PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus Dated April 6, 2000)
[GRAPHIC OMITTED]
$150,000,000
Toll Corp.
8.25% Senior Subordinated Notes due 2011
Guaranteed on a Senior Subordinated Basis by
Toll Brothers, Inc.
------------------------
The Company:
o We design, build, market and arrange financing for single-family detached and
attached homes in middle-income and high-income residential communities.
Use of Proceeds:
o We intend to use the net proceeds from this offering for general corporate
purposes, which may include acquisition of residential development property,
repayment of bank debt, repurchase of our common stock and working capital
needs.
The Senior Subordinated Notes:
o Issuer: Toll Corp. will be the issuer of the notes. Toll Corp. is an
indirect, wholly-owned, consolidated subsidiary of Toll Brothers, Inc. Toll
Brothers, Inc. will be the guarantor of the notes.
o Maturity: The notes will mature on December 1, 2011.
o Interest Payments: The notes will pay interest semi-annually in cash in
arrears on June 1 and December 1 of each year, starting on June 1, 2002.
o Ranking: The notes will be general unsecured senior subordinated obligations
of Toll Corp. and will be junior in right of payment to all of Toll Corp.'s
existing and future senior indebtedness. The guarantee will be an unsecured
senior subordinated obligation of Toll Brothers, Inc. and will be junior in
right of payment to all of the existing and future senior indebtedness of
Toll Brothers, Inc.
o Optional Redemption: We may redeem the notes on or after December 1, 2006 at
redemption prices described in this prospectus supplement. Prior to December
1, 2004, we may redeem up to 35% of the aggregate principal amount of the
notes with the net proceeds of one or more public equity offerings as
described in this prospectus supplement.
The underwriters have agreed to purchase the notes from Toll Corp. at
99.831675% of their principal amount for total proceeds to Toll Corp. of
$149,747,512, before deducting expenses. The underwriters propose to offer the
notes from time to time for sale in one or more negotiated transactions, or
otherwise, at varying prices to be determined at the time of each sale.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus to which it relates
is truthful or complete. Any representation to the contrary is a criminal
offense.
Banc of America Securities LLC expects that the notes will be ready for
delivery in book-entry-only form to The Depository Trust Company on or about
November 30, 2001.
Sole Book-Running Manager
Banc of America Securities LLC
------------------------
Co-Managers
Banc One Capital Markets, Inc.
BNP PARIBAS
Comerica Securities, Inc.
Credit Lyonnais Securities
Goldman, Sachs & Co.
SunTrust Robinson Humphrey
The date of this prospectus supplement is November 27, 2001.
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TABLE OF CONTENTS
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Prospectus Supplement
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Page Page
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Prospectus Supplement Summary ........................... S-3 Description of Notes................................. S-17
Use of Proceeds ......................................... S-9 Underwriting......................................... S-29
Capitalization .......................................... S-9 Legal Matters........................................ S-30
Business ................................................ S-10 Foward-Looking Statements............................ S-30
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Prospectus
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Page Page
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About this Prospectus ................................... 2 Description of Capital Stock......................... 16
Where You Can Find More Information ..................... 2 Description of Warrants.............................. 20
Toll Brothers, Inc. ..................................... 3 Classified Board of Directors and
The Housing Industry .................................... 4 Restrictions on Removal............................ 23
Use of Proceeds ......................................... 5 Plan of Distribution................................. 23
Ratio of Earnings to Fixed Charges ...................... 5 Legal Matters........................................ 25
Description of Debt Securities and Guarantees ........... 5 Experts.............................................. 26
When this prospectus supplement uses the words "we," "us" and "our," they
refer to Toll Brothers, Inc. and its subsidiaries, including Toll Corp.,
unless the context otherwise requires.
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S-2
PROSPECTUS SUPPLEMENT SUMMARY
The following is a summary of the more detailed information appearing
elsewhere in this prospectus supplement, the accompanying prospectus or the
documents that are incorporated by reference in the prospectus. It does not
contain all of the information that may be important to you. You should read
carefully the entire prospectus supplement and the accompanying prospectus and
the other information we refer to before you decide to invest in the notes.
Toll Brothers, Inc.
Toll Brothers, Inc., through its subsidiaries, designs, builds, markets and
arranges financing for single-family detached and attached homes in middle-
income and high-income residential communities. We cater to the move-up,
empty-nester and age-qualified home buyer. We currently conduct operations in
21 states and six regions around the United States. Our communities are
generally located on land we have developed or acquired fully approved and, in
some cases, improved. We market our homes primarily to middle-income and
upper-income buyers. We emphasize high quality construction and customer
satisfaction. We also operate our own land development, architectural,
engineering, mortgage, title, security monitoring, landscape, cable T.V.,
broad band Internet access, lumber distribution, house component assembly and
manufacturing operations.
At October 31, 2000, we were offering homes for sale in 146 communities with
over 17,500 home sites which we owned or controlled through options. We also
owned or controlled over 15,500 home sites in proposed communities. We were
offering single-family detached homes at prices, excluding customized options,
generally ranging from $183,000 to $1,120,000, with an average base sales
price of $453,000. We were offering attached homes, excluding customized
options, at prices generally ranging from $155,000 to $600,000, with an
average base sales price of $298,000. In the five years ended October 31,
2000, we delivered more than 15,000 homes in 321 communities.
In recognition of our achievements, we have received numerous awards from
national, state and local homebuilder publications and associations. We are
the only publicly traded home builder to have won all three of the industry's
highest honors: America's Best Builder (1996), the National Housing Quality
Award (1995), and Builder of the Year (1988).
Recent Financial Data
For the fiscal year ended October 31, 2001, revenues from housing sales were
approximately $2.18 billion (4,358 homes) as compared to $1.76 billion (3,945
homes) in fiscal 2000. New sales contracts were approximately $2.17 billion
(4,366 homes) in fiscal 2001 as compared to $2.15 billion (4,418 homes) in
fiscal 2000.
For the three months ended October 31, 2001, revenues from housing sales
were approximately $651 million (1,279 homes) and new contracts signed were
approximately $489 million (970 homes). For the three months ended October 31,
2000, revenues from housing sales were approximately $603 million (1,277
homes) and new contracts signed were approximately $576 million (1,096 homes).
Our backlog at October 31, 2001 was approximately $1.41 billion (2,727
homes) as compared to $1.43 billion (2,779 homes) at October 31, 2000. We
expect to deliver substantially all homes in backlog at October 31, 2001 by
October 31, 2002. This backlog represents approximately 65% of fiscal 2001
homebuilding revenues and provides a strong start to fiscal 2002.
At October 31, 2001, we were selling homes from 155 communities as compared
to 146 communities at October 31, 2000. We expect to have over 160 selling
communities by January 31, 2002 and approximately 175 selling communities by
October 31, 2002.
The terrorist attacks of September 11, 2001 impacted us most severely in the
first few weeks immediately after the events as consumer confidence dropped
and the stock market declined. Since
S-3
then, deposit trends on new homes have improved, although they have been quite
volatile from week to week. For the eight-week period beginning October 1,
2001, total deposits were almost equal to the same period of the prior year
and were down approximately 10% on a per community basis. Compared to the
previous five-year average for the same period, deposits were down
approximately 2% on a per community basis.
In addition to the effects of September 11, 2001, delays in opening new
communities negatively affected the number of contracts we signed during the
fourth quarter of fiscal 2001. Municipalities continue to create new rules and
requirements for securing the final approvals that allow us to start selling
homes in new communities. While in the short term these delays will hamper our
results, we believe that in the longer term these obstacles create barriers to
entry that reduce competition and favor the major builders such as ourselves,
who have the capital and expertise to persevere through the more arduous
approval processes.
Based on our existing backlog, the first half of fiscal 2002 should be
strong; however, if signed contracts in the current quarter lag last year's
pace, as they did in the fourth quarter of fiscal 2001, we would expect that
fiscal 2002 housing revenues would be lower than fiscal 2001 housing revenues.
Toll Corp.
Toll Corp. is an indirect, wholly-owned, consolidated subsidiary of Toll
Brothers, Inc. Toll Corp. generates no operating revenues and has no
independent operations other than the financing of other subsidiaries of Toll
Brothers, Inc. by lending the proceeds of the notes offered in this prospectus
supplement and similar activities related to previous offerings of debt
securities.
S-4
The Offering
Issuer.................................. Toll Corp., a Delaware corporation.
The Notes............................... $150,000,000 aggregate principal amount of 8.25% Senior Subordinated Notes due 2011. We
may, from time to time, issue an unlimited amount of additional notes of the same series
ranking equally with the notes.
Maturity................................ The notes will mature on December 1, 2011.
Payment of Interest..................... Interest on the notes, at the rate of 8.25% per annum, will be payable semi-annually on
June 1 and December 1 of each year, commencing June 1, 2002.
Guarantee............................... Payment of principal and interest on the notes will be fully and unconditionally guaranteed
on a senior subordinated basis by Toll Brothers, Inc.
Optional Redemption..................... On or after December 1, 2006, Toll Corp. may, upon at least 30 days notice, redeem the
notes, in whole or in part, at the redemption prices described in this prospectus
supplement, together with accrued and unpaid interest on the notes. In addition, at any
time prior to December 1, 2004, we may, at our option, redeem up to 35% of the aggregate
principal amount of the notes, including any additional notes, issued with the net
proceeds of one or more public equity offerings, at a redemption price of 108.25% of the
aggregate principal amount of the notes to be redeemed, together with accrued and unpaid
interest up to the date of redemption.
Subordination........................... The notes will be general unsecured senior subordinated obligations of Toll Corp. and will
be junior in right of payment to all existing and future senior indebtedness of Toll
Corp. The guarantee will be an unsecured obligation of Toll Brothers, Inc. and will be
junior in right of payment to all existing and future senior indebtedness of Toll
Brothers, Inc. The notes and the guarantee will be effectively junior to all existing
and future claims of creditors of Toll Brothers, Inc.'s other subsidiaries. At July 31,
2001, after giving effect to the issuance of the notes, the amount of liabilities of
Toll Brothers, Inc. and its subsidiaries effectively ranking senior in right of payment
to the notes, including senior indebtedness of Toll Corp. and Toll Brothers, Inc. and
liabilities of Toll Brothers, Inc.'s subsidiaries other than Toll Corp., would have been
$1,364,111,000. Although the indenture that will govern the notes contains limitations
on the amount of additional indebtedness we may incur, Toll Brothers, Inc. and its
subsidiaries currently could incur significant additional indebtedness, including senior
indebtedness.
S-5
Use of Proceeds......................... We estimate that the net proceeds from this offering will be approximately $149.4 million.
We intend to use these proceeds for general corporate purposes, which may include
acquisition of residential development property, repayment of bank debt, repurchase of
our common stock and working capital needs.
Pending the use of the proceeds from this offering, we expect to invest the proceeds in
high-grade, short- term, marketable, interest-bearing securities.
Certain Covenants....................... The indenture under which the notes will be issued will contain covenants that, among other
things, limit the ability of Toll Brothers, Inc. and its subsidiaries to incur
additional indebtedness and pay dividends or make other distributions and investments.
Principal Executive Offices
The principal executive offices of both Toll Brothers, Inc. and Toll Corp.
are located at 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006-
4298. The telephone number at the principal executive offices is (215) 938-
8000.
Our web address is www.tollbrothers.com. This web address is provided for
informational purposes only. Information contained on our web site does not
constitute part of this prospectus supplement or the accompanying prospectus.
S-6
Summary Consolidated Financial Information and Operating Data
(Dollars in Thousands)
The following summary consolidated financial information for the five years
ended October 31, 2000 is derived from our audited consolidated financial
statements. The summary consolidated financial information for the nine months
ended July 31, 2001 and 2000 is derived from our unaudited quarterly
consolidated financial statements. The results of operations for the nine
months ended July 31, 2001 may not be indicative of results of operations to
be expected for the fiscal year.
Nine Months Ended
Year ended October 31, July 31,
------------------------------------------------------------ -----------------------
1996 1997 1998 1999 2000 2000 2001
-------- -------- ---------- ---------- ---------- ---------- ----------
Income Statement Data:
Revenues................................ $760,707 $971,660 $1,210,816 $1,464,115 $1,814,362 $1,199,569 $1,573,853
-------- -------- ---------- ---------- ---------- ---------- ----------
Costs and expenses
Land and housing construction........... 580,990 748,323 933,853 1,131,247 1,366,869 910,569 1,150,747
Selling, general and administrative..... 69,735 86,301 106,729 130,213 170,358 119,307 152,894
Interest................................ 24,189 29,390 35,941 39,905 46,169 31,211 40,506
-------- -------- ---------- ---------- ---------- ---------- ----------
674,914 864,014 1,076,523 1,301,365 1,583,396 1,061,087 1,344,147
-------- -------- ---------- ---------- ---------- ---------- ----------
Income before income taxes and
extraordinary item.................... $ 85,793 $107,646 $ 134,293 $ 162,750 $ 230,966 $ 138,482 $ 229,706
======== ======== ========== ========== ========== ========== ==========
Income before extraordinary item........ $ 53,744 $ 67,847 $ 85,819 $ 103,027 $ 145,943 $ 87,577 $ 145,147
Extraordinary loss from extinguishment
of debt, net of income taxes.......... -- (2,772) (1,115) (1,461) -- -- --
-------- -------- ---------- ---------- ---------- ---------- ----------
Net income.............................. $ 53,744 $ 65,075 $ 84,704 $ 101,566 $ 145,943 $ 87,577 $ 145,147
======== ======== ========== ========== ========== ========== ==========
Other Financial Data:
Depreciation and amortization........... $ 3,306 $ 4,055 $ 5,611 $ 6,594 $ 8,528 $ 6,115 $ 7,233
Interest incurred....................... $ 27,695 $ 35,242 $ 38,331 $ 51,396 $ 60,236 $ 43,602 $ 58,110
Ratio of earnings to fixed charges,
including consolidated mortgage
financing partnerships(1)............. 3.87 3.81 4.35 3.89 4.53 3.84 4.58
October 31, July 31,
-------------------------------------------------------------- -----------------------
1996 1997 1998 1999 2000 2000 2001
-------- ---------- ---------- ---------- ---------- ---------- ----------
Balance Sheet Data:
Assets
Inventory............................. $772,471 $ 921,595 $1,111,223 $1,443,282 $1,712,383 $1,668,976 $2,129,122
-------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets....................... $837,926 $1,118,626 $1,254,468 $1,668,062 $2,030,254 $1,947,884 $2,428,806
======== ========== ========== ========== ========== ========== ==========
Debt
Loans payable......................... $132,109 $ 189,579 $ 182,292 $ 213,317 $ 326,537 $ 348,622 $ 364,261
Subordinated debt..................... 208,415 319,924 269,296 469,418 469,499 469,479 669,561
-------- ---------- ---------- ---------- ---------- ---------- ----------
Total debt......................... $340,524 $ 509,503 $ 451,588 $ 682,735 $ 796,036 $ 818,101 $1,033,822
======== ========== ========== ========== ========== ========== ==========
Shareholders' equity.................. $314,677 $ 385,252 $ 525,756 $ 616,334 $ 745,145 $ 691,606 $ 877,033
======== ========== ========== ========== ========== ========== ==========
Summary Operating Data:
Nine Months Ended
Year Ended October 31, July 31,
-------------------------------------------------------------- -----------------------
1996 1997 1998 1999 2000 2000 2001
-------- ---------- ---------- ---------- ---------- ---------- ----------
Number of homes closed................ 2,109 2,517 3,099 3,555 3,945 2,668 3,079
Sales value of homes closed(2)........ $759,303 $ 968,253 $1,206,290 $1,438,171 $1,762,930 $1,160,379 $1,529,394
Number of homes contracted(2)......... 2,398 2,701 3,387 3,845 4,418 3,322 3,396
Sales value of homes contracted(2).... $884,677 $1,069,279 $1,383,093 $1,640,990 $2,149,366 $1,573,814 $1,685,197
Number of homes in backlog, end of
period(2)........................... 1,367 1,551 1,892 2,381 2,779 2,983 3,055
Sales value of backlog, end of
period(2)........................... $526,194 $ 627,220 $ 814,714 $1,067,685 $1,434,946 $1,468,254 $1,579,110
S-7
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(1) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes, extraordinary loss plus interest
expense and fixed charges except interest incurred. Fixed charges consist
of interest incurred, whether expensed or capitalized, one-third of rent
expense that is representative of the interest factor and amortization of
debt discount and issuance costs. The pro forma ratio of earnings to fixed
charges, including consolidated mortgage financing partnerships, would be
3.09 for the year ended October 31, 2000 assuming that the $150,000,000
principal amount of notes offered by this prospectus supplement and the
$200,000,000 principal amount of 8 1/4% Senior Subordinated Notes issued in
January 2001 were outstanding as of November 1, 1999.
(2) Backlog consists of homes which were under contract but not closed at the
end of the period. New contracts for fiscal 2000 and 1999 included
$14,844,000 (54 homes) and $13,141,000 (46 homes), respectively, from an
unconsolidated 50% owned joint venture. Backlog as of October 31, 2000 and
1999 included $9,425,000 (33 homes) and $13,756,000 (54 homes),
respectively, from this joint venture. New contracts for the nine months
ended July 31, 2001 and 2000 included $11,638,000
(41 homes) and $12,339,000 (45 homes), respectively, from this joint
venture. Backlog as of July 31, 2001 and 2000 included $9,081,000 (30
homes) and $13,229,000 (47 homes), respectively, from this joint venture.
S-8
USE OF PROCEEDS
We estimate that the net proceeds from this offering will be approximately
$149.4 million. We intend to use these proceeds for general corporate
purposes, which may include acquisition of residential development property,
repayment of bank debt, repurchase of our common stock and working capital
needs. Pending the use of the proceeds from this offering, we expect to invest
the proceeds in high-grade, short-term, marketable, interest-bearing
securities.
We have a $535 million unsecured revolving credit facility with 16 banks of
which $445 million extends through March 2006 and $90 million extends through
February 2003. Interest is payable on short-term borrowings under the facility
at 0.90% above the Eurodollar rate or at other specified variable rates as
selected by us from time to time. The interest rates on the amounts
outstanding under the revolving credit facility as of October 31, 2001 ranged
from 3.32% to 6.39%. We incurred the indebtedness outstanding under the
revolving credit facility to acquire residential development property,
refinance previously incurred indebtedness, repurchase our common stock and
fund our working capital requirements.
CAPITALIZATION
The following table sets forth the consolidated capitalization of Toll
Brothers, Inc. at July 31, 2001 and as adjusted to give effect to the sale of
the notes.
July 31, 2001
------------------------
Actual As Adjusted
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(Dollars in Thousands)
Debt:
Loans payable(1) .................................. $ 364,261 $ 364,261
8 3/4% Senior Subordinated Notes due 2006 ......... 100,000 100,000
7 3/4% Senior Subordinated Notes due 2007 ......... 100,000 100,000
8 1/8% Senior Subordinated Notes due 2009 ......... 170,000 170,000
8% Senior Subordinated Notes due 2009 ............. 100,000 100,000
8 1/4% Senior Subordinated Notes due 2011 ......... 200,000 200,000
8.25% Senior Subordinated Notes due 2011 .......... -- 150,000
---------- ----------
Total debt....................................... 1,034,261 1,184,261
---------- ----------
Shareholders' equity(2):
Preferred stock, par value $.01 per share; none
issued............................................
Common stock, par value $.01 per share; 35,656,000
issued............................................ 357 357
Additional paid-in capital ........................ 108,351 108,351
Retained earnings ................................. 813,755 813,755
Treasury stock, at cost; 1,359,000 shares ......... (45,430) (45,430)
---------- ----------
Total shareholders' equity....................... 877,033 877,033
---------- ----------
Total debt and shareholders' equity ................ $1,911,294 $2,061,294
========== ==========
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(1) We have a $535 million unsecured revolving credit facility with 16 banks,
of which $445 million extends through March 2006 and $90 million extends
through February 2003. At July 31, 2001, we had $80 million of loans and
approximately $43 million of letters of credit outstanding under the
facility. In addition, we had $235 million of term loans from a number of
banks and $49.3 million of purchase money mortgages payable and other debt.
(2) Our authorized capital stock consists of 45,000,000 shares of common stock,
par value $.01 per share, and 1,000,000 shares of preferred stock, par
value $.01 per share. Our board of directors is authorized to amend our
Certificate of Incorporation to increase the number of authorized shares of
common stock to 200,000,000 shares and the number of shares of authorized
preferred stock to 15,000,000 shares.
S-9
BUSINESS
We began doing business through predecessor entities in 1967 and formed Toll
Brothers, Inc. in the State of Delaware in May 1986. We design, build, market
and arrange financing for single-family detached and attached homes in middle-
income and high-income residential communities catering to move-up, empty-
nester and age-qualified homebuyers in 21 states and six regions around the
country. These communities are generally located on land that we have either
developed or acquired fully approved and, in some cases, improved. We
emphasize high quality construction and customer satisfaction.
Currently, we operate in the major suburban residential areas of:
o southeastern Pennsylvania and Delaware
o central New Jersey
o the Virginia and Maryland suburbs of Washington, D.C.
o Baltimore County, Maryland
o the Boston, Massachusetts metropolitan area
o Rhode Island
o southern New Hampshire
o Fairfield and Hartford Counties, Connecticut
o Westchester County, New York
o the Los Angeles metropolitan area and San Diego, California
o the San Francisco Bay area of northern California
o Palm Springs, California
o Raleigh and Charlotte, North Carolina
o the Phoenix, Arizona metropolitan area
o Dallas, Austin and San Antonio, Texas
o the east and west coasts of Florida
o Las Vegas, Nevada
o Columbus, Ohio
o Nashville, Tennessee
o Detroit, Michigan
o Chicago, Illinois
o Denver, Colorado
We continue to explore additional geographic areas for expansion. We also
operate our own land development, architectural, engineering, mortgage, title,
security monitoring, landscape, cable T.V., broad band Internet access, lumber
distribution, house component assembly and manufacturing operations.
We market our homes primarily to middle-income and upper-income buyers,
emphasizing high quality construction and customer satisfaction. At October
31, 2000, we were offering single-family detached homes at prices, excluding
customized options, generally ranging from $183,000 to $1,120,000, with an
average base sales price of $453,000. We were offering attached homes,
excluding customized options, at prices generally ranging from $155,000 to
$600,000, with an average base sales price of $298,000. In the five years
ended October 31, 2000, we delivered more than 15,000 homes in 321
communities.
S-10
In recognition of our achievements, we have received numerous awards from
national, state and local homebuilder publications and associations. We are
the only publicly traded home builder to have won all three of the industry's
highest honors: America's Best Builder (1996), the National Housing Quality
Award (1995), and Builder of the Year (1988).
We generally attempt to reduce certain risks homebuilders encounter by:
o controlling land for future development through options whenever possible,
allowing us to obtain the necessary governmental approvals before
acquiring title to the land;
o beginning construction of homes after signing an agreement of sale with a
buyer; and
o using subcontractors to perform home construction and land development
work on a fixed-price basis.
In order to obtain better terms or prices or due to competitive pressures,
we have occasionally purchased properties outright, or acquired the underlying
mortgage and subsequently acquired title to the property, prior to obtaining
all of the necessary governmental approvals needed to commence development.
The Communities
Our communities are generally located in suburban areas near major highways
with access to major cities. Before 1982, all of our communities were located
in southeastern Pennsylvania. We expanded outside of Pennsylvania as shown in
the table below:
Fiscal Year Fiscal Year
State of Entry State of Entry
- ----- -------- ----- --------
New Jersey........................................ 1982 Arizona ....................................... 1995
Delaware.......................................... 1987 Florida ....................................... 1995
Massachusetts..................................... 1988 Ohio .......................................... 1997
Maryland.......................................... 1988 Tennessee ..................................... 1998
Virginia.......................................... 1992 Nevada ........................................ 1998
Connecticut....................................... 1992 Michigan ...................................... 1999
New York.......................................... 1993 Illinois ...................................... 1999
California........................................ 1994 Rhode Island .................................. 2000
North Carolina.................................... 1994 New Hampshire ................................. 2000
Texas............................................. 1995 Colorado ...................................... 2001
We build high-quality, detached single-family homes that are marketed
primarily to "upscale" luxury home buyers, generally those persons who have
previously owned a principal residence and are seeking to buy a larger home --
the so-called "move-up" market. We believe our reputation as a developer of
homes for this market enhances our competitive position with respect to the
sale of more moderately priced detached homes, as well as attached homes.
We also market to the 50+ year-old "empty-nester" market and believe that
this market has strong growth potential. We have developed a number of home
designs with features such as single-story floor plans and first floor master
bedroom suites, as well as communities with recreational amenities such as
golf courses, pools, country clubs and recreation centers, that we believe
appeal to this category of home buyer and have integrated these designs and
features into our communities along with our other homes.
In 1999, we opened for sale our first active-adult, age-qualified community
for households in which at least one member is 55 years of age. We are
currently operating five of these communities and expect to open several more
during the next few years.
We believe that the demographics of the move-up, empty-nester and age-
qualified, active-adult up-scale markets provide us with potential for growth
in the coming decade. According to the U.S. Census Bureau, the number of
households earning $100,000 or more (in constant 2000 dollars) now stands at
14.3 million households, approximately 13.4% of all U.S. households. This
group has grown at over eight times the rate of
S-11
increase of all U.S. households over the past two decades. According to
Claritas, Inc., a provider of demographic information, approximately six
million of these households are located in our current markets.
The largest number of baby boomers, the more than four million born annually
between 1954 and 1964, are now 37 to 47 years of age and in their peak move-up
home buying years. The leading edge of the baby boom generation is just
entering its 50's and the empty-nester market. Additionally, the U.S. Census
Bureau projects that by 2010, the number of households of 55 to 64 year-olds,
households we target for our age-qualified communities, will increase by over
47%.
We also develop master planned country club communities. We currently have
open ten of these communities containing approximately 10,000 home sites and
expect to open three additional communities during the next two years. These
communities, many of which contain golf courses and other country club-type
amenities, enable us to offer multiple home types and sizes to a broad range
of move-up, empty-nester and age-qualified buyers. We currently have open
master planned communities in California, Florida, Michigan, North Carolina
and Virginia.
Each of our single-family detached home communities offers several home
plans, with the opportunity for home buyers to select various exterior styles.
The communities are designed to fit existing land characteristics. We blend
winding streets with cul-de-sacs to establish a pleasant environment. We
strive to create a diversity of architectural styles within an overall planned
community. We attempt to achieve this diversity by:
o offering several different home models with various exterior design
options for each model within each community;
o preserving existing trees and foliage whenever feasible; and
o limiting the number of homes visible from any particular vantage point
within the community by designing streets that curve.
In addition, homes of the same type or color are typically not built next to
each other. Our communities have attractive entrances with distinctive signage
and landscaping which we believe avoids a "development" appearance and gives
each community a diversified neighborhood appearance that enhances home
values.
Our attached home communities generally offer one to three-story homes,
provide for limited exterior options and often include commonly-owned
recreational acreage containing playing fields, swimming pools and/or tennis
courts.
The Homes
Most of our single-family detached-home communities offer at least four
different home plans, each with several substantially different architectural
styles. For example, the same basic floor plan may be selected with a
Colonial, Georgian, Federal or Provincial design, and exteriors may be varied
further by the use of stone, stucco, brick or siding. Attached home
communities generally offer two or three different floor plans with two, three
or four bedrooms.
In all of our communities, a wide selection of options is available to the
purchaser for additional charges. The options typically are more numerous and
significant on the more expensive homes. Major options include additional
garages, guest suites, extra rooms, finished lofts and additional fireplaces.
As a result of the additional charges for such options, the average sales
price of our homes for fiscal 2000 was approximately 19% higher than the base
sales price for fiscal 2000.
S-12
The range of base sales prices for our various lines of homes at October 31,
2000, was as follows:
Single-Family Detached Homes:
Move-up..................................... $183,000 - $ 727,000
Executive................................... 271,000 - 899,000
Estate...................................... 330,000 - 1,120,000
Active-Adult, Age-Qualified................. 196,000 - 439,000
Attached Homes:
Flats....................................... $155,000 - $ 225,000
Townhomes................................... 190,000 - 396,000
Carriage Homes.............................. 254,000 - 600,000
Contracts for the sale of homes are at fixed prices. The prices at which we
offer homes have generally increased from time to time during the sellout
period for each community; however, we cannot assure you that sales prices
will increase in the future.
We use some of the same basic home designs in similar communities. However,
we are continuously developing new designs to replace or augment existing
designs to assure that our homes reflect current consumer preferences. For new
designs, we have our own architectural staff and also engage unaffiliated
architectural firms. During fiscal 2000, we introduced over 80 new models.
We operate in six regions throughout the United States. The following table
summarizes by region our closings and new contracts signed for fiscal 2000 and
backlog at October 31, 2000:
Closings New Contracts Backlog
------------------ ------------------ ------------------
Regions Units $000 Units $000 Units $000
- ------- ----- ---------- ----- ---------- ----- ----------
Northeast (MA, NY, CT, NJ, NH, RI) ............. 1,043 $ 492,567 1,043 $ 513,938 723 $ 367,586
Mid-Atlantic (PA, DE, MD, VA) .................. 1,293 584,912 1,280 592,738 679 319,220
Southeast (NC, TN, FL) ......................... 269 133,892 419 203,963 312 146,632
Southwest (AZ, NV, TX) ......................... 734 276,548 731 315,643 417 209,327
Midwest (IL, MI, OH) (1) ....................... 335 122,145 481 205,994 311 147,214
West (CA) ...................................... 271 152,866 464 317,090 337 244,967
----- ---------- ----- ---------- ----- ----------
Total........................................ 3,945 $1,762,930 4,418 $2,149,366 2,779 $1,434,946
===== ========== ===== ========== ===== ==========
- ---------------
(1) New contracts include $14,844 (54 homes) from an unconsolidated 50% owned
joint venture. Backlog includes $9,425 (33 homes) from this joint venture.
The following table summarizes certain information with respect to
residential communities under development at October 31, 2000:
Homes Under
Number of Homes Homes Contract and Home Sites
Regions Communities Approved Closed Not Closed Available
- ------- ----------- -------- ------ ------------ ----------
Northeast......................................................... 52 5,008 1,932 723 2,353
Mid-Atlantic...................................................... 55 8,043 2,546 679 4,818
Southeast......................................................... 30 3,496 517 312 2,667
Southwest......................................................... 36 3,733 1,258 417 2,058
Midwest........................................................... 24 2,728 649 311 1,768
West.............................................................. 16 1,607 202 337 1,068
--- ------ ----- ----- ------
Total.......................................................... 213 24,615 7,104 2,779 14,732
=== ====== ===== ===== ======
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Of the 213 communities under development at October 31, 2000, 146 had homes
being offered for sale and 40 had not yet opened for sale. The other 27 had
been sold out but not all closings had been completed. Of the 146 communities
in which homes were being offered for sale, 129 were single-family detached
home communities containing a total of 188 homes under construction but not
under contract, exclusive of model homes and 17 were attached home communities
containing a total of 54 homes under construction but not under contract,
exclusive of model homes.
At October 31, 2000, we had not commenced significant site improvements on
approximately 9,239 of the 14,732 available home sites. Of the 14,732
available home sites, 1,035 were not owned by us, but were controlled through
options.
Land Policy
Before entering into a contract to acquire land, we complete extensive
comparative studies and analyses on detailed internally-designed forms that
assist us in evaluating each acquisition. We generally attempt to follow a
policy of acquiring options to purchase land for future communities. However,
in order to obtain better terms or prices, or due to competitive pressures, we
will, from time to time, acquire property outright. In addition, we have, at
times, acquired the underlying mortgage on a property and subsequently
obtained title to that property.
Our options or purchase agreements are generally on a non-recourse basis,
thereby limiting our financial exposure to the amounts we invest in property
and pre-development costs. The use of options or purchase agreements may
increase the price of land that we eventually acquire, but significantly
reduces risk. It also allows us to obtain necessary development approvals
before acquisition of the land, which generally enhances the value of the
options or purchase agreements, and the land, when acquired. We are able to
extend many of these options for varying periods of time, in some cases by
paying an additional deposit, and in other cases without an additional
payment. Our purchase agreements are typically subject to numerous conditions
including, but not limited to, our ability to obtain necessary governmental
approvals for the proposed community. Often, the down payment on an agreement
will be returned to us if all approvals are not obtained, although pre-
development costs may not be recoverable. We have the right to cancel any of
our land agreements by forfeiture of our down payment on the agreement. In
these instances, we generally are not able to recover any pre-development
costs.
During the early 1990's, due to the recession and the difficulties other
builders and land developers had in obtaining financing, the number of buyers
competing for land in our market areas decreased, while the number of sellers
increased, resulting in lower prices for our land acquisitions. Further, many
of the land parcels offered for sale were fully approved, and often improved,
subdivisions. Previously, such types of subdivisions generally were not
available for acquisition in our market areas. We purchased several such
subdivisions outright and acquired control of several others through option
contracts.
Due to the improvement in the economy and the increased availability of
capital during the later portion of the 1990's, we experienced an increase in
competition for available land in our market areas. Our ability to continue
our development activities over the long-term is dependent upon our continued
ability to locate and enter into options or agreements to purchase land,
obtain governmental approvals for suitable parcels of land, and consummate the
acquisition and complete the development of such land.
While we believe that there is significant diversity in our existing markets
and that this diversity provides protection from the vagaries of individual
local economies, we also believe that entry into additional geographic markets
will provide additional protection and more opportunities for growth. We
continue to look for new markets.
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The following is a summary of the parcels of land that we either owned or
controlled through options at October 31, 2000 for proposed communities, as
distinguished from those currently under development:
Number of Number of
Regions Communities Homes Planned
------- ----------- -------------
Northeast ....................................... 50 5,183
Mid-Atlantic .................................... 50 7,710
Southeast ....................................... 3 438
Southwest ....................................... 3 344
Midwest ......................................... 4 902
West ............................................ 11 1,030
--- ------
Total......................................... 121 15,607
=== ======
Of the 15,607 planned home sites at October 31, 2000, 5,799 lots were owned
and 1,417 were held for sale. The aggregate purchase price of land parcels
under option at October 31, 2000 was approximately $648,347,000, of which
$32,934,000 had been paid or deposited.
We evaluate all of the land under our control for proposed communities on an
ongoing basis for economic and market feasibility. As a result of this
evaluation, we charged approximately $1,618,000 of costs related to proposed
communities to expense in fiscal 2000 because we no longer deemed them
recoverable.
We cannot assure you that we will be successful in securing necessary
development approvals for the land currently under our control or for land
which we may acquire control of in the future or, that upon obtaining the
development approvals, we will elect to complete our purchases under the
options. We have generally been successful in the past in obtaining
governmental approvals, have substantial land currently owned or under our
control for which we have obtained or are seeking such approvals, as set forth
in the table above, and have devoted significant resources to locating
suitable land for future development and to obtaining the required approvals
on land under our control. Failure to locate sufficient suitable land or to
obtain necessary governmental approvals, however, may impair our ability over
the long-term to maintain current levels of development activities.
We believe that we have an adequate supply of land in our existing
communities and in land held for future development, assuming that all
properties are developed, to maintain our operations at current levels for
several years.
Community Development
We expend considerable effort in developing a concept for each community,
which includes determining the sizes, styles and price ranges of the homes,
layout of the streets and individual lots, and overall community design. After
obtaining the necessary governmental subdivision and other approvals, which
can sometimes require several years, we improve the land by grading and
clearing it, installing roads, underground utility lines and pipes, erecting
distinctive entrance structures, and staking out individual home sites.
Each community is managed by a project manager who is located at the site.
Working with construction managers, marketing personnel and, when required,
other internal and outside professionals such as engineers, architects and
legal counsel, the project manager is responsible for supervising and
coordinating the various developmental steps from acquisition through the
approval stage, marketing, construction and customer service, including
monitoring the progress of work and controlling expenditures. Major decisions
regarding each community are made by senior members of management.
We recognize revenue only when title and possession of a home are
transferred to the buyer, which generally occurs shortly after home
construction is substantially completed. The most significant variable
affecting the timing of our revenue stream, other than housing demand, is
receipt of final regulatory approvals. Only upon receiving these approvals may
we begin the process of obtaining executed contracts for sales of homes.
Receipt of final approvals is not seasonal. Although sales and construction
activities vary
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somewhat with the seasons, affecting the timing of closings, any seasonal
effect is relatively insignificant compared to the effect of receipt of final
governmental approvals.
Subcontractors perform all home construction and land development work,
generally under fixed-price contracts. We act as a general contractor and
purchase some, but not all, of the building supplies we require. While we have
experienced some shortages in the availability of subcontractors in some
markets, we do not anticipate any material effect from these shortages in our
homebuilding operations. Our construction managers and assistant managers
coordinate subcontracting activities and supervise all aspects of construction
work and quality control. One of the ways we seek to achieve home buyer
satisfaction is by providing our construction managers with incentive
compensation arrangements based on each home buyer's satisfaction as reported
on their pre-closing and post-closing checklists.
We maintain insurance to protect ourselves against various risks associated
with our activities. These insurance policies include, among others, general
liability, "all-risk" property, workers' compensation, automobile, and
employee fidelity.
Marketing
We believe that our marketing strategy, which emphasizes our more expensive
"Estate" and "Executive" lines of homes, has enhanced our reputation as a
builder-developer of high-quality upscale housing. We believe this reputation
results in greater demand for all of our lines of homes. We generally include
attractive decorative features such as chair rails, crown moldings, dentil
moldings and other aesthetic elements, even in our less expensive homes, based
on our belief that this additional construction expense is important to our
marketing effort.
In addition to relying on management's extensive experience, we determine
the price for our homes through an internally-designed value analysis program
that compares our homes with homes offered by other builders in the same local
marketing area. We accomplish this by assigning a positive or negative dollar
value to differences in product features, such as amenities, location and
marketing.
We expend great effort in creating our model homes, which play an important
role in our marketing. In our models, we create an attractive atmosphere, with
bread baking in the oven, fires burning in fireplaces, and music playing in
the background. Interior decorations vary among the models and are carefully
selected based upon the lifestyles of the prospective buyers. During the past
several years, we have received a number of awards from various homebuilder
associations for our interior merchandising.
The sales office located in each community is generally staffed by our own
sales personnel, who are compensated with salary and commission. In addition,
we derive a significant portion of our sales from the introduction of
customers to our communities by local cooperating realtors.
We advertise extensively in newspapers, other local and regional
publications and on billboards. We also use videotapes and attractive color
brochures to describe each community. The Internet has become an important
source of information for our customers. A visitor to our award-winning web
site can obtain information regarding our communities and homes across the
country and take a panoramic or video tour of many of our homes. Our web
address is www.tollbrothers.com. This web address is provided for
informational purposes only. Information contained in our web site does not
constitute part of this prospectus supplement or the accompanying prospectus.
We sell all of our homes under a limited warranty as to workmanship and
mechanical equipment. We also provide many homebuyers with a limited ten-year
warranty as to structural integrity.
Competition
The homebuilding business is highly competitive and fragmented. We compete
with numerous homebuilders of varying size, ranging from local to national in
scope, some of which have greater sales and financial resources than we have.
Re-sales of existing homes also provide competition. We compete primarily on
the basis of price, location, design, quality, service and reputation;
however, during the past several years, our financial stability, relative to
others in our industry, has become an increasingly favorable competitive
S-16
factor. We believe that, due to the increased availability of capital,
competition has increased during the past several years.
Regulation and Environmental Matters
We are subject to various local, state and federal statutes, ordinances,
rules and regulations concerning zoning, building design, construction and
similar matters, including local regulations that impose restrictive zoning
and density requirements in order to limit the number of homes that can
eventually be built within the boundaries of a particular locality. In a
number of our markets there has been an increase in state and local
legislation authorizing the acquisition of land as dedicated open space mainly
by governmental, quasi-public and non-profit entities. In addition, we are
subject to various licensing, registration and filing requirements in
connection with the construction, advertisement and sale of homes in our
communities. These laws have not had a material effect on us, except to the
extent that their application may have caused us to conclude that development
of a proposed community would not be economically feasible, even if any or all
necessary governmental approvals were obtained. See "Business--Land Policy."
We may also be subject to periodic delays or may be precluded entirely from
developing communities due to building moratoriums in the areas in which we
operate. These moratoriums generally relate to insufficient water or sewage
facilities or inadequate road capacity.
In order to secure approvals, in some areas, we may have to provide a
limited amount of affordable housing at below-market rental or sales prices.
The impact on us will depend on how the various state and local governments in
the areas in which we engage in development, or intend to engage in
development, implement their programs for affordable housing. To date, these
restrictions have not had a material impact on us.
We are also subject to a variety of local, state and federal statutes,
ordinances, rules and regulations concerning protection of health and the
environment, as well as the effects of environmental factors. The particular
environmental laws that apply to any given community vary greatly according to
the location of the site, the site's environmental condition and the present
and former uses of the site. These environmental laws may result in delays,
may cause us to incur substantial compliance and other costs, and may prohibit
or severely restrict development in certain environmentally sensitive regions
or areas.
We maintain a policy of engaging independent environmental consultants to
evaluate land for the potential of hazardous or toxic materials, wastes or
substances prior to consummating the acquisition of the property. Because we
have generally obtained these assessments for the land we have purchased, we
have not been significantly affected to date by the presence of these
materials.
DESCRIPTION OF NOTES
General
The notes offered by this prospectus supplement will constitute a single
series of debt securities, as discussed in the accompanying prospectus. We
may, from time to time, issue an unlimited amount of additional notes of the
same series which, together with the notes offered by this prospectus
supplement, will be treated as a single class for all purposes of the
indenture, including waivers, amendments, redemptions and offers to purchase.
The notes will be issued under an indenture, among Toll Corp., Toll Brothers,
Inc. and Bank One Trust Company, NA, as trustee, as supplemented by an
authorizing resolution relating to the notes, which collectively will
constitute the indenture governing the notes. The indenture is more fully
described in the accompanying prospectus. The notes will bear interest from
the date of original issuance, at the rate per annum shown on the front cover
page of this prospectus supplement, computed on the basis of a 360-day year of
twelve 30-day months. Interest will be payable semiannually on June 1 and
December 1 in each year, commencing June 1, 2002, to the persons in whose name
the notes are registered at the close of business on May 15 or November 15, as
the case may be, preceding that interest payment date. The notes will be due
on December 1, 2011 and will be issued in fully registered book-entry form.
See "--Book-Entry System" below.
S-17
The notes are subordinated in right of payment to all senior indebtedness of
Toll Corp. under the provisions described under "Subordination of Notes and
Guarantee" below. Toll Brothers, Inc. will unconditionally guarantee on a
senior subordinated basis the due and punctual payment of the principal of,
and premium, if any, and interest on, the notes, when and as the same become
due and payable, whether at maturity, by declaration of acceleration, call for
redemption or otherwise. The guarantee is subordinated in right of payment to
all senior indebtedness of Toll Brothers, Inc. pursuant to the provisions
described under "Subordination of Notes and Guarantee" below. The notes and
the guarantee are not by their terms, nor are they otherwise currently, senior
to any indebtedness of Toll Corp. or Toll Brothers, Inc., respectively, and
have been designated "senior subordinated" primarily because the notes and the
guarantee rank equally in right of payment with Toll Corp.'s 8 3/4% Senior
Subordinated Notes due 2006, 7 3/4% Senior Subordinated Notes due 2007, 8 1/8%
Senior Subordinated Notes due 2009, 8% Senior Subordinated Notes due 2009, 8
1/4% Senior Subordinated Notes due 2011 and Toll Brothers, Inc.'s related
guarantees.
Toll Corp. may pay principal and interest by wire transfer or by check and
may mail an interest check to the registered address of each holder of each
outstanding note. Noteholders must surrender notes to a paying agent to
collect principal payments.
Initially, the trustee will act as paying agent and registrar with respect
to the notes. Toll Corp. may change any paying agent and registrar without
notice. The trustee is an affiliate of a participant in the revolving credit
agreement and a term loan, both of which are guaranteed by Toll Brothers, Inc.
The terms of the notes and the guarantee include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939, as amended.
Redemption
Optional Redemption. The notes may be redeemed at any time on or after
December 1, 2006 and prior to maturity at the option of Toll Corp., in whole
or in part, from time to time, on not less than 30 nor more than 60 days prior
notice, mailed by first-class mail to each holder of record at the holder's
last address as it appears on the registration books of the registrar, at the
following redemption prices, expressed as percentages of the principal amount,
in each case with accrued and unpaid interest thereon to the redemption date,
if redeemed during the 12-month period beginning December 1 of the following
years:
Year Percentage
---- ----------
2006................................ 104.125%
2007................................ 102.750%
2008................................ 101.375%
2009 and thereafter................. 100.000%
Optional Redemption upon Equity Offerings. Prior to December 1, 2004, Toll
Corp. may, at its option, use all or a portion of the net proceeds of one or
more public equity offerings (as defined below) to redeem up to 35% of the
aggregate principal amount of the notes, including any additional notes,
issued at a redemption price equal to 108.25% of the aggregate principal
amount of the notes to be redeemed, together with accrued and unpaid interest,
if any, thereon to the date of redemption; provided, however, that at least
65% of the aggregate principal amount of notes, including any additional
notes, issued remains outstanding immediately after giving effect to any such
redemption. Notice of any redemption must be mailed within 60 days after the
closing date of the applicable public equity offering and in any event not
less than 30 nor more than 60 days prior to the applicable redemption date,
all in accordance with the requirements of the indenture.
As used in the preceding paragraph, public equity offering means an
underwritten public offering of common stock of Toll Brothers, Inc. pursuant
to a registration statement filed with the Securities and Exchange Commission
in accordance with the Securities Act of 1933, as amended.
Selection for Redemption. If less than all the notes are to be redeemed,
selection of notes for redemption will be made by the trustee, if the notes
are listed on a national securities exchange, in accordance with the rules of
such exchange, or if the notes are not so listed, on a pro rata basis or by
lot or in such other manner as the trustee deems appropriate and fair in its
discretion in denominations of $1,000 and integral multiples thereof.
S-18
Subordination of Notes and Guarantee
The payment of the principal of, and premium, if any, and interest on, the
notes will be junior in right of payment, in the manner and to the extent set
forth in the indenture, to the prior payment in full of all senior
indebtedness of Toll Corp. whether outstanding on the date of the indenture or
thereafter created, incurred, assumed or guaranteed. Upon (1) the maturity of
any senior indebtedness of Toll Corp. by lapse of time, acceleration, unless
waived, or otherwise, or (2) any distribution of the assets of Toll Corp. upon
any dissolution, winding up, liquidation or reorganization of Toll Corp., the
holders of senior indebtedness of Toll Corp. will be entitled to receive
payment in full before the holders of the notes will be entitled to receive
any payments on the notes. If, in any of the situations referred to in clause
(1) or (2) above, a payment is made to the trustee or to the noteholders by
Toll Corp. before all senior indebtedness of Toll Corp. has been paid in full
or provision has been made for such payment, the payment to the trustee or the
noteholders must be paid over to the holders of senior indebtedness of Toll
Corp.
Senior indebtedness of Toll Corp. is defined as the principal of, and
premium, if any, and interest on, any indebtedness, whether outstanding on the
date of the indenture or thereafter created, incurred, assumed or guaranteed
by Toll Corp.:
o under Toll Brothers, Inc.'s revolving credit agreement;
o for money borrowed from others, including, for this purpose, all
obligations incurred under capitalized leases or purchase money mortgages
or under letters of credit or similar commitments; and
o in connection with the acquisition by it of any other business, property
or entity and, in each case, all renewals, extensions and refundings
thereof, unless the terms of the instrument creating or evidencing the
indebtedness expressly provide that the indebtedness is not superior in
right of payment to the payment of the principal of, and premium, if any,
and interest on, the notes.
Senior indebtedness of Toll Corp. does not include:
o indebtedness or amounts owed for compensation to employees, for goods or
materials purchased in the ordinary course of business, or for services;
o indebtedness of Toll Corp. to Toll Brothers, Inc. or any subsidiary, as
defined in the indenture, of Toll Brothers, Inc., for money borrowed or
advances from those entities;
o Toll Corp.'s 8 3/4% Senior Subordinated Notes due 2006, which will rank
equally in right of payment with the notes;
o Toll Corp.'s 7 3/4% Senior Subordinated Notes due 2007, which will rank
equally in right of payment with the notes;
o Toll Corp.'s 8 1/8% Senior Subordinated Notes due 2009, which will rank
equally in right of payment with the notes;
o Toll Corp.'s 8% Senior Subordinated Notes due 2009, which will rank
equally in right of payment with the notes;
o Toll Corp.'s 8 1/4% Senior Subordinated Notes due 2011, which will rank
equally in right of payment with the notes; and
o the notes.
Toll Brothers, Inc.'s obligations under the guarantee to pay the principal
of, and premium, if any, and interest on, the notes, will be junior in right
of payment, in the manner and to the extent set forth in the indenture, to the
prior payment in full of all senior indebtedness of Toll Brothers, Inc.,
whether outstanding on the date of the indenture or thereafter created,
incurred, assumed or guaranteed. Upon (1) the maturity of any senior
indebtedness of Toll Brothers, Inc. by lapse of time, acceleration, unless
waived, or otherwise or (2) any distribution of the assets of Toll Brothers,
Inc. upon any dissolution, winding up, liquidation or reorganization of Toll
Brothers, Inc., the holders of senior indebtedness of Toll Brothers, Inc. will
be entitled to receive payment in full before the holders of the notes will be
entitled to receive any payments on the
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notes pursuant to the guarantee. If, in any of the situations referred to in
clause (1) or (2) above, a payment is made to the trustee or to the
noteholders by Toll Brothers, Inc. before all senior indebtedness of Toll
Brothers, Inc. has been paid in full or provision has been made for such
payment, the payment to the trustee or noteholders must be paid over to the
holders of senior indebtedness of Toll Brothers, Inc.
Senior indebtedness of Toll Brothers, Inc. is defined as the principal of,
and premium, if any, and interest on, any indebtedness, whether outstanding on
the date of the indenture or thereafter created, incurred, assumed or
guaranteed by Toll Brothers, Inc.:
o under Toll Brothers, Inc.'s revolving credit agreement;
o for money borrowed from others, including, for this purpose, all
obligations incurred under capitalized leases or purchase money mortgages
or under letters of credit or similar commitments; and
o in connection with the acquisition by it of any other business, property
or entity, and, in each case, all renewals, extensions and refundings
thereof, unless the terms of the instrument creating or evidencing the
indebtedness expressly provide that the indebtedness is not superior in
right of payment to the payment of the notes pursuant to the guarantee.
Senior indebtedness of Toll Brothers, Inc. does not include:
o the guarantee;
o indebtedness of Toll Brothers, Inc. to any subsidiary of Toll Brothers,
Inc. for money borrowed or advances from the subsidiary;
o Toll Brothers, Inc.'s guarantee of Toll Corp.'s 8 3/4% Senior Subordinated
Notes due 2006, which will rank equally in right of payment with the
guarantee of the notes;
o Toll Brothers, Inc.'s guarantee of Toll Corp.'s 7 3/4% Senior Subordinated
Notes due 2007, which will rank equally in right of payment with the
guarantee of the notes;
o Toll Brothers, Inc.'s guarantee of Toll Corp.'s 8 1/8% Senior Subordinated
Notes due 2009, which will rank equally in right of payment with the
guarantee of the notes;
o Toll Brothers, Inc.'s guarantee of Toll Corp.'s 8% Senior Subordinated
Notes due 2009, which will rank equally in right of payment with the
guarantee of the notes; and
o Toll Brothers, Inc.'s guarantee of Toll Corp.'s 8 1/4% Senior Subordinated
Notes due 2011, which will rank equally in right of payment with the
guarantee of the notes.
Toll Brothers, Inc.'s assets consist principally of the stock of its
subsidiaries. Therefore, its rights and the rights of its creditors, including
the holders of the notes under the indenture, to participate in the assets of
any subsidiary of Toll Brothers, Inc., other than Toll Corp., upon
liquidation, recapitalization or otherwise will be subject to the prior claims
of that subsidiary's creditors, except to the extent that claims of Toll
Brothers, Inc. itself may be recognized as a creditor of such a subsidiary.
This includes the prior claims of the banks that have provided and are
providing First Huntingdon Finance Corp. a revolving credit facility under an
agreement pursuant to which Toll Brothers, Inc. and its other subsidiaries,
including Toll Corp., have guaranteed or will guarantee the obligations owing
to the banks under that facility.
At July 31, 2001, after giving effect to the issuance of the notes, the
amount of outstanding indebtedness of Toll Brothers, Inc. and its subsidiaries
effectively ranking senior in right of payment to the notes, would have been
$1,364,111,000.
Certain Covenants
Maintenance of Consolidated Net Worth. The indenture provides that if the
Consolidated Net Worth of Toll Brothers, Inc. and its subsidiaries at the end
of any two consecutive fiscal quarters is less than $55,000,000, then Toll
Brothers, Inc. will cause Toll Corp. to offer to repurchase (the "Offer") on
the last day of the fiscal quarter next following the second fiscal quarter,
or, if the second fiscal quarter ends on the last day of Toll Brothers, Inc.'s
fiscal year, 120 days following the last day of the second fiscal quarter (the
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"Purchase Date"), $7,500,000 aggregate principal amount of notes (or such
lesser amount as may be outstanding at the time) at a purchase price equal to
their principal amount, plus accrued and unpaid interest to the Purchase Date.
Toll Corp. may credit against its obligation to offer to repurchase notes on a
Purchase Date the principal amount of (1) notes acquired by Toll Corp. and
surrendered for cancellation otherwise than pursuant to an Offer and (2) notes
redeemed or called for redemption, in each case at least 60 days before the
Purchase Date. In no event will the failure to meet the minimum Consolidated
Net Worth stated above at the end of any fiscal quarter (a "Consolidated Net
Worth shortfall") be counted toward more than one Offer.
The following example illustrates the maximum number of days between the
occurrence of a Consolidated Net Worth shortfall and the required date of
repurchase of the notes if a second consecutive Consolidated Net Worth
shortfall were to occur. If Toll Brothers, Inc.'s Consolidated Net Worth were
to fall below $55,000,000 on the last day of the third fiscal quarter of Toll
Brothers, Inc.'s fiscal year, noteholders would not be entitled to have any
portion of their notes repurchased as a result unless Toll Brothers, Inc.'s
Consolidated Net Worth also were to remain below that amount on the last day
of the fourth fiscal quarter of that fiscal year. In that event, Toll Corp.
would then be obligated to repurchase the notes pursuant to the related Offer
on the day that is 120 days after the last day of the fourth fiscal quarter;
that is, 212 days after the date on which the first Consolidated Net Worth
shortfall occurred.
Any Offer to acquire notes as described above will be mailed not less than
30 days nor more than 60 days prior to the Purchase Date to each noteholder at
its last registered address. Toll Brothers, Inc. will comply with Rule 14e-1
under the Securities Exchange Act of 1934, as amended, to the extent that
regulation is applicable, in connection with any Offer made pursuant to the
terms of the indenture. If an Offer to acquire notes is oversubscribed, Toll
Corp. will acquire notes on a pro rata basis with such adjustment as may be
deemed appropriate by Toll Brothers, Inc. so that only notes in denominations
of $1,000 or integral multiples of $1,000 will be acquired.
In addition, the indentures governing Toll Corp.'s 8 3/4% Senior
Subordinated Notes due 2006, Toll Corp.'s 7 3/4% Senior Subordinated Notes due
2007, Toll Corp.'s 8 1/8% Senior Subordinated Notes due 2009, Toll Corp.'s 8%
Senior Subordinated Notes due 2009 and Toll Corp.'s 8 1/4% Senior Subordinated
Notes due 2011 require Toll Corp. to repurchase $7,500,000 aggregate principal
amount of each of those notes, or lesser amounts as may be outstanding at the
time if Toll Brothers, Inc.'s consolidated net worth at the end of any two
consecutive fiscal quarters is less than $55,000,000.
There are no legal or contractual limitations on Toll Corp.'s ability to
repurchase the notes pursuant to an Offer or on Toll Corp.'s ability to repay
any other outstanding indebtedness, other than as described under
"--Subordination of Notes and Guarantee." However, in the event Toll Corp. is
required to make one or more Offers to acquire the notes, or one or more
offers to acquire the 8 3/4% Notes, the 7 3/4% Notes, the 8 1/8% Notes, the 8%
Notes or the 8 1/4% Notes, or any or all of them, in connection with a
Consolidated Net Worth shortfall, there can be no assurance that Toll Corp.
will have sufficient funds available to repurchase the notes, the 8 3/4%
Notes, the 7 3/4% Notes, the 8 1/8% Notes, the 8% Notes or the 8 1/4% Notes.
Toll Brothers, Inc.'s Consolidated Net Worth at July 31, 2001 was
approximately $877,033,000.
Limitation on Additional Indebtedness. Toll Brothers, Inc. will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, incur,
issue, assume, guarantee or in any other manner become liable, contingently or
otherwise, with respect to any Indebtedness (or, with respect to Restricted
Subsidiaries only, any preferred stock) (whether in liquidation or otherwise)
other than Excluded Debt, unless, after giving effect thereto, either (1) the
Consolidated Fixed Charge Ratio of Toll Brothers, Inc. exceeds 1.5:1 or (2)
the ratio of Indebtedness (and, if applicable, Restricted Subsidiary preferred
stock) of such persons (excluding, for purposes of this calculation, purchase
money mortgages that are Non-Recourse Indebtedness, obligations incurred under
letters of credit, escrow agreements and surety bonds in the ordinary course
of business, Indebtedness of Toll Brothers, Inc.'s directly or indirectly
majority-owned mortgage finance Affiliates and Excluded Debt) to Consolidated
Adjusted Net Worth of Toll Brothers, Inc. is less than 4.5:1. Notwithstanding
the foregoing, Toll Brothers, Inc. and its Restricted Subsidiaries may incur,
issue, assume, guarantee or otherwise become liable with respect to:
o purchase money mortgages that are Non-Recourse Indebtedness;
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o obligations incurred under letters of credit, escrow agreements and surety
bonds in the ordinary course of business;
o indebtedness of Toll Brothers, Inc.'s directly or indirectly majority-
owned mortgage finance Affiliates; and
o indebtedness solely for the purpose of refinancing or repaying any
existing Indebtedness or Restricted Subsidiary preferred stock so long as
after giving effect to such refinancing or repayment, the sum of total
consolidated Indebtedness of Toll Brothers, Inc. and its Restricted
Subsidiaries and the aggregate liquidation preference of Restricted
Subsidiary preferred stock is not increased; provided that for purposes of
this subparagraph, application of the proceeds from the sale of assets of
Toll Brothers, Inc. or its Restricted Subsidiaries in the ordinary course
of business to reduce Indebtedness or Restricted Subsidiary preferred
stock and the subsequent reborrowing to purchase assets in the ordinary
course of business will be deemed to be a refinancing.
Currently, Toll Brothers, Inc. and its subsidiaries can incur significant
additional borrowings notwithstanding the limitations set forth above.
Limitation on Restricted Payments. The indenture provides that Toll
Brothers, Inc. may not declare or pay any dividend or make any distribution or
payment on its capital stock or to its stockholders, as stockholders (other
than dividends or distributions payable in its capital stock), or purchase,
redeem or otherwise acquire or retire for value, or permit any Restricted
Subsidiary to purchase or otherwise acquire for value, any capital stock of
Toll Brothers, Inc. (collectively, "Restricted Payments"), or make or permit
any Restricted Subsidiary to make (a) any loan, advance, capital contribution
or transfer other than for fair market value (as determined by a majority of
the disinterested members of the board of directors of Toll Brothers, Inc. or
the relevant Restricted Subsidiary, which will be evidenced by a written
resolution of the board of directors) in or to any Affiliate (which term does
not include joint ventures (whether in corporate, partnership or other form)
with an unaffiliated party or parties) other than a Restricted Subsidiary or
Toll Brothers, Inc. or (b) any Unrestricted Subsidiary Investment
(collectively, "Restricted Investments"), if, at the time of the Restricted
Payment or Restricted Investment, or after giving effect thereto:
(1) a default or an event of default has occurred and is continuing;
(2) the sum of:
o the aggregate amount expended for the Restricted Payments (the amount
expended for such purposes, if other than in cash, to be determined by
the board of directors of Toll Brothers, Inc. whose determination will
be conclusive and evidenced by a resolution of the board of directors
filed with the trustee) subsequent to October 31, 1991; and
o the amount by which the aggregate book value of all property, net of any
previous write-downs or reserves in respect of the property, subject to
Non-Recourse Indebtedness which has been accelerated or is in default,
is in excess of that Non-Recourse Indebtedness; and
o the aggregate amount of Restricted Investments then outstanding,
will exceed the sum of:
o 50% of the aggregate Consolidated Net Income (or, in case the aggregate
Consolidated Net Income is a deficit, minus 100% of the deficit) of Toll
Brothers, Inc. accrued on a cumulative basis subsequent to October 31,
1991; and
o the aggregate net proceeds, including the fair market value of property
other than cash, as determined by the board of directors of Toll
Brothers, Inc. whose determination will be conclusive and evidenced by a
resolution of the board of directors filed with the trustee, received by
Toll Brothers, Inc. from the issue or sale after October 31, 1991 of
capital stock of Toll Brothers, Inc. including capital stock of Toll
Brothers, Inc. issued upon the conversion of indebtedness of Toll
Brothers, Inc. other than capital stock that is redeemable at the option
of the holder or is mandatorily redeemable; and
o $20,000,000; or
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(3) Toll Brothers, Inc. would be unable to incur an additional $1.00 of
Indebtedness (other than Excluded Debt) pursuant to the covenant
described under "--Limitation on Additional Indebtedness" above;
provided, however, that the foregoing will not prevent (a) the payment of any
dividend within 60 days after the date of declaration thereof, if at the date
of declaration the making of the payment would have complied with the
provisions of this limitation on dividends, or (b) the retirement of any
shares of Toll Brothers, Inc.'s capital stock by exchange for, or out of
proceeds of the substantially concurrent sale of, other shares of its capital
stock (other than capital stock that is redeemable at the option of the holder
or is mandatorily redeemable), or (c) the payment or advance of cash
compensation or any compensation pursuant to or in connection with any
employee benefit plan of Toll Brothers, Inc. and the subsidiaries paid or
payable to any person in his or her capacity as an employee, officer or
director, and neither the retirement nor the proceeds of any sale or exchange
nor the payment or advance of any compensation shall be included in any
computation made under clause (2) above.
Limitation on Restrictions on Payment of Dividends by Subsidiaries to Toll
Brothers, Inc. Toll Brothers, Inc. will not, and will not permit any
subsidiary to, enter into any agreement or amendment of any existing agreement
if the agreement or amendment would restrict the payment of dividends or the
making of other distributions on any subsidiary's capital stock, provided that
a subsidiary may enter into an agreement or amendment if, immediately prior
thereto, either (1) (a) the Consolidated Net Worth of Toll Brothers, Inc.
excluding the Consolidated Net Worth of the subsidiary and any other
subsidiaries which have such agreements is at least $50,000,000 and (b) the
Consolidated Net Worth of the subsidiary and any other subsidiaries which have
such agreements does not account for more than 20% of the Consolidated Net
Worth of Toll Brothers, Inc. including the subsidiary and any other
subsidiaries which have such agreements or (2) the Consolidated Net Worth of
Toll Brothers, Inc. excluding the Consolidated Net Worth of the subsidiary and
any other subsidiaries which have such agreements is at least $70,000,000.
Restricted and Unrestricted Subsidiaries. Toll Brothers, Inc. will not
permit any Restricted Subsidiary to be designated as an Unrestricted
Subsidiary unless Toll Brothers, Inc. and its Restricted Subsidiaries would
thereafter be permitted to (1) incur at least $1.00 of Indebtedness (other
than Excluded Debt) pursuant to the covenant described under "-- Limitation on
Additional Indebtedness" above and (2) make a Restricted Payment or Restricted
Investment of at least $1.00 under the covenant described under "-- Limitation
on Restricted Payments" above.
Toll Brothers, Inc. will not permit any Unrestricted Subsidiary to be
designated as a Restricted Subsidiary unless the subsidiary has outstanding no
Indebtedness except Indebtedness as Toll Brothers, Inc. could permit it to
become liable for immediately after becoming a Restricted Subsidiary under the
provisions of the covenant described under "-- Limitation on Additional
Indebtedness" above.
Toll Brothers, Inc. will not designate Toll Corp. an Unrestricted
Subsidiary.
Events of Default, Notice and Waiver. Each of the following events will be
an "Event of Default" with respect to the notes:
o Toll Brothers, Inc. or Toll Corp. fails to pay interest due on the notes
for 30 days;
o Toll Brothers, Inc. or Toll Corp. fails to pay the principal of the notes
when due;
o Toll Brothers, Inc. or Toll Corp. fails to perform any other agreements
contained in the notes or in the guarantee or contained in the indenture
for a period of 60 days after Toll Corp.'s receipt of notice of the
default from the trustee under the indenture or the holders of at least
25% in principal of the notes;
o default in the payment of indebtedness of Toll Brothers, Inc. or any
subsidiary, including Toll Corp., First Huntingdon Finance Corp. or Toll
Finance Corp., under the terms of the instrument evidencing or securing
the indebtedness which permits the holder of the indebtedness to
accelerate the payment of in excess of an aggregate of $2,000,000
(increasing to $10,000,000 when all of the indebtedness evidenced by the 8
3/4% Notes, the 7 3/4% Notes, the 8 1/8% Notes, the 8% Notes and the 8 1/
4% Notes has been repaid), in principal amount of the indebtedness, after
the lapse of applicable grace periods or, in the case of non-payment
defaults, acceleration of the indebtedness if the acceleration is not
rescinded
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or annulled within ten days after the acceleration, provided that, subject
to certain limitations described in the indenture, the term "indebtedness"
does not include for this purpose an acceleration of or default on certain
"Non-Recourse Indebtedness," as that term is defined in the indenture;
o a final judgment for the payment of money in an amount in excess of
$2,000,000 (increasing to $10,000,000 when all of the indebtedness
evidenced by the 8 3/4% Notes, the 7 3/4% Notes, the 8 1/8% Notes, the 8%
Notes and the 8 1/4% Notes has been repaid) is entered against Toll
Brothers, Inc. or any subsidiary, as defined in the indenture, of Toll
Brothers, Inc., including Toll Corp., First Huntingdon Finance Corp. or
Toll Finance Corp., which remains undischarged for a period during which
execution is not effectively stayed of 60 days after the date on which the
right to appeal has expired, provided that the term "final judgment" will
not include a "Non-Recourse Judgment," as that term is defined in the
indenture, unless the book value of all property, net of any previous
write downs or reserves in respect of the property, subject to the Non-
Recourse Judgment exceeds the amount of the Non-Recourse Judgment by more
than $5,000,000 (increasing to $10,000,000 when all of the indebtedness
evidenced by the 8 3/4% Notes, the 7 3/4% Notes, the 8 1/8% Notes, the 8%
Notes and the 8 1/4% Notes has been repaid);
o any one of various events of bankruptcy, insolvency or reorganization
specified in the indenture occurs with respect to Toll Brothers, Inc. or
Toll Corp.; or
o the guarantee of Toll Brothers, Inc. relating to the notes ceases to be in
full force and effect for any reason other than in accordance with its
terms.
"Non-Recourse Indebtedness," as defined in the indenture, means indebtedness
or other obligations secured by a lien on property to the extent that the
liability for the indebtedness or other obligations is limited to the security
of the property without liability on the part of Toll Brothers, Inc. or any
subsidiary, other than the subsidiary which holds title to the property, for
any deficiency.
"Non-Recourse Judgment," as defined in the indenture, means a judgment in
respect of indebtedness or other obligations secured by a lien on property to
the extent that the liability for (1) the indebtedness or other obligations
and (2) the judgment is limited to the property without liability on the part
of Toll Brothers, Inc. or any subsidiary, other than the subsidiary which
holds title to the property, for any deficiency.
The trustee is required to give notice to the holders of the notes within 90
days of a default with respect to the notes under the indenture. However, the
trustee may withhold notice to the holders of the notes, except in the case of
a default in the payment of principal, premium, or interest, if any, with
respect to the notes, if the trustee considers the withholding to be in the
interest of the holders.
If an Event of Default under the notes, other than an Event of Default
resulting from certain events of bankruptcy, insolvency or reorganization with
respect to Toll Brothers, Inc. or Toll Corp. occurs and is continuing, either
the trustee or the holders of at least 25% in principal amount of all of the
notes may, by giving an acceleration notice to Toll Corp., declare the unpaid
principal of and accrued and unpaid interest on all of the notes to be due and
payable if, with respect to the notes (1) (a) no designated senior debt of
Toll Brothers, Inc. or Toll Corp. is outstanding, or (b) if the notes are not
subordinated to other indebtedness of Toll Corp., immediately; or (2) if
designated senior debt of Toll Brothers, Inc. or Toll Corp. is outstanding and
the notes are junior to other indebtedness of Toll Corp., upon the earlier of
(A) ten days after the acceleration notice is received by Toll Corp. or (B)
the acceleration of any senior indebtedness of Toll Brothers, Inc. or Toll
Corp. The designated senior debt of Toll Brothers, Inc. is referred to in the
indenture as "Designated Senior Debt of the Guarantor" and the designated
senior debt of Toll Corp. is referred to in the indenture as "Designated
Senior Debt of the Company."
If an Event of Default occurs under the notes as a result of certain events
of bankruptcy, insolvency or reorganization with respect to Toll Brothers,
Inc. or Toll Corp., then the unpaid principal amount of all of the notes, and
any accrued and unpaid interest, will automatically become due and payable
immediately without any declaration or other act by the trustee or any holder
of the notes. At any time after a declaration of acceleration with respect to
the notes has been made, but before a judgment or decree based on acceleration
has been obtained, the holders of a majority in principal amount of the notes
may rescind the acceleration,
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provided that, among other things, all Events of Default with respect to the
notes, other than payment defaults caused by the acceleration, have been cured
or waived as provided in the indenture.
The holders of a majority in outstanding principal amount of the notes may
generally waive an existing default with respect to the notes and its
consequences in accordance with terms and conditions provided in the
indenture. However, these holders may not waive a default in the payment of
the principal, any premium or any interest on the notes.
Toll Brothers, Inc. and Toll Corp. will be required to file annually with
the trustee under the indenture a certificate, signed by an officer of Toll
Brothers, Inc. and Toll Corp., stating whether or not the officer knows of any
default under the terms of the indenture and providing a description of any
default of which the officer has knowledge.
Successor Corporation
The indenture provides that each of Toll Corp. and Toll Brothers, Inc. may
not consolidate with, merge into or transfer all or substantially all of its
assets to another person unless the person is a corporation organized and
existing under the laws of the United States or any state or the District of
Columbia and assumes all the obligations of Toll Corp. or Toll Brothers, Inc.,
as applicable, under the indenture and either the notes issued thereunder or
the guarantee, as the case may be, immediately after giving effect to the
transaction, no Default or Event of Default has occurred and is continuing,
the Consolidated Net Worth of the obligor of the notes or the guarantee, as
the case may be, immediately after the transaction is not less than the
Consolidated Net Worth of Toll Corp. or Toll Brothers, Inc. as applicable,
immediately before the transaction and the surviving corporation would be able
to incur at least an additional $1.00 of Indebtedness, other than Excluded
Debt, under the covenant described under "--Limitation on Additional
Indebtedness" above.
Other Provisions
See the accompanying prospectus.
Definitions
A summary of some of the defined terms used in the indenture is provided
below. Reference is made to the indenture for the full definition of all these
terms, as well as any other capitalized terms used in this prospectus
supplement for which no definition is provided.
"Affiliate," as defined in the indenture, has the meaning provided in Rule
405 promulgated under the Securities Act of 1933, as amended and in effect on
the date of this prospectus supplement.
"Consolidated Adjusted Net Worth" of Toll Brothers, Inc. means the
Consolidated Net Worth of Toll Brothers, Inc. less the stockholders' equity of
each of the Unrestricted Subsidiaries, as determined in accordance with
generally accepted accounting principles.
"Consolidated Fixed Charge Ratio" of Toll Brothers, Inc. means the ratio of
(1) the aggregate amount of Consolidated Net Income Available for Fixed
Charges of the person for the four fiscal quarters for which financial
information in respect thereof is available immediately prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Ratio (the "Transaction Date") to (2) the aggregate Consolidated
Interest Expense of the person for the four fiscal quarters for which
financial information in respect thereof is available immediately prior to the
Transaction Date.
"Consolidated Income Tax Expense" of Toll Brothers, Inc. means, for any
period for which the determination thereof is to be made, the aggregate of the
income tax expense of Toll Brothers, Inc. and its Restricted Subsidiaries for
the period, determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Consolidated Interest Expense" of Toll Brothers, Inc. means, for any period
for which the determination thereof is to be made, the Interest Expense of
Toll Brothers, Inc. and its Restricted Subsidiaries
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for the period, determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Consolidated Net Adjusted Income" of Toll Brothers, Inc. means, for any
period for which the determination thereof is to be made taken as one
accounting period, the aggregate Consolidated Net Income of Toll Brothers,
Inc. and its subsidiaries determined on a consolidated basis in accordance
with generally accepted accounting principles, adjusted by excluding (to the
extent not otherwise excluded in calculating Consolidated Net Income) any net
extraordinary gain or any net extraordinary loss, as the case may be, during
the period.
"Consolidated Net Income" for any period means the aggregate of the Net
Income of Toll Brothers, Inc. and its consolidated subsidiaries for the
period, on a consolidated basis, determined in accordance with generally
accepted accounting principles, provided that
(1) the Net Income of any person in which Toll Brothers, Inc. or any
consolidated subsidiary has a joint interest with a third party or which
is organized outside of the United States will be included only to the
extent of the lesser of (a) the amount of dividends or distributions
paid to Toll Brothers, Inc. or a consolidated subsidiary or (b) Toll
Brothers, Inc.'s direct or indirect proportionate interest in the Net
Income of the person, provided that, so long as Toll Brothers, Inc. or a
consolidated subsidiary has an unqualified legal right to require the
payment of a dividend or distribution, Net Income shall be determined
solely pursuant to clause (b);
(2) the Net Income of any person acquired in a pooling of interests
transaction for any period prior to the date of the acquisition will be
excluded, and
(3) the Net Income of any Unrestricted Subsidiary will be included only to
the extent that the amount of dividends or distributions, the fair value
of which, if other than in cash, to be determined by the board of
directors, in good faith, by the Unrestricted Subsidiary is received by
Toll Brothers, Inc. or any of its consolidated Restricted Subsidiaries.
"Consolidated Net Income Available for Fixed Charges" means, for any period
for which the determination thereof is to be made, the sum of the amounts for
the period of
(1) Consolidated Net Adjusted Income,
(2) Consolidated Interest Expense excluding capitalized interest, and
(3) Consolidated Income Tax Expense,
all as determined on a consolidated basis for Toll Brothers, Inc. and its
subsidiaries in conformity with generally accepted accounting principles.
"Consolidated Net Worth" of any person means the consolidated stockholders'
equity of the person, as determined in accordance with generally accepted
accounting principles.
"Designated Senior Debt of the Company" means any single issue of
Indebtedness of Toll Corp. constituting Senior Indebtedness of Toll Corp.
which at the time of determination has an aggregate principal amount
outstanding of at least $25,000,000 and is specifically designated in the
instrument or instruments creating, governing or evidencing the Senior
Indebtedness of Toll Corp. as "Designated Senior Debt of Toll Corp.," it being
understood that Toll Corp.'s guarantee of Toll Brothers, Inc.'s Revolving
Credit Agreement, as defined in the indenture, will be considered a single
issue of Indebtedness of Toll Corp. for purposes of this definition.
"Designated Senior Debt of the Guarantor" means any single issue of
Indebtedness of Toll Brothers, Inc. constituting Senior Indebtedness of Toll
Brothers, Inc. which at the time of determination has an aggregate principal
amount outstanding of at least $25,000,000 and is specifically designated in
the instrument or instruments creating, governing or evidencing the Senior
Indebtedness of Toll Brothers, Inc. as "Designated Senior Debt of Toll
Brothers, Inc.," it being understood that Toll Brothers, Inc.'s guarantee of
the Revolving Credit Agreement will be considered a single issue of
Indebtedness of Toll Brothers, Inc. for purposes of this definition.
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"Excluded Debt" means any Indebtedness of Toll Brothers and any Indebtedness
or preferred stock of Toll Corp., whether outstanding on the date of the
indenture or thereafter created, which is (1) subordinated in right of payment
to the notes or the guarantee (upon liquidation or otherwise) and (2) matures
after, and is not redeemable, mandatorily or at the option of the holder
thereof prior to the date of maturity of the notes.
"Indebtedness," for the purpose of the covenants described under "-- Certain
Covenants -- Limitation on Additional Indebtedness" and "-- Restricted and
Unrestricted Subsidiaries," and certain definitions, means without duplication
(1) any liability of any person (a) for borrowed money or 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 (other than a trade payable or current
liability arising in the ordinary course of business) to the extent it
would appear as a liability upon a balance sheet of the person prepared
on a consolidated basis in accordance with generally accepted accounting
principles, or (b) for the payment of money relating to a capitalized
lease obligation;
(2) any liability of any person under any obligation incurred under letters
of credit; and
(3) any liability of others described in clause (1) or (2) with respect to
which the person has made a guarantee or similar arrangement, directly
or indirectly to the extent of the guarantee or arrangement.
"Interest Expense" of any person means, for any period for which the
determination thereof is to be made, the sum of the aggregate amount of
(1) interest in respect of indebtedness, including all commissions,
discounts and other fees and charges owed with respect to letters of
credit and bankers' acceptance financing,
(2) all but the principal component of rentals in respect of capitalized
lease obligations, paid, accrued or scheduled to be paid or accrued by
the person during the period and
(3) capitalized interest, all as determined in accordance with generally
accepted accounting principles,
minus
(4) interest expense attributable to the person's directly or indirectly
majority-owned mortgage finance Affiliates.
"Net Income" of any person means the net income (loss) of the person,
determined in accordance with generally accepted accounting principles;
excluding, however, from the determination of Net Income all gain (to the
extent that it exceeds all losses) realized upon the sale or other disposition
(including, without limitation, dispositions pursuant to sale leaseback
transactions) of any real property or equipment of the person, which is not
sold or otherwise disposed of in the ordinary course of business, or of any
capital stock of the person or its subsidiaries owned by the person.
"Non-Recourse Indebtedness" means Indebtedness or other obligations secured
by a lien on property to the extent that the liability for the Indebtedness or
other obligations is limited to the security of the property without liability
on the part of Toll Brothers, Inc. or any subsidiary, other than the
subsidiary which holds the title to the property, for any deficiency.
"Restricted Subsidiary" means any subsidiary that is not an Unrestricted
Subsidiary.
"Unrestricted Subsidiary" means (1) any subsidiary which, in accordance with
the provisions of the indenture, has been designated in a Board Resolution of
Toll Brothers, Inc. as an Unrestricted Subsidiary, in each case unless and
until the subsidiary must, in accordance with the provisions of the indenture,
be designated by board resolution as a Restricted Subsidiary; and (2) any
subsidiary a majority of the voting stock of which will at the time be owned
directly or indirectly by one or more Unrestricted Subsidiaries.
"Unrestricted Subsidiary Investment" means any loan, advance, capital
contribution or transfer (including by way of guarantee or other similar
arrangement) in or to any Unrestricted Subsidiary. For the purposes of the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments" above, (1) "Unrestricted Subsidiary Investment" will include the
fair market value of the net assets of any
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subsidiary at the time that the subsidiary is designated an Unrestricted
Subsidiary and (2) any property transferred to an Unrestricted Subsidiary will
be valued at fair market value at the time of the transfer, in each case as
determined by the board of directors of Toll Brothers, Inc. in good faith.
"Unrestricted Subsidiary Investment" does not include the fair market value of
the net assets of an Unrestricted Subsidiary that is designated as a
Restricted Subsidiary (as determined by the board of directors of Toll
Brothers, Inc. in good faith), provided that the designation is then permitted
pursuant to the terms of the indenture.
Book-Entry System
The notes will be represented by a global note that will be deposited with
the trustee on behalf of The Depository Trust Company (the "Depositary") and
registered in the name of a nominee of the Depositary.
The Depositary has advised Toll Corp. and the underwriters as follows: the
Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. The Depositary was created to hold securities of its
participating organizations ("participants") and to facilitate the clearance
and settlement of securities transactions, such as transfers and pledges,
among its participants in such securities through electronic computerized
book-entry changes in accounts of the participants, thereby eliminating the
need for physical movement of securities certificates. Participants include
securities brokers and dealers, including the underwriters for this offering,
banks, trust companies, clearing corporations and certain other organizations,
some of whom, and/or their representatives, own the Depositary. Access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Persons who are not participants may beneficially own securities held by the
Depositary only through participants.
Unless and until it is exchanged in whole or in part for certificated notes
in definitive form, the global note may not be transferred except as a whole
by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary.
The notes represented by the global note will not be exchangeable for
certificated notes, provided that if the Depositary is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is
not appointed by Toll Corp. within 90 days, Toll Corp. will issue individual
notes in definitive form in exchange for the global note. In addition, Toll
Corp. may at any time and in its sole discretion determine not to have a
global note and, in such event, will issue individual notes in definitive form
in exchange for the global note then representing all the notes. In either
instance, an owner of a beneficial interest in the global note will be
entitled to physical delivery of notes in definitive form equal in principal
amount to the beneficial interest and to have the notes registered in its
name. Individual notes issued in definitive form will be issued in
denominations of $1,000 and any larger amount that is an integral multiple of
$1,000 and will be issued in registered form only, without coupons.
Payments of principal of and interest on the notes will be made by Toll
Corp. through the trustee to the Depositary or its nominee, as the case may
be, as the registered owner of the global note. Neither Toll Corp. nor the
trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the global note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. Toll Corp. expects
that the Depositary, upon receipt of any payment of principal or interest in
respect of the global note, will credit the accounts of the related
participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interest in the global note as
shown on the records of the Depositary. Toll Corp. also expects that payments
by participants to owners of beneficial interests in the global note will be
governed by standing customer instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
participants.
S-28
UNDERWRITING
Toll Corp. intends to offer the notes through a number of underwriters.
Subject to the terms and conditions set forth in the underwriting agreement
and terms agreement, dated November 27, 2001, the underwriters named below
have severally agreed to purchase, and Toll Corp. has agreed to sell to them,
severally, the respective principal amount of the notes set forth opposite
their respective names below. Banc of America Securities LLC is acting as sole
book-running manager for the notes offering.
Principal amount
Name of the notes
---- ----------------
Banc of America Securities LLC ................. $116,250,000
Banc One Capital Markets, Inc. ................. 15,000,000
BNP Paribas Securities Corp. ................... 3,750,000
Comerica Securities, Inc. ...................... 3,750,000
Credit Lyonnais Securities (USA) Inc. .......... 3,750,000
Goldman, Sachs & Co. ........................... 3,750,000
SunTrust Capital Markets, Inc. ................. 3,750,000
------------
Total ....................................... $150,000,000
The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the notes is subject to, among
other things, the approval of certain legal matters by their counsel and
certain other conditions. Under the terms of the underwriting agreement, the
underwriters are committed to take and pay for all of the notes, if any are
taken.
The underwriters have advised us that they propose to offer the notes from
time to time for sale in one or more negotiated transactions, or otherwise, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The underwriters may effect
such transactions by selling the notes to or through dealers, and such dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from the underwriters and/or the purchasers of the notes for whom
they may act as agent. The underwriters and any dealers that participate with
the underwriters in the distribution of the notes may be deemed to be
underwriters, and any discounts or commissions received by them and any profit
on the resale of the notes by them may be deemed to be underwriting discounts
or commissions, under the Securities Act of 1933, as amended.
In connection with the offering, the underwriters may purchase and sell
notes in the open market. These transactions may include syndicate covering
transactions and stabilizing transactions. Syndicate covering transactions
involve purchases of the notes in the open market after the distribution has
been completed in order to cover syndicate short positions. Stabilizing
transactions consist of certain bids or purchases of notes made for the
purpose of preventing or retarding a decline in the market price of the notes
while the offering is in progress.
The notes are a new issue of securities with no established trading market.
Toll Corp. does not currently intend to apply for listing of the notes on a
national securities exchange, but has been advised by the underwriters that
they intend to make a market in the notes. The underwriters are not obligated,
however, to do so and may discontinue their market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for the notes.
Toll Corp. estimates that its share of total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$300,000.
From time to time in the ordinary course of their respective businesses, the
underwriters and their respective affiliates have engaged in, and may in the
future engage in commercial and/or investment banking transactions with us and
our affiliates. In particular, affiliates of Banc of America Securities LLC,
Banc One Capital Markets, Inc., BNP Paribas Securities Corp., Comerica
Securities, Inc., Credit Lyonnais Securities (USA) Inc., and SunTrust Capital
Markets, Inc. are Co-Agents and/or lenders under our $535 million unsecured
revolving credit facility. An affiliate of Banc of America Securities LLC is a
lender and Syndication Agent of our $192.5 million bank term loan. An
affiliate of Banc One Capital Markets, Inc. is a
S-29
lender and Administrative Agent of our $192.5 million term loan and affiliates
of BNP Paribas Securities Corp. and SunTrust Capital Markets, Inc. are lenders
under this term loan.
Toll Corp. has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain matters with respect to the notes offered hereby, are being passed
upon for Toll Brothers, Inc. and Toll Corp. by Wolf, Block, Schorr and Solis-
Cohen LLP, Philadelphia, Pennsylvania. Certain legal matters with respect to
the notes offered hereby are being passed upon for the underwriters by Cahill
Gordon & Reindel, New York, New York.
FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the documents
that are incorporated by reference in the prospectus include forward-looking
statements. These forward-looking statements relate, among other things, to:
o anticipated operating results;
o financial resources;
o increases in revenues;
o increased profitability;
o interest expense;
o growth and expansion; and
o ability to acquire land.
We have based these forward-looking statements on our current expectations
and projections about future events. These forward-looking statements are
subject to risks, uncertainties, and assumptions about us, including, among
other things, those relating to:
o local, regional and national economic and political conditions;
o the consequences of any future terrorist attacks such as those that
occurred on September 11, 2001;
o the effects of governmental regulation;
o the competitive environment in which we operate;
o fluctuations in interest rates;
o changes in home prices and in the demand for homes;
o the availability and cost of land for future growth;
o the availability of capital;
o the availability and cost of labor and materials; and
o weather conditions.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus supplement, the
accompanying prospectus and the documents that are incorporated by reference
in the prospectus might not occur or might occur otherwise than as discussed.
S-30
PROSPECTUS
[GRAPHIC OMITTED]
TOLL BROTHERS, INC.
Common Stock
Preferred Stock
Warrants
Guarantees of Debt Securities
TOLL CORP.
FIRST HUNTINGDON FINANCE CORP.
TOLL FINANCE CORP.
Debt Securities
Toll Brothers, Inc. may offer any of the following securities from time to
time:
o common stock;
o preferred stock;
o warrants to purchase common stock or preferred stock issued by Toll
Brothers, Inc. or debt securities issued by Toll Corp., First Huntingdon
Finance Corp. or Toll Finance Corp.; and
o guarantees of debt securities issued by Toll Corp., First Huntingdon
Finance Corp. or Toll Finance Corp.
Toll Corp., First Huntingdon Finance Corp. and Toll Finance Corp. may
offer debt securities from time to time. Toll Corp., First Huntingdon Finance
Corp. and Toll Finance Corp. are wholly-owned subsidiaries of Toll Brothers,
Inc.
Toll Brothers, Inc.'s common stock is listed on the New York Stock
Exchange and the Pacific Exchange under the Symbol "TOL."
Each time we offer any of the securities described in this prospectus we
will provide a prospectus supplement that will describe the specific price of
the securities being offered and the other terms of the offering. You should
read this prospectus and the applicable prospectus supplement carefully before
you invest. This prospectus may not be used to sell any securities unless it is
accompanied by the applicable prospectus supplement.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed on the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this Prospectus is April 6, 2000.
ABOUT THIS PROSPECTUS
This prospectus describes certain securities of Toll Brothers, Inc., Toll
Corp., First Huntingdon Finance Corp. and Toll Finance Corp. This prospectus is
part of a registration statement that we filed with the SEC utilizing a "shelf"
registration process, which allows us to offer and sell any combination of the
securities described in this prospectus in one or more offerings. Using this
prospectus, Toll Brothers, Inc., Toll Corp., First Huntingdon Finance Corp. and
Toll Finance Corp. may offer up to $500,000,000 worth of securities.
This prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide a prospectus
supplement that will describe the specific terms of the securities we are
offering. Each supplement will also contain specific information about the
terms of the offering it describes. The prospectus supplement may also add to,
update or change the information contained in this prospectus. In addition, as
we describe below in the section entitled "Where You Can Find More
Information," Toll Brothers, Inc. has filed and plans to continue to file other
documents with the SEC that contain information about it and the business
conducted by it and its subsidiaries. Before you decide whether to invest in
any of the securities offered by this prospectus, you should read this
prospectus, the prospectus supplement that further describes the offering of
those securities and the information Toll Brothers, Inc. otherwise files with
the SEC.
When this prospectus or a supplement to this prospectus uses the words
"we," "us" and "our," they refer to Toll Brothers, Inc. and its subsidiaries,
including Toll Corp., First Huntingdon Finance Corp. and Toll Finance Corp.,
unless the context otherwise requires. The phrase "this prospectus" refers to
this prospectus and any applicable prospectus supplement, unless the context
otherwise requires.
WHERE YOU CAN FIND MORE INFORMATION
Toll Brothers, Inc. is subject to the informational requirements of the
Securities Exchange Act of 1934. In accordance with those requirements, Toll
Brothers, Inc. files annual, quarterly and special reports, proxy statements
and other information with the SEC. You can read and copy any document Toll
Brothers, Inc. files with the SEC at the SEC's public reference rooms at the
following locations:
Judiciary Plaza 7 World Trade Center
450 Fifth Street, N.W. 13th Floor
Washington, D.C. 20549 New York, New York 10048
You may obtain information on the operation of the SEC's public reference rooms
by calling the SEC at 1-800-SEC-0330. The SEC filings of Toll Brothers, Inc.
are also available to the public from the SEC's Internet website at
http://www.sec.gov. In addition, the common stock of Toll Brothers, Inc. is
listed on the New York Stock Exchange and the Pacific Exchange and similar
information concerning Toll Brothers, Inc. can be inspected and copied at the
New York Stock Exchange, 20 Broad Street, New York, New York 10005 and the
Pacific Exchange, 301 Pine Street, San Francisco, California 94104.
The SEC allows us to "incorporate by reference" into this prospectus the
information Toll Brothers, Inc. files with the SEC. This means that we are
permitted to disclose important information to you by referring you to other
documents Toll Brothers, Inc. has filed with the SEC. We incorporate by
reference in two ways. First, we list certain documents that Toll Brothers,
Inc. has filed with the SEC. The information in these documents is considered
part of this prospectus. Second, Toll Brothers, Inc. expects to file additional
documents with the SEC in the future. The information in these documents, when
filed, will update and supersede the current information included in or
incorporated by reference in this prospectus. You should consider any statement
contained in this prospectus or in a document which is incorporated by
reference into this prospectus to be modified or superseded to the extent that
the statement is modified or superseded by another statement contained in a
later dated document that constitutes a part of this prospectus or is
incorporated by reference into this prospectus. You should consider any
statement which is so modified or superseded to be a part of this prospectus
only as so modified or superseded.
We incorporate by reference in this prospectus all the documents listed
below and any filings Toll Brothers, Inc. makes with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
of this prospectus and before all the securities offered by this prospectus
have been sold or de-registered:
2
o The annual report of Toll Brothers, Inc. on Form 10-K filed with the
SEC for the fiscal year ended October 31, 1999;
o The quarterly report of Toll Brothers, Inc. on Form 10-Q filed with
the SEC for the fiscal quarter ended January 31, 2000;
o An amended quarterly report of Toll Brothers, Inc. on Form 10-Q/A
filed with the SEC on March 28, 2000;
o The description of the common stock of Toll Brothers, Inc. contained
in its registration statement filed with the SEC on a Form 8-A dated
June 19, 1986 registering the common stock under Section 12 of the
Securities Exchange Act of 1934; and
o The description of preferred stock purchase rights contained in the
registration statement of Toll Brothers, Inc. filed with the SEC on a
Form 8-A dated June 20, 1997, as the same was amended by an amendment
on Form 8-A/A on August 21, 1998, registering the preferred stock
purchase rights under Section 12 of the Securities Exchange Act of
1934.
We will deliver, without charge, to anyone receiving this prospectus, upon
written or oral request, a copy of any document incorporated by reference in
this prospectus but not delivered with this prospectus, but the exhibits to
those documents will not be delivered unless they have been specifically
incorporated by reference. Requests for these documents should be made to:
Director of Investor Relations, Toll Brothers, Inc., 3103 Philmont Avenue,
Huntingdon Valley, PA 19006, (215) 938-8000. We will also make available to the
holders of the securities offered by this prospectus annual reports which will
include audited financial statements of Toll Brothers, Inc. and its
consolidated subsidiaries, including Toll Corp., First Huntingdon Finance Corp.
and Toll Finance Corp. Toll Corp., First Huntingdon Finance Corp. and Toll
Finance Corp. do not expect that they will be required to make filings with the
SEC under Section 15(d) of the Securities Exchange Act of 1934.
This prospectus is part of our "shelf" registration statement. Toll
Brothers, Inc., Toll Corp., First Huntingdon Finance Corp. and Toll Finance
Corp. have filed the registration statement with the SEC under the Securities
Act of 1933 to register the securities that any of them may offer by this
prospectus, including any applicable prospectus supplement. Not all of the
information in the registration statement appears in this prospectus, or will
appear in any prospectus supplement. You should refer to the registration
statement and to the exhibits filed with the registration statement for further
information about Toll Brothers, Inc., its consolidated subsidiaries, including
Toll Corp., First Huntingdon Finance Corp. and Toll Finance Corp., and the
securities offered by this prospectus.
TOLL BROTHERS, INC.
Toll Brothers, Inc. designs, builds, markets and arranges financing for
single-family homes in residential communities that include both detached and
attached homes. We market our homes primarily to middle-income and upper-income
buyers, catering to move-up, empty nester and age-qualified home buyers. We
emphasize high quality construction and consumer satisfaction. In the design,
construction and marketing of our homes, we utilize our own architectural,
engineering, mortgage, title, security monitoring, landscape, insurance
brokerage, component assembly and manufacturing operations. We currently
operate in eighteen states in six regions around the country. While we continue
to explore additional geographic areas for expansion, our operations are
currently conducted in the following major suburban residential areas:
o southeastern Pennsylvania and Delaware
o central New Jersey
o the Virginia and Maryland suburbs of Washington, D.C.
o the Boston, Massachusetts metropolitan area
o Fairfield and Hartford Counties, Connecticut
o Westchester County, New York
o southern and northern California
3
o Raleigh and Charlotte, North Carolina
o Metro Phoenix, Arizona
o Las Vegas, Nevada
o Dallas and Austin, Texas
o the east and west coasts of Florida
o Columbus, Ohio
o Nashville, Tennessee
o Detroit, Michigan
o Chicago, Illinois
In recognition of its achievements, Toll Brothers, Inc. has received
numerous awards from national, state and local homebuilder publications and
associations. Toll Brothers, Inc. is the only publicly traded home builder to
have won all three of the industry's hightest honors: America's Best Builder
(1996). The National Housing Quality Award (1995), and Builder of the Year
(1986).
Co-founded by Robert I. Toll and Bruce E. Toll, Toll Brothers, Inc.
commenced its business operations, through predecessor entities, in 1967. Toll
Brothers, Inc. is a Delaware corporation that was formed in May 1986.
Toll Corp., First Huntingdon Finance Corp. and Toll Finance Corp. are
indirect, wholly- owned subsidiaries of Toll Brothers, Inc. which were
incorporated in Delaware in July 1987, July 1987 and October 1998,
respectively. Neither Toll Corp., First Huntingdon Finance Corp. nor Toll
Finance Corp. has any independent operations or generates any operating
revenues other than providing financing to other subsidiaries of Toll Brothers,
Inc. by lending the proceeds of its offerings of debt securities and related
activities. There is no present intention to have Toll Corp., First Huntingdon
Finance Corp. or Toll Finance Corp. engage in other activities.
The principal executive offices of Toll Brothers, Inc., Toll Corp., First
Huntingdon Finance Corp. and Toll Finance Corp. are located at 3103 Philmont
Avenue, Huntingdon Valley, Pennsylvania 19006, and their telephone number is
(215) 938-8000.
THE HOUSING INDUSTRY
Residential real estate developers, including Toll Brothers, Inc., are
subject to various risks, both on the national and regional levels. These risks
include:
o economic recession,
o oversupply of homes,
o changes in governmental regulation,
o effects of environmental factors,
o increases in costs of land, materials and labor,
o increases in real estate taxes; and
o the unavailability of construction funds or mortgage loans at rates
acceptable to builders and home buyers.
Our business and earnings are substantially dependent on our ability to
obtain financing for our development activities on terms that are acceptable to
us. Increases in interest rates increase our construction cost and, to the
extent the increase is passed on to our customers in the form of higher prices
for our homes, may adversely impact our ability to sell our homes. In addition,
increases in interest rates may have an adverse effect on the availability of
home financing to our present and potential customers.
4
The housing industry has been subject to increasing environmental,
building, zoning and sales regulation by various federal, state and local
authorities. This regulation affects construction activities as well as sales
activities and other dealings with consumers. In addition, the industry has
also seen an increase in state and local legislation authorizing the
acquisition of land, mainly by governmental, quasi-public and non-profit
entities, as designated open spaces. We must obtain the approval of numerous
governmental authorities in connection with our development activities. We may
be required to apply for additional approvals or the modification of our
existing approvals because of changes in local circumstances or applicable law.
Expansion of regulation in the housing industry has increased the time required
to obtain the necessary approvals to begin construction and has prolonged the
time between the initial acquisition of land or land options and the
commencement and completion of construction.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities offered
by this prospectus for general corporate purposes, which may include the
acquisition of residential development properties, the repayment of our
outstanding indebtedness, working capital or for any other purposes as may be
described in an accompanying prospectus supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows the ratio of earnings to fixed charges of Toll
Brothers, Inc. for the periods indicated:
Three Months Ended
Year Ended October 31, January 31,
--------------------------------------------------------- ---------------------
1995 1996 1997 1998 1999 1999 2000
--------- --------- --------- --------- --------- --------- ---------
Ratio, including collateralized
mortgage financing(1) ......... 3.82 3.87 3.81 4.35 3.89 3.43 3.08
- ------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes, extraordinary loss and change in
accounting plus interest expense and fixed charges except interest
incurred. Fixed charges consist of interest incurred (whether expensed or
capitalized), the portion of rent expense that is representative of the
interest factor, and amortization of debt discount and issuance costs.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
Toll Corp., First Huntingdon Finance Corp. and Toll Finance Corp. may
issue debt securities from time to time in one or more series. Any series of
debt securities offered by Toll Corp., First Huntingdon Finance Corp. or Toll
Finance Corp. will be offered together with the unconditional guarantees of
Toll Brothers, Inc.
One or more series of the debt securities of Toll Corp., First Huntingdon
Finance Corp. or Toll Finance Corp. may be issued under a single indenture.
Alternatively, any series of debt securities may be issued under a separate
indenture. The terms applicable to each series of debt securities will be
stated in the indenture and may be modified by the resolution(s) authorizing
that series of debt securities adopted by the board of directors, or an officer
or committee of officers authorized by the board of directors, of both the
issuer of the debt securities and Toll Brothers, Inc. under the applicable
indenture. We refer in this prospectus to the resolution(s) authorizing a
series of debt securities as an authorizing resolution. Each indenture under
which any debt securities are issued, including the applicable authorizing
resolution(s), is referred to in this prospectus as an "indenture," and
collectively with any other indentures, as the "indentures." Each indenture
will be entered into among Toll Corp., First Huntingdon Finance Corp. or Toll
Finance Corp., as the obligor, Toll Brothers, Inc., as the issuer of the
related guarantees, and Bank One Trust Company, NA, or another institution
named in the applicable prospectus supplement, as trustee.
The following is a description of certain general terms and provisions of
the debt securities we may offer by this prospectus. The name of the issuer and
the particular terms of any series of debt securities we offer, including the
extent to which the general terms and provisions may apply to that series of
debt securities, will
5
be described in a prospectus supplement relating to those debt securities.
Except as otherwise indicated in this prospectus or in the applicable
prospectus supplement, the following description of indenture terms is
applicable to, and each reference to "the indenture" is a reference to, each
indenture that Toll Corp., First Huntingdon Finance Corp. or Toll Finance Corp.
may enter into with respect to any series of debt securities we may offer by
this prospectus, unless the context otherwise requires. All references to
"Section" in the following description refer to the applicable Section of the
indenture.
The terms of any series of the debt securities include those stated in the
applicable indenture. Holders of each series of the debt securities are
referred to the indenture for that series, including the applicable authorizing
resolution, for a statement of the terms. The respective forms of the indenture
for the debt securities of Toll Corp., First Huntingdon Finance Corp. and Toll
Finance Corp. are filed as exhibits to the registration statement. Each
indenture may be amended or modified for any series of debt securities by an
authorizing resolution which will be described in an applicable prospectus
supplement, and the applicable authorizing resolution relating to any series of
debt securities offered pursuant to this prospectus will be filed as an exhibit
to a report incorporated by reference in this prospectus. The following summary
of certain provisions of the debt securities and the indenture is not complete.
You should read all of the provisions of the indenture, including the
definitions contained in the indenture which are not otherwise defined in this
prospectus, and the applicable prospectus supplement. Wherever we refer to
particular provisions or defined terms of the indenture, these provisions or
defined terms are incorporated in this prospectus by reference.
General
The debt securities, when issued, will be obligations that constitute
either senior secured debt, senior unsecured debt, senior subordinated debt or
subordinated debt of Toll Corp., First Huntingdon Finance Corp. or Toll Finance
Corp., as the case may be. Toll Brothers, Inc. will unconditionally guarantee
the payment of the principal, premium, if any, and interest on the debt
securities when due, whether at maturity, by declaration of acceleration, call
for redemption or otherwise. See "Guarantee of Debt Securities." The total
principal amount of debt securities which may be issued under the indenture
will not be limited. Debt securities may be issued under the indenture from
time to time in one or more series. Unless the applicable prospectus supplement
relating to the original offering of a particular series of debt securities
indicates otherwise, the issuer of that series of debt securities will have the
ability to reopen the previous issue of that series of debt securities and
issue additional debt securities of that series pursuant to an authorizing
resolution, an officers' certificate or an indenture supplement. Because
neither Toll Corp., First Huntingdon Finance Corp. nor Toll Finance Corp. has
any independent operations or generates any operating revenues, the funds
required to pay the principal, the premium, if any, and interest on the debt
securities will come from Toll Brothers, Inc. and its other subsidiaries.
Except as otherwise stated in the applicable prospectus supplement, there is no
legal or contractual restriction on the ability of Toll Brothers, Inc. or the
other subsidiaries of Toll Brothers, Inc. to provide these funds.
If the debt securities of any series issued by Toll Corp., First
Huntingdon Finance Corp. or Toll Finance Corp. will be subordinated to any
other indebtedness of that issuer, the indebtedness of that issuer to which
that series will be subordinated will be referred to in the applicable
authorizing resolution and prospectus supplement as senior indebtedness of Toll
Corp., First Huntingdon Finance Corp. or Toll Finance Corp., as the case may
be. The applicable authorizing resolution and prospectus supplement will define
that senior indebtedness and describe the terms of the subordination. Unless
otherwise stated in the applicable prospectus supplement, the payment of
principal, premium, if any, and interest on any series of debt securities
issued by Toll Corp., First Huntingdon Finance Corp. or Toll Finance Corp.
which is subordinated by its terms to other indebtedness of that issuer will be
subordinated in right of payment, in the manner and to the extent described in
the indenture under which that series is issued, to the prior payment in full
of all senior indebtedness of the issuer, as defined in the applicable
authorizing resolution and prospectus supplement, whether the senior
indebtedness is outstanding on the date of the indenture or is created,
incurred, assumed or guaranteed after the date of the indenture.
The prospectus supplement relating to any series of debt securities that
are offered by this prospectus will name the issuer and describe the specific
terms of that series of debt securities. The applicable prospectus supplement
will describe, among other things, the following terms, to the extent they are
applicable to that series of debt securities:
6
o their title and, if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which they will be issuable;
o their price or prices (expressed as a percentage of the respective
aggregate principal amount of the debt securities) at which they will be
issued;
o their total principal amount and, if applicable, the terms on which the
principal amount of the series may be increased by a subsequent offering
of additional debt securities of the same series;
o the interest rate (which may be fixed or variable and which may be zero
in the case of certain debt securities issued at an issue price
representing a discount from the principal amount payable at maturity),
the date or dates from which interest, if any, will accrue and the
circumstances, if any, in which the issuer may defer interest payments;
o any special provisions for the payment of any additional amounts with
respect to the debt securities;
o any provisions relating to the seniority or subordination of all or any
portion of the indebtedness evidenced by the securities to other
indebtedness of the issuer;
o the date or dates on which principal and premium, if any, are payable or
the method of determining those dates;
o the dates and times at which interest, if any, will be payable, the
record date for any interest payment and the person to whom interest will
be payable if other than the person in whose name the debt security is
registered at the close of business on the record date for the interest
payment;
o the place or places where principal of, premium, if any, and interest,
if any, will be payable;
o the terms applicable to any "original issue discount" (as defined in the
Internal Revenue Code of 1986, as amended, and the related regulations),
including the rate or rates at which the original issue discount will
accrue, and any special federal income tax and other considerations;
o the right or obligation, if any, of the issuer to redeem or purchase debt
securities under any sinking fund or analogous provisions or at the option
of a holder of debt securities, or otherwise, the conditions, if any,
giving rise to the right or obligation and the period or periods within
which, and the price or prices at which and the terms and conditions upon
which, debt securities will be redeemed or purchased, in whole or in part,
and any provisions for the marketing of the debt securities;
o if the amount of payments of principal, premium, if any, and interest, if
any, is to be determined by reference to an index, formula or other
method, the manner in which these amounts are to be determined and the
calculation agent, if any, with respect to the payments;
o if other than the principal amount of the debt securities, the portion of
the principal amount of the debt securities which will be payable upon
declaration or acceleration of the stated maturity of the debt securities
pursuant to an "Event of Default," as defined in the applicable indenture;
o whether the debt securities will be issued in registered or bearer form
and the terms of these forms;
o whether the debt securities will be issued in certificated or book-entry
form and, if applicable, the identity of the depositary;
o any provision for electronic issuance or issuances in uncertificated
form;
o any listing of the debt securities on a securities exchange;
o any events of default or covenants in addition to or in place of those
described in this prospectus;
o the terms, if any, on which the debt securities will be convertible into
or exchangeable for other debt or equity securities, including without
limitation the conversion price, the conversion period and any other
provisions in addition to or in place of those included in this
prospectus;
o the collateral, if any, securing payments with respect to the debt
securities and any provisions relating to the collateral;
7
o whether and upon what terms the debt securities may be defeased; and
o any other material terms of that series of debt securities.
Guarantee of Debt Securities
Toll Brothers, Inc. will unconditionally guarantee the payment of the
principal, premium, if any, and interest on the debt securities as they become
due, whether at maturity, by declaration of acceleration, call for redemption
or otherwise.
Unless otherwise provided in the applicable prospectus supplement or
authorizing resolution, the payment of principal, premium, if any, and interest
on the debt securities under the guarantees will be junior in right of payment
to the prior payment in full of all senior indebtedness of Toll Brothers, Inc.,
in the manner and to the extent described in the indenture, whether the senior
indebtedness is outstanding on the date of the indenture or is created,
incurred, assumed or guaranteed after the date of the indenture. The senior
indebtedness of Toll Brothers, Inc. is referred to in the indenture as "Senior
Indebtedness of the Guarantor" and may be further defined in the applicable
prospectus supplement and authorizing resolution.
Unless otherwise provided in the applicable prospectus supplement, upon
(1) the maturity of any senior indebtedness of Toll Brothers, Inc. by lapse of
time, acceleration, unless waived, or otherwise or (2) any distribution of the
assets of Toll Brothers, Inc. upon any dissolution, winding up, liquidation or
reorganization of Toll Brothers, Inc., the holders of senior indebtedness of
Toll Brothers, Inc. will be entitled to receive payment in full before the
holders of any then outstanding debt securities of a series offered by this
prospectus will be entitled to receive any payment on those debt securities
pursuant to the guarantees. Except as otherwise provided in the applicable
prospectus supplement, if in any of the situations referred to in (1) or (2)
above, a payment is made to the trustee or to holders of the debt securities of
a series offered by this prospectus before all senior indebtedness of Toll
Brothers, Inc. has been paid in full or provision has been made for payment of
all of the senior indebtedness of Toll Brothers, Inc., the payment to the
trustee or holders must be paid over to the holders of the senior indebtedness
of Toll Brothers, Inc.
The assets of Toll Brothers, Inc. consist principally of the stock of its
subsidiaries. Therefore, the rights of Toll Brothers, Inc. and the rights of
its creditors, including the holders of debt securities unconditionally
guaranteed by Toll Brothers, Inc., to participate in the assets of any
subsidiary other than the issuer of those debt securities upon liquidation,
recapitalization or otherwise will be subject to the prior claims of that
subsidiary's creditors except to the extent that claims of Toll Brothers, Inc.
itself as a creditor of the subsidiary may be recognized. This includes the
prior claims of the banks that have provided and are providing First Huntingdon
Finance Corp. a revolving credit facility under an agreement pursuant to which
Toll Brothers, Inc. and its other subsidiaries, including Toll Corp. and Toll
Finance Corp., have guaranteed or will guarantee the obligations owing to the
banks under the revolving credit facility.
Conversion of Debt Securities
Unless otherwise indicated in the applicable prospectus supplement, the
debt securities will not be convertible into common stock of Toll Brothers,
Inc. or into any other securities. The particular terms and conditions of the
conversion rights of any series of convertible debt securities other than those
described below will be described in the applicable prospectus supplement.
Unless otherwise indicated in the applicable prospectus supplement, and
subject, if applicable, to prior redemption at the option of the issuer of the
debt securities, the holders of any series of convertible debt securities will
be entitled to convert the principal amount or a portion of the principal
amount which is an integral multiple of $1,000 at any time before the date
specified in the applicable prospectus supplement for the series of debt
securities into shares of the common stock of Toll Brothers, Inc. at the
conversion price stated in the applicable prospectus supplement, subject to
adjustment as described below.
In the case of any debt security or portion of debt security called for
redemption, conversion rights will expire at the close of business on the
second business day preceding the redemption date. (Section 10.02).
8
Toll Brothers, Inc. will not be required to issue fractional shares of
common stock upon conversion of the debt securities of a convertible series.
Instead, Toll Brothers, Inc. will pay a cash adjustment for any fractional
interest in a share of its common stock. (Section 10.04).
Convertible debt securities surrendered for conversion during the period
from the close of business on a "Record Date," as defined in the applicable
indenture, or the next preceding "Business Day," as defined in the applicable
indenture, if the Record Date is not a Business Day, preceding any "Interest
Payment Date," as defined in the applicable indenture, to the opening of
business on that Interest Payment Date, other than convertible debt securities
or portions of convertible debt securities called for redemption during the
period, will be accompanied by payment in next-day funds or other funds
acceptable to Toll Brothers, Inc. of an amount equal to the interest payable on
the Interest Payment Date on the principal amount of the convertible debt
securities then being converted. Except as described in the preceding sentence,
no payment or adjustment will be made on conversion of convertible debt
securities on account of interest accrued on the debt securities surrendered
for conversion or for dividends on the common stock delivered on conversion. If
an issuer of convertible debt securities defaults on the payment of interest
for which payment is made upon the surrender of those convertible debt
securities for conversion, the amount so paid will be returned to the party who
made the payment. (Section 10.03).
The conversion price of the debt securities of a convertible series will
be subject to adjustment in certain events, including:
o the subdivision, combination or reclassification of the outstanding
common stock of Toll Brothers, Inc.;
o the issuance of common stock of Toll Brothers, Inc. as a dividend or
distribution on common stock of Toll Brothers, Inc.;
o the issuance of rights or warrants, expiring within 45 days after the
record date for issuance, to the holders of common stock of Toll
Brothers, Inc. generally entitling them to acquire shares of common
stock of Toll Brothers, Inc. at less than the common stock's then
"Current Market Price" as defined in the indenture; or
o the distribution to the holders of common stock of Toll Brothers, Inc.
generally of rights or warrants to subscribe for securities of Toll
Brothers, Inc. other than those for which adjustment is otherwise made,
or evidences of indebtedness or assets of Toll Brothers, Inc., excluding
cash dividends paid from retained earnings and dividends or
distributions payable in stock for which adjustment is otherwise made.
There will be no upward adjustment in the conversion price except in the
event of a reverse stock split. Toll Brothers, Inc. is not required to make any
adjustment in the conversion price of less than 1%, but the adjustment will be
carried forward and taken into account in the computation of any subsequent
adjustment. (Section 10.05).
A conversion price adjustment or the failure to make a conversion price
adjustment may, under various circumstances, be deemed to be a distribution
that could be taxable as a dividend under the Internal Revenue Code to holders
of debt securities or to holders of common stock.
There will be no adjustments to the conversion price of the debt
securities of any convertible series as discussed above in the following
situations:
o any consolidation or merger to which Toll Brothers, Inc. is a party
other than a merger or consolidation in which Toll Brothers, Inc. is the
continuing corporation;
o any sale or conveyance to another corporation of the property of Toll
Brothers, Inc. as an entirety or substantially as an entirety; or
o any statutory exchange of securities with another corporation, including
any exchange effected in connection with a merger of a third corporation
into Toll Brothers, Inc.
However, the holder of each convertible debt security outstanding at that
time will have the right to convert the debt security into the kind and amount
of securities, cash or other property which the holder would have owned or have
been entitled to receive immediately after the transaction if the debt security
was converted immediately before the effective date of the transaction.
(Section 10.10).
9
Form, Exchange, Registration, Conversion, Transfer and Payment
Unless otherwise indicated in the applicable prospectus supplement:
o each series of debt securities will be issued in registered form only,
without coupons;
o payment of principal, premium, if any, and interest, if any, on each
series of the debt securities will be payable at the office or agency of
the issuer of that series maintained for this purpose; and
o the exchange, conversion and transfer of each series of debt securities
may be registered at the office or agency of the issuer of that series
maintained for this purpose and at any other office or agency maintained
for this purpose. (Section 2.03).
Subject to various exceptions described in the indenture, the issuer of
each series of debt securities will be entitled to charge a reasonable fee for
the registration of transfer or exchange of the debt securities of that series,
including an amount sufficient to cover any tax or other governmental charge
imposed or expenses incurred in connection with the transfer or exchange.
(Section 2.06).
All payments made by the issuer of a series of debt securities to the
trustee and paying agent for the payment of principal, premium, if any, and
interest on the debt securities of that series which remain unclaimed for two
years after the principal, premium, if any, or interest has become due and
payable may be repaid to the issuer. Afterwards, the holder of the debt
security may look only to the issuer or, if applicable, Toll Brothers, Inc.,
for payment. (Section 11.03).
Registered Global Securities
The registered debt securities of a series may be issued in whole or in
part in the form of one or more registered global debt securities. A registered
global security is a security, typically held by a depositary, that represents
the beneficial interests of a number of purchasers of the security. Any
registered global debt securities will be deposited with and registered in the
name of a depositary or its nominee identified in the applicable prospectus
supplement. In this case, one or more registered global securities will be
issued, each in a denomination equal to the portion of the total principal
amount of outstanding registered debt securities of the series to be
represented by the registered global security.
Unless and until a registered global security is exchanged in whole or in
part for debt securities in definitive registered form, it may not be
transferred except as a whole:
o by the depositary for the registered global security to a nominee for
the depository;
o by a nominee of the depositary to the depositary or to another nominee
of the depositary; or
o by the depositary or its nominee to a successor depositary or a nominee
of a successor depositary.
The prospectus supplement relating to a particular series of debt
securities will describe the specific terms of the depositary arrangement
involving any portion of a series of debt securities to be represented by a
registered global security. We anticipate that the following provisions will
apply to all depositary arrangements for debt securities:
o ownership of beneficial interests in a registered global security will
be limited to persons that have accounts with the depositary for the
registered global security (each a "participant" and, collectively, the
"participants") or persons holding interests through the participants;
o after the issuer of a series of debt securities issues the registered
global security for the series, the depositary will credit, on its
book-entry registration and transfer system, the participants' accounts
with the respective principal amounts of the debt securities of that
series represented by the registered global security beneficially owned
by the participants;
o the underwriters, agents or dealers participating in the distribution of
the debt securities will designate the accounts to be credited;
10
o only a participant or a person that may hold an interest through a
participant may be the beneficial owner of a registered global security;
and
o ownership of beneficial interests in the registered global security will
be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by the depositary for the
registered global security for interests of the participants, and on the
records of the participants for interests of persons holding through the
participants.
The laws of some states may require that specified purchasers of
securities take physical delivery of the securities in definitive form. These
laws may limit the ability of those persons to own, transfer or pledge
beneficial interests in registered global securities.
So long as the depositary for a registered global security, or its
nominee, is the registered owner of the registered global security, the
depositary or its nominee, as the case may be, will be considered the sole
owner or holder of the debt securities represented by the registered global
security for all purposes under the indenture. Except as stated below, owners
of beneficial interests in a registered global security:
o will not be entitled to have the debt securities represented by a
registered global security registered in their names;
o will not receive or be entitled to receive physical delivery of the debt
securities in definitive form; and
o will not be considered the owners or holders of the debt securities
under the indenture.
Accordingly, each person owning a beneficial interest in a registered global
security must rely on the procedures of the depositary for the registered
global security and, if the person is not a participant, on the procedures of
the participant through which the person owns its interests, to exercise any
rights of a holder under the indenture applicable to the registered global
security.
We understand that under existing industry practices, if we request any
action of holders, or if an owner of a beneficial interest in a registered
global security desires to give or take any action which a holder is entitled
to give or take under the indenture, the depositary for the registered global
security would authorize the participants holding the relevant beneficial
interests to give or take the action, and the participants would authorize
beneficial owners owning through the participants to give or take the action or
would otherwise act upon the instructions of beneficial owners holding through
them.
Principal, premium, if any, and interest payments on debt securities
represented by a registered global security registered in the name of a
depositary or its nominee will be made to the depositary or its nominee, as the
case may be, as the registered owner of the registered global security. Neither
the issuer of a series of debt securities, Toll Brothers, Inc., the trustee
under the indenture nor any other agent of any of them will be responsible or
liable for any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in the registered global security for the
series or for maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.
We expect that the depositary for any debt securities represented by a
registered global security, upon receipt of any payment of principal, premium,
if any, or interest in respect of the registered global security, will
immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the registered global security as shown on the depositary's records. We also
expect that payments by participants to owners of beneficial interests in a
registered global security held through the participants will be governed by
standing customer instructions and customary practices, as is now the case with
the securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of the participants.
If the depositary for any debt securities represented by a registered
global security is at any time unwilling or unable to continue as depositary or
ceases to be a clearing agency registered under the Securities Exchange Act of
1934, Toll Brothers, Inc. will appoint an eligible successor depositary. If
Toll Brothers, Inc. fails to appoint an eligible successor depositary within 90
days, the debt securities will be issued in definitive form in
11
exchange for the registered global security. In addition, Toll Brothers, Inc.
may at any time and in its sole discretion determine not to have any debt
securities of a series represented by one or more registered global securities.
In that event, debt securities of that series will be issued in definitive form
in exchange for each registered global security representing the debt
securities. Any debt securities issued in definitive form in exchange for a
registered global security will be registered in such name or names as the
depositary instructs the trustee. We expect that the instructions will be based
upon directions received by the depositary from the participants with respect
to ownership of beneficial interests in the registered global security.
Events of Default, Notice and Waiver
Unless otherwise indicated in the applicable prospectus supplement, each
of the following events will be an "Event of Default" with respect to each
series of debt securities issued under the indenture:
o Toll Brothers, Inc. or the issuer of that series of debt securities
fails to pay interest due on any debt securities of that series for 30
days;
o Toll Brothers, Inc. or the issuer of that series of debt securities
fails to pay the principal of any debt securities of that series when
due;
o Toll Brothers, Inc. or the issuer of that series of debt securities
fails to perform any other agreements contained in the debt securities
of that series or in the guarantee relating to that series of debt
securities or contained in the indenture for that series of debt
securities and applicable to that series for a period of 60 days after
the issuer's receipt of notice of the default from the trustee under the
indenture or the holders of at least 25% in principal of the debt
securities of that series;
o default in the payment of indebtedness of Toll Brothers, Inc. or any
"Subsidiary," as defined in the indenture of Toll Brothers, Inc.,
including Toll Corp., First Huntingdon Finance Corp. or Toll Finance
Corp., under the terms of the instrument evidencing or securing the
indebtedness which permits the holder of the indebtedness to accelerate
the payment of in excess of an aggregate of $5,000,000 in principal
amount of the indebtedness, after the lapse of applicable grace periods
or, in the case of non-payment defaults, acceleration of the
indebtedness if the acceleration is not rescinded or annulled within 10
days after the acceleration, provided that, subject to certain
limitations described in the indenture, the term "indebtedness" does not
include for this purpose an acceleration of or default on certain
"Non-Recourse Indebtedness," as that term is defined in the indenture;
o a final judgment for the payment of money in an amount in excess of
$5,000,000 is entered against Toll Brothers, Inc. or any subsidiary (as
defined in the indenture) of Toll Brothers, Inc., including Toll Corp.,
First Huntingdon Finance Corp. or Toll Finance Corp., which remains
undischarged for a period during which execution is not effectively
stayed of 60 days after the date on which the right to appeal has
expired, provided that the term "final judgment" will not include a
"Non-Recourse Judgment," as that term is defined in the indenture,
unless the book value of all property, net of any previous write downs
or reserves in respect of the property, subject to the Non-Recourse
Judgment exceeds the amount of the Non-Recourse Judgment by more than
$10,000,000;
o an "Event of Default", as that term is defined in the indenture relating
to Toll Corp.'s 83/4% Senior Subordinated Notes due 2006, 73/4% Senior
Subordinated Notes due 2007, 81/8% Senior Subordinated Notes due 2009,
or 8% Senior Subordinated Notes due 2009 (each of these series of notes
being referred to below as an "Outstanding Series"), occurs, provided
that on the date of the occurrence, the outstanding principal amount of
at least one Outstanding Series to which the occurrence relates exceeds
$5,000,000;
o any one of various events of bankruptcy, insolvency or reorganization
specified in the indenture occurs with respect to Toll Brothers, Inc. or
the issuer of that series of debt securities; or
o the guarantee of Toll Brothers, Inc. relating to that series of debt
securities ceases to be in full force and effect for any reason other
than in accordance with its terms. (Section 8.01).
"Non-Recourse Indebtedness," as defined in the indenture, means
indebtedness or other obligations secured by a lien on property to the extent
that the liability for the indebtedness or other obligations is limited to the
security of the property without liability on the part of Toll Brothers, Inc.
or any subsidiary, other than the subsidiary which holds title to the property,
for any deficiency.
12
"Non-Recourse Judgment," as defined in the indenture, means a judgment in
respect of indebtedness or other obligations secured by a lien on property to
the extent that the liability for (1) the indebtedness or other obligations and
(2) the judgment is limited to the property without liability on the part of
Toll Brothers, Inc. or any subsidiary, other than the subsidiary which holds
title to the property, for any deficiency.
The trustee is required to give notice to the holders of any series of
debt securities within 90 days of a default with respect to that series of debt
securities under the indenture. However, the trustee may withhold notice to the
holders of any series of debt securities, except in the case of a default in
the payment of principal, premium, if any, or interest, if any, with respect to
that series, if the trustee considers the withholding to be in the interest of
the holders. (Section 9.05).
If an Event of Default for the debt securities of any series at the time
outstanding, other than an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization with respect to Toll Brothers, Inc. or
the issuer of that series of debt securities, occurs and is continuing, either
the trustee or the holders of at least 25% in principal amount of all of the
outstanding debt securities of that series may, by giving an acceleration
notice to the issuer of that series of debt securities, declare the unpaid
principal of and accrued and unpaid interest on all of the debt securities of
that series to be due and payable if, with respect to debt securities of that
series (1) (a) no designated senior debt of Toll Brothers, Inc. or the issuer
of that series of debt securities is outstanding, or (b) if the debt securities
of that series are not subordinated to other indebtedness of the issuer of that
series of debt securities, immediately; or (2) if designated senior debt of
Toll Brothers, Inc. or the issuer of that series of debt securities is
outstanding and the debt securities of that series are junior to other
indebtedness of the issuer of that series of debt securities, upon the earlier
of (A) ten days after the acceleration notice is received by the issuer of that
series of debt securities or (B) the acceleration of any senior indebtedness of
Toll Brothers, Inc. or the issuer of that series of debt securities. The
designated senior debt of Toll Brothers, Inc. is referred to in the indenture
as "Designated Senior Debt of the Guarantor" and the designated senior debt of
Toll Corp., First Huntingdon Finance Corp. or Toll Finance Corp., as the case
may be, is referred to in the indenture for that issuer's debt securities as
"Designated Senior Debt of the Company," and each, as defined in the indenture,
may be further defined in the applicable prospectus supplement.
If an Event of Default occurs with respect to a series of debt securities
as a result of certain events of bankruptcy, insolvency or reorganization with
respect to Toll Brothers, Inc. or the issuer of that series of debt securities,
then the unpaid principal amount of all of the debt securities of that series
outstanding, and any accrued and unpaid interest, will automatically become due
and payable immediately without any declaration or other act by the trustee or
any holder of debt securities of that series. At any time after a declaration
of acceleration with respect to debt securities of any series has been made,
but before a judgment or decree based on acceleration has been obtained, the
holders of a majority in principal amount of the outstanding debt securities of
that series may rescind the acceleration, provided that, among other things,
all Events of Default with respect to the particular series, other than payment
defaults caused by the acceleration, have been cured or waived as provided in
the indenture. (Section 8.02).
The holders of a majority in outstanding principal amount of the debt
securities of a particular series may generally waive an existing default with
respect to that series and its consequences in accordance with terms and
conditions provided in the indenture. However, these holders may not waive a
default in the payment of the principal, any premium or any interest on the
debt securities. (Section 8.04).
Toll Brothers, Inc. and any issuer of debt securities offered by this
prospectus will be required to file annually with the trustee under the
indenture a certificate, signed by an officer of Toll Brothers, Inc. and the
issuer, stating whether or not the officer knows of any default under the terms
of the indenture and providing a description of any default of which the
officer has knowledge. (Section 4.03).
Additional Provisions
Subject to the duty of the trustee to act with the required standard of
care during a default, the indenture provides that the trustee will be under no
obligation to perform any duty or to exercise any of its rights or powers under
the indenture, unless the trustee receives indemnity satisfactory to it against
any loss, liability or
13
expense. (Section 9.01). Subject to these provisions for the indemnification of
the trustee and various other conditions, the holders of a majority in total
principal amount of the outstanding debt securities of any series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee, or exercising any trust or power conferred on
the trustee, with respect to the debt securities of that series. (Section
8.05).
A holder of debt securities of a series will not have the right to pursue
any remedy with respect to the indenture or the debt securities of that series,
unless:
o the holder gives to the trustee written notice of a continuing Event of
Default;
o the holders of not less than 25% in total principal amount of the
outstanding debt securities of that series make a written request to the
trustee to pursue the remedy;
o the holder offers the trustee indemnity satisfactory to it against any
loss, liability or expense;
o the trustee fails to comply with the holder's request within 60 days
after receipt of the written request and offer of indemnity; and
o the trustee, during the same 60-days, has not received from the holders
of a majority in principal amount of the outstanding debt securities of
that series a direction inconsistent with the aforementioned written
request of holders. (Section 8.06).
However, the holder of any debt security will have an absolute right to
receive payment of the principal of and interest on that debt security on or
after the respective due dates expressed in that debt security and to bring
suit for the enforcement of any payment. (Section 8.07).
Covenants
The prospectus supplement relating to the debt securities of any series
will describe any special covenants applicable to the issuer of the series or
Toll Brothers, Inc. with respect to that series.
Merger or Consolidation
Neither Toll Brothers, Inc. nor the issuer of a series of debt securities
offered by this prospectus may consolidate with or merge into, or transfer all
or substantially all of its assets to, any other person without the consent of
the holders of that series of debt securities, unless:
o the other person is a corporation organized and existing under the laws
of the United States or a state thereof or the District of Columbia and
expressly assumes by supplemental indenture all the obligations of Toll
Brothers, Inc. or the issuer, as the case may be, under the indenture
and either the guarantees or the debt securities, as the case may be;
and
o immediately after giving effect to the transaction no "Default" or
"Event of Default," as these terms are defined in the indenture, has
occurred and is continuing.
Afterwards, all of the obligations of the predecessor corporation will
terminate. (Section 5.01).
Modification of an Indenture
The respective obligations of Toll Brothers, Inc. and the issuer of debt
securities of any series offered by this prospectus and the rights of the
holders of those debt securities under the indenture generally may be modified
with the consent of the holders of a majority in outstanding principal amount
of the debt securities of all series under the indenture affected by the
modification. However, without the consent of each affected holder of debt
securities, no amendment, supplement or waiver may:
o extend the maturity of any debt securities;
o reduce the rate or extend the time for payment of interest on the debt
securities;
o reduce the principal amount of, or premium on, the debt securities;
14
o change the redemption provisions;
o make a change that adversely affects the right to convert or the
conversion price for any series of convertible debt securities;
o reduce the amount of debt securities whose holders must consent to an
amendment, supplement or waiver;
o waive a default in the payment of the principal, premium, if any, or
interest on any series of debt securities;
o modify the subordination or guarantee provisions in a manner adverse to
holders of any series of debt securities;
o make the medium of payment other than that stated in the debt
securities;
o make any change in the right of any holder of debt securities to receive
payment of principal of, premium, if any, and interest on those debt
securities, or to bring suit for the enforcement of any of these
payments; and
o change the provisions regarding modifications to the indenture or waiver
of Defaults or Events of Default that will be effective against any
holders of any series of debt securities. (Section 12.02).
Governing Law
The indenture, the debt securities and the guarantees will be governed by
the laws of the State of New York. (Section 13.09).
Satisfaction and Discharge of Indenture
Unless otherwise provided in the applicable authorizing resolution and
prospectus supplement, the indenture will be discharged:
o upon payment of all the series of debt securities issued under the
indenture; or
o upon deposit with the trustee, within one year of the date of maturity
or redemption of all of the series of debt securities issued under the
indenture, of funds sufficient for the payment or redemption of the
securities.
Reports to Holders of Debt Securities
Toll Brothers, Inc. and each issuer of the debt securities offered by this
prospectus will file with the trustee copies of their annual reports and other
information, documents and reports that they file with the SEC. So long as the
obligation of Toll Brothers, Inc. to file these reports or information with the
SEC are suspended or terminated, Toll Brothers, Inc. will provide the trustee
with audited annual financial statements prepared in accordance with generally
accepted accounting principles and unaudited condensed quarterly financial
statements. These financial statements will be accompanied by management's
discussion and analysis of the results of operations and financial condition of
Toll Brothers, Inc. for the period reported upon in substantially the form
required under the rules and regulations of the SEC currently in effect.
15
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Toll Brothers, Inc. consists of 45,000,000
shares of common stock, $.01 par value per share, and 1,000,000 shares of
preferred stock, $.01 par value per share; however, subject to the limitations
and procedures described below, the stockholders of Toll Brothers, Inc. have
authorized increases in the respective numbers of shares of common stock and
preferred stock. In March 1998, the stockholders of Toll Brothers, Inc.
authorized the filing by the Board of Directors, in its discretion, of one or
more amendments to the Certificate of Incorporation from time to time on or
before March 31, 2003 (1) to increase the authorized common stock by up to
55,000,000 additional shares in any combination of one or more 5,000,000-share
increments and/or (2) to increase the authorized preferred stock by a single
increment of 14,000,000 additional shares. If amendments increasing the
authorized capital stock of Toll Brothers, Inc. to the maximum limits
authorized by the stockholders are filed by March 31, 2003, the authorized
common stock of Toll Brothers, Inc. will be increased to 100,000,000 shares and
the authorized preferred stock of Toll Brothers, Inc. will be increased to
15,000,000 shares. The procedure was approved by stockholders to permit Toll
Brothers, Inc. to save on its annual Delaware corporate franchise tax while
giving the Board of Directors the flexibility to increase quickly the
authorized shares of common or preferred stock without the necessity of further
action by the stockholders.
Common Stock
Subject to the rights and preferences of any holders of the preferred
stock of Toll Brothers, Inc., none of which is currently outstanding, the
holders of the common stock of Toll Brothers, Inc. are entitled to one vote per
share on all matters which require a vote of the common stockholders. In
addition, the holders of the common stock of Toll Brothers, Inc. are entitled
to receive dividends as legally may be declared by the board of directors and
to receive pro rata the net assets of Toll Brothers, Inc. upon liquidation.
There are no cumulative voting, preemptive, conversion or redemption rights
applicable to the common stock of Toll Brothers, Inc. Persons casting a
majority of the votes in the election of directors will be entitled to elect
all of the directors.
On June 12, 1997, the board of directors of Toll Brothers, Inc. adopted a
Stockholder Rights Plan. This Stockholder Rights Plan provides that one right
will attach to each share of the common stock of Toll Brothers, Inc. Each right
entitles the registered holder to purchase from Toll Brothers, Inc. a unit
consisting of one one-thousandth of a share of Series A Junior Participating
Preferred Stock of Toll Brothers, Inc. at a purchase price of $100 per unit.
Initially the rights will attach to all common stock certificates and no
separate rights certificates will be distributed. The rights will separate from
the common stock and a distribution date will occur upon the earlier of:
o 10 days following a public announcement that a person or group of
affiliated persons has acquired beneficial ownership of 15% or more of
the outstanding shares of common stock of Toll Brothers, Inc.; or
o 10 business days following the commencement of a tender offer that would
result in a person or group beneficially owning 15% or more of the
outstanding shares of common stock of Toll Brothers, Inc.
The rights are not exercisable until the distribution date and will expire
at the close of business on July 11, 2007. In the event any non-exempt person
or group acquires 15% or more of the then outstanding shares of common stock,
unless the acquisition is made pursuant to a tender offer for all outstanding
shares at a price determined by a majority of the independent directors of Toll
Brothers, Inc., each holder of a right will have the right to receive, upon
exercise, common stock having a value equal to two times the exercise price of
the right. At any time until 10 days following the stock acquisition date, Toll
Brothers, Inc. may redeem the rights at a price of $.001 per right. The Rights
Agreement establishing the Stockholder Rights Plan was filed with the SEC as an
exhibit to a registration statement on Form 8-A. An amendment to the Rights
Agreement was filed with the SEC as an exhibit to an amended registration
statement on Form 8-A/A. This summary of the rights is not complete. Holders of
the common stock of Toll Brothers, Inc. should read the Rights Agreement and
the amendment to that agreement which are incorporated by reference in this
prospectus, for additional information.
The common stock of Toll Brothers, Inc. is traded on the New York Stock
Exchange and the Pacific Exchange under the symbol "TOL". The registrar and
transfer agent for the common stock of Toll Brothers, Inc. is Chase Mellon
Shareholder Services, L.L.C.
16
Preferred Stock
General. Toll Brothers, Inc. may issue, from time to time, shares of one
or more series of preferred stock.
We have summarized below the general terms and provisions that will apply
to any preferred stock that may be offered, except as otherwise described by
the applicable prospectus supplement. When Toll Brothers, Inc. offers to sell a
particular series of preferred stock, a prospectus supplement will describe the
specific terms of that series of preferred stock. If any of the general terms
and provisions described in this prospectus apply to the particular series of
preferred stock the applicable prospectus supplement will so indicate and will
describe any alternative provisions that are applicable. The preferred stock
will be issued under a certificate of designations relating to each series of
preferred stock, and is also subject to the Toll Brothers, Inc. Certificate of
Incorporation, as amended.
The following summary of various provisions of the preferred stock is not
complete. You should read Toll Brothers, Inc.'s Certificate of Incorporation,
as amended, and each certificate of designation relating to a specific series
of preferred stock for additional information. Each certificate of designation
relating to a specific series of preferred stock will be filed as an exhibit
to, or will be incorporated by reference in, the registration statement at or
prior to the time of issuance of the particular series of preferred stock.
The board of directors of Toll Brothers, Inc. is authorized to issue
shares of preferred stock, in one or more series, and to fix for each series
voting powers and the preferences and relative, participating, optional or
other special rights and the qualifications, limitations or restrictions, that
are permitted by the Delaware General Corporation Law.
The board of directors of Toll Brothers, Inc. is authorized to determine
the following terms for each series of preferred stock, which will be described
in the applicable prospectus supplement:
o the number of shares and their designation and title;
o the dividend rate or the method of calculating the dividend rate, if
applicable;
o the priority as to payment of dividends;
o the dividend periods or the method of calculating the dividend periods,
if applicable;
o the voting rights, if any;
o the liquidation preference and the priority as to payment of the
liquidation preference upon any liquidation or winding-up of Toll
Brothers, Inc.;
o whether or not and on what terms the shares will be subject to redemption
or repurchase at the option of Toll Brothers, Inc.;
o whether and on what terms the shares will be convertible into or
exchangeable for other debt or equity securities;
o whether the shares will be listed on a securities exchange; and
o the other rights and privileges and any qualifications, limitations or
restrictions relating to the shares.
Dividends. Holders of preferred stock will be entitled to receive cash
dividends if declared by the board of directors of Toll Brothers, Inc. out of
funds which Toll Brothers, Inc. may legally use for payment. The applicable
prospectus supplement will identify the dividend rates and the dates on which
Toll Brothers, Inc. will pay dividends.
Unless otherwise described in the applicable prospectus supplement, each
series of preferred stock will rank junior as to dividends to any series of
preferred stock that may be issued in the future that is expressly senior as to
dividends to the earlier series of the preferred stock. If at any time Toll
Brothers, Inc. has failed to pay accrued dividends on any senior series of
preferred stock at the time dividends are payable on a junior series of
preferred stock, Toll Brothers, Inc. may not pay any dividend on the junior
series of preferred stock or redeem or otherwise repurchase shares of the
junior series of preferred stock until the accumulated but unpaid dividends on
the senior series have been paid or set aside for payment in full by Toll
Brothers, Inc.
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Unless otherwise described in the applicable prospectus supplement:
o no dividends, other than in common stock or other capital stock ranking
junior to the preferred stock of any series as to dividends and upon
liquidation, may be declared or paid or set aside for payment; and
o no distribution may be declared or made upon the common stock, or any
other capital stock of Toll Brothers, Inc. ranking junior to or equally
with the preferred stock of the particular series as to dividends.
In addition, unless otherwise described in the applicable prospectus
supplement, no common stock or any other capital stock of Toll Brothers, Inc.
ranking junior to or equally with the preferred stock of the particular series
as to dividends may be redeemed, purchased or otherwise acquired for any
consideration and no monies may be paid to or made available for a sinking fund
for the redemption of any shares of any such stock by Toll Brothers, Inc.
except by conversion into or exchange for other capital stock of Toll Brothers,
Inc. ranking junior to the preferred stock of the particular series as to
dividends unless:
o if the series of preferred stock has a cumulative dividend, full
cumulative dividends on the preferred stock of the series have been or
contemporaneously are declared and paid or declared and an amount
sufficient for the payment of the dividends has been set apart for all
past dividend periods and the then current dividend period; or
o if the particular series of preferred stock does not have a cumulative
dividend, full dividends on the preferred stock of the series have been or
contemporaneously are declared and paid or declared and an amount
sufficient for the payment of the dividends has been set apart for payment
for the then current dividend period; provided, however, that any monies
deposited up until that time in any sinking fund with respect to any
preferred stock of Toll Brothers, Inc. in compliance with the provisions
of the sinking fund may subsequently be applied to the purchase or
redemption of the preferred stock in accordance with the terms of the
sinking fund, regardless of whether at the time of the application full
cumulative dividends upon shares of the preferred stock outstanding on the
last dividend payment date have been paid or declared and set apart for
payment; and provided, further, that any of the junior or equally-ranked
classes of preferred stock or common stock of Toll Brothers, Inc. may be
converted into or exchanged for stock of Toll Brothers, Inc. ranking
junior to the series of preferred stock then senior to the junior or
equally-ranked classes of preferred stock as to dividends.
The amount of dividends payable for the initial dividend period or any
period shorter than a full dividend period will be computed on the basis of a
360-day year of twelve 30-day months. Accrued but unpaid dividends will not
bear interest.
Convertibility. Toll Brothers, Inc. will not convert or exchange any
series of preferred stock for other securities or property unless otherwise
stated in the applicable prospectus supplement.
Redemption and Sinking Fund. Toll Brothers, Inc. will not redeem or pay
into a sinking fund any series of preferred stock unless otherwise stated in
the applicable prospectus supplement.
Liquidation Rights. Unless otherwise stated in the applicable prospectus
supplement, in the event of any liquidation, dissolution or winding-up of Toll
Brothers, Inc., holders of each series of preferred stock will be entitled to
receive the liquidation preference per share specified in the applicable
prospectus supplement for that particular series of preferred stock plus any
accrued and unpaid dividends. Toll Brothers, Inc. will pay these amounts to the
holders of each series of the preferred stock and all amounts owing on any
preferred stock ranking equally with that series of preferred stock as to
distributions. These payments will be made out of the assets of Toll Brothers,
Inc. available for distribution to stockholders before any distribution is made
to holders of common stock or any other shares of preferred stock of Toll
Brothers, Inc. ranking junior to the series of preferred stock as to rights
upon liquidation, dissolution or winding-up.
In the event that there are insufficient funds to pay in full the amounts
payable to all equally-ranked classes of preferred stock, Toll Brothers, Inc.
will allocate the remaining assets equally among all series of equally-ranked
preferred stock in proportion to the full respective preferential amounts to
which they are entitled. Unless otherwise specified in a prospectus supplement
for a series of preferred stock, after Toll Brothers, Inc. pays the
18
full amount of the liquidation distribution to which they are entitled, the
holders of shares of a series of preferred stock will not be entitled to
participate in any further distribution of the assets of Toll Brothers, Inc.
The consideration or merger of Toll Brothers, Inc. with another corporation or
sale of securities will not be considered a liquidation, dissolution or
winding-up of Toll Brothers, Inc. for these purposes.
Voting Rights. Holders of preferred stock will not have any voting rights
except as described in the applicable prospectus supplement or as otherwise
from time to time required by law.
Miscellaneous. When the preferred stock is issued, it will be fully paid
and nonassessable. Holders of preferred stock will have no preemptive rights.
If Toll Brothers, Inc. redeems or otherwise reacquires any shares of preferred
stock, it will restore the shares to the status of authorized and unissued
shares of preferred stock. These shares will not be a part of any particular
series of preferred stock and Toll Brothers, Inc. may reissue the shares. There
are no restrictions on repurchase or redemption of the preferred stock on
account of any arrearage on sinking fund installments, except as may be
described in an applicable prospectus supplement. Payment of dividends on any
series of preferred stock may be restricted by loan agreements, indentures or
other agreements entered into by Toll Brothers, Inc. The accompanying
prospectus supplement will describe any material contractual restrictions on
dividend payments. The prospectus supplement will also describe any material
United States federal income tax considerations applicable to the preferred
stock.
No Other Rights. The shares of a series of preferred stock will not have
any preferences, voting powers or relative, participating, optional or other
special rights except for those described above or in the applicable prospectus
supplement, the Certificate of Incorporation, as amended, or the applicable
certificate of designation, or as otherwise required by law.
Transfer Agent and Registrar. The prospectus supplement for each series of
preferred stock will identify the transfer agent and registrar.
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DESCRIPTION OF WARRANTS
General
Toll Brothers, Inc. may issue, together with other securities offered by
this prospectus or separately, warrants for the purchase of the following:
o debt securities of Toll Corp., First Huntingdon Finance Corp. or Toll
Finance Corp. with the unconditional guarantees of Toll Brothers, Inc.;
o common stock of Toll Brothers, Inc.; or
o preferred stock of Toll Brothers, Inc.
Each series of warrants will be issued under a separate warrant agreement
to be entered into between Toll Brothers, Inc. and a bank or trust company, as
warrant agent. The terms of each warrant agreement will be discussed in the
applicable prospectus supplement relating to the particular series of warrants.
Copies of the form of agreement for each warrant, including the forms of
certificates representing the warrants, reflecting the provisions to be
included in these agreements for a particular offering will be, in each case,
filed with the SEC as an exhibit to a document incorporated by reference in the
registration statement of which this prospectus is a part prior to the date of
any prospectus supplement relating to an offering of the particular warrant.
We have summarized below the general terms and provisions that will apply
to any warrants that may be offered, except as otherwise described by the
applicable prospectus supplement. When Toll Brothers, Inc. offers to sell
warrants, a prospectus supplement will describe the specific terms of that
series of warrants. If any of the general terms and provisions described in
this prospectus do not apply to the particular series of warrants being offered
the applicable prospectus supplement will so indicate and will describe any
alternative provisions that are applicable. The following summary of various
provisions of the warrants, the warrant agreements and the warrant certificates
is not complete. You should read all of the provisions of the applicable
warrant agreement and warrant certificate, including the definitions contained
in those documents of various terms, for additional important information
concerning any series of warrants offered by this prospectus.
Debt Warrants
General. The prospectus supplement relating to any series of debt warrants
that are offered by this prospectus will describe the specific terms of that
series of debt warrants, any related debt warrant agreement and the debt
warrant certificate(s) representing the debt warrants. The applicable
prospectus supplement will describe, among other things, the following terms,
to the extent they are applicable to that series of debt warrants:
o the issuer of the debt securities which may be purchased upon exercise
of the debt warrants, the designation, number, stated value and terms of
those debt securities, the terms of the related guarantees and the
procedures and conditions relating to the exercise of the debt warrants;
o the designation and terms of any debt securities and related guarantees
with which the debt warrants are issued and the number of the debt
warrants issued with each debt security;
o the date, if any, on and after which the debt warrants and the related
debt securities will be separately transferable;
o the principal amount of debt securities which may be purchased upon
exercise of each debt warrant and the price at which the principal
amount of debt securities may be purchased upon exercise of the debt
warrant;
o the date on which the right to exercise the debt warrants will begin and
the date on which the right will expire;
o a discussion of the material United States federal income tax
considerations relevant to the exercise of the debt warrants;
20
o whether the debt warrants represented by the debt warrant certificates
will be issued in registered or bearer form, and, if registered, where
they may be transferred and registered;
o call provisions of the debt warrants, if any; and
o any other material terms of the debt warrants.
Debt warrant certificates will be exchangeable for new debt warrant
certificates of different denominations. In addition, debt warrants may be
exercised at the corporate trust office of the warrant agent or any other
office indicated in the applicable prospectus supplement. A holder of a debt
warrant will not have any of the rights of a holder of the debt securities
which may be purchased by the exercise of the debt warrant before the debt
securities are purchased by the exercise of the debt warrant. Accordingly,
before a debt warrant is exercised, the holder will not be entitled to receive
any payments of principal, premium, if any, or interest, if any, on the debt
securities which may be purchased by the exercise of that debt warrant.
Exercise of Debt Warrants. Each debt warrant will entitle the holder to
purchase for cash the principal amount of debt securities described in the
applicable prospectus supplement at the exercise price described or explained
in the prospectus supplement. Debt warrants may be exercised at any time from
the time they become exercisable, as described in the applicable prospectus
supplement, up to the time on the date stated in the applicable prospectus
supplement. Afterwards, unexercised debt warrants will become void.
Debt warrants may be exercised in the manner described in the applicable
prospectus supplement. When Toll Brothers, Inc. receives payment and the
properly completed and duly executed debt warrant certificate at the corporate
trust office of the warrant agent or any other office indicated in the
applicable prospectus supplement, it will, as soon as practicable, forward the
debt securities purchased upon the exercise of the debt warrants. If less than
all of the debt warrants represented by the debt warrant certificate are
exercised, Toll Brothers, Inc. will issue a new debt warrant certificate for
the amount of debt warrants that remain exercisable.
Common Stock Warrants
General. The prospectus supplement relating to any series of common stock
warrants that are offered by this prospectus will describe the specific terms
of that series of common stock warrants, any related common stock warrant
agreement and the common stock warrant certificate(s) representing the common
stock warrants. The applicable prospectus supplement will describe, among other
things, the following terms, to the extent they are applicable to that series
of common stock warrants:
o the procedures and conditions relating to the exercise of the common
stock warrants;
o the number of shares of common stock, if any, issued with the common
stock warrants;
o the date, if any, on and after which the common stock warrants and any
related shares of common stock will be separately transferable;
o the offering price of the common stock warrants, if any;
o the number of shares of common stock which may be purchased upon
exercise of the common stock warrants and the price or prices at which
the shares may be purchased upon exercise;
o the date on which the right to exercise the common stock warrants will
begin and the date on which the right will expire;
o a discussion of the material United States federal income tax
considerations applicable to the exercise of the common stock warrants;
o call provisions of the common stock warrants, if any; and
o any other material terms of the common stock warrants.
Common stock warrant certificates will be exchangeable for new common
stock warrant certificates of different denominations. In addition, common
stock warrants may be exercised at the corporate trust office of the warrant
agent or any other office indicated in the applicable prospectus supplement. A
holder of a common stock
21
warrant will not have any of the rights of a holder of the common stock which
may be purchased by the exercise of the common stock warrant before the common
stock is purchased by the exercise of the common stock warrant. Accordingly,
before a common stock warrant is exercised, the holder will not be entitled to
receive any dividend payments or exercise any voting or other rights associated
with the shares of common stock which may be purchased when the common stock
warrant is exercised.
Exercise of Common Stock Warrants. Each common stock warrant will entitle
the holder to purchase for cash the number of shares of common stock of Toll
Brothers, Inc. at the exercise price that is described or explained in the
applicable prospectus supplement. Common stock warrants may be exercised at any
time from the time they become exercisable, as described in the applicable
prospectus supplement, up to the time on the date stated in the applicable
prospectus supplement. Afterwards, unexercised common stock warrants will
become void.
Common stock warrants may be exercised in the manner described in the
applicable prospectus supplement. When Toll Brothers, Inc. receives payment and
the properly completed and duly executed common stock warrant certificate at
the corporate trust office of the warrant agent or any other office indicated
in the applicable prospectus supplement, it will, as soon as practicable,
forward a certificate representing the number of shares of common stock
purchased upon exercise of the common stock warrants. If less than all of the
common stock warrants represented by the common stock warrant certificate are
exercised, Toll Brothers, Inc. will issue a new common stock warrant
certificate for the amount of common stock warrants that remain exercisable.
Preferred Stock Warrants
General. The prospectus supplement relating to any series of preferred
stock warrants that are offered by this prospectus will describe the specific
terms of that series of preferred stock warrants, any related preferred stock
warrant agreement and the preferred stock warrant certificate(s) representing
the preferred stock warrants. The applicable prospectus supplement will
describe, among other things, the following terms, to the extent they are
applicable to that series of preferred stock warrants:
o the designation and terms of the shares of preferred stock which may be
purchased upon exercise of the preferred stock warrants and the
procedures and conditions relating to the exercise of the preferred
stock warrants;
o the designation and terms of any related shares of preferred stock with
respect to which the preferred stock warrants are issued and the number
of shares of the preferred stock, if any, issued with preferred stock
warrants;
o the date, if any, on and after which the preferred stock warrants and
any related shares of preferred stock will be separately transferable;
o the offering price of the preferred stock warrants, if any;
o the number of shares of preferred stock which may be purchased upon
exercise of the preferred stock warrants and the initial price or prices
at which the shares may be purchased upon exercise;
o the date on which the right to exercise the preferred stock warrants
will begin and the date on which the right will expire;
o a discussion of the material United States federal income tax
considerations relevant to the exercise of the preferred stock warrants;
o call provisions of the preferred stock warrants, if any; and
o any other material terms of the preferred stock warrants.
Preferred stock warrant certificates will be exchangeable for new
preferred stock warrant certificates of different denominations. In addition,
preferred stock warrants may be exercised at the corporate trust office of the
warrant agent or any other office indicated in the applicable prospectus
supplement. A holder of a preferred stock
22
warrant will not have any of the rights of a holder of the preferred stock
which may be purchased by the exercise of the preferred stock warrant before
the preferred stock is purchased by the exercise of the preferred stock
warrant. Accordingly, before a preferred stock warrant is exercised, the holder
will not be entitled to receive any dividend payments or exercise any voting or
other rights associated with the preferred stock which may be purchased when
the preferred stock warrant is exercised.
Exercise of Preferred Stock Warrants. Each preferred stock warrant will
entitle the holder to purchase for cash the number of shares of preferred stock
of Toll Brothers, Inc. at the exercise price described or explained in the
applicable prospectus supplement. Preferred stock warrants may be exercised at
any time from the time they become exercisable, as described in the applicable
prospectus supplement, up to the time on the date stated in the applicable
prospectus supplement. Afterwards, unexercised preferred stock warrants will
become void.
Preferred stock warrants may be exercised in the manner described in the
applicable prospectus supplement. When Toll Brothers, Inc. receives payment and
the properly completed and duly executed preferred stock warrant certificate at
the corporate trust office of the warrant agent or any other office indicated
in the applicable prospectus supplement, it will, as soon as practicable,
forward a certificate representing the number of shares of preferred stock
purchased upon exercise of the preferred stock warrants. If less than all of
the preferred stock warrants represented by the preferred stock warrant
certificate are exercised, Toll Brothers, Inc. will issue a new preferred stock
warrant certificate for the amount of preferred stock warrants that remain
exercisable.
CLASSIFIED BOARD OF DIRECTORS AND RESTRICTIONS ON REMOVAL
Under the Certificate of Incorporation, as amended, of Toll Brothers,
Inc., the board of directors is divided into three classes of directors serving
staggered terms of three years each. Each class is to be as nearly equal in
number as possible, with one class being elected each year. The Certificate of
Incorporation, as amended, also provides that:
o directors may be removed from office only for cause and only with the
affirmative vote of 662/3% of the voting power of the voting stock;
o any vacancy on the board of directors or any newly created directorship
will be filled by the remaining directors then in office, though less
than a quorum; and
o advance notice of shareholder nominations for the elections of directors
must be given in the manner provided by the By-Laws of Toll Brothers,
Inc.
The required 662/3% shareholder vote necessary to alter, amend or repeal
these provisions of the Certificate of Incorporation, as amended, the related
amendments to the By-Laws and all other provisions of the By-Laws, or to adopt
any provisions relating to the classification of the board of directors and the
other matters described above may make it more difficult to change the
composition of the board of directors of Toll Brothers, Inc. and may discourage
or make difficult any attempt by a person or group to obtain control of Toll
Brothers, Inc.
PLAN OF DISTRIBUTION
Toll Brothers, Inc., Toll Corp., First Huntingdon Finance Corp. and Toll
Finance Corp., or any of them, may offer and sell their respective securities
to which this prospectus relates in any one or more of the following ways:
o directly to purchasers;
o to or through underwriters;
o to or through dealers; or
o to or through agents.
Each time we sell securities, we will provide a prospectus supplement that
will name any underwriter, dealer or agent involved in the offer and sale of
the securities. The prospectus supplement will also set forth the terms of the
offering, including the purchase price of the securities and the proceeds to
the issuer(s) from the
23
sale of the securities, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers and any securities
exchanges on which the securities may be listed.
The securities may be distributed from time to time in one or more
transactions:
o at a fixed price or prices, which may be changed;
o at market prices prevailing at the time of sale;
o at prices related to prevailing market prices; or
o at negotiated prices.
Each time we sell securities, we will describe the method of distribution
of the securities in the prospectus supplement relating to the transaction.
If underwriters are used in the offer and sale of the securities being
offered by this prospectus, the name of each managing underwriter, if any, and
any other underwriters and the terms of the transaction, including any
underwriting discounts and other items constituting compensation of the
underwriters and dealers, if any, will be included in the prospectus supplement
relating to the offering. The securities will be acquired by the underwriters
for their own accounts and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
If a dealer is used in the sale of the securities being offered by this
prospectus, the issuer(s) of the securities will sell those securities to the
dealer, as principal. The dealer may then resell those securities to the public
at varying prices to be determined by the dealer at the time of resale. The
name of the dealer and the terms of the transaction will be identified in the
applicable prospectus supplement.
If an agent is used in an offering of securities being offered by this
prospectus, the agent will be named, and the terms of the agency will be
described, in the applicable prospectus supplement relating to the offering.
Unless otherwise indicated in the prospectus supplement, an agent will act on a
best efforts basis for the period of its appointment.
Offers to purchase the securities offered by this prospectus may be
solicited, and sales of the securities may be made, by the issuer(s) of those
securities directly to institutional investors or others, who may be deemed to
be underwriters within the meaning of the Securities Act of 1933 with respect
to any resales of the securities. The terms of any offer made in this manner
will be included in the prospectus supplement relating to the offer.
If indicated in the applicable prospectus supplement, the issuer(s) of the
securities to which the prospectus supplement relates will authorize
underwriters or their other agents to solicit offers by certain institutional
investors to purchase securities from the issuer(s) pursuant to contracts
providing for payment and delivery at a future date. Institutional investors
with which these contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others. In all cases, these purchasers must be
approved by the issuer(s) of the securities. The obligations of any purchaser
under any of these contracts will not be subject to any conditions except that
(a) the purchase of the securities must not at the time of delivery be
prohibited under the laws of any jurisdiction to which that purchaser is
subject and (b) if the securities are also being sold to underwriters, the
issuer(s) must have sold to these underwriters the securities not subject to
delayed delivery. Underwriters and other agents will not have any
responsibility in respect of the validity or performance of these contracts.
In addition, the securities offered by this prospectus and an accompanying
prospectus supplement may be offered and sold by the holders of the securities
in one or more of the transactions described above, which transactions may be
effected at any time and from time to time. Upon a sale of securities made in
this manner, the respective holders of the securities and any participating
broker, dealer or underwriter may be deemed to be underwriters within the
meaning of Section 2(11) of the Securities Act of 1933, and any commissions,
discounts or concessions upon the sale, or any profit on the resale of the
securities, received in connection with the sale
24
may be deemed to be underwriting commissions or discounts under the Securities
Act of 1933. The compensation, including commissions, discounts, concessions
and other profits, received by any broker, dealer or underwriter in connection
with the sale of any of the securities, may be less than or in excess of
customary commissions.
Some of the underwriters, dealers or agents used by Toll Brothers, Inc.,
Toll Corp., First Huntingdon Finance Corp. and Toll Finance Corp., or any of
them, in any offering of securities under this prospectus may be customers of,
including borrowers from, engage in transactions with, and perform services
for, Toll Brothers, Inc. Toll Corp., First Huntingdon Finance Corp. and Toll
Finance Corp., or any of them, and/or one or more of their respective
affiliates in the ordinary course of business. Underwriters, dealers, agents
and other persons may be entitled, under agreements which may be entered into
with Toll Brothers, Inc., Toll Corp., First Huntingdon Finance Corp. or Toll
Finance Corp., as the case may be, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act of 1933 and to be reimbursed by Toll Brothers, Inc. and/or Toll Corp. Toll
Finance Corp. or First Huntingdon Finance Corp. for certain expenses.
Until the distribution of the securities offered by this prospectus is
completed, rules of the SEC may limit the ability of the underwriters and
certain selling group members, if any, to bid for and purchase the securities.
As an exception to these rules, the representatives of the underwriters, if
any, are permitted to engage in certain transactions that stabilize the price
of the securities. These transactions may consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the securities.
If underwriters create a short position in the securities in connection
with the offering of the securities (i.e., if they sell more securities than
are included on the cover page of the applicable prospectus supplement), the
representatives of the underwriters may reduce that short position by
purchasing securities in the open market. The representatives of the
underwriters also may elect to reduce any short position by exercising all or
part of the over-allotment option, if any, described in the applicable
prospectus supplement.
The representatives of the underwriters also may impose a penalty bid on
certain underwriters and selling group members. This means that if the
representatives purchase securities in the open market to reduce the
underwriters' short position or to stabilize the price of the securities, they
may reclaim the amount of the selling concession from the underwriters and
selling group members who sold those securities as part of the offering of the
securities.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of these types of purchases.
The imposition of a penalty bid might have an effect on the price of a security
to the extent that it were to discourage resales of the security by purchasers
in the offering.
Neither Toll Brothers, Inc., Toll Corp., First Huntingdon Finance Corp. or
Toll Finance Corp. nor any of the underwriters, if any, makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the securities.
In addition, neither Toll Brothers, Inc., Toll Corp., First Huntingdon Finance
Corp. or Toll Finance Corp. nor any of the underwriters, if any, makes any
representation that the representatives of the underwriters, if any, will
engage in these transactions or that these transactions, once commenced, will
not be discontinued without notice.
The anticipated date of delivery of the securities offered by this
prospectus will be described in the applicable prospectus supplement relating
to the offering. The securities offered by this prospectus may or may not be
listed on a national securities exchange or a foreign securities exchange. We
cannot give any assurances that there will be a market for any of the
securities offered by this prospectus and any prospectus supplement.
We estimate that the total expenses we will incur in offering the
securities to which this prospectus relates, excluding underwriting discounts
and commissions, if any, will be approximately $1,200,000.
LEGAL MATTERS
Certain legal matters relating to the validity of the securities offered
by this prospectus will be passed upon by Wolf, Block, Schorr and Solis-Cohen
LLP, Philadelphia, Pennsylvania.
25
EXPERTS
The consolidated financial statements and schedule of Toll Brothers, Inc.
appearing in Toll Brothers, Inc.'s Annual Report (Form 10-K) for the year ended
October 31, 1999, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein
by reference. Such consolidated financial statements and schedule are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
26
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$150,000,000
Toll Corp.
8.25% Senior Subordinated Notes due 2011
Guaranteed on a Senior Subordinated Basis by
Toll Brothers, Inc.
[GRAPHIC OMITTED]
PROSPECTUS SUPPLEMENT
November 27, 2001
Sole Book-Running Manager
Banc of America Securities LLC
------------------------
Co-Managers
Banc One Capital Markets, Inc.
BNP PARIBAS
Comerica Securities, Inc.
Credit Lyonnais Securities
Goldman, Sachs & Co.
SunTrust Robinson Humphrey
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