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Exhibit 99.2
Supplement No. 1 to
Solicitation Statement Dated October 25, 2000
NVR, INC.
Solicitation of Consents to Amendment
of
the Indenture Governing
its
8% Senior Notes due 2005
(CUSIP No. 62944T AB 1)
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This Supplement No. 1 amends the Solicitation Statement dated October 25,
2000 (the "Solicitation Statement") of NVR, Inc. (the "Company") by which the
Company is soliciting (the "Solicitation") the consent of the Registered Holders
of its 8% Senior Notes due 2005 (the "Notes") to the amendment of the indenture
dated as of April 14, 1998 between the Company and The Bank of New York, as
trustee, pursuant to which the Notes were issued (the "Indenture"). Capitalized
terms not defined in this Supplement have the meanings given to them in the
Solicitation Statement.
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The Solicitation Agent for the Consent Solicitation is:
Credit Suisse First Boston
The date of this Supplement No. 1 is November 10, 2000.
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Expiration Date Extended
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The Solicitation Statement is hereby amended to extend the Expiration Date
of the Solicitation to, and to amend the term "Expiration Date" as it is used in
the Solicitation Statement to mean, 5:00 p.m., New York City time, on November
16, 2000 (as such time may be further extended by the Company).
Consent Payment Increased
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The Solicitation Statement is hereby amended to increase the amount of the
Consent Payment to, and to amend the term "Consent Payment" as it is used in the
Solicitation Statement to mean, $40 in cash for each $1,000 principal amount of
Notes for which a Consent has been accepted as described in the Solicitation
Statement. Consent Payments will be made only to Holders on the Record Date who
validly consent to the Proposed Amendment prior to the Expiration Date and whose
Consents have been accepted by the Company as described in the Solicitation
Statement.
"Summary - Certain Tax Considerations" Amended and Replaced in its Entirety
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The section entitled "Summary - Certain Tax Considerations" in the
Solicitation Statement shall be amended and replaced in its entirety with the
following:
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"Certain Tax Consequences............ The Company believes that the receipt of the
Consent Payment by a beneficial owner of Notes (a
"Note Holder") will result in a deemed exchange
for federal income tax purposes of the Notes held
by such Note Holder. Accordingly, the
transaction will be treated as if such Holder had
exchanged its existing Notes (the "Old Notes")
for new Notes (the "New Notes"). It is possible that
the deemed exchange may qualify as a tax-free
recapitalization. In this case, the Note Holder
would not recognize gain or loss, except with
respect to the receipt of the Consent Payment.
If the deemed exchange does not qualify as a
tax-free recapitalization, such deemed exchange
will be a taxable transaction. In addition,
whether or not the deemed exchange is a tax-free
recapitalization, the New Notes may be deemed to
be issued with original issue discount ("OID").
If so, Note Holders of the New Notes will be
required to include certain amounts in income as
interest for federal income tax purposes before
receiving the cash to which such interest income
is attributable. The Company believes that there
will be no tax consequences to a Note Holder if
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such Note Holder does not receive the Consent
Payment. See "Certain Federal Income Tax
Consequences." Because the tax consequences to
each Note Holder are dependent on such Note
Holder's personal situation, each Note Holder is
urged to consult his or her tax advisors."
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"Certain Considerations" Supplemented
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The following paragraph shall be added to the end of the section entitled
"Certain Considerations" in the Solicitation Statement:
"Consequences to all Note Holders if any Note Holders do not Receive the Consent
Payment
The Company believes that the receipt of the Consent Payment by a Note
Holder will result in a deemed exchange for federal income tax purposes of the
Notes held by such Note Holder. In this case, the "New Notes" may be deemed to
be issued with OID. See "Certain Federal Income Tax Consequences." If this
occurs, all Note Holders who receive the Consent Payment will have "New Notes"
deemed to be issued with OID and any Note Holders who do not receive the Consent
Payment will continue to hold the existing Notes which were issued without OID.
Under these circumstances, the disparate tax characteristics of the Notes would
result in the Notes having two different CUSIP numbers which could have an
adverse effect on liquidity. However, all of the Notes--existing Notes as well
as New Notes--will be treated as a single class of securities with respect to
any actions required by the Note Holders of a specified percentage of
outstanding Notes under the Indenture, and all of the Notes--existing Notes as
well as New Notes--will remain subject to all of the terms of the Indenture."
"Certain Federal Income Tax Consequences" Amended and Replaced in its Entirety
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The section entitled "Certain Federal Income Tax Consequences" in the
Solicitation Statement shall be amended and replaced in its entirety with the
following:
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain of the anticipated federal
income tax consequences to Note Holders arising from receipt of the Consent
Payment by a Note Holder and the adoption of the Proposed Amendment. The tax
treatment of a Note Holder might vary depending upon such Note Holder's
particular situation, and certain Note Holders, including foreign persons or
entities, insurance companies, tax-exempt organizations, financial institutions
and dealers in securities, might be subject to special rules not discussed
below. In addition, this discussion does not consider the effect of any
foreign, state or other tax laws that may be applicable to particular Note
Holders. Further, this summary assumes that Note Holders hold their Notes as
"capital assets" (generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code").
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This summary is based on the Code and applicable Treasury Regulations,
rulings, administrative pronouncements and decisions as of the date hereof, all
of which are subject to change or different interpretations at any time with
possible retroactive effect.
The federal income tax consequences of the adoption of the Proposed
Amendment and the receipt of the Consent Payment by a Note Holder will depend on
whether a constructive exchange of Notes for new Notes having modified terms is
deemed to have occurred for federal income tax purposes as a result of the
adoption of the Proposed Amendment or the receipt of the Consent Payment.
Treasury Regulations promulgated under Section 1001 of the Code provide that
such a deemed exchange occurs if a "significant modification" in the terms of
the debt instrument has occurred, taking into account all relevant facts and
circumstances, including the receipt of the Consent Payment.
Under the governing Treasury Regulations, a "significant modification" of a
debt instrument results in a deemed exchange, whereas a "modification" that is
not "significant" is not treated as a deemed exchange. Under the Treasury
Regulations, a change in the annual yield of a debt instrument, including a
change in the yield that occurs as a result of payments made by the issuer and
received by the holders as consideration for modification of the debt
instrument, such as the Consent Payment, will constitute a significant
modification and result in a deemed exchange if the annual yield on the debt
instrument is increased by more than the greater of (a) 0.25% or (b) 5% of the
annual yield of the unmodified instrument, measured as of the date of the
modification.
Certain Federal Income Tax Consequences To Note Holders Who Receive The Consent
Payment
As a result of the receipt of the Consent Payment by a Note Holder, the
Company believes that there will be a significant modification of the Notes held
by such Note Holder and, accordingly, there will be a deemed exchange of the
Notes for federal income tax purposes. While the law is not clear as to whether
the deemed exchange involves the exchange of securities for federal income tax
purposes, it is possible that the Old Notes and the New Notes may qualify as
securities for federal income tax purposes. If the Old Notes and the New Notes
are securities, the deemed exchange will constitute a tax-free recapitalization
and a Note Holder would not recognize taxable gain or loss, except with respect
to the receipt of the Consent Payment. If the Old Notes or the New Notes are not
securities, however, a Note Holder would recognize gain or loss on the deemed
exchange in an amount equal to the difference between (x) the issue price of the
New Notes (generally their fair market value as of the date of the deemed
exchange) (plus, as described below, possibly the amount of the Consent Payment)
and (y) such Note Holder's adjusted tax basis in the Old Notes.
Although the matter is not free from doubt, the Company believes that the
Consent Payment should be treated for federal income tax purposes as a fee paid
to Note Holders to obtain its consent and the Company intends to treat the
Consent Payment in this manner. If such treatment is respected, a Note Holder
who receives the Consent Payment will recognize ordinary income equal to the
amount of the Consent Payment whether or not the deemed exchange qualifies as a
tax-free recapitalization. If, in the alternative, the Internal Revenue Service
were to treat the Consent Payment as a payment on the Notes, then (i) if the
deemed exchange qualifies
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as a tax-free recapitalization, a Note Holder generally would recognize gain in
an amount equal to the lesser of (a) the Consent Payment and (b) the excess of
the issue price of the New Notes plus the Consent Payment over the Note Holder's
adjusted tax basis in the Old Notes and (ii) if the deemed exchange is not a
tax-free recapitalization, the Consent Payment would be treated as an additional
amount realized with respect to the deemed exchange, which would increase the
Note Holder's taxable gain or decrease the Note Holder's taxable loss, as the
case may be.
In deciding whether or not to consent to the Proposed Amendment, Note
Holders are urged to consult their tax advisors regarding the tax consequences
arising from the Consent Payment.
Whether the deemed exchange constitute a tax-free recapitalization or a
taxable exchange, if the issue price of the New Notes is less than the stated
redemption price at maturity of the New Notes by more than a statutorily defined
de minimis amount, then the New Notes will be deemed to be issued with OID. The
amount of OID on a New Note would equal the excess of the stated redemption
price at maturity of a New Note over its issue price. The stated redemption
price at maturity of a New Note will equal its principal amount. The statutorily
defined de minimis exception will be satisfied and there will not be OID on the
New Notes if the difference between the issue price and the stated redemption
price at maturity of the New Notes is less than .25% of the stated redemption
price at maturity of the New Notes multiplied by the number of complete years to
maturity of the New Notes.
If the New Notes are issued with OID, each Note Holder (whether reporting
on the cash or accrual basis of accounting for tax purposes) will be required to
include in taxable income for any particular taxable year the daily portion of
the OID described in the preceding paragraph that accrues on the New Note for
each day during the taxable year on which such Note Holder holds the New Note.
Thus, a Note Holder would be required to include OID in income in advance of the
receipt of the cash to which such OID is attributable. The daily portion is
determined by allocating to each day of an accrual period (generally, the period
between interest payments or compounding dates) a pro rata portion of the OID
allocable to such accrual period. The amount of OID that will accrue during an
accrual period is the product of the "adjusted issue price" of the New Note at
the beginning of the accrual period multiplied by the yield to maturity of the
New Note less the amount of any qualified stated interest (defined generally as
stated interest that is unconditionally payable in cash or other property (other
than debt instruments of the Company) at least annually at a single fixed rate)
allocable to such accrual period. The "adjusted issue price" of a New Note at
the beginning of an accrual period will equal its issue price, increased by the
aggregate amount of OID that has accrued on the New Note in all prior accrual
periods, and decreased by any payments made during all prior accrual periods of
amounts included in the stated redemption price at maturity of the Note.
If the issue price of the New Notes exceeds the amount payable at maturity,
such excess will generally be deductible by a Note Holder as amortizable bond
premium over the term of the New Note (taking into account earlier call dates,
as appropriate) under a yield to maturity formula if an election by the taxpayer
under Section 171 of the Code is in effect or is made. However, under Treasury
Regulations, the amount of amortizable bond premium that a U.S. holder may
deduct in any accrual period is limited to the amount by which the holder's
total interest inclusions on the New Notes in prior accrual periods exceed the
total amount treated by
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the holder as a bond premium deduction in prior accrual periods. If any of the
excess bond premium is not deductible under Section 171, that amount is carried
forward to the next accrual period and is treated as bond premium allocable to
that period.
An election under Section 171 of the Code is revocable only with the
consent of the IRS and applies to all debt obligations owned or subsequently
acquired by the taxpayer. To the extent the excess of the issue price of the New
Note over the amount payable at the maturity date (or earlier redemption date if
appropriate) is deducted as amortizable bond premium, the Note Holder's tax
basis in the New Note will be reduced.
Backup withholding at the rate of 31% may apply with respect to the Consent
Payment unless the Note Holder (i) is a corporation or comes within certain
other exempt categories and, when required, demonstrates this fact or (ii)
provides a correct taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A Note Holder who does not provide
his correct taxpayer identification number may be subject to penalties imposed
by the Internal Revenue Service. Any amount withheld under these rules will be
creditable against the Note Holder's federal income tax liability provided the
required information is furnished to the Internal Revenue Service in a timely
manner.
Certain Federal Income Tax Consequences To Note Holders Who Do Not Receive The
Consent Payment
The Company believes that the adoption of the Proposed Amendment without
receipt of the Consent Payment by a Note Holder should not result in a
significant modification of the Notes held by such Note Holder because the
Proposed Amendment is the alteration of a customary financial covenant and thus
should not create a deemed exchange of such Notes for federal income tax
purposes. If a Note Holder does not receive a Consent Payment, and the adoption
of the Proposed Amendment does not create a deemed exchange of the Notes, this
Solicitation and the adoption of the Proposed Amendment would have no tax
consequences to such a Note Holder.
The preceding discussion of certain federal income tax consequences is
intended for general information only, and does not constitute tax advice. Each
Note Holder should consult his or her own tax adviser as to the federal, state,
local and foreign tax consequences to him or her of the receipt of the Consent
Payment and the adoption of the Proposed Amendment."
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