redemption date interest ceases to accrue
on Securities or portions of them called for redemption, provided that if the
Company shall default in the payment of such Security at the redemption price
together with accrued in-
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<PAGE>
terest, interest shall continue to accrue at the rate borne by the Securities.
6. Denominations, Transfer, Exchange.
---------------------------------
The Securities are in registered form only without coupons in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Securities by presentation of such Securities to the Registrar or a
co-Registrar with a request to register the transfer or to exchange them for an
equal principal amount of Securities of other denominations. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not transfer or exchange any Security
selected for redemption, except the unredeemed part thereof if the Security is
redeemed in part, or transfer or exchange any Securities for a period of 15 days
before a selection of Securities to be redeemed.
7. Persons Deemed Owners.
---------------------
The registered Holder of this Security shall be treated as the owner
of it for all purposes.
8. Unclaimed Money.
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent will pay the money back to the
Company at its request. After that, Holders entitled to the money must look to
the Company for payment unless an abandoned property law designates another
person.
9. Amendment, Supplement, Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the outstanding Securities and any past default or
compliance with any provision relating to the Securities may be waived in a
particular instance with the consent of the Holders of a majority in principal
amount of the outstanding Securities. Without the consent of any
Securityholder, the Company and the Trustee may amend or supplement the
Indenture or the Securities to cure any ambiguity, defect or inconsistency, to
provide for uncerti-
A-5
<PAGE>
ficated Securities in addition to or in place of certificated Securities, to
create a Series and establish its terms, to remove a Guarantor which, in
accordance with the terms of the Indenture, ceases to be liable in respect of
its Guarantee, or to make any other change, provided such action does not
adversely affect the rights of any Securityholder.
10. Successor Corporation.
---------------------
When a successor corporation assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor corporation
will be released from those obligations.
11. Trustee Dealings With Company.
-----------------------------
American Stock Transfer & Trust Company, the Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or its affiliates, and may
otherwise deal with the Company or its affiliates, as if it were not Trustee.
12. No Recourse Against Others.
--------------------------
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Securityholder by accepting
a Security waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities.
13. Discharge of Indenture.
----------------------
The Indenture contains certain provisions pertaining to defeasance,
which provisions shall for all purposes have the same effect as if set forth
herein.
14. Authentication.
--------------
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
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<PAGE>
15. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
A-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form
below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address, and zip code)
----------
and irrevocably appoint
- -------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
- -------------------------------------------------------------------------------
Date: Your signature:
----------------- --------------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee:
----------------------------------------------------------
Signature must be guaranteed by
participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
[FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE]
GUARANTEE
The undersigned (the "Guarantors") have unconditionally guaranteed,
jointly and severally (such guarantee by each Guarantor being referred to herein
as the "Guarantee") (i) the due and punctual payment of the principal of and
interest on the Securities, whether at maturity, by acceleration or otherwise,
the due and punctual payment of interest on the overdue principal and interest,
if any, on the Securities, to the extent lawful, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms set forth in Article Nine of the
Indenture and (ii) in case of any extension of time of payment or renewal of any
Securities or any of such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Guarantors shall have any liability under
the Guarantee by reason of such person's status as stockholder, officer,
director, employee or incorporator. Each holder of a Security by accepting a
Security waives and releases all such liability. This waiver and release are
part of the consideration for the issuance of the Guarantees.
Each holder of a Security by accepting a Security agrees that any
Guarantor named below shall have no further liability with respect to its
Guarantee if such Guarantor otherwise ceases to be liable in respect of its
Guarantee in accordance with the terms of the Indenture.
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
[Guarantors]
By:
-------------------------------
Title:
<PAGE>
Exhibit 12.1
D.R. HORTON, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
For the fiscal years
ended September 30,
----------------------------------------------------
1994 1995 1996 1997 1998
----------------------------------------------------
($'s in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated pretax income from continuing
operations ................................... $ 51,728 $ 58,022 $ 89,814 $108,550 $159,099
Amortization of capitalized interest ................ 12,259 18,734 25,670 29,323 47,995
Interest expensed ................................... 7,946 9,551 10,006 11,707 17,453
----------------------------------------------------
Earnings ..................................... $ 71,933 $ 86,307 $125,490 $149,580 $224,547
====================================================
Interest incurred ................................... $ 23,869 $ 34,500 $ 39,807 $ 51,978 $ 71,649
----------------------------------------------------
Fixed charges ................................ $ 23,869 $ 34,500 $ 39,807 $ 51,978 $ 71,649
====================================================
Ratio of earnings to fixed charges .................. 3.01 2.50 3.15 2.88 3.13
====================================================
</TABLE>
