e424b5
The
information in this preliminary prospectus supplement and
accompanying prospectus is not complete and may be changed. This
prospectus supplement and the accompanying prospectus are not an
offer to sell these securities and are not soliciting an offer
to buy these securities in any jurisdiction where the offer or
sale is not permitted.
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Filed pursuant to Rule 424(b)(5)
Registration
No. 333-134986
SUBJECT TO COMPLETION, DATED
MAY 5, 2009
PROSPECTUS SUPPLEMENT
(to Prospectus Dated June 13, 2006)
$400,000,000
% Convertible Senior Notes
due 2014
We are offering $400,000,000 aggregate principal amount of
our % Convertible Senior Notes
due 2014. Interest on the notes will be payable semi-annually in
arrears on May 15 and November 15 of each year,
beginning on November 15, 2009. The notes will mature on
May 15, 2014, unless earlier repurchased by us or converted.
Holders may convert their notes at their option at any time
prior to the close of business on the second scheduled trading
day immediately preceding the maturity date for the notes. Upon
conversion, we will pay or deliver, as the case may be, cash,
shares of our common stock or a combination thereof at our
election as described in this prospectus supplement. The initial
conversion rate for the notes will
be shares
of our common stock per $1,000 principal amount of notes,
equivalent to an initial conversion price of approximately
$ per share of common stock. Such
conversion rate will be subject to adjustment in certain events
but will not be adjusted for accrued interest, including any
additional interest.
Following certain corporate transactions, we will increase the
applicable conversion rate for a holder that elects to convert
its notes in connection with such corporate transactions by a
number of additional shares of our common stock as described in
this prospectus supplement.
We may not redeem the notes prior to their stated maturity date.
If we undergo a fundamental change, as defined in this
prospectus supplement, holders may require us to purchase all or
a portion of their notes for cash at a price equal to 100% of
the principal amount of the notes to be purchased plus any
accrued and unpaid interest to, but excluding, the fundamental
change purchase date, as defined herein.
The notes will be unsecured, senior obligations of our company
and will rank equally with all of our existing and future
unsecured and unsubordinated indebtedness.
On the closing date substantially all of our current
homebuilding subsidiaries will guarantee the notes. The
guarantees will be unsecured and will rank equally with all
existing and future unsecured and unsubordinated indebtedness of
the guarantors, including their guarantees of our other senior
notes.
We have applied for listing of the notes, the related guarantees
and the shares of stock issuable upon conversion of the notes on
the New York Stock Exchange. Our common stock is listed on the
New York Stock Exchange under the symbol DHI. The
last reported sale price of our common stock on the New York
Stock Exchange on May 5, 2009 was $12.35 per share.
Investing in the notes or our common stock issuable upon
conversion of the notes involves risks. See Risk
Factors beginning on
page S-8
of this prospectus supplement and the Risk Factors
sections in our annual report on
Form 10-K
for the fiscal year ended September 30, 2008 and in our
quarterly report on Form 10-Q for the quarterly period
ended March 31, 2009.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
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Per Note
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Total(1)
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Public offering price(2)
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%
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Underwriting discounts and commissions
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%
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Proceeds, before expenses, to D.R. Horton, Inc.(2)
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%
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We have granted the underwriters an option to purchase from us,
not later than June 10, 2009, up to an additional
$60,000,000 principal amount of notes at the public offering
price, less the underwriting discount, solely to cover
over-allotments. |
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Plus accrued interest from May , 2009, if
settlement occurs after that date. |
The underwriters expect to deliver the notes to investors in
book-entry form through The Depository Trust Company on or
about May , 2009.
Book-Running Manager
Citi
Joint Lead Managers
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J.P.
Morgan |
UBS Investment Bank |
Wachovia Securities |
May , 2009
We have not authorized anyone to provide you with any
different information or to make any representation that is
different from, or in addition to, the information contained in
this prospectus supplement and the accompanying prospectus, any
documents incorporated by reference in this prospectus
supplement or the accompanying prospectus and any free writing
prospectus. If anyone provides you with different or
inconsistent information, you should not rely on it. You should
not assume that the information contained in this prospectus
supplement or the accompanying prospectus, or the information
contained in any document incorporated by reference in this
prospectus supplement or the accompanying prospectus, is
accurate as of any date other than the date of each such
document, unless the information specifically indicates that
another date applies.
TABLE OF
CONTENTS
Prospectus
Supplement
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S-ii
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S-iii
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S-iv
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S-1
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S-8
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S-15
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S-16
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S-18
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S-19
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S-46
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S-48
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S-56
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S-61
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S-61
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Prospectus dated June 13, 2006
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Forward-Looking Statements
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ii
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Risk Factors
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1
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The Company
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The Trusts
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7
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Securities We May Offer
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9
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Use of Proceeds
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10
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Summary Consolidated Financial Information and Operating Data
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10
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Ratio of Earnings To Fixed Charges
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12
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Description of Debt Securities
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13
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Description of Common Stock, Preferred Stock and Depositary
Shares
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16
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Description of Warrants
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19
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Description of Stock Purchase Contracts and Stock Purchase Units
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20
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Description of Units
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20
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Description of Trust Preferred Securities
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21
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Plan of Distribution
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30
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Legal Matters
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31
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Experts
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31
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Where You Can Find More Information
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31
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Incorporation of Certain Documents by Reference
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31
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The distribution of this prospectus supplement and the
accompanying prospectus may be restricted by law in certain
jurisdictions. You should inform yourself about and observe any
of these restrictions. This prospectus supplement and the
accompanying prospectus do not constitute, and may not be used
in connection with, an offer or solicitation by anyone in any
jurisdiction in which the offer or solicitation is not
authorized, or in which the person making the offer or
solicitation is not qualified to do so, or to any person to whom
it is unlawful to make the offer or solicitation.
S-i
ABOUT
THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus
supplement, which describes certain matters relating to us and
this offering. The second part, the accompanying prospectus,
gives more general information about securities we may offer
from time to time, some of which may not apply to the notes
offered by this prospectus supplement and accompanying
prospectus. For information about the notes, see
Description of Notes in this prospectus supplement.
For information about our common stock, see Description of
Common Stock in this prospectus supplement. When we refer
to this document, we mean this prospectus supplement
and the accompanying prospectus, unless the context otherwise
requires.
Before you invest in the notes, you should read the registration
statement of which this document forms a part and this document,
including the documents incorporated by reference herein that
are described under the heading Incorporation by
Reference.
If the information set forth in this prospectus supplement
varies in any way from the information set forth in the
accompanying prospectus, you should rely on the information
contained in this prospectus supplement. If the information set
forth in this prospectus supplement varies in any way from the
information set forth in a document we have incorporated by
reference, you should rely on the information in the more recent
document.
S-ii
INCORPORATION
BY REFERENCE
The Securities and Exchange Commission allows us to
incorporate by reference information into this
prospectus supplement and the accompanying prospectus. This
means that we can disclose important information to you by
referring you to another document filed separately with the SEC.
The information incorporated by reference is considered to be
part of this prospectus supplement and the accompanying
prospectus, except for any information that is superseded by
information that is included directly in this or another
document.
This prospectus supplement and the accompanying prospectus
incorporate by reference the documents listed below that we have
filed with the SEC but have not been included or delivered with
this document. These documents contain important information
about us and our business, prospects and financial condition.
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Filing
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Period or Date Filed
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Annual Report on
Form 10-K
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Year ended September 30, 2008
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Quarterly Reports on
Form 10-Q
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Quarter ended December 31, 2008
Quarter ended March 31, 2009
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Current Reports on
Form 8-K
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November 26, 2008
December 16, 2008
March 10, 2009
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The information set forth under the captions
Proposal One Election of Directors,
Corporate Governance, Section 16(a)
Beneficial Ownership Reporting Compliance,
Requesting Documents from the Company,
Executive Compensation, Beneficial Ownership
of Common Stock and Independent Registered Public
Accountants contained in our proxy statement relating to
our January 29, 2009 annual meeting of stockholders and
incorporated into our annual report on
Form 10-K
for the fiscal year ended September 30, 2008.
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We also incorporate by reference any future filings we make with
the SEC under sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, between the date of
this prospectus supplement and the termination of the offering
of the securities. These additional documents include periodic
reports, such as annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K
(other than information furnished and not filed by us under any
item of any current report on
Form 8-K,
including the related exhibits, which is deemed not to be
incorporated by reference in this prospectus supplement or the
accompanying prospectus), as well as proxy statements (other
than information identified in them as not incorporated by
reference). You should review these filings as they may disclose
changes in our business, prospects, financial condition or other
affairs after the date of this prospectus supplement. The
information that we file later with the SEC under
sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and
before the termination of this offering will automatically
update and supersede previous information included or
incorporated by reference in this prospectus supplement and the
accompanying prospectus.
You can obtain any of the documents incorporated by reference in
this prospectus supplement and the accompanying prospectus from
us without charge, excluding any exhibits to those documents
unless the exhibit is specifically incorporated by reference in
this prospectus supplement and the accompanying prospectus. You
can obtain documents incorporated by reference in this
prospectus supplement and the accompanying prospectus by
requesting them in writing or by telephone from us at the
following address:
Investor Relations
D.R. Horton, Inc.
301 Commerce Street, Suite 500
Fort Worth, Texas 76102
(817) 390-8200
S-iii
FORWARD-LOOKING
STATEMENTS
Some of the statements contained or incorporated by reference in
this prospectus supplement and the accompanying prospectus may
be construed as forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933,
Section 21E of the Securities Exchange Act of 1934 and the
Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on managements
beliefs as well as assumptions made by, and information
currently available to, management. These forward-looking
statements typically include the words anticipate,
believe, consider, estimate,
expect, forecast, goal,
intend, objective, plan,
predict, projection, seek,
strategy, target or other words of
similar meaning. Any or all of the forward-looking statements
included or incorporated by reference in this prospectus
supplement and the accompanying prospectus may not approximate
actual experience, and the expectations derived from them may
not be realized, due to risks, uncertainties and other factors.
As a result, actual results may differ materially from the
expectations or results we discuss in the forward-looking
statements. These risks, uncertainties and other factors
include, but are not limited to:
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the continuing downturn in the homebuilding industry, including
further deterioration in industry or broader economic conditions;
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the downturn in homebuilding and the disruptions in the credit
markets, which could limit our ability to access capital and
increase our costs of capital;
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the reduction in availability of mortgage financing and the
increase in mortgage interest rates;
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the limited success of our strategies in responding to adverse
conditions in the industry;
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changes in general economic, real estate, construction and other
business conditions;
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changes in the costs of owning a home;
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the effects of governmental regulations and environmental
matters on our homebuilding operations;
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the effects of governmental regulation on our financial services
operations;
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our substantial debt and our ability to comply with related debt
covenants, restrictions and limitations;
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competitive conditions within our industry;
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our ability to effect any future growth strategies successfully;
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our ability to realize our deferred tax asset; and
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the uncertainties inherent in home warranty and construction
defect claims matters.
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We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise. However, any further
disclosures made on related subjects in subsequent reports
incorporated by reference in this prospectus supplement and the
accompanying prospectus should be consulted. Additional
information about issues that could lead to material changes in
performance and risk factors that have the potential to affect
us is contained in this prospectus supplement, and in our annual
report on
Form 10-K
for the fiscal year ended September 30, 2008 and our
quarterly reports on
Form 10-Q
for the quarterly period ended December 31, 2008 and the
quarterly period ended March 31, 2009, including the
sections entitled Risk Factors and
Managements Discussion and Analysis of Financial
Condition and Results of Operations, which are filed with
the SEC. See Incorporation by Reference.
S-iv
SUMMARY
This is only a summary of the offering. To fully understand
an investment in the notes, you must consider this prospectus
supplement, the accompanying prospectus and the detailed
information incorporated by reference into them, including the
financial statements and their accompanying notes. Unless the
context otherwise requires, the terms the Company,
we and our refer to D.R. Horton, Inc., a
Delaware corporation, and its predecessors and subsidiaries.
Except as otherwise noted, all information in this prospectus
supplement assumes that the underwriters will not exercise their
option to purchase additional notes.
D.R.
Horton, Inc.
D.R. Horton, Inc. is one of the largest homebuilding companies
in the United States, based on homes closed. We construct and
sell high quality homes through our operating divisions in
27 states and 77 metropolitan markets of the United States,
primarily under the name of D.R. Horton, Americas
Builder. Our homes generally range in size from 1,000 to
5,000 square feet and in price from $90,000 to $900,000.
The current downturn in our industry has resulted in a decrease
in the size of our operations and has adversely affected our
operating results during fiscal 2007, 2008 and 2009, as we have
been affected by, and have reacted to, the weakened market for
new homes. For the year ended September 30, 2008, we closed
26,396 homes with an average closing sales price of
approximately $233,500. For the six months ended March 31,
2009, we closed 7,653 homes with an average closing sales price
of approximately $216,400. For the three months ended
March 31, 2009, we closed 3,585 homes with an average
closing sales price of approximately $215,000.
Through our financial services operations, we provide mortgage
financing and title agency services to homebuyers in many of our
homebuilding markets. DHI Mortgage, our wholly-owned subsidiary,
provides mortgage financing services, principally to the
purchasers of the homes we build. We generally do not seek to
retain or service the mortgages we originate but, rather, seek
to sell the mortgages and related servicing rights to investors.
Our subsidiary title companies serve as title insurance agents
by providing title insurance policies on behalf of various title
underwriters, examination and closing services, primarily to the
purchasers of our homes.
Our financial reporting segments consist of six homebuilding
segments and a financial services segment. Our homebuilding
operations are by far the most substantial part of our business,
comprising approximately 98% of consolidated revenues of
$6.6 billion for the year ended September 30, 2008,
and approximately 99% of consolidated revenues of
$1.7 billion for the six months ended March 31, 2009.
Our homebuilding operations generate most of their revenues from
the sale of completed homes, with a lesser amount from the sale
of land and lots. In addition to building traditional
single-family detached homes, we also build attached homes, such
as town homes, duplexes, triplexes and condominiums (including
some mid-rise buildings), which share common walls and roofs.
The sale of detached homes generated approximately 77% of home
sales revenues for the year ended September 30, 2008 and
82% of home sales revenues for the six months ended
March 31, 2009. Our financial services segment generates
its revenues from originating and selling mortgages and
collecting fees for title insurance agency and closing services.
For more information about our business, please refer to the
Business section in our most recent annual report on
Form 10-K
filed with the SEC and incorporated by reference in this
prospectus supplement and the Managements Discussion
and Analysis of Financial Condition and Results of
Operations sections of our most recent annual report on
Form 10-K
and quarterly reports on
Form 10-Q
filed with the SEC and incorporated by reference in this
prospectus supplement.
Our principal executive offices are located at 301 Commerce
Street, Suite 500, Fort Worth, Texas 76102. Our
telephone number is
(817) 390-8200,
and our Internet website address is www.drhorton.com.
Information on or connected to our Internet website is not part
of this prospectus supplement.
S-1
Recent
Developments
Quarterly
Cash Dividend
In April 2009, we declared a quarterly cash dividend of $0.0375
per common share, which represents a decrease in our quarterly
dividend from the $0.075 per common share paid in the comparable
quarter of fiscal 2008. The dividend is payable on May 27,
2009 to stockholders of record on May 19, 2009.
Renewal
of Mortgage Repurchase Facility
On March 5, 2009, we amended our mortgage repurchase
facility, which provides financing and liquidity to our mortgage
operations. The amendment extends the facilitys term to
March 4, 2010, reduces capacity under the facility to
$75 million, with a provision allowing an increase in the
capacity to $100 million during the last five business days
of a fiscal quarter and the first seven business days of the
following fiscal quarter, and eliminates a financial covenant.
Termination
of Revolving Credit Facility
On May 4, 2009, we delivered a notice of our intention to
voluntarily terminate our $1.65 billion unsecured revolving
credit facility, which was undrawn on such date and has been
unutilized since January 2008. In accordance with its terms, the
facility will therefore terminate on May 11, 2009. In such
connection, we cash collateralized the $61 million of
letters of credit previously issued under the facility.
Annual
Stockholders Meeting
At our 2009 annual meeting of stockholders held on
January 29, 2009, the stockholders re-elected each of the
members of our board of directors. The stockholders also voted
to approve a stockholder proposal requesting that the board of
directors amend our governance documents to provide that
director nominees shall be elected by the affirmative vote of
the majority of votes cast at an annual meeting of stockholders,
with a plurality vote standard retained for contested director
elections. We intend to amend our bylaws to implement the
proposal prior to our next annual meeting.
Current
Industry Conditions
The U.S. homebuilding industry continues to be challenged
by the difficult homebuilding market downturn. The factors
hurting demand for new homes are pervasive across the United
States. High inventory levels of both new and existing homes,
elevated cancellation rates, low sales absorption rates and
overall weak consumer confidence have persisted. The effects of
these factors have been magnified by reduced availability of
credit in the mortgage markets, high levels of home foreclosures
and severe shortages of liquidity in the financial markets. The
overall economy has weakened significantly and is now in a
recession marked by high unemployment levels, deterioration in
consumer confidence and reduced consumer spending. These factors
have caused our sales volume to be significantly reduced from
prior years.
We continue to remain cautious regarding our outlook for the
homebuilding industry. We believe that housing market conditions
may continue to deteriorate, that challenging conditions will
persist for some time and that the timing of a recovery in the
housing market remains unclear. Our outlook incorporates several
factors, including continued margin pressure from sales price
reductions and incentives; continued high levels of new and
existing homes available for sale; weak demand from new home
consumers; continued high sales cancellations; significant
restrictions on the availability of certain mortgage products
and an overall increase in the underwriting requirements for
home financing as a result of the credit tightening in the
mortgage markets. We believe the long-term fundamentals which
support housing demand, namely population growth and household
formation, remain solid. However, it is not possible to predict
how long the negative effects of the current market conditions
will persist or to what extent they will continue to deteriorate.
S-2
The
Offering
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Issuer |
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D.R. Horton, Inc., a Delaware corporation |
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The Notes |
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$400,000,000 aggregate principal amount
of % convertible senior notes due
2014. We have also granted the underwriters the option to
purchase, not later than June 10, 2009, up to an additional
$60,000,000 aggregate principal amount of notes, solely to cover
over-allotments. |
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Maturity |
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May 15, 2014, unless earlier repurchased or converted. |
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Payment of Interest |
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% per year. Interest will accrue
from May , 2009 and will be
payable semi-annually in arrears on May 15 and
November 15 of each year, commencing on November 15,
2009. |
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Optional Redemption |
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We may not redeem the notes prior to their stated maturity date. |
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Conversion Rights |
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Holders may convert their notes at their option at any time
prior to the close of business on the second scheduled trading
day immediately preceding the maturity date of the notes. |
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The initial conversion rate for the notes will
be shares
of our common stock per $1,000 principal amount of notes,
equivalent to an initial conversion price of approximately
$ per share of common stock. Such
conversion rate will be subject to adjustment in certain events
but will not be adjusted for accrued interest, including any
additional interest. See Description of Notes
Conversion Rights Conversion Rate Adjustments. |
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Upon conversion, we will pay or deliver, as the case may be,
cash, shares of our common stock or a combination thereof at our
election. We refer to our obligation to pay or deliver these
amounts as our conversion obligation. If we satisfy our
conversion obligation solely in cash or through payment and
delivery, as the case may be, of a combination of cash and
shares of our common stock, the amount of cash and shares of our
common stock, if any, due upon conversion will be based on a
daily conversion value (as described herein) calculated on a
proportionate basis for each trading day in the 20
trading-day
cash settlement averaging period, as described under
Description of Notes Conversion
Rights Settlement upon Conversion. |
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In addition, following certain corporate transactions, we will
increase the applicable conversion rate for a holder who elects
to convert in connection with such corporate transactions by a
number of additional shares of our common stock as described
under Description of Notes Conversion
Rights Adjustment to Shares Delivered upon
Conversion upon Certain Corporate Transactions. |
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You will not receive any additional cash payment, including any
additional interest, upon conversion of a note except in
circumstances described in Description of
Notes Conversion Rights General.
Instead, interest will be deemed paid by the cash, shares of our
common stock or a combination thereof paid or delivered, as the
case may be, to you upon conversion of a note. |
S-3
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Fundamental Change |
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If we undergo a fundamental change (as defined under
Description of Notes Fundamental
Change), you will have the option to require us to
purchase all or any portion of your notes. The fundamental
change purchase price will be 100% of the principal amount of
the notes to be purchased plus any accrued and unpaid interest,
including any additional interest, to but excluding the
fundamental change purchase date. We will pay cash for all notes
so purchased. |
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Guarantees |
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On the closing date of this offering, the notes will be
guaranteed by substantially all of our homebuilding
subsidiaries. These subsidiaries will continue to guarantee the
notes so long as they guarantee certain of our other publicly
traded debt securities, subject to certain limitations. Our
subsidiaries engaged in the financial services segment do not
guarantee our other publicly traded debt securities and
therefore will not guarantee the notes. If we cannot make
payments on the notes when they are due, the guarantor
subsidiaries must make them. |
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Ranking |
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The notes are our general obligations and will not be secured by
any collateral. Your right to payment under the notes will be: |
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effectively junior to the rights of our secured
creditors to the extent of the value of their security in our
assets;
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equal with the rights of creditors under our other
unsecured unsubordinated debt; and
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senior to the rights of creditors under our debt
that is expressly subordinated to these notes.
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The guarantees will also not be secured by any collateral. Your
right to payment under any guarantee will be: |
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effectively junior to the rights of secured
creditors to the extent of their security in the
guarantors assets;
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equal with the rights of creditors under the
guarantors other unsecured unsubordinated debt; and
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senior to the rights of creditors under the
guarantors debt that is expressly subordinated to the
guarantees.
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The notes will be effectively subordinated to the indebtedness
and liabilities of our non-guarantor subsidiaries. |
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At March 31, 2009, assuming we had completed this offering
of notes, D.R. Horton, Inc. and the guarantors would have had
approximately $3,267.6 million of debt outstanding,
including the notes being offered by this prospectus supplement.
Of this debt, $37.2 million would have been secured debt,
$3,215.1 million would have been unsubordinated unsecured
debt that ranked equally with the notes being offered by this
prospectus supplement, and $15.3 million would have been
subordinated to these notes. In addition, at such date, our
non-guarantor subsidiaries had approximately $44.4 million
of debt outstanding. |
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Use of Proceeds |
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We intend to use the net proceeds of this offering for general
corporate purposes, which may include repayment or repurchase of
outstanding indebtedness. For more details, see Use of
Proceeds. |
S-4
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United States Federal Income Tax Consequences |
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For certain United States federal income tax consequences of the
acquisition, disposition and conversion of the notes, and the
acquisition and disposition of shares of our common stock, see
Certain United States Federal Income Tax
Consequences. |
|
Listing |
|
We have applied to list the notes, the related guarantees and
the shares of stock issuable upon conversion of the notes on the
New York Stock Exchange. |
|
New York Stock Exchange Symbol for Our Common Stock |
|
Our common stock is listed on the New York Stock Exchange under
the symbol DHI. |
S-5
Summary
Consolidated Financial Information and Operating Data
The following summary consolidated financial information for the
five years ended September 30, 2008 is derived from our
audited consolidated financial statements, except as described
in the footnotes below. The following summary consolidated
financial information for the six months ended March 31,
2009 and 2008 is derived from our unaudited consolidated
financial statements. The unaudited consolidated financial
statements have been prepared on the same basis as the audited
consolidated financial statements. The data should be read in
conjunction with the consolidated financial statements, related
notes, managements discussion and analysis of financial
condition and results of operations, and other financial
information incorporated by reference into this prospectus
supplement. These historical results are not necessarily
indicative of the results to be expected in the future. Interim
results for the current year are not necessarily indicative of
the results that may be expected for the entire year.
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|
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|
|
|
|
|
|
|
|
|
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Six Months Ended
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March 31,
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Year Ended September 30,
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|
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2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In millions, except per share amounts and number of
homes)
|
|
|
Statement of operations data:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales
|
|
$
|
1,656.4
|
|
|
$
|
3,204.8
|
|
|
$
|
6,164.3
|
|
|
$
|
10,721.2
|
|
|
$
|
14,545.4
|
|
|
$
|
13,376.6
|
|
|
$
|
10,491.1
|
|
Land/lot sales
|
|
|
19.2
|
|
|
|
126.8
|
|
|
|
354.3
|
|
|
|
367.6
|
|
|
|
215.1
|
|
|
|
252.0
|
|
|
|
166.9
|
|
Total homebuilding
|
|
|
1,675.6
|
|
|
|
3,331.6
|
|
|
|
6,518.6
|
|
|
|
11,088.8
|
|
|
|
14,760.5
|
|
|
|
13,628.6
|
|
|
|
10,658.0
|
|
Financial services
|
|
|
20.4
|
|
|
|
67.9
|
|
|
|
127.5
|
|
|
|
207.7
|
|
|
|
290.8
|
|
|
|
235.1
|
|
|
|
182.8
|
|
Gross profit home sales
|
|
|
240.0
|
|
|
|
379.4
|
|
|
|
691.2
|
|
|
|
1,848.9
|
|
|
|
3,497.6
|
|
|
|
3,416.0
|
|
|
|
2,416.5
|
|
Inventory impairments and land option cost write-offs
|
|
|
104.4
|
|
|
|
1,079.5
|
|
|
|
2,484.5
|
|
|
|
1,329.5
|
|
|
|
270.9
|
|
|
|
17.1
|
|
|
|
20.1
|
|
Gross profit (loss) homebuilding
|
|
|
138.8
|
|
|
|
(677.2
|
)
|
|
|
(1,763.2
|
)
|
|
|
603.7
|
|
|
|
3,342.2
|
|
|
|
3,488.3
|
|
|
|
2,460.7
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
79.4
|
|
|
|
474.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding
|
|
|
(149.0
|
)
|
|
|
(1,106.3
|
)
|
|
|
(2,666.9
|
)
|
|
|
(1,020.0
|
)
|
|
|
1,878.7
|
|
|
|
2,273.0
|
|
|
|
1,508.2
|
|
Financial services
|
|
|
(15.3
|
)
|
|
|
18.8
|
|
|
|
35.1
|
|
|
|
68.8
|
|
|
|
108.4
|
|
|
|
105.6
|
|
|
|
74.7
|
|
Net income (loss)
|
|
|
(171.1
|
)
|
|
|
(1,434.5
|
)
|
|
|
(2,633.6
|
)
|
|
|
(712.5
|
)
|
|
|
1,233.3
|
|
|
|
1,470.5
|
|
|
|
975.1
|
|
Net income (loss) per share(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.54
|
)
|
|
|
(4.55
|
)
|
|
|
(8.34
|
)
|
|
|
(2.27
|
)
|
|
|
3.94
|
|
|
|
4.71
|
|
|
|
3.14
|
|
Diluted
|
|
|
(0.54
|
)
|
|
|
(4.55
|
)
|
|
|
(8.34
|
)
|
|
|
(2.27
|
)
|
|
|
3.90
|
|
|
|
4.62
|
|
|
|
3.09
|
|
Cash dividends declared per common share(1)
|
|
|
0.075
|
|
|
|
0.30
|
|
|
|
0.45
|
|
|
|
0.60
|
|
|
|
0.44
|
|
|
|
0.3075
|
|
|
|
0.215
|
|
Selected operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin home sales
|
|
|
14.5
|
%
|
|
|
11.8
|
%
|
|
|
11.2
|
%
|
|
|
17.2
|
%
|
|
|
24.0
|
%
|
|
|
25.5
|
%
|
|
|
23.0
|
%
|
Gross profit margin homebuilding
|
|
|
8.3
|
%
|
|
|
(20.3
|
)%
|
|
|
(27.0
|
)%
|
|
|
5.4
|
%
|
|
|
22.6
|
%
|
|
|
25.6
|
%
|
|
|
23.1
|
%
|
Number of homes closed
|
|
|
7,653
|
|
|
|
13,268
|
|
|
|
26,396
|
|
|
|
41,370
|
|
|
|
53,099
|
|
|
|
51,172
|
|
|
|
43,567
|
|
Net sales orders (homes)(2)
|
|
|
6,937
|
|
|
|
11,773
|
|
|
|
21,251
|
|
|
|
33,687
|
|
|
|
51,980
|
|
|
|
53,232
|
|
|
|
45,263
|
|
Net sales orders ($ value)(2)
|
|
$
|
1,412.0
|
|
|
$
|
2,588.1
|
|
|
$
|
4,677.2
|
|
|
$
|
8,230.6
|
|
|
$
|
13,895.2
|
|
|
$
|
14,643.4
|
|
|
$
|
11,406.2
|
|
Sales order backlog at end of period (homes)(3)
|
|
|
4,581
|
|
|
|
8,947
|
|
|
|
5,297
|
|
|
|
10,442
|
|
|
|
18,125
|
|
|
|
19,244
|
|
|
|
17,184
|
|
Sales order backlog at end of period ($ value)(3)
|
|
$
|
963.0
|
|
|
$
|
2,077.8
|
|
|
$
|
1,207.4
|
|
|
$
|
2,694.4
|
|
|
$
|
5,185.1
|
|
|
$
|
5,835.2
|
|
|
$
|
4,568.5
|
|
Other financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
978.6
|
|
|
$
|
1,010.0
|
|
|
$
|
1,879.9
|
|
|
$
|
1,355.5
|
|
|
$
|
(1,190.8
|
)
|
|
$
|
(620.7
|
)
|
|
$
|
(422.5
|
)
|
Cash (used in) investing activities
|
|
|
(4.5
|
)
|
|
|
(6.8
|
)
|
|
|
(6.6
|
)
|
|
|
(39.8
|
)
|
|
|
(83.3
|
)
|
|
|
(68.2
|
)
|
|
|
(55.2
|
)
|
Net cash (used in) provided by financing activities
|
|
|
(846.2
|
)
|
|
|
(711.9
|
)
|
|
|
(755.6
|
)
|
|
|
(1,633.7
|
)
|
|
|
711.9
|
|
|
|
1,320.7
|
|
|
|
412.8
|
|
Interest expensed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expensed directly(4)
|
|
|
49.7
|
|
|
|
13.3
|
|
|
|
42.7
|
|
|
|
23.6
|
|
|
|
37.1
|
|
|
|
21.2
|
|
|
|
9.3
|
|
Amortized to cost of sales
|
|
|
58.7
|
|
|
|
133.2
|
|
|
|
227.9
|
|
|
|
220.3
|
|
|
|
237.1
|
|
|
|
225.0
|
|
|
|
249.0
|
|
Provision for (benefit from) income taxes
|
|
|
6.8
|
|
|
|
347.0
|
|
|
|
1.8
|
|
|
|
(238.7
|
)
|
|
|
753.8
|
|
|
|
908.1
|
|
|
|
607.8
|
|
Depreciation and amortization
|
|
|
14.7
|
|
|
|
29.1
|
|
|
|
53.2
|
|
|
|
64.4
|
|
|
|
56.5
|
|
|
|
52.8
|
|
|
|
49.6
|
|
Interest incurred(4)(5)
|
|
|
107.9
|
|
|
|
121.5
|
|
|
|
240.4
|
|
|
|
327.9
|
|
|
|
362.5
|
|
|
|
294.1
|
|
|
|
242.6
|
|
(see footnotes on following page)
S-6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
As of September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(In millions)
|
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,515.2
|
|
|
$
|
1,387.3
|
|
|
$
|
269.6
|
|
|
$
|
587.6
|
|
|
$
|
1,149.8
|
|
|
$
|
518.0
|
|
Inventories
|
|
|
4,168.0
|
|
|
|
4,683.2
|
|
|
|
9,343.5
|
|
|
|
11,343.1
|
|
|
|
8,486.8
|
|
|
|
6,567.4
|
|
Deferred income taxes, net of valuation allowance
|
|
|
213.5
|
|
|
|
213.5
|
|
|
|
863.8
|
|
|
|
374.0
|
|
|
|
265.1
|
|
|
|
180.4
|
|
Deferred income tax valuation allowance
|
|
|
1,019.2
|
|
|
|
961.3
|
|
|
|
4.7
|
|
|
|
4.7
|
|
|
|
6.6
|
|
|
|
6.6
|
|
Total assets
|
|
|
6,477.7
|
|
|
|
7,709.6
|
|
|
|
11,556.3
|
|
|
|
14,820.7
|
|
|
|
12,514.8
|
|
|
|
8,985.2
|
|
Notes payable
|
|
|
2,912.0
|
|
|
|
3,748.4
|
|
|
|
4,376.8
|
|
|
|
6,078.6
|
|
|
|
4,909.6
|
|
|
|
3,499.2
|
|
Stockholders equity
|
|
|
2,647.3
|
|
|
|
2,834.3
|
|
|
|
5,586.9
|
|
|
|
6,452.9
|
|
|
|
5,360.4
|
|
|
|
3,960.7
|
|
|
|
|
(1) |
|
All basic and diluted income per share amounts and cash
dividends declared per share amounts reflect the effects of the
four-for-three stock split (effected as a
331/3%
stock dividend) of March 16, 2005. |
|
(2) |
|
Represents homes placed under contract during the period, net of
cancellations. |
|
(3) |
|
Represents homes under contract but not yet closed at the end of
the period, many of which are subject to contingencies,
including mortgage loan approval. A portion of the contracts in
backlog will not result in closings, principally due to
cancellations, which have increased significantly from
historical levels in the current market conditions. We cannot
assure you that homes subject to pending sales contracts will
close. |
|
(4) |
|
Includes losses on early retirement of debt of $4.4 million
and $3.0 million in fiscal years 2005 and 2004,
respectively. |
|
(5) |
|
Interest incurred consists of all interest costs, whether
expensed or capitalized, including amortization of debt issuance
costs, if applicable. |
Ratio of
Earnings to Fixed Charges
The following table sets forth our ratio of earnings to fixed
charges for the six months ended March 31, 2009 and for the
five years ended September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Year Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Ratio(1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.78
|
|
|
|
8.60
|
|
|
|
7.39
|
|
|
|
|
(1) |
|
For purposes of computing the ratio of earnings to fixed
charges, earnings consist of income, including distributions
received from equity investments, before income taxes, interest
expensed, interest amortized to cost of sales and income
attributable to minority interests. Fixed charges consist of
interest incurred, whether expensed or capitalized, including
amortization of debt issuance costs, if applicable, and the
portion of rent expense deemed to represent interest. |
|
(2) |
|
Earnings for the six months ended March 31, 2009 and the
fiscal years ended September 30, 2008 and 2007 were
insufficient to cover fixed charges for the periods by
$159.6 million, $2,454.3 million and
$998.4 million, respectively. |
See Risk Factors beginning on
page S-8,
the Risk Factors sections of our annual report on
Form 10-K
for the fiscal year ended September 30, 2008 and our
quarterly report on
Form 10-Q
for the quarterly period ended March 31, 2009, and other
information included or incorporated by reference in this
prospectus supplement for a discussion of the factors you should
consider carefully before deciding to invest in the securities
being offered by this prospectus supplement.
S-7
RISK
FACTORS
Investing in the notes or our common stock issuable upon
conversion of the notes involves risks. Our business is
influenced by many factors that are difficult to predict and
beyond our control and that involve uncertainties that may
materially affect our results of operations, financial condition
or cash flows, or the value of the notes or our common stock.
These risks and uncertainties include those described in the
risk factor and other sections of the documents that are
incorporated by reference in this prospectus supplement. The
risks and uncertainties incorporated by reference in this
prospectus supplement are not the only risks and uncertainties
we may confront. Moreover, risks and uncertainties not presently
known to us or currently deemed immaterial by us may also
adversely affect our business, results of operations, financial
condition or cash flows, or the value of the notes or our common
stock. You should carefully consider these risks and
uncertainties and all of the information contained or
incorporated by reference in this prospectus supplement and the
accompanying prospectus before you invest in the notes or our
common stock issuable upon conversion of the notes.
Risks
Relating to Our Business
Certain risks relating to us and our business are described
under the heading Risk Factors in our annual report
on
Form 10-K
for the fiscal year ended September 30, 2008 and our
quarterly report on
Form 10-Q
for the quarterly period ended March 31, 2009, which are
incorporated by reference into this prospectus supplement and
supersede any risk factors included in the accompanying
prospectus.
Risks
Related to Our Common Stock
The
market price of our common stock has been and may continue to be
volatile and may decline.
The market price of our common stock may fluctuate widely. Over
the 12-month
period beginning on May 5, 2008 through May 5, 2009,
the market price of our common stock has ranged from $3.79 to
$16.94 per share. The market price of our common stock may
further fluctuate widely due to many factors, including:
|
|
|
|
|
our financial condition and operating results;
|
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write-offs of our assets;
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changes in analysts recommendations and projections;
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changes in general valuations for homebuilding companies;
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the markets perception of our prospects and the prospects
of the homebuilding industry in general;
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general stock market conditions;
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changes in interest rates, mortgage availability and consumer
confidence;
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governmental reactions to current economic and market conditions;
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regional, national and global political and economic conditions
and other factors.
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Any of these factors could have a material adverse effect on an
investment in our common stock and may prevent investors from
being able to sell their shares of common stock at or above the
price at which they acquired such shares on conversion.
We are
subject to anti-takeover provisions in our charter and bylaws
that could delay or prevent an acquisition of us even if such an
acquisition would be beneficial to our
stockholders.
Certain provisions of our certificate of incorporation and
bylaws could delay or prevent a third party from acquiring us,
even if doing so might be beneficial to our stockholders, or
could limit the price investors might be willing to pay for our
common stock. These provisions include:
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an article in our charter prohibiting stockholder action by
written consent;
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S-8
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an article in our charter requiring the affirmative vote of the
holders of two-thirds of the outstanding shares of common stock
to remove a director;
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a bylaw limiting the persons who may call special meetings of
stockholders to our board of directors or a committee authorized
to call a meeting by the board or the bylaws; and
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bylaws providing time limitations for nominations for election
to the board of directors or for proposing matters which can be
acted upon at stockholders meetings.
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These provisions may delay stockholder actions with respect to
business combinations and the election of new members to our
board of directors. As such, the provisions could discourage
open market purchases of our common stock because a stockholder
who desires to participate in a business combination or elect a
new director may consider them disadvantageous. Additionally,
the issuance of preferred stock could delay or prevent a change
of control or other corporate action.
Adverse
financial results or other factors may limit our ability to pay
dividends.
Our board of directors decides whether we will pay dividends on
our common stock. That decision depends upon, among other
things, future earnings, cash flows, capital requirements, our
financial condition and general business conditions, as well as
compliance with any applicable covenants that may be contained
in our debt agreements from time to time. If any of these
factors are adversely affected, it may impact our ability to pay
dividends on our common stock. Our board of directors has
reduced dividends twice in recent periods and could determine to
further reduce or eliminate dividends payable on our common
stock in the future.
Risks
Related to the Notes
Recent
developments in the convertible debt markets may adversely
affect the market value of the notes.
The convertible debt markets have experienced unprecedented
disruptions resulting from, among other things, the recent
instability in the credit and capital markets and the emergency
orders issued by the SEC on September 17 and 18, 2008 (and
extended on October 1, 2008). These SEC orders were issued
as a stop-gap measure while Congress worked to provide a
comprehensive legislative plan to stabilize the credit and
capital markets. Among other things, these SEC orders
temporarily imposed a prohibition on effecting short sales of
the common stock of certain financial companies. As a result,
the SEC orders made the convertible arbitrage strategy that many
convertible notes investors employ difficult to execute for
outstanding convertible notes of those companies whose common
stock was subject to the short sale prohibition. The SEC orders
expired on October 8, 2008. However, the SEC and New York
Stock Exchange are currently considering instituting other
limitations on effecting short sales (such as the up-tick rule),
and other regulatory organizations may do the same. Any future
governmental actions that interfere with the ability of
convertible notes investors to effect short sales on the
underlying common stock could significantly affect the market
value of convertible securities, including the notes.
The
notes are not protected by restrictive covenants. We will have
the ability to incur substantially more indebtedness, including
secured indebtedness.
The indenture governing the notes will not contain any financial
or operating covenants or restrictions on the payments of
dividends, the incurrence of indebtedness or the issuance or
repurchase of securities by us or any of our subsidiaries. If we
and our subsidiaries incur significant additional indebtedness,
the related risks that we face could intensify. In addition, the
indenture does not contain covenants or other provisions to
afford protection to holders of the notes in the event of a
fundamental change involving us except to the extent described
under Description of Notes Fundamental
Change and Description of Notes
Conversion Rights Adjustment to Shares Delivered
upon Conversion upon Certain Corporate Transactions.
S-9
Your
right to receive payments on the notes is effectively junior to
those lenders who have a security interest in our
assets.
Our obligations under the notes will be unsecured. If we
incur additional secured indebtedness and subsequently default
under that indebtedness, the lenders could declare all of the
funds borrowed thereunder, together with accrued interest,
immediately due and payable. If we were unable to repay such
indebtedness, the lenders could foreclose on the pledged assets
securing such indebtedness to the exclusion of holders of the
notes, even if an event of default exists under the indenture
governing the notes at such time. In any such event, because the
notes will not be secured by any of our assets, it is possible
that there would be no assets remaining from which payments
could be made on the notes or, if any assets remained, they
might be insufficient to satisfy fully our obligations under the
notes. Additionally, in the event of our bankruptcy,
liquidation, reorganization or other winding up, assets that
secure debt will be available to pay obligations on the notes
only after all debt secured by those assets has been repaid in
full.
If you
hold notes, you are not entitled to any rights with respect to
our common stock, but you are subject to all changes made with
respect to our common stock.
If you hold notes, you are not entitled to any rights with
respect to our common stock, including voting rights and rights
to receive any dividends or other distributions on our common
stock, but you are subject to all changes affecting the common
stock. You will have the rights with respect to our common stock
only if you receive our common stock upon conversion and only as
of the date when you become an owner of the shares of our common
stock upon such conversion. For example, in the event that an
amendment is proposed to our charter or bylaws requiring
stockholder approval and the record date for determining the
stockholders of record entitled to vote on the amendment occurs
prior to the date you are deemed the owner of the shares of our
common stock, if any, due upon conversion, you will not be
entitled to vote on the amendment, although you will
nevertheless be subject to any changes in the powers,
preferences or special rights of our common stock once you
become a stockholder.
There
may be future sales or other dilution of our equity, which may
adversely affect the market price of our common stock and the
value of the notes.
Except as described under the heading Underwriting,
we are not restricted from issuing additional common stock,
including securities that are convertible into or exchangeable
for, or that represent the right to receive, common stock. The
issuance of additional shares of our common stock will dilute
the ownership interest of our existing common stockholders.
Sales of a substantial number of shares of our common stock or
other equity-related securities in the public market could
depress the market price of the notes, our common stock, or
both, and impair our ability to raise capital through the sale
of additional equity securities. We cannot predict the effect
that future sales of our common stock or other equity-related
securities would have on the market price of our common stock or
the value of the notes. The price of our common stock could be
affected by possible sales of our common stock by investors who
view the notes as a more attractive means of equity
participation in our company and by hedging or arbitrage trading
activity. The hedging or arbitrage could, in turn, affect the
market price of the notes.
The
market price of the notes is expected to be significantly
affected by the market price of our common stock, which may be
volatile and will be affected by factors beyond our
control.
We expect that the market price of the notes will be
significantly affected by the market price of our common stock.
This may result in greater volatility in the market price of the
notes than would be expected for nonconvertible debt securities.
The market price of our common stock will likely continue to
fluctuate in response to the factors discussed elsewhere in
Risk Factors, including under the subheading,
Risks Related to Our Common Stock, and
in Forward-Looking Statements, among others, many of
which are beyond our control.
S-10
Upon
conversion of the notes, we will pay a settlement amount
consisting of cash, shares of our common stock or a combination
of cash and shares of our common stock, based upon a specified
cash settlement averaging period, and you may receive less
proceeds than expected.
Generally, we will satisfy our conversion obligation to holders
by paying a settlement amount in cash, shares of our common
stock or a combination of cash and shares of our common stock,
based upon a 20
trading-day
cash settlement averaging period. Accordingly, upon conversion
of a note, holders might not receive any shares of our common
stock, or they might receive fewer shares of common stock than
would be implied by the conversion value of the note as of the
conversion date (as defined under Description of
Notes Conversion Rights Settlement upon
Conversion). In addition, because of the 20
trading-day
cash settlement averaging period, settlement generally will be
delayed until at the least the 23rd trading day following
the related conversion date unless we elect to satisfy the
conversion obligation by issuing common stock only. See
Description of Notes Conversion
Rights Settlement upon Conversion. Upon
conversion of the notes, you may receive consideration worth
less than the conversion value of the note as of the conversion
date because the value of our common stock may decline (or not
appreciate as much as you may expect) between the conversion
date and the end of the cash settlement averaging period.
Our failure to convert the notes into cash, shares of our common
stock or a combination of cash and shares of our common stock,
upon exercise of a holders conversion right in accordance
with the provisions of the indenture, would constitute a default
under the indenture. In addition, a default under the indenture
could lead to a default under existing and future agreements
governing our indebtedness. If, due to a default, the repayment
of related indebtedness were to be accelerated after any
applicable notice or grace periods, we may not have sufficient
funds to repay such indebtedness and the notes.
We may
invest or spend the net proceeds of this offering in ways with
which you may not agree and in ways that may not earn a
profit.
We intend to use the net proceeds of this offering for general
corporate purposes, which may include repayment or repurchase of
other indebtedness. These purposes could also include
acquisitions or other investments. However, we will retain broad
discretion over the use of the net proceeds from this offering.
You may not agree with the ways we decide to use these proceeds,
and our use of the proceeds may not yield any profits.
The
conversion rate for notes may not be adjusted for all dilutive
events.
The conversion rate of the notes is subject to adjustment for
certain events, including, but not limited to, the issuance of
stock dividends on our common stock, the issuance of certain
rights or warrants, subdivisions, combinations, distributions of
capital stock, indebtedness or assets, certain cash dividends
and certain issuer tender or exchange offers as described under
Description of Notes Conversion
Rights Conversion Rate Adjustments. Such
conversion rate will not be adjusted, however, for other events,
such as a third-party tender or exchange offer or an issuance of
common stock for cash, that may adversely affect the trading
price of the notes or our common stock. In addition, an event
that adversely affects the value of the notes may occur, and
that event may not result in an adjustment to such conversion
rate.
We may
not have the ability to raise the funds necessary to purchase
the notes upon a fundamental change as required by the indenture
governing the notes.
Holders may require us to purchase their notes upon a
fundamental change as described under Description of
Notes Fundamental Change. Other of our senior
and senior subordinated notes, which constituted
$1.0 billion in aggregate principal amount as of
March 31, 2009, also require us to offer to purchase such
notes if a change of control occurs as defined in the indentures
governing them. A fundamental change may also constitute an
event of default, and result in the effective acceleration of
the maturity, of other then-existing indebtedness. There can be
no assurance that we would have sufficient financial resources,
or would be able to arrange financing, to pay the fundamental
change purchase price for the notes surrendered by
S-11
the holders in cash. Failure by us to purchase the notes when
required will result in an event of default with respect to the
notes.
Some
significant restructuring transactions may not constitute a
fundamental change, in which case we would not be obligated to
offer to purchase the notes.
Upon the occurrence of certain fundamental change transactions
described under Description of Notes
Fundamental Change, you have the right to require us to
repurchase your notes. However, the fundamental change
provisions will only afford protection to holders of notes in
the event of certain transactions. Other transactions such as
leveraged recapitalizations, refinancings, restructurings, or
acquisitions initiated by us may not constitute a fundamental
change requiring us to repurchase the notes. In the event of any
such transaction, the holders would not have the right to
require us to repurchase the notes, even though each of these
transactions could increase the amount of our indebtedness or
otherwise adversely affect our capital structure or any credit
ratings, thereby adversely affecting the holders of notes.
The
adjustment to the applicable conversion rate for notes converted
in connection with a specified corporate transaction may not
adequately compensate you for any lost value of your notes as a
result of such transaction.
If a specified corporate transaction constituting a make-whole
fundamental change, as described under Description of
Notes Conversion Rights Adjustment to
Shares Delivered upon Conversion upon Certain Corporate
Transactions, occurs, under certain circumstances we will
increase the applicable conversion rate by a number of
additional shares of our common stock for notes converted in
connection with such specified corporate transaction. The
increase in the applicable conversion rate will be determined
based on the date on which the specified corporate transaction
becomes effective and the price paid per share of our common
stock in, or the price of our common stock over a five
trading-day
period immediately preceding the effective date of, such
transaction, as described under Description of
Notes Conversion Rights Adjustment to
Shares Delivered upon Conversion upon Certain Corporate
Transactions. The adjustment to the applicable conversion
rate for notes converted in connection with a specified
corporate transaction may not adequately compensate you for any
lost value of your notes as a result of such transaction. In
addition, if the stock price for such transaction (determined as
described under Description of Notes
Conversion Rights Adjustment to Shares Delivered
upon Conversion upon Certain Corporate Transactions) is
greater than $ per share, or if
such price is less than $ per
share (each such price, subject to adjustment), no adjustment
will be made to the applicable conversion rate.
Our obligation to increase the applicable conversion rate in
connection with any such specified corporate transaction could
be considered a penalty, in which case the enforceability
thereof would be subject to general principles of reasonableness
of economic remedies.
The
net share settlement feature of the notes may have adverse
consequences.
The net share settlement feature of the notes, as described
under Description of Notes Conversion
Rights Settlement upon Conversion, may:
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result in holders receiving no shares upon conversion or fewer
shares relative to the conversion value of the notes;
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reduce our liquidity;
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delay holders receipt of the consideration due upon
conversion; and
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subject holders to market risk before receiving any shares upon
conversion.
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The
fundamental change provisions may delay or prevent an otherwise
beneficial takeover attempt of us.
The fundamental change purchase rights, which will allow
noteholders to require us to purchase all or a portion of their
notes upon the occurrence of a fundamental change, as defined in
Description of Notes
S-12
Fundamental Change, and the provisions requiring an
increase to the conversion rate for conversions in connection
with make-whole fundamental changes may in certain circumstances
delay or prevent a takeover of us and the removal of incumbent
management that might otherwise be beneficial to investors.
Conversion
of the notes may dilute the ownership interest of existing
stockholders, including holders who have previously converted
their notes.
The conversion of some or all of the notes may dilute the
ownership interests of existing stockholders. Any sales in the
public market of any of our common stock issuable upon such
conversion could adversely affect prevailing market prices of
our common stock. In addition, the anticipated conversion of the
notes into shares of our common stock or a combination of cash
and shares of our common stock could depress the price of our
common stock.
You
may be subject to tax upon an adjustment to, or a failure to
adjust, the conversion rate of the notes even though you do not
receive a corresponding cash distribution.
The conversion rate of the notes will be adjusted in certain
circumstances. See the discussion under the heading
Description of Notes Conversion
Rights Conversion Rate Adjustments and
Description of Notes Conversion
Rights Adjustment to Shares Delivered upon
Conversion upon Certain Corporate Transactions.
Adjustments to the conversion rate of the notes (or failures to
make adjustments to other classes of outstanding convertible
instruments, options or warrants) that have the effect of
increasing your proportionate interest in our assets or earnings
may in some circumstances result in a taxable constructive
distribution to you for U.S. federal income tax purposes,
notwithstanding the fact that you do not receive an actual
distribution of cash or property. In addition, you may be
subject to U.S. federal withholding taxes in connection
with such a constructive distribution. If we pay withholding
taxes on your behalf as a result of an adjustment to the
conversion rate of the notes (or a failure to make other
adjustments), we may, at our option and pursuant to certain
provisions of the indenture, set off such payments against
payments of cash and common stock on the notes. You are urged to
consult your tax advisors with respect to the U.S. federal
income tax consequences resulting from an adjustment to the
conversion rate of the notes (or a failure to make other
adjustments). See the discussions under the headings
Certain United States Federal Income Tax
Consequences Tax Consequences to
U.S. Holders Constructive Dividends and
Certain United States Federal Income Tax
Consequences Tax Consequences to
Non-U.S. Holders
Dividends.
Non-U.S.
holders may be subject to U.S. taxation, and purchasers may be
required to withhold certain amounts, under the Foreign
Investment in Real Property Tax Act.
We may currently be, and may remain, a United States real
property holding corporation for U.S. federal income
tax purposes. As a result, under U.S. federal income tax
laws enacted as part of the Foreign Investment in Real Property
Tax Act,
non-U.S. holders
of the notes or common stock may be subject to U.S. federal
withholding tax or U.S. federal income tax, or both, in
respect of certain payments made or deemed made in respect of
the notes or common stock, and purchasers may be required to
withhold certain amounts upon the acquisition of notes or common
stock.
Non-U.S. holders
are urged to consult their tax advisors with respect to the
U.S. federal income tax consequences that arise from our
status as a United States real property holding corporation. See
the discussion under the heading Certain United States
Federal Income Tax Consequences Tax Consequences to
Non-U.S. Holders
Foreign Investment in Real Property Tax Act.
The
accounting method for convertible debt securities that may be
settled in cash, such as the notes, is the subject of recent
changes that could have a material effect on our reported
financial results.
In May 2008, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position No. APB
14-1,
Accounting for Convertible Debt Instruments That May be Settled
in Cash Upon Conversion (Including Partial Cash Settlement)
(FSP APB
14-1).
Under FSP APB
14-1, an
entity must separately account for the liability and equity
components of the convertible debt instruments (such as the
notes) that may be settled entirely or partially in cash upon
conversion in a manner that reflects the issuers economic
interest cost. The effect of FSP APB
14-1 on the
accounting for the notes is that the equity component would be
included in
S-13
additional capital in the stockholders equity section of
our consolidated balance sheet and the value of the equity
component would be treated as original issue discount for
purposes of accounting for the debt component of the notes. FSP
APB 14-1 is
effective for fiscal years beginning after December 15,
2008, and for interim periods within those fiscal years, with
retrospective application required. As a result, because of our
adoption of FSP APB
14-1 for
fiscal 2010 (effective October 1, 2009), we will be
required to retrospectively restate our results for the third
and fourth quarters of fiscal 2009 and record a greater amount
of non-cash interest expense in these and future periods
presented as a result of the amortization of the discounted
carrying value of the notes to their face amount over the term
of the notes. We will report lower net income in our financial
results upon adoption of FSP APB
14-1, which
will require interest to include both the current periods
amortization of the debt discount and the instruments
coupon interest, which could adversely affect our reported or
future financial results, the trading price of our common stock
and the trading price of the notes.
The
notes will be structurally subordinated to indebtedness of our
non-guarantor subsidiaries.
The notes will be structurally subordinated to all existing and
future debt and other liabilities of our non-guarantor
subsidiaries, and the claims of creditors of those subsidiaries
will have priority as to the assets of those subsidiaries. At
March 31, 2009, our non-guarantor subsidiaries had
approximately $44.4 million of debt outstanding. The
indenture under which the notes will be issued will permit our
non-guarantor subsidiaries to incur additional indebtedness. In
addition, subject to certain limitations, the indenture will
permit the creation of non-guarantor subsidiaries and the
release of subsidiaries from the guarantees.
Federal
and state laws allow courts, under specific circumstances, to
void guarantees and to require you to return payments received
from guarantors.
Although you will be direct creditors of the guarantors by
virtue of the guarantees, a court could void or subordinate any
guarantors guarantee under the fraudulent conveyance laws
if existing or future creditors of any such guarantor were
successful in establishing that:
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such guarantee was incurred with fraudulent intent; or
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such guarantor did not receive fair consideration or reasonably
equivalent value for issuing its guarantee; and
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was insolvent at the time of the guarantee;
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was rendered insolvent by reason of the guarantee;
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was engaged in a business or transaction for which its assets
constituted unreasonably small capital to carry on its
business; or
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intended to incur, or believed that it would incur, debt beyond
its ability to pay such debt as it matured.
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The measures of insolvency for purposes of determining whether a
fraudulent conveyance occurred would vary depending upon the
laws of the relevant jurisdiction and upon the valuation
assumptions and methodology applied by the court. Generally,
however, a company would be considered insolvent for purposes of
the foregoing if:
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the sum of the companys debts, including contingent,
unliquidated and unmatured liabilities, is greater than all of
such companys property at a fair valuation; or
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the present fair saleable value of the companys assets is
less than the amount that will be required to pay the probable
liability on its existing debts as they become absolute and
matured.
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An
active trading market for the notes may not
develop.
The notes are a new issue of securities and an active trading
market for the notes may not develop. We have applied for
listing of the notes and the related guarantees on the New York
Stock Exchange; however, we
S-14
can give no assurance that the notes and related guarantees will
be so listed. Each underwriter has advised us that it intends to
make a market in the notes, but no underwriter is obligated to
do so. Any underwriter may discontinue market making at any time
in its sole discretion without notice. Accordingly we cannot
assure you that a liquid trading market will develop for the
notes, that you will be able to sell your notes at a particular
time or that the prices you receive when you sell will be
favorable.
USE OF
PROCEEDS
We estimate that the net proceeds from this offering after
payment of fees and expenses will be approximately
$ million (or
$ million if the
over-allotment option is exercised in full). We intend to use
the net proceeds of this offering for general corporate
purposes, including repayment or repurchase of outstanding
indebtedness.
S-15
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of March 31, 2009 and as adjusted to
reflect the sale of $400 million aggregate principal amount
of notes (assuming no exercise of the underwriters
over-allotment option) and the application of the estimated net
proceeds thereof as described under Use of Proceeds.
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As of March 31, 2009
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Actual
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Adjusted(1)
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(In millions)
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Cash and cash equivalents
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$
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1,515.2
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$
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Homebuilding debt:
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Notes payable under revolving credit facility(2)
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$
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$
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Notes payable other, secured
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37.2
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37.2
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4.875% senior notes due 2010, net
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173.7
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173.7
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9.75% senior notes due 2010
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70.5
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70.5
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6% senior notes due 2011, net
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242.0
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242.0
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7.875% senior notes due 2011, net
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188.3
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188.3
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5.375% senior notes due 2012
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300.0
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300.0
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6.875% senior notes due 2013
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200.0
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200.0
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5.875% senior notes due 2013
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100.0
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100.0
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6.125% senior notes due 2014, net
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198.3
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198.3
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% convertible senior notes due 2014
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400.0
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5.625% senior notes due 2014, net
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248.7
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248.7
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5.25% senior notes due 2015, net
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298.5
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298.5
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5.625% senior notes due 2016, net
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298.2
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298.2
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6.5% senior notes due 2016, net
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496.9
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496.9
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9.75% senior subordinated notes due 2010, net
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15.3
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15.3
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Total homebuilding debt
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2,867.6
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3,267.6
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Financial services debt:
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Borrowings under mortgage repurchase facility(3)
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44.4
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44.4
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Total financial services debt
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44.4
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44.4
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Total debt
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2,912.0
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3,312.0
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Stockholders equity:
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Preferred stock, $0.10 par value: 30,000,000 shares
authorized; no shares issued
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Common stock, $0.01 par value: 1,000,000,000 shares
authorized; 320,532,017 shares issued and
316,876,784 shares outstanding at March 31, 2009(4)
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3.2
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3.2
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Additional capital
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1,724.2
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1,724.2
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Retained earnings
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1,015.6
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1,015.6
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Treasury stock, 3,655,233 shares, at cost
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(95.7
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)
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(95.7
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)
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Total stockholders equity
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2,647.3
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2,647.3
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Total capitalization
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$
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5,559.3
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$
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5,959.3
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(1) |
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In May 2008, FASB issued FSP APB
14-1. FSP
APB 14-1
specifies that issuers of convertible debt that may be wholly or
partially settled in cash should separately account for the
liability and equity |
S-16
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components in a manner that will reflect the entitys
nonconvertible debt borrowing rate when interest cost is
recognized in subsequent periods. The new FSP will become
effective for us on October 1, 2009. Had we been able to
adopt FSP APB
14-1 on
March 31, 2009, a debt discount of
$ million would have been
recorded for the notes, reducing total homebuilding debt to
$ million and increasing
additional capital by
$ million, net of tax. |
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(2) |
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As of March 31, 2009, we had a $1.65 billion unsecured
revolving credit facility with a maturity date of
December 16, 2011 and included a $1.0 billion letter
of credit sub-facility. On May 4, 2009, we delivered a
notice of our intention to voluntarily terminate the revolving
credit facility. In accordance with its terms, the facility will
therefore terminate on May 11, 2009. In such connection, we
cash collateralized the $61 million of letters of credit
previously issued under the facility. |
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(3) |
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Our mortgage subsidiary has a repurchase facility that provides
financing and liquidity by facilitating purchase transactions in
which our mortgage subsidiary transfers eligible loans to buyers
against transfers of funds by the buyers. On March 5, 2009,
through an amendment to the repurchase agreement, the capacity
of the facility was reduced from $275 million to
$75 million, with a provision allowing an increase in the
capacity to $100 million during the last five business days
of a fiscal quarter and the first seven business days of the
following fiscal quarter. Interest is effectively paid on each
advance under the repurchase facility at a rate of either
(i) the greater of the one month LIBOR floating daily rate
or 1.5%, plus a pricing premium of typically 2.25%, or
(ii) the administrative agents prime rate. |
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(4) |
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Does not reflect 39,306,368 shares of common stock reserved
for issuance under outstanding options, as well as $260,720 of
outstanding elections under our employee stock purchase plan. |
S-17
PRICE
RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed on the New York Stock Exchange under
the symbol DHI. The following table sets forth, for
the periods indicated, the range of high and low sales prices
for our common stock, as reported by the NYSE, and the quarterly
cash dividends declared per common share.
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Price Range
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Declared
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High
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Low
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Dividends
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Fiscal 2009
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First quarter
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$
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13.40
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$
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3.79
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$
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0.0375
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Second quarter
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11.35
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5.72
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|
|
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0.0375
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Third quarter (through May 5, 2009)
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13.74
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|
|
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9.29
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|
|
|
0.0375
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Fiscal 2008
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|
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|
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First quarter
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$
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15.18
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|
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$
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10.15
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$
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0.15
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Second quarter
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|
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17.80
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|
|
|
9.78
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|
|
|
0.15
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Third quarter
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|
|
17.95
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|
|
|
10.74
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|
|
|
0.075
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Fourth quarter
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|
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15.46
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|
|
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8.93
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|
0.075
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Fiscal 2007
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First quarter
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$
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27.81
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$
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21.51
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$
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0.15
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Second quarter
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31.13
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|
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21.79
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0.15
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Third quarter
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24.49
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|
|
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19.76
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0.15
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Fourth quarter
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20.75
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12.46
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0.15
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As of May 5, 2009, the closing price of our common stock on
the NYSE was $12.35. On April 30, 2009, there were
approximately 610 holders of record of our common stock.
The declaration of future cash dividends is at the discretion of
our board of directors and will depend upon, among other things,
future earnings, cash flows, capital requirements, our financial
condition and general business conditions, as well as compliance
with any applicable covenants that may be contained in our debt
agreements from time to time. Our board of directors reduced the
amount of our quarterly dividend during the third quarter of
fiscal 2008, and they further reduced our dividend amount during
the first quarter of fiscal 2009. You should read the
information in this section in conjunction with the section
entitled Managements Discussion and Analysis of
Financial Condition and Results of Operations in our
quarterly report on
Form 10-Q
for the quarterly period ended March 31, 2009, incorporated
by reference in this prospectus supplement.
S-18
DESCRIPTION
OF NOTES
The following description of the particular terms of the Notes
offered hereby supplements and, to the extent inconsistent
therewith, replaces the description of the general terms of the
Debt Securities set forth under the heading Description of
Debt Securities in the accompanying prospectus, to which
description reference is hereby made. The Notes will be issued
under an Indenture dated as of June 9, 1997, among the
Company, the guarantors party thereto and American Stock
Transfer & Trust Company, LLC, as trustee (the
Trustee), as supplemented by a supplemental
indenture (as supplemented, the Indenture).
The following is a summary of the material terms and provisions
of the Notes. The terms of the Notes include those set forth in
the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (the
Trust Indenture Act), as in effect on
the date of the Indenture. The Notes are subject to all such
terms, and prospective purchasers of the Notes are referred to
the Indenture and the Trust Indenture Act for a statement
of such terms. As used in this Description of Notes,
the term Company refers to D.R. Horton,
Inc. and not any of its Subsidiaries.
Definitions of certain terms are set forth under Certain
Definitions and throughout this description. Capitalized
terms that are used but not otherwise defined herein have the
meanings assigned to them in the Indenture, and those
definitions are incorporated herein by reference.
General
The Notes will bear interest from May , 2009,
payable semi-annually on May 15 and November 15, of each
year (each, an Interest Payment Date),
commencing November 15, 2009, to Holders of record at the
close of business on May 1 or November 1, as the case
may be, immediately preceding each such interest payment date.
The Notes bear interest at % per
annum and will mature on May 15, 2014. All of the Notes
will be issued in denominations of $2,000 and integral multiples
of $1,000 in excess thereof.
An aggregate principal amount of $400,000,000 of Notes will be
issued in this offering (or $460,000,000 if the underwriters
exercise their over-allotment option in full). Additional Notes
(the Additional Notes) in an unlimited amount
may be issued in one or more series from time to time on the
same terms and conditions and with the same CUSIP numbers as the
Notes offered hereby without the consent of Holders of the
Notes. Any Additional Notes issued will have the same CUSIP
number as the Notes offered hereby only if they are fungible for
federal income tax and securities law purposes with the Notes
offered hereby.
The Notes will be guaranteed by each of the Guarantors pursuant
to the guarantees of the Notes (the
Guarantees) described below. On the Issue
Date substantially all of our homebuilding subsidiaries will be
Guarantors. The Guarantors currently do not include our
subsidiaries that are engaged in the financial services segment
or certain insignificant subsidiaries.
The Notes may be converted at an initial conversion rate
of shares of our common stock
per $1,000 principal amount of Notes (equal to an initial
conversion price of approximately
$ per share of common stock). The
applicable conversion rate is subject to adjustment if certain
events occur.
Upon conversion of a Note, we will pay or deliver, as the case
may be, cash, shares of our common stock or a combination
thereof at our election as described below under
Conversion Rights Settlement upon
Conversion. Holders will not receive any additional cash
payment for interest or additional interest, if any, accrued and
unpaid to the conversion date except under the circumstances
described below under Conversion
Rights General.
The Notes will not be subject to the provision described in the
accompanying prospectus under the caption Description of
Debt Securities Defeasance.
Ranking
The Notes are general unsecured obligations of the Company and
rank senior in right of payment to all existing and future
Indebtedness of the Company that is, by its terms, expressly
subordinated in right of payment to the Notes and pari passu
in right of payment with all existing and future unsecured
Indebtedness
S-19
of the Company that is not so subordinated. The Guarantees
described below will be general unsecured obligations of the
Guarantors and will rank senior in right of payment to all
existing and future Indebtedness of the Guarantors that is, by
its terms, expressly subordinated in right of payment to the
Guarantees and will rank pari passu in right of payment
with all existing and future unsecured Indebtedness of the
Guarantors that is not so subordinated.
Secured creditors of the Company and the Guarantors will have a
claim on the assets which secure the obligations of the Company
and the Guarantors to such creditors prior to claims of Holders
of the Notes against those assets.
At March 31, 2009, assuming we had completed this offering
of Notes on such date, the Company and the Guarantors would have
had approximately $3,267.6 million of Indebtedness
(including the Notes) outstanding. Of this Indebtedness,
$37.2 million would have been secured debt,
$3,215.1 million would have ranked pari passu in
right of payment with the Notes, and $15.3 million would
have been subordinated to the Notes. In addition, at such date,
our non-guarantor subsidiaries had approximately
$44.4 million of Indebtedness outstanding. The Notes are
effectively subordinated in right of payment to the existing and
future debt and other liabilities of our non-guarantor
subsidiaries since their creditors will generally be entitled to
payment of their claims from the assets of those subsidiaries
before these assets are available to creditors of the Company.
Optional
Redemption
No sinking fund is provided for the Notes.
The Notes will not be redeemable prior to their maturity date.
The
Guarantees
The Notes will be guaranteed by each of the Guarantors pursuant
to the Guarantees.
Each of the Guarantors will unconditionally guarantee on a joint
and several basis all of the Companys obligations under
the Notes, including its obligations to pay principal, premium,
if any, and interest, if any, with respect to the Notes. The
Guarantees will be general unsecured obligations of the
Guarantors and will rank pari passu with all existing and
future unsecured Indebtedness of the Guarantors that is not, by
its terms, expressly subordinated in right of payment to the
Guarantees. The obligations of each Guarantor are limited to the
maximum amount which, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after
giving effect to any collections from or payments made by or on
behalf of any other Guarantor in respect of the obligations of
such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the Indenture, will result in the
obligations of such Guarantor under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer
under federal or state law. Each Guarantor that makes a payment
or distribution under a Guarantee will be entitled to a
contribution from each other Guarantor in an amount equal to
such Guarantors pro rata share of such payment, determined
based on the net assets of each Guarantor (including the funding
Guarantor) and in accordance with GAAP. Except as provided in
the covenants described under Certain
Covenants Limitations on Mergers, Consolidation and
Sales of Assets below, the Company is not restricted from
selling or otherwise disposing of the capital stock or assets of
any of the Guarantors.
The Indenture requires each existing and future Subsidiary that
guarantees any other Publicly Traded Debt Securities to be a
Guarantor. A Guarantor will be automatically and unconditionally
released from its Guarantee (i) if it no longer guarantees
any other Publicly Traded Debt Securities (other than by reason
of payment under any guarantee of any such Publicly Traded Debt
Securities), (ii) if as a result of the sale or other
disposition of its Capital Stock, it ceases to be a Subsidiary
of the Company, (iii) upon a sale or other disposition of
all or substantially all of its assets, or (iv) upon a
merger or consolidation of a Guarantor with a Person other than
the Company or another Guarantor, subject, in the case of (ii),
(iii) and (iv), to the provisions of the covenant described
below under Certain Covenants Limitations on
Mergers, Consolidation and Sales of Assets below.
S-20
The Guarantees with respect to a Note are not convertible and
will automatically terminate when that Note is converted into
common stock.
Conversion
Rights
General
Holders may convert each of their Notes at an initial conversion
rate of shares of our common
stock per $1,000 principal amount of Notes (equivalent to an
initial conversion price of approximately
$ per share of common stock) at
any time prior to the close of business on the second scheduled
trading day immediately preceding the maturity date for the
Notes. Upon conversion of a Note, we will satisfy our conversion
obligation by paying or delivering, as the case may be, cash,
shares of our common stock or a combination thereof at our
election, all as set forth below under
Settlement upon Conversion. If we
satisfy our conversion obligation solely in cash or through
payment and delivery of a combination of cash and shares of our
common stock, the amount of cash and shares of our common stock,
if any, due upon conversion will be based on a daily conversion
value (as defined below under Settlement upon
Conversion) calculated on a proportionate basis for each
trading day in the 20
trading-day
cash settlement averaging period (as defined below under
Settlement upon Conversion).
The conversion rate and the corresponding conversion price in
effect at any given time are referred to as the
applicable conversion rate and the
applicable conversion price, respectively,
and will be subject to adjustment as described below under
Conversion Rate Adjustments and
Adjustment to Shares Delivered upon Conversion
upon Certain Corporate Transactions. The applicable
conversion price at any given time will be computed by dividing
$1,000 by the applicable conversion rate at such time. A Holder
may convert fewer than all of such Holders Notes so long
as the Notes converted are $2,000 or an integral multiple of
$1,000 principal amount in excess thereof.
Upon conversion, a Holder will not receive any additional cash
payment for accrued and unpaid interest and additional interest,
if any, unless such conversion occurs between a regular record
date and the interest payment date to which it relates. Except
in such case, our settlement of conversions as described below
under Settlement upon Conversion will be
deemed to satisfy our obligation to pay:
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the principal amount of the Note; and
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accrued and unpaid interest and additional interest, if any, to,
but not including, the conversion date.
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As a result, accrued and unpaid interest and additional
interest, if any, to, but not including, the conversion date
will be deemed to be paid in full rather than cancelled,
extinguished or forfeited.
Notwithstanding the preceding paragraph, if Notes are converted
after 5:00 p.m., New York City time, on a regular record
date but prior to 9:00 a.m., New York City time, on the
immediately following interest payment date, Holders of such
Notes at 5:00 p.m., New York City time, on the regular
record date will receive payment of the interest and additional
interest, if any, payable on such Notes on the corresponding
interest payment date notwithstanding the conversion of such
Notes at any time after the close of business on the applicable
regular record date. Any Notes surrendered for conversion by a
Holder during the period from 5:00 p.m., New York City
time, on any regular record date to 9:00 a.m., New York
City time, on the immediately following interest payment date,
must be accompanied by funds equal to the amount of interest and
additional interest, if any, payable on the Notes so converted;
provided that no such payment need be made:
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if we have specified a fundamental change purchase date (as
defined below) that is after a regular record date and on or
prior to the corresponding interest payment date;
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to the extent of any overdue interest, if any overdue interest
exists at the time of conversion with respect to such
Note; or
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if the Notes are surrendered for conversion after
5:00 p.m., New York City time, on the regular record date
immediately preceding the maturity date.
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S-21
If a Holder converts Notes, we will pay any documentary, stamp
or similar issue or transfer tax due on the issuance of any
shares of our common stock upon the conversion, unless the tax
is due because the Holder requests any shares to be issued in a
name other than the Holders name, in which case the Holder
will pay that tax.
The conversion date with respect to a Note
means the date on which the Holder of the Note has complied with
all requirements under the Indenture to convert a Note.
Conversion
Procedures
If you hold a beneficial interest in a global note, to convert
you must comply with DTCs procedures for converting a
beneficial interest in a global note and, if required, pay funds
equal to the amount of interest and additional interest, if any,
payable on the next interest payment date and all transfer or
similar taxes, if any.
If you hold a certificated Note, to convert you must:
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complete and manually sign the conversion notice on the back of
the Note, or a facsimile of the conversion notice;
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deliver the conversion notice, which is irrevocable, and the
Note to the conversion agent;
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if required, furnish appropriate endorsements and transfer
documents;
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if required, pay all transfer or similar taxes; and
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if required, pay funds equal to interest (including additional
interest, if any) payable on the next interest payment date.
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If a Holder has already delivered a purchase notice as described
under Fundamental Change with respect to
a Note, the Holder may not surrender that Note for conversion
until the Holder has withdrawn the purchase notice in accordance
with the Indenture.
Settlement
upon Conversion
Upon conversion, we may choose to deliver either cash, shares of
our common stock or a combination of cash and shares of our
common stock, as described below.
All conversions on or after the 23rd scheduled trading day
immediately preceding the maturity date will be settled in the
same relative proportions of cash
and/or
shares of our common stock, which we refer to as the
settlement method. If we have not delivered a
notice of our election of settlement method prior to the
23rd scheduled trading day immediately preceding the
maturity date, we will be deemed to have elected to deliver cash
and shares of our common stock in respect of our conversion
obligation, as described in the third bullet point of the third
paragraph below, and the specified dollar amount (as defined
below) will be equal to $1,000.
On any conversion date prior to the 23rd scheduled trading
day immediately preceding the maturity date, we will use the
same settlement method for all conversions occurring on such
conversion date. Except for any conversions that occur on or
after the 23rd scheduled trading day immediately preceding
the maturity date, we will not have any obligation to use the
same settlement method with respect to conversions that occur on
different trading days.
In other words, we may choose on one trading day to settle
conversions in shares of our common stock only, and choose on
another trading day to settle in cash, shares of our common
stock or a combination of cash and shares of our common stock.
If we elect to do so, we will inform Holders so converting
through the Trustee of the settlement method we have selected
(including the specified dollar amount, if applicable) no later
than the second business day immediately following the related
conversion date. If we do not make such an election, we will be
deemed to have elected to deliver cash and shares of our common
stock in respect of our conversion obligation, as described in
the third bullet point below, and the specified dollar amount
will be equal to $1,000.
S-22
Settlement amounts will be computed as follows:
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if we elect to satisfy our conversion obligation solely in
shares of our common stock, we will deliver to the converting
Holder a number of shares of our common stock equal to (1)
(i) the aggregate principal amount of Notes to be converted
divided by (ii) $1,000, multiplied by
(2) the applicable conversion rate;
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if we elect to satisfy our conversion obligation solely in cash,
we will deliver to the converting Holder, in respect of each
$1,000 principal amount of Notes being converted, cash in an
amount equal to the sum of the daily conversion values for each
of the 20 consecutive trading days during the related cash
settlement averaging period; and
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if we elect to satisfy our conversion obligation through
delivery of a combination of cash and shares of our common
stock, we will deliver to the converting Holder in respect of
each $1,000 principal amount of Notes being converted a
settlement amount equal to the sum of the
daily settlement amounts for each of the 20 consecutive trading
days during the related cash settlement averaging period.
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The daily settlement amount, for each of the
20 consecutive trading days during the cash settlement averaging
period, will consist of:
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cash equal to the lesser of (i) a dollar amount per Note to
be received upon conversion as specified by us in the notice
regarding our chosen settlement method (the specified
dollar amount), if any, divided by 20 (such
quotient being referred to as the daily measurement
value) and (ii) the daily conversion
value; and
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to the extent the daily conversion value exceeds the daily
measurement value, a number of shares equal to (i) the
difference between the daily conversion value and the daily
measurement value, divided by (ii) the daily VWAP of
our common stock for such trading day.
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daily conversion value means, for each of the
20 consecutive trading days during the cash settlement averaging
period, one-twentieth (1/20th) of the product of (i) the
applicable conversion rate and (ii) the daily VWAP of our
common stock on such trading day.
daily VWAP of our common stock, in respect of
any trading day, means the per share volume-weighted average
price on the New York Stock Exchange as displayed under the
heading Bloomberg VWAP on Bloomberg page DHI.N
<equity> AQR (or its equivalent successor if such page
is not available) in respect of the period from the scheduled
open of trading until the scheduled close of trading of the
primary trading session on such trading day (or if such
volume-weighted average price is unavailable, the market value
of one share of our common stock on such trading day as
determined by our board of directors in a commercially
reasonable manner, using a volume-weighted average price method)
and will be determined without regard to
after-hours
trading or any other trading outside of the regular trading
session.
cash settlement averaging period, with
respect to any Note, means the 20 consecutive trading day period
beginning on, and including, the third trading day immediately
following the related conversion date, except that cash
settlement averaging period means, with respect to any
conversion date occurring during the period beginning on, and
including, the 23rd scheduled trading day immediately
preceding the maturity date and ending at 5:00 p.m., New
York City time, on the second scheduled trading day immediately
preceding the maturity date, the 20 consecutive trading day
period beginning on, and including, the 22nd scheduled
trading day immediately preceding the maturity date.
trading day means a day during which trading
in our common stock generally occurs on the primary exchange or
quotation system on which our common stock then trades or is
quoted and there is no market disruption event.
market disruption event means (1) a
failure by the primary exchange or quotation system on which our
common stock trades or is quoted to open for trading during its
regular trading session or (2) the occurrence or existence,
prior to 1:00 p.m., New York City time, on any trading day
for our common stock, of an aggregate one
half-hour
period of any suspension or limitation imposed on trading (by
reason of movements
S-23
in price exceeding limits permitted by the stock exchange or
otherwise) in our common stock or in any options, contracts or
future contracts relating to our common stock.
scheduled trading day means any day that is
scheduled to be a trading day.
We generally will deliver the conversion consideration in
respect of any Notes that you convert by the third trading day
immediately following the last trading day of the cash
settlement averaging period. However:
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if we elect to satisfy our conversion obligation solely in
shares of our common stock, we will deliver the conversion
consideration due in respect of conversion on the third trading
day immediately following the relevant conversion date; and
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if prior to the conversion date for any converted Notes our
common stock has been replaced by reference property (as defined
under Conversion Rate Adjustments below)
consisting solely of cash (pursuant to the provisions described
under Conversion Rate Adjustments), we
will deliver the conversion consideration due in respect of
conversion on the third trading day immediately following the
relevant conversion date.
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Notwithstanding the foregoing, if any information required in
order to calculate the conversion consideration deliverable will
not be available as of the applicable settlement date, we will
deliver the additional shares of our common stock resulting from
that adjustment on the third trading day after the earliest
trading day on which such calculation can be made. Further, if
application of the provisions described in the second sentence
of this paragraph would result in settlement of a conversion
during the 10 trading days immediately following the effective
date of a fundamental change, settlement will instead take place
on the tenth trading day following the relevant effective date.
We will not issue fractional shares of our common stock upon
conversion of Notes. Instead, we will pay cash in lieu of
fractional shares based on the daily VWAP of our common stock on
the relevant conversion date (if we elect to satisfy our
conversion obligation solely in shares of our common stock) or
based on the daily VWAP of our common stock on the last trading
day of the relevant cash settlement averaging period (in the
case of any other settlement method).
Conversion
Rate Adjustments
The applicable conversion rate will be adjusted as described
below, except that we will not make any adjustments to the
conversion rate if Holders of the Notes participate (as a result
of holding the Notes, and at the same time as common
stockholders participate) in any of the transactions described
below as if such Holders of the Notes held a number of shares of
our common stock equal to the applicable conversion rate,
multiplied by the principal amount (expressed in
thousands) of Notes held by such Holder, without having to
convert their Notes.
(1) If we issue solely shares of our common stock as a
dividend or distribution on all or substantially all of our
shares of our common stock, or if we effect a share split or
share combination of our common stock, the applicable conversion
rate will be adjusted based on the following formula:
where,
CRo
= the applicable conversion rate in effect immediately prior to
the open of business on the ex-dividend date for such dividend
or distribution, or immediately prior to the open of business on
the effective date of such share split or share combination, as
the case may be;
CR = the applicable conversion rate in effect immediately after
the open of business on the ex-dividend date for such dividend
or distribution, or immediately after the open of business on
the effective date of such share split or share combination, as
the case may be;
S-24
OSo
= the number of shares of our common stock outstanding
immediately prior to the open of business on the ex-dividend
date for such dividend or distribution, or immediately prior to
the open of business on the effective date of such share split
or share combination, as the case may be; and
OS = the number of shares of our common stock outstanding
immediately after such dividend or distribution, or immediately
after the effective date of such share split or share
combination, as the case may be.
As used in this section, ex-dividend date
means the first date on which the shares of our common stock
trade on the applicable exchange or in the applicable market,
regular way, without the right to receive the issuance or
distribution in question.
(2) If we distribute to all or substantially all holders of
our common stock any rights, options or warrants entitling them
for a period of not more than 60 calendar days from the record
date for such distribution to subscribe for or purchase shares
of our common stock, at a price per share less than the average
of the last reported sale prices of our common stock for the 10
consecutive
trading-day
period ending on, and including, the trading day immediately
preceding the declaration date for such distribution, the
applicable conversion rate will be increased based on the
following formula (provided that the applicable conversion rate
will be readjusted to the extent that such rights, options or
warrants are not exercised prior to their expiration):
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CR
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=
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CRo
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×
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OSo
+ X
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OSo
+ Y
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where,
CRo
= the applicable conversion rate in effect immediately prior to
the open of business on the ex-dividend date for such
distribution;
CR = the applicable conversion rate in effect immediately after
the open of business on the ex-dividend date for such
distribution;
OSo
= the number of shares of our common stock outstanding
immediately prior to the open of business on the ex-dividend
date for such distribution;
X = the total number of shares of our common stock issuable
pursuant to such rights, options or warrants; and
Y = the number of shares of our common stock equal to the
aggregate price payable to exercise such rights, options or
warrants divided by the average of the last reported sale
prices of our common stock over the 10 consecutive
trading-day
period ending on, and including, the trading day immediately
preceding the ex-dividend date for such distribution.
For purposes of this clause (2), in determining whether any
rights, options or warrants entitle the Holders to subscribe for
or purchase our common stock at less than the average of the
last reported sale prices of our common stock for each trading
day in the applicable 10 consecutive
trading-day
period, there shall be taken into account any consideration we
receive for such rights, options or warrants and any amount
payable on exercise thereof, with the value of such
consideration if other than cash to be determined by our board
of directors.
(3) If we distribute shares of our capital stock, evidences
of our indebtedness or other assets or property of ours to all
or substantially all holders of our common stock, excluding
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dividends or distributions (including share splits) referred to
in clause (1) or (2) above;
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dividends or distributions paid exclusively in cash; and
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spin-offs to which the provisions set forth below in this
clause (3) shall apply,
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then the applicable conversion rate will be increased based on
the following formula:
where,
CRo
= the applicable conversion rate in effect immediately prior to
the open of business on the ex-dividend date for such
distribution;
CR = the applicable conversion rate in effect immediately after
the open of business on the ex-dividend date for such
distribution;
SPo
= the average of the last reported sale prices of our common
stock over the 10 consecutive
trading-day
period ending on, and including, the trading day immediately
preceding the ex-dividend date for such distribution; and
FMV = the fair market value (as determined by our board of
directors) of the shares of capital stock, evidences of
indebtedness, assets or property distributed with respect to
each outstanding share of our common stock as of the open of
business on the ex-dividend date for such distribution.
With respect to an adjustment pursuant to this clause (3)
where there has been a payment of a dividend or other
distribution on our common stock of shares of capital stock of
any class or series, or similar equity interest, of or relating
to a subsidiary or other business unit and such capital stock or
similar equity interest distributed to holders of our common
stock is traded or quoted on an exchange or quotation system,
which we refer to as a spin-off, the
applicable conversion rate will be increased based on the
following formula:
where,
CRo
= the applicable conversion rate in effect immediately prior to
the open of business on the ex-dividend date for the spin-off;
CR = the applicable conversion rate in effect immediately after
the open of business on the ex-dividend date for the spin-off;
FMV = the average of the last reported sale prices of the
capital stock or similar equity interest distributed to holders
of our common stock applicable to one share of our common stock
over the first 10 consecutive
trading-day
period immediately following, and including, the ex-dividend
date for the spin-off (for this purpose trading day refers to a
day during such trading in such capital stock or similar equity
interest generally occurs on the primary exchange or quotation
system where such capital stock or equity interest is traded or
quoted and there is no market disruption event); and
MPo
= the average of the last reported sale prices of our common
stock over the first 10 consecutive
trading-day
period immediately following, and including, the ex-dividend
date for the spin-off (such period, the valuation
period).
The adjustment to the applicable conversion rate under the
preceding paragraph of this clause (3) will be made
immediately after the open of business on the day after the last
day of the valuation period, but will be given effect as of the
open of business on the ex-dividend date for the spin-off. If
the ex-dividend date for the spin-off is less than 10 trading
days prior to, and including, the end of the cash settlement
averaging period in respect of any conversion, references within
this clause (3) to 10 trading days shall be deemed
replaced, for purposes of calculating the affected daily
conversion rates in respect of that conversion, with such lesser
number of trading days as have elapsed from, and including, the
ex-dividend date for the spin-off to, and including, the last
trading day of such cash settlement averaging period. For
purposes of determining the applicable conversion rate, in
respect of any conversion during the 10 trading days commencing
on the ex-dividend date for any spin-off, references within the
portion of this clause (3) related to spin-offs
to 10
S-26
trading days shall be deemed replaced with such lesser number of
trading days as have elapsed from, and including, the
ex-dividend date for such spin-off to, but excluding, the
relevant conversion date.
(4) If we make or pay a cash dividend or distribution in
excess of $0.0375 per share in any fiscal quarter (the
initial dividend threshold) to all, or
substantially all, holders of our outstanding common stock, the
applicable conversion rate will be increased based on the
following formula:
where,
CRo
= the applicable conversion rate in effect immediately prior to
the open of business on the ex-dividend date for such dividend
or distribution;
CR = the applicable conversion rate in effect immediately after
the open of business on the ex-dividend date for such dividend
or distribution;
SPo
= the average of the last reported sale prices of our common
stock over the 10 consecutive
trading-day
period ending on, and including, the trading day immediately
preceding the ex-dividend date for such dividend or
distribution; and
C = the amount in cash per share we pay or distribute to holders
of our common stock in excess of the initial dividend threshold.
The initial dividend threshold is subject to adjustment in a
manner inversely proportional to adjustments to the conversion
rate, provided that no adjustment will be made to the dividend
threshold amount for any adjustment made to the conversion rate
under this clause (4).
(5) If we or any of our subsidiaries makes a payment in
respect of a tender offer or exchange offer for our common stock
and, if the cash and value of any other consideration included
in the payment per share of common stock exceeds the average of
the last reported sale prices of our common stock over the 10
consecutive
trading-day
period commencing on, and including, the trading day next
succeeding the last date on which tenders or exchanges may be
made pursuant to such tender or exchange offer (the
expiration date), the applicable conversion
rate will be increased based on the following formula:
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CR
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=
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CRo
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×
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AC + (SP × OS)
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OSo
× SP
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where,
CRo
= the applicable conversion rate in effect immediately prior to
the open of business on the trading day next succeeding the
expiration date;
CR = the applicable conversion rate in effect immediately after
the open of business on the trading day next succeeding the
expiration date;
AC = the aggregate value of all cash and any other consideration
(as determined by our board of directors) paid or payable for
shares purchased in such tender or exchange offer;
OSo
= the number of shares of our common stock outstanding
immediately prior to the time (the expiration
time) such tender or exchange offer expires (prior to
giving effect to such tender offer or exchange offer);
OS = the number of shares of our common stock outstanding
immediately after the expiration time (after giving effect to
such tender offer or exchange offer); and
SP = the average of the last reported sale prices of our common
stock over the 10 consecutive
trading-day
period commencing on, and including, the trading day next
succeeding the expiration date.
The adjustment to the applicable conversion rate under the
preceding paragraph of this clause (5) will be given effect
at the open of business on the trading day next succeeding the
expiration date. If the trading day
S-27
next succeeding the expiration date is less than 10 trading days
prior to, and including, the end of the cash settlement
averaging period in respect of any conversion, references within
this clause (5) to 10 trading days shall be deemed
replaced, for purposes of calculating the affected daily
conversion rates in respect of that conversion, with such lesser
number of trading days as have elapsed from, and including, the
trading day next succeeding the expiration date to, and
including, the last trading day of such cash settlement
averaging period. For purposes of determining the applicable
conversion rate, in respect of any conversion during the 10
trading days commencing on the trading day next succeeding the
expiration date, references within this clause (5) to 10
trading days shall be deemed replaced with such lesser number of
trading days as have elapsed from, and including, the trading
day next succeeding the expiration date to, but excluding, the
relevant conversion date.
If:
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we elect to satisfy our conversion obligation through delivery
of a combination of cash and common stock and shares of common
stock are deliverable to settle the daily settlement amount for
a given trading day within the cash settlement averaging period
applicable to Notes that you have converted,
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any distribution or transaction described in clauses (1) to
(5) above has not yet resulted in an adjustment to the
applicable conversion rate on the trading day in
question, and
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the shares you will receive in respect of such trading day are
not entitled to participate in the relevant distribution or
transaction (because they were not held on a related record date
or otherwise),
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then, without duplication to any conversion rate adjustment set
forth in clauses (1) to (5) above, we will adjust the
number of shares that we deliver to you in respect of the
relevant trading day to reflect the relevant distribution or
transaction.
If:
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we elect to satisfy our conversion obligation solely in shares
of common stock,
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any distribution or transaction described in clauses (1) to
(5) above has not yet resulted in an adjustment to the
applicable conversion rate on the conversion date, and
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the shares you will receive on settlement are not entitled to
participate in the relevant distribution or transaction (because
they were not held on a related record date or otherwise),
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then, without duplication to any conversion rate adjustment set
forth in clauses (1) to (5) above, we will adjust the
number of shares that we deliver to you in respect of the
relevant trading day to reflect the relevant distribution or
transaction.
Except with respect to a spin-off, in cases where the fair
market value of the shares of capital stock, evidences of
indebtedness, assets or property or the amount of the cash
dividend or distribution applicable to one share of our common
stock distributed to all, or substantially all, holders of our
outstanding common stock:
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equals or exceeds the average of the last reported sale prices
of our common stock over the ten consecutive
trading-day
period ending on the trading day immediately preceding the
ex-dividend date for such distribution; or
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such average last reported sale price exceeds the fair market
value of such shares of capital stock, evidences of
indebtedness, assets or property or the amount of cash so
distributed by less than $1.00,
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rather than being entitled to an adjustment in the conversion
rate, the Holder of a Note will be entitled to receive upon
conversion, in addition to shares of our common stock, cash or a
combination of cash and shares of our common stock, the kind and
amount of shares of capital stock, evidences of indebtedness,
assets or property or cash comprising the distribution, if any,
that such Holder would have received if such Holder had held a
number of shares of our common stock equal to the principal
amount of the Notes held divided by the conversion price
in effect immediately prior to the ex-dividend date determining
the holders of our common stock entitled to receive the
distribution.
S-28
Except as stated herein, we will not adjust the applicable
conversion rate for the issuance of shares of our common stock
or any securities convertible into or exchangeable for shares of
our common stock or the right, option or warrant to purchase
shares of our common stock or such convertible or exchangeable
securities.
If any declared dividend or distribution described in
clauses (1) through (5) above results in an adjustment
in the conversion rate but such dividend or distribution is not
so paid or made, the new conversion rate shall be readjusted to
the conversion rate that would then be in effect if such
dividend or distribution had not been declared.
If we adjust the conversion rate pursuant to the above
provisions, we will notify the Trustee and issue a press release
containing the relevant information (and make the press release
available on our website).
In the event of:
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any reclassification of our common stock;
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a consolidation, merger, combination or binding share exchange
involving us; or
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a sale or conveyance to another person of all or substantially
all of our property and assets,
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in each case, in which holders of our outstanding common stock
are entitled to receive cash, securities or other property for
their shares of our common stock (reference
property), you will be entitled thereafter to convert
your Notes into the kind and amount of shares of stock, other
securities or other property or assets (including cash or any
combination thereof) that a holder of a number of shares of our
common stock equal to the conversion rate immediately prior to
such transaction would have owned or been entitled to receive
upon such transaction; provided that, at and after the
effective time of any such transaction, any amount otherwise
payable in cash upon conversion of the Notes will continue to be
payable as described under the provision under
Settlement upon Conversion, including
our right to determine the form of consideration as described
therein.
If the Notes become convertible into reference property, we will
notify the Trustee and issue a press release containing the
relevant information (and make the press release available on
our website).
For purposes of the foregoing, the type and amount of
consideration that holders of our common stock are entitled to
in the case of reclassifications, consolidations, mergers,
combinations, binding share exchanges, sales or transfers of
assets or other transactions that cause our common stock to be
converted into the right to receive more than a single type of
consideration because the holders of our common stock have the
right to elect the type of consideration they receive will be
deemed to be the weighted average of the types and amounts of
consideration received by the holders of our common stock that
affirmatively make such an election. We will notify Holders and
the Trustee of the weighted average as soon as practicable after
such determination is made.
We are permitted to increase the applicable conversion rate of
the Notes by any amount for a period of at least 20 business
days if our board of directors determines that such increase
would be in our best interest. We may also (but are not required
to) increase the applicable conversion rate to avoid or diminish
income tax to holders of our common stock or rights to purchase
shares of our common stock in connection with a dividend or
distribution of shares (or rights to acquire shares) or similar
event. We will not take any action that would result in
adjustment of the conversion rate, pursuant to the provisions
described above, in such a manner as to result in the reduction
of the conversion price to less than the par value per share of
our common stock.
A Holder may, in some circumstances, including the distribution
of cash dividends to holders of our common stock, be deemed to
have received a distribution or dividend subject to
U.S. federal income tax as a result of an adjustment or the
nonoccurrence of an adjustment to the applicable conversion
rate. For a discussion of the U.S. federal income tax
treatment of an adjustment to the applicable conversion rate,
see Certain United States Federal Income Tax
Consequences elsewhere in this prospectus supplement.
To the extent that we have a rights plan in effect upon
conversion of the Notes (i.e., a poison pill), you will receive,
in addition to any common stock received in connection with such
conversion, the rights under the rights plan, unless prior to
any conversion, the rights have separated from the common stock,
in which
S-29
case the applicable conversion rate will be adjusted at the time
of separation as if we distributed to all holders of our common
stock, shares of our capital stock, evidences of indebtedness or
other assets or property as described in clause (3) above,
subject to readjustment in the event of the expiration,
termination or redemption of such rights.
The applicable conversion rate will not be adjusted:
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upon the issuance of any shares of our common stock pursuant to
any present or future plan providing for the reinvestment of
dividends or interest payable on our securities and the
investment of additional optional amounts in shares of our
common stock under any plan;
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upon the issuance of any shares of our common stock or options
or rights to purchase those shares pursuant to any present or
future employee, director or consultant benefit plan or program
of, or assumed by, us or any of our subsidiaries;
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upon the issuance of any shares of our common stock pursuant to
any option, warrant, right or exercisable, exchangeable or
convertible security not described in the preceding bullet and
outstanding as of the Issue Date;
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for a change in the par value of our common stock; or
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for accrued and unpaid interest and additional interest, if any.
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Adjustments to the applicable conversion rate will be calculated
to the nearest 1/10,000th of a share. We will not be
required to make an adjustment in the conversion rate unless the
adjustment would require a change of at least 1% in the
conversion rate. However, we will carry forward any adjustments
that are less than 1% of the conversion rate and make such
carried forward adjustment, regardless of whether the aggregate
adjustment is less than 1%, (i) upon any conversion of
Notes and (ii) on each of the 22 scheduled trading days
immediately preceding the maturity date. Except as described in
this section or in Adjustment to Shares
Delivered upon Conversion upon Certain Corporate
Transactions, we will not adjust the conversion rate.
Adjustment
to Shares Delivered upon Conversion upon Certain Corporate
Transactions
If you elect to convert your Notes at any time from, and
including, the effective date of a make-whole fundamental change
(as defined below) to, and including, the second scheduled
trading day immediately preceding the related fundamental change
purchase date (as defined below), or if a make-whole fundamental
change does not also constitute a fundamental change as
described under Fundamental Change the
20th trading day immediately following the effective date
of such make-whole fundamental change (such period, the
make-whole fundamental change period), the
applicable conversion rate will be increased by an additional
number of shares of our common stock (these shares being
referred to as the additional shares) as described below. We
will notify Holders and the Trustee of the anticipated effective
date of such make-whole fundamental change and issue a press
release (and make the press release available on our website) as
soon as practicable after we first determine the anticipated
effective date of such make-whole fundamental change. We will
use commercially reasonable efforts to make such determination
in time to deliver such notice no later than 50 business days in
advance of such anticipated effective date.
A make-whole fundamental change means any
transaction or event that constitutes a fundamental change under
clause (1), (2) or (3) of the definition of
fundamental change as described under
Fundamental Change below (in the case of
any fundamental change described in clause (3) of the
definition thereof, determined without regard to the proviso in
such definition, but subject to the paragraphs immediately
following clause (6) of the definition thereof).
The number of additional shares by which the conversion rate for
the Notes will be increased for conversions that occur during
the make-whole fundamental change period will be determined by
reference to the table below, based on the date on which the
make-whole fundamental change occurs (the effective
date) and the price (the stock
price) paid or deemed paid per share of our common
stock in the make-whole fundamental change. If holders of our
common stock receive only cash in the case of a make-whole
fundamental change described in clause (3) under the
definition of fundamental change, the stock price shall
S-30
be the cash amount paid per share of our common stock. In the
case of any other make-whole fundamental change, the stock price
shall be the average of the last reported sales prices of our
common stock over the five
trading-day
period ending on the trading day immediately preceding the
effective date of such make-whole fundamental change.
The stock prices set forth in the first row of the table below
(i.e., column headers) will be adjusted as of any date on which
the applicable conversion rate of the Notes is otherwise
adjusted. The adjusted stock prices will equal the stock prices
applicable immediately prior to such adjustment, multiplied by a
fraction, the numerator of which is the applicable conversion
rate in effect immediately prior to the adjustment giving rise
to the stock price adjustment and the denominator of which is
the applicable conversion rate as so adjusted. The number of
additional shares will be adjusted in the same manner as the
applicable conversion rate as set forth under
Conversion Rate Adjustments.
The following table sets forth numbers of additional shares to
be received per $1,000 principal amount of Notes based on
hypothetical stock prices and effective dates:
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Stock Price
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Effective Date
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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May , 2009
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May 15, 2010
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May 15, 2011
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May 15, 2012
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May 15, 2013
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May 15, 2014
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The exact stock prices and effective dates may not be set forth
in the table above, in which case:
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if the stock price is between two stock prices in the table or
the effective date is between two effective dates in the table,
the number of additional shares will be determined by a
straight-line interpolation between the number of additional
shares set forth for the higher and lower stock prices and the
earlier and later effective dates, based on a
365-day
year, as applicable;
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if the stock price is greater than
$ per share (subject to
adjustment), no additional shares will be issued upon
conversion; and
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if the stock price is less than $
per share (subject to adjustment), no additional shares will be
issued upon conversion.
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Notwithstanding the foregoing, in no event will the total number
of shares of our common stock issuable upon conversion of Notes
exceed
per $1,000 principal amount of such Notes, subject to
adjustments in the same manner as the applicable conversion rate
as set forth under Conversion Rate
Adjustments.
Fundamental
Change
If a fundamental change (as defined below in this section)
occurs at any time, you will have the right, at your option, to
require us to purchase all of your Notes or any portion of the
principal amount thereof that is equal to $2,000, or an integral
multiple of $1,000 in excess thereof, on a date (the date being
referred to as the fundamental change purchase
date) of our choosing that is not less than 20 or more
than 35 business days after the date on which we notify Holders
and the Trustee of the occurrence of the effective date for such
fundamental change. The price we are required to pay is equal to
100% of the principal amount of the Notes to be purchased plus
accrued and unpaid interest, including any additional interest,
to but excluding the fundamental change purchase date (unless
the fundamental change purchase date is after a regular record
date and on or prior to the interest payment date to which it
relates, in which case interest accrued to the interest payment
date will be paid to Holders of the Notes as of the preceding
record date and the price we are required to pay to the Holder
surrendering the Note for repurchase will be equal to 100% of
the principal amount of Notes subject to repurchase and will not
include any accrued and unpaid interest, including any
additional interest). Any Notes purchased by us will be paid for
in cash.
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A fundamental change will be deemed to have
occurred at the time after the Issue Date when any of the
following occurs:
(1) a person or group within the
meaning of Section 13(d) of the Exchange Act other than us,
our Subsidiaries or permitted holders (as defined
below), files a Schedule TO or any schedule, form or report
under the Exchange Act disclosing that such person or group has
become the direct or indirect ultimate beneficial
owner, as defined in
Rule 13d-3
under the Exchange Act, of our common equity representing more
than 50% of the voting power of our common equity;
(2) any permitted holder has, or any permitted holders
have, become the direct or indirect beneficial owners of our
common equity representing more than 80%, in the aggregate, of
the voting power of our common equity;
(3) consummation of any binding share exchange, exchange
offer, tender offer, consolidation or merger of us pursuant to
which our common stock will be converted into cash, securities
or other property or any sale, lease or other transfer in one
transaction or a series of transactions of all or substantially
all of the consolidated assets of us and our Subsidiaries, taken
as a whole, to any person other than one or more of our
Subsidiaries (any such exchange, offer, consolidation, merger,
transaction or series of transactions being referred to herein
as a merger event); provided, however,
that any such merger event where the holders of more than
50% of our shares of common stock immediately prior to such
merger event, own, directly or indirectly, more than 50% of all
classes of common equity of the continuing or surviving person
or transferee or the parent thereof immediately after such
merger event shall not be a fundamental change;
(4) the first day on which continuing directors cease to
constitute at least a majority of our board of directors;
(5) our stockholders approve any plan or proposal for our
liquidation or dissolution (other than any liquidation or
dissolution that is part of a merger event and excluded from the
definition of fundamental change by reason of the proviso in
clause (3) above); or
(6) our common stock (or other common stock into which the
Notes are then convertible) ceases to be quoted or listed on at
least one United States national or regional securities exchange.
No transaction or merger event described in clause (3)
above will constitute a fundamental change if:
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at least 90% of the consideration, excluding cash payments for
fractional shares, in the transaction or event that would
otherwise have constituted a fundamental change consists of
shares of common stock that are traded on a U.S. national
or regional securities exchange or that will be so traded when
issued or exchanged in connection with the relevant transaction
or event (these securities being referred to as
publicly traded securities) and
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as a result of this transaction or merger event the Notes become
convertible into such publicly traded securities and subject to
the directly preceding paragraph, other consideration (subject
to the provisions set forth above under
Settlement upon Conversion).
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If any transaction in which our common stock is replaced by the
securities of another entity occurs, following completion of any
related make-whole fundamental change period and any related
fundamental change purchase date, references to us in the
definition of fundamental change above will apply to
such other entity instead. In addition, a filing that would
otherwise constitute a fundamental change under clause (1)
above will not constitute a fundamental change if (x) the
filing occurs in connection with a transaction in which our
common stock is replaced by the securities of another entity and
(y) no such filing is made or is in effect with respect to
common equity representing more than 50% of the voting power of
such other entity.
permitted holder means any of Donald R.
Horton, Terrill J. Horton, or their respective wives, children,
grandchildren and other descendants, or any trust or other
entity controlled by any of such individuals.
continuing director means a director who
either was a member of our board of directors on the Issue Date
or who becomes a member of our board of directors subsequent to
that date and whose election,
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appointment or nomination for election by our stockholders, is
duly approved by a majority of the continuing directors on our
board of directors at the time of such approval, either by a
specific vote or by approval of the proxy statement issued by us
on behalf of our entire board of directors in which such
individual is named as nominee for director.
On or before the 20th day after the occurrence of a
fundamental change, we will provide to all Holders of the Notes
and the Trustee and paying agent a notice of, and issue a press
release (and make the press release available on our website) in
respect of, the occurrence of the fundamental change and of the
resulting purchase right. Such notice will state, among other
things:
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the events causing a fundamental change;
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the effective date of the fundamental change, and whether the
fundamental change is a make-whole fundamental change, in which
case the effective date of the make-whole fundamental change;
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the last date on which a Holder may exercise the purchase right;
the fundamental change purchase price;
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the fundamental change purchase date;
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if applicable, the name and address of the paying agent and the
conversion agent;
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if applicable, the applicable conversion rate and any
adjustments to the applicable conversion rate;
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if applicable, that the Notes with respect to which a
fundamental change purchase notice has been delivered by a
Holder may be converted only if the Holder withdraws the
fundamental change purchase notice in accordance with the terms
of the Indenture; and
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the procedures that Holders must follow to require us to
purchase their Notes.
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To exercise your fundamental change purchase right, you must
deliver, on or before the scheduled trading day immediately
preceding the fundamental change purchase date, the Notes to be
purchased, duly endorsed for transfer, together with a written
purchase notice and the form entitled Form of Fundamental
Change Purchase Notice on the reverse side of the Notes
duly completed, to the paying agent. Your purchase notice must
state:
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if certificated Notes have been issued, the certificate numbers
of your Notes to be delivered for purchase;
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the portion of the principal amount of Notes to be purchased,
which must be $2,000 or an integral multiple of $1,000 in excess
thereof; and
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that the Notes are to be purchased by us pursuant to the
applicable provisions of the Notes and the Indenture.
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If the Notes are not in certificated form, the notice given by
each Holder must comply with appropriate DTC procedures.
You may withdraw any purchase notice (in whole or in part) by a
written notice of withdrawal delivered to the paying agent prior
to 5:00 p.m., New York City time, on the scheduled trading
day immediately preceding the fundamental change purchase date.
The notice of withdrawal must state:
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the principal amount of the withdrawn Notes;
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if certificated Notes have been issued, the certificate numbers
of the withdrawn Notes;
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the principal amount, if any, which remains subject to the
purchase notice; and
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if the Notes are not in certificated form, the withdrawal notice
given by each Holder must comply with appropriate DTC procedures.
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We will be required to purchase the Notes that have been validly
surrendered for purchase and not withdrawn on the fundamental
change purchase date. You will receive payment of the
fundamental change
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purchase price promptly following the later of the fundamental
change purchase date or the time of book-entry transfer or the
delivery of your Notes. If the paying agent holds money or
securities sufficient to pay the fundamental change purchase
price of the Notes on the fundamental change purchase date, then:
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the Notes will cease to be outstanding and interest, including
any additional interest, if any, will cease to accrue (whether
or not book-entry transfer of the Notes is made or whether or
not the Note is delivered to the paying agent); and
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all other rights of the Holder will terminate (other than the
right to receive the fundamental change purchase price and
previously accrued and unpaid interest (including any additional
interest) upon book-entry transfer or delivery of the Notes).
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The purchase rights of the Holders could discourage a potential
acquirer of us, even if the acquisition may be beneficial to
you. The fundamental change purchase feature, however, is not
the result of managements knowledge of any specific effort
to obtain control of us by any means or part of a plan by
management to adopt a series of anti-takeover provisions.
The term fundamental change is limited to specified transactions
and may not include other events that might adversely affect our
financial condition. In addition, the requirement that we offer
to purchase the Notes upon a fundamental change may not protect
Holders in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving us.
No Notes may be repurchased by us at the option of the Holders
upon a fundamental change if the principal amount of the Notes
has been accelerated, and such acceleration has not been
rescinded, on or prior to such date.
The definition of fundamental change includes a phrase relating
to the sale, lease or other transfer of all or
substantially all of our consolidated assets. There is no
precise, established definition of the phrase
substantially all under applicable law. Accordingly,
the ability of a Holder of the Notes to require us to purchase
its Notes as a result of the sale, lease or other transfer of
less than all of our assets may be uncertain.
If a fundamental change were to occur, we may not have enough
funds to pay the fundamental change purchase price. In addition,
we have, and may in the future incur, other indebtedness with
similar change of control provisions permitting our debt holders
to accelerate upon the occurrence of similar events and that may
contain negative covenants limiting our ability to purchase the
Notes upon the occurrence of a fundamental change. See
Risk Factors Risks Relating to the
Notes We may not have the ability to raise the funds
necessary to purchase the notes upon a fundamental change as
required by the indenture governing the notes. If we fail
to purchase the Notes when required following a fundamental
change, we will be in default under the Indenture.
In connection with any fundamental change purchase offer, we
will:
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comply with the provisions of
Rule 13e-4,
Rule 14e-1
and any other tender offer rules under the Exchange Act, to the
extent applicable;
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file a Schedule TO or any successor or similar schedule, if
required, under the Exchange Act; and
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otherwise comply with all federal and state securities laws in
connection with any offer by us to purchase the Notes.
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We will not be required to make a fundamental change purchase
offer if a third party makes the fundamental change purchase
offer in the manner, at the times and otherwise in compliance
with the requirements set forth in the Indenture applicable to a
fundamental change purchase offer made by us and purchases all
Notes validly tendered and not withdrawn under such fundamental
change purchase offer.
Certain
Covenants
Limitations on Mergers, Consolidations and Sales of
Assets. The Indenture provides that neither
the Company nor any Guarantor will consolidate or merge with or
into, or sell, lease, convey or otherwise dispose
S-34
of all or substantially all of its assets (including, without
limitation, by way of liquidation or dissolution), to any Person
(in each case other than in a transaction in which the Company
or a Guarantor is the survivor of a consolidation or merger, or
the transferee in a sale, lease, conveyance or other
disposition) unless:
(1) the Person formed by or surviving such consolidation or
merger (if other than the Company or the Guarantor, as the case
may be), or to which such sale, lease, conveyance or other
disposition will be made (collectively, the
Successor), is a corporation or other legal
entity organized and existing under the laws of the United
States or any state thereof or the District of Columbia, and the
Successor assumes by supplemental indenture in a form reasonably
satisfactory to the Trustee all of the obligations of the
Company or the Guarantor, as the case may be, under the Notes or
a Guarantee, as the case may be, and the Indenture, and
(2) immediately after giving effect to such transaction, no
Default or Event of Default has occurred and is continuing.
The foregoing provisions shall not apply to:
(a) a transaction involving the sale or disposition of
Capital Stock of a Guarantor, or the consolidation or merger of
a Guarantor, or the sale, lease, conveyance or other disposition
of all or substantially all of the assets of a Guarantor where
such Capital Stock, or the assets of the Guarantor being merged
or consolidated or the assets being sold, leased, conveyed or
otherwise disposed of, as the case may be, do not constitute all
or substantially all of the assets of the Company (determined on
a consolidated basis), or
(b) a transaction the purpose of which is to change the
state of incorporation of the Company or any Guarantor.
Upon any such consolidation, merger, sale, lease, conveyance or
other disposition, the Successor will be substituted for the
Company or the relevant Guarantor under the Indenture. The
Successor may then exercise every power and right of the Company
or the relevant Guarantor under the Indenture, and the Company
or the relevant Guarantor will be released from all of its
liabilities and obligations in respect of the Notes and the
Indenture. If the Company or a Guarantor leases all or
substantially all of its assets, the lessee will be the
Successor to the Company or such Guarantor and may exercise
every power and right of the Company or such Guarantor under the
Indenture, but the Company or such Guarantor will not be
released from its obligations to pay the principal of and
premium, if any, and interest, if any, on the Notes.
Although these types of transactions are permitted under the
Indenture, certain of the foregoing transactions could
constitute a fundamental change (as defined above) permitting
each Holder to require the Company to purchase the Notes of such
Holder as described above.
Reports
The Indenture provides that any documents or reports that the
Company is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act must be furnished
by the Company to the Trustee within 15 days after the same
are required to be filed with the Commission (giving effect to
any grace period provided by
Rule 12b-25
under the Exchange Act). Documents filed by the Company with the
Commission via the IDEA (f/k/a EDGAR) system will be deemed
furnished to the Trustee as of the time such documents are filed
via IDEA.
Events of
Default
The following are Events of Default in respect of the Notes
under the Indenture:
(1) the failure by the Company to pay interest on any such
Note when the same becomes due and payable and the continuance
of any such failure for a period of 30 days;
(2) the failure by the Company to pay the principal or
premium of any such Note when the same becomes due and payable
at maturity, upon acceleration or otherwise;
S-35
(3) the failure by the Company or any of its Subsidiaries
to comply with any of its agreements or covenants in, or
provisions of, such Notes, the Guarantees or the Indenture and
such failure continues for the period and after the notice
specified below (except in the case of a default under the
covenant described under Limitations on Mergers,
Consolidations and Sales of Assets, which will constitute
an Event of Default with notice but without passage of time);
(4) the acceleration of any Indebtedness (other than
Non-Recourse Indebtedness) of the Company or any Guarantor that
has an outstanding principal amount of $50 million or more,
individually or in the aggregate, and such acceleration does not
cease to exist, or such Indebtedness is not satisfied, in either
case within 30 days after such acceleration;
(5) the failure by the Company or any Guarantor to make any
principal or interest payment in an amount of $50 million
or more, individually or in the aggregate, in respect of
Indebtedness (other than Non-Recourse Indebtedness) of the
Company or any Guarantor within 30 days of such principal
or interest becoming due and payable (after giving effect to any
applicable grace period set forth in the documents governing
such Indebtedness);
(6) the Company or any Guarantor that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy
Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it
in an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors;
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Guarantor that
is a Significant Subsidiary as debtor in an involuntary case,
(B) appoints a Custodian of the Company or any Guarantor
that is a Significant Subsidiary or a Custodian for all or
substantially all of the property of the Company or any
Guarantor that is a Significant Subsidiary, or
(C) orders the liquidation of the Company or any Guarantor
that is a Significant Subsidiary, and the order or decree
remains unstayed and in effect for 60 days;
(8) any Guarantee of a Guarantor that is a Significant
Subsidiary ceases to be in full force and effect (other than in
accordance with the terms of such Guarantee and the Indenture)
or is declared null and void and unenforceable or found to be
invalid or any Guarantor denies its liability under its
Guarantee (other than by reason of release of a Guarantor from
its Guarantee in accordance with the terms of the Indenture and
the Guarantee);
(9) the failure by the Company to comply with the
obligation to convert the Notes into common stock, cash or a
combination of cash and common stock, as applicable, upon
exercise of a Holders conversion right and such failure
continues for five days; or
(10) the failure by the Company to timely issue a
fundamental change notice in accordance with the terms of the
Indenture described in Fundamental
Change.
A Default as described in subclause (3) above will not be
deemed an Event of Default until the Trustee notifies the
Company, or the Holders of at least 25 percent in principal
amount of the then outstanding Notes notify the Company and the
Trustee, of the Default and (except in the case of a default
with respect to the covenant described under Limitations
on Mergers, Consolidations and Sales of Assets) the
Company does not cure the Default within 60 days after
receipt of the notice. The notice must specify the Default,
demand
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that it be remedied and state that the notice is a Notice
of Default. If such a Default is cured within such time
period, it ceases.
If an Event of Default (other than an Event of Default with
respect to the Company resulting from subclauses (6) or
(7) above), shall have occurred and be continuing under the
Indenture, the Trustee by notice to the Company, or the Holders
of at least 25 percent in principal amount of the Notes
then outstanding by notice to the Company and the Trustee, may
declare all such Notes to be due and payable immediately. Upon
such declaration of acceleration, the amounts due and payable on
such Notes will be due and payable immediately. If an Event of
Default with respect to the Company specified in
subclauses (6) or (7) above occurs, such an amount
will ipso facto become and be immediately due and payable
without any declaration, notice or other act on the part of the
Trustee and the Company or any Holder.
Notwithstanding the foregoing, if the Company so elects, any
failure to file reports as described under
Reports will not result in the
occurrence of an Event of Default until the expiration of the
first 180 days after the date (the Specified
Date) on which an Event of Default would otherwise
occur as a result of any such failure (which would be the
120th day after written notice is provided to the Company
in accordance with subclause (3) above), provided
the Company pays additional interest on the Notes at an annual
rate equal to (x) 0.25% of the outstanding principal amount
of the Notes for the first 90 days of such
180-day
period and (y) 0.50% of the outstanding principal amount of
the Notes for the remaining 90 days of such
180-day
period. Additional interest will be payable in arrears on each
interest payment date following the Specified Date in the same
manner as regular interest on the Notes. On the 181st day
after the Specified Date (if such violation is not cured or
waived prior to such 181st day), an Event of Default will
be deemed to occur and the Notes will be subject to acceleration
as provided above. The provisions of the Indenture described in
this paragraph will not affect the rights of Holders of Notes in
the event of the occurrence of any other Event of Default. In
the event we do not elect to pay additional interest upon any
such failure to file reports as described under
Reports in accordance with this
paragraph, an Event of Default will be deemed to occur and the
Notes will be subject to acceleration as provided above.
In order to elect to pay additional interest relating to the
failure to comply with the reporting obligations in accordance
with the immediately preceding paragraph, the Company must
notify all Holders of record of the Notes and the Trustee and
paying agent of such election on or before the close of business
on the 5th business day after the Specified Date. Upon our
failure to timely give such notice or pay additional interest,
the Notes will be immediately subject to acceleration as
provided above.
The Holders of a majority in principal amount of the Notes then
outstanding by written notice to the Trustee and the Company may
waive any Default or Event of Default (other than any Default or
Event of Default in payment of principal or interest) on such
Notes under the Indenture. Holders of a majority in principal
amount of the then outstanding Notes may rescind an acceleration
and its consequence (except an acceleration due to nonpayment of
principal or interest on such Notes) if the rescission would not
conflict with any judgment or decree and if all existing Events
of Default (other than the non-payment of accelerated principal)
have been cured or waived.
The Holders may not enforce the provisions of the Indenture, the
Notes or the Guarantees except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in
principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power, provided,
however, that such direction does not conflict with the
terms of the Indenture. The Trustee may withhold from the
Holders notice of any continuing Default or Event of Default
(except any Default or Event of Default in payment of principal
or interest on the Notes) if the Trustee determines that
withholding such notice is in the Holders interest.
The Company is required to deliver to the Trustee an annual
statement regarding compliance with the Indenture, and include
in such statement, if any Officer of the Company is aware of any
continuing Default or Event of Default, a statement specifying
such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto. In addition,
the Company is required to deliver to the Trustee prompt written
notice of the occurrence of any continuing Default or Event of
Default.
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Discharge
of Indenture
The Company and the Guarantors may satisfy and discharge their
obligations under the Indenture by delivering to the registrar
for cancellation all outstanding Notes or by depositing with the
Trustee and delivering to Holders, as applicable, after the
Notes have become due and payable, whether at the stated
maturity, any fundamental change purchase date or upon
conversion or otherwise, cash or cash and shares of common
stock, if any (solely to satisfy outstanding conversions, if
applicable), sufficient to pay all of the outstanding Notes and
all other sums payable under the Indenture. Such discharge is
subject to the terms contained in the Indenture.
Amendment,
Supplement and Waiver
Subject to certain exceptions, the Indenture, the Notes or the
Guarantees may be amended or supplemented with the consent
(which may include consents obtained in connection with a
purchase of, or a tender offer or exchange offer for Notes) of
the Holders of at least a majority in principal amount of the
Notes then outstanding, and any existing Default under, or
compliance with any provision of the Indenture may be waived
(other than any continuing Default or Event of Default in the
payment of interest on or the principal of the Notes) with the
consent (which may include consents obtained in connection with
a purchase of, or a tender offer or exchange offer for the
Notes) of the Holders of a majority in principal amount of the
Notes then outstanding. Without the consent of any Holder, the
Company and the Trustee may amend or supplement the Indenture,
the Notes or the Guarantees to cure any ambiguity, defect or
inconsistency; to comply with the Limitations on Mergers,
Consolidations and Sales of Assets covenant set forth in
the Indenture; to provide for uncertificated Notes in addition
to or in place of certificated Notes; to make any change that
does not adversely affect the legal rights of any Holder; or to
delete a Guarantor which, in accordance with the terms of the
Indenture, ceases to be liable on its Guarantee.
Without the consent of each Holder affected, the Company and the
Trustee may not:
(1) reduce the amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(3) reduce the principal of or change the fixed maturity of
any Note or make the Notes redeemable at the option of the
Company;
(4) make any change that impairs or adversely affects the
conversion rights of any Notes;
(5) after a fundamental change has occurred, reduce the
fundamental change purchase price of any Note or amend or modify
in any manner adverse to the Holders of Notes the Companys
obligation to make payment of that price, whether through an
amendment or waiver of provisions in the covenants, definitions
or otherwise;
(6) make any Note payable in money or securities other than
that stated in such Note,
(7) make any change in the Waiver of Past Defaults
and Compliance with Indenture Provisions, Rights of
Holders to Receive Payment or the With Consent of
Holders sections set forth in the Indenture;
(8) modify the ranking or priority of the Notes or any
Guarantee;
(9) release any Guarantor from any of its obligations under
its Guarantee or the Indenture otherwise than in accordance with
the Indenture; or
(10) waive a continuing Default or Event of Default in the
payment of principal of or interest on the Notes.
The right of any Holder to participate in any consent required
or sought pursuant to any provision of the Indenture (and the
obligation of the Company to obtain any such consent otherwise
required from such
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Holder) may be subject to the requirement that such Holder shall
have been the Holder of record of any Notes with respect to
which such consent is required or sought as of a date identified
by the Trustee in a notice furnished to Holders in accordance
with the terms of the Indenture.
Calculations
in Respect of the Notes
Except as otherwise provided above, the Company will be
responsible for making all calculations called for under the
Indenture and the Notes. These calculations include, but are not
limited to, determinations of the last reported sale prices of
common stock, accrued interest payable on the Notes and the
applicable conversion rate. The Company will make all these
calculations in good faith and, absent manifest error, the
Companys calculations will be final and binding on Holders
of Notes.
Concerning
the Trustee
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain
property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest
(as defined in the Indenture), it must eliminate such conflict
or resign. In the ordinary course of its business, the Trustee
provides, and may continue to provide, service to the Company as
transfer agent for the common stock and as trustee for other
debt securities of the Company.
The Holders of a majority in principal amount of the then
outstanding Notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy
available to the Trustee, subject to certain exceptions. The
Indenture provides that in case an Event of Default occurs and
is not cured, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent person in
similar circumstances in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the
request of any Holder, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to the Trustee.
The Trustee will initially act as the conversion agent.
Governing
Law
The Indenture, the Notes and the Guarantees are governed by the
laws of the State of New York without giving effect to
principles of conflict of laws.
Book-Entry,
Settlement and Clearance
The
Global Notes
The Notes will be initially issued in the form of one or more
registered notes in global form, without interest coupons, which
we refer to as the global notes. Upon issuance, each of the
global notes will be deposited with the Trustee as custodian for
DTC and registered in the name of Cede & Co., as
nominee of DTC.
Ownership of beneficial interests in a global note will be
limited to persons who have accounts with DTC, which we refer to
as DTC participants, or persons who hold interests through DTC
participants. We expect that under procedures established by DTC:
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upon deposit of a global note with DTCs custodian, DTC
will credit portions of the principal amount of the global note
to the accounts of DTC participants designated by the
underwriters; and
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ownership of beneficial interests in a global note will be shown
on, and transfer of ownership of those interests will be
effected only through, records maintained by DTC (with respect
to interests of DTC participants) and the records of DTC
participants (with respect to other owners of beneficial
interests in the global note).
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Beneficial interests in global notes may not be exchanged for
notes in physical, certificated form except in the limited
circumstances described below.
Book-Entry
Procedures for the Global Notes
All interests in the global notes will be subject to the
operations and procedures of DTC. We provide the following
summary of those operations and procedures solely for the
convenience of investors. The operations and procedures of DTC
are controlled by that settlement system and may be changed at
any time. Neither we nor the underwriters are responsible for
those operations or procedures.
DTC has advised us that it is:
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a limited purpose trust company organized under the laws of the
State of New York;
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a banking organization within the meaning of the New
York State Banking Law;
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a member of the Federal Reserve System;
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a clearing corporation within the meaning of the
Uniform Commercial Code; and
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a clearing agency registered under Section 17A
of the Exchange Act.
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DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities
transactions between its participants through electronic
book-entry changes to the accounts of its participants.
DTCs participants include securities brokers and dealers,
including the underwriters; banks and trust companies; clearing
corporations and other organizations. Indirect access to
DTCs system is also available to others such as banks,
brokers, dealers and trust companies; these indirect
participants clear through or maintain a custodial relationship
with a DTC participant, either directly or indirectly. Investors
who are not DTC participants may beneficially own securities
held by or on behalf of DTC only through DTC participants or
indirect participants in DTC.
So long as DTCs nominee is the registered owner of a
global note, that nominee will be considered the sole owner or
holder of the notes represented by that global note for all
purposes under the Indenture. Except as provided below, owners
of beneficial interests in a global note:
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will not be entitled to have notes represented by the global
note registered in their names;
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will not receive or be entitled to receive physical,
certificated notes; and
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will not be considered the owners or holders of the notes under
the Indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the Trustee
under the Indenture.
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As a result, each investor who owns a beneficial interest in a
global note must rely on the procedures of DTC to exercise any
rights of a holder of notes under the Indenture (and, if the
investor is not a participant or an indirect participant in DTC,
on the procedures of DTC participant through which the investor
owns its interest).
Payments of principal and interest (including any additional
interest) with respect to the Notes represented by a global note
will be made by the Trustee to DTCs nominee as the
registered holder of the global note. Neither we nor the Trustee
will have any responsibility or liability for the payment of
amounts to owners of beneficial interests in a global note, for
any aspect of the records relating to or payments made on
account of those interests by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to those
interests.
Neither we, nor the Trustee, the registrar, paying agent nor
conversion agent have or will have any responsibility for the
performance by DTC or any DTC participants or indirect
participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised us that
it will take any action permitted to be taken by a Holder of the
Notes, including the presentation of the Notes for exchange,
only at the direction of one or more of DTCs participants
to whose account interests in the global notes are
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credited, and only in respect of the principal amount of the
Notes represented by the global notes as to which the DTC
participant or DTC participants has or have given such direction.
Payments by participants and indirect participants in DTC to the
owners of beneficial interests in a global note will be governed
by standing instructions and customary industry practice and
will be the responsibility of those participants or indirect
participants and DTC.
Transfers between participants in DTC will be effected under
DTCs procedures and will be settled in
same-day
funds.
Certificated
Notes
Notes in physical, certificated form will be issued and
delivered to each person that DTC identifies as a beneficial
owner of an interest in a global note only if:
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DTC notifies us at any time that it is unwilling or unable to
continue as depositary for the global notes and a successor
depositary is not appointed within 90 days of such notice;
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DTC ceases to be registered as a clearing agency under the
Exchange Act and a successor depositary is not appointed within
90 days; or
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an event of default in respect of the Notes has occurred and is
continuing.
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Certain
Definitions
Set forth below is a summary of certain of the defined terms
used in the Indenture. Reference is made to the Indenture for
the full definition of all terms used in the Indenture.
Additional Notes has the meaning set forth in
General.
Bankruptcy Law means title 11 of the
United States Code, as amended, or any similar federal or state
law for the relief of debtors.
board of directors means the board of
directors of the Company or, other than when used in
Fundamental Change above, any authorized
committee thereof.
Capital Stock means, with respect to any
Person, any and all shares, interests, participations or other
equivalents (however designated) of or in such Persons
capital stock or other equity interests.
Capitalized Lease Obligations of any Person
means the obligations of such Person to pay rent or other
amounts under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
Commission means the Securities and Exchange
Commission.
control means, when used with respect to any
Person, the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms
controlling and controlled have meanings
correlative to the foregoing.
Currency Agreement of any Person means any
foreign exchange contract, currency swap agreement or other
similar agreement or arrangement designed to protect such Person
or any of its Subsidiaries against fluctuations in currency
values.
Custodian means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy
Law.
Default means any event, act or condition
that is, or after notice or the passage of time or both would
be, an Event of Default.
Event of Default has the meaning set forth in
Events of Default.
Exchange Act means the Securities Exchange
Act of 1934, as amended.
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GAAP means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a
significant segment of the accounting profession of the United
States, as in effect from time to time.
Guarantee means the guarantee of the Notes by
each Guarantor under the Indenture.
Guarantors means (i) initially, each of:
C. Richard Dobson Builders, Inc., a Virginia corporation;
CH Investments of Texas, Inc., a Delaware corporation;
CHI Construction Company, an Arizona corporation;
CHTEX of Texas, Inc., a Delaware corporation;
Continental Homes, Inc., a Delaware corporation;
Continental Homes of Texas, L.P., a Texas limited partnership;
Continental Residential, Inc., a California corporation;
D.R. Horton Emerald, Ltd., a Texas limited
partnership;
D.R. Horton, Inc. Birmingham, an Alabama
corporation;
D.R. Horton, Inc. Chicago, a Delaware
corporation;
D.R. Horton, Inc. Dietz-Crane, a Delaware
corporation;
D.R. Horton, Inc. Fresno, a Delaware
corporation;
D.R. Horton, Inc. Greensboro, a Delaware
corporation;
D.R. Horton, Inc. Gulf Coast, a Delaware
corporation;
D.R. Horton, Inc. Jacksonville, a Delaware
corporation;
D.R. Horton, Inc. Louisville, a Delaware
corporation;
D.R. Horton, Inc. Minnesota, a Delaware
corporation;
D.R. Horton, Inc. New Jersey, a Delaware
corporation;
D.R. Horton, Inc. Portland, a Delaware
corporation;
D.R. Horton, Inc. Sacramento, a California
corporation;
D.R. Horton, Inc. Torrey, a Delaware
corporation;
D.R. Horton LA North, Inc., a Delaware corporation;
D.R. Horton Los Angeles Holding Company, Inc., a California
corporation;
D.R. Horton Management Company, Ltd., a Texas limited
partnership;
D.R. Horton Materials, Inc., a Delaware corporation;
D.R. Horton OCI, Inc., a Delaware corporation;
D.R. Horton VEN, Inc., a California corporation;
D.R. Horton Schuler Homes, LLC, a Delaware
limited liability company;
D.R. Horton Texas, Ltd., a Texas limited
partnership;
DRH Cambridge Homes, Inc., a California corporation;
DRH Cambridge Homes, LLC, a Delaware limited liability company;
DRH Construction, Inc., a Delaware corporation;
DRH Regrem VII, LP, a Texas limited partnership;
DRH Regrem VIII, LLC, a Delaware limited liability company;
DRH Regrem XI, Inc., a Delaware corporation;
DRH Regrem XII, LP, a Texas limited partnership;
DRH Regrem XIII, Inc., a Delaware corporation;
DRH Regrem XIV, Inc., a Delaware corporation;
DRH Regrem XV, Inc., a Delaware corporation;
DRH Regrem XVI, Inc., a Delaware corporation;
DRH Regrem XVII, Inc., a Delaware corporation;
DRH Regrem XVIII, Inc., a Delaware corporation;
DRH Regrem XIX, Inc., a Delaware corporation;
DRH Regrem XX, Inc., a Delaware corporation;
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DRH Regrem XXI, Inc., a Delaware corporation;
DRH Regrem XXII, Inc., a Delaware corporation;
DRH Regrem XXIII, Inc., a Delaware corporation;
DRH Regrem XXIV, Inc., a Delaware corporation;
DRH Regrem XXV, Inc., a Delaware corporation;
DRH Southwest Construction, Inc., a California corporation;
DRH Tucson Construction, Inc., a Delaware corporation;
HPH Homebuilders 2000 L.P., a California limited partnership;
KDB Homes, Inc., a Delaware corporation;
Meadows I, Ltd., a Delaware corporation;
Meadows II, Ltd., a Delaware corporation;
Meadows VIII, Ltd., a Delaware corporation;
Meadows IX, Inc., a New Jersey corporation;
Meadows X, Inc., a New Jersey corporation;
Melmort Co., a Colorado corporation;
Melody Homes, Inc., a Delaware corporation;
Schuler Homes of Arizona, LLC, a Delaware limited liability
company;
Schuler Homes of California, Inc., a California corporation;
Schuler Homes of Oregon, Inc., an Oregon corporation;
Schuler Homes of Washington, Inc., a Washington corporation;
Schuler Mortgage, Inc., a Delaware corporation;
Schuler Realty Hawaii, Inc., a Hawaii corporation;
SGS Communities at Grande Quay, L.L.C., a New Jersey limited
liability company;
SHA Construction LLC, a Delaware limited liability company;
SHLR of California, Inc., a California corporation;
SHLR of Colorado, Inc., a Colorado corporation;
SHLR of Nevada, Inc., a Nevada corporation;
SHLR of Utah, Inc., a Utah corporation;
SHLR of Washington, Inc., a Washington corporation;
SRHI LLC, a Delaware limited liability company;
SSHI LLC, a Delaware limited liability company;
Vertical Construction Corporation, a Delaware corporation;
Western Pacific Funding, Inc., a California corporation;
Western Pacific Housing Co., a California Limited Partnership, a
California limited partnership;
Western Pacific Housing Management, Inc., a California
corporation;
Western Pacific Housing, Inc., a Delaware corporation;
Western Pacific Housing Antigua, LLC, a Delaware
limited liability company;
Western Pacific Housing Aviara, L.P., a California
limited partnership;
Western Pacific Housing Boardwalk, LLC, a Delaware
limited liability company;
Western Pacific Housing Broadway, LLC, a Delaware
limited liability company;
Western Pacific Housing Canyon Park, LLC, a Delaware
limited liability company;
Western Pacific Housing Carmel, LLC, a Delaware
limited liability company;
Western Pacific Housing Carrillo, LLC, a Delaware
limited liability company;
Western Pacific Housing Communications Hill, LLC, a
Delaware limited liability company;
Western Pacific Housing Copper Canyon, LLC, a
Delaware limited liability company;
Western Pacific Housing Creekside, LLC, a Delaware
limited liability company;
Western Pacific Housing Culver City, L.P., a
California limited partnership;
Western Pacific Housing Del Valle, LLC, a Delaware
limited liability company;
Western Pacific Housing Lomas Verdes, LLC, a
Delaware limited liability company;
Western Pacific Housing Lost Hills Park, LLC, a
Delaware limited liability company;
Western Pacific Housing McGonigle Canyon, LLC, a
Delaware limited liability company;
Western Pacific Housing Mountaingate, L.P., a
California limited partnership;
Western Pacific Housing Norco Estates, LLC, a
Delaware limited liability company;
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Western Pacific Housing Oso, L.P., a California
limited partnership;
Western Pacific Housing Pacific Park II, LLC, a
Delaware limited liability company;
Western Pacific Housing Park Avenue East, LLC, a
Delaware limited liability company;
Western Pacific Housing Park Avenue West, LLC, a
Delaware limited liability company;
Western Pacific Housing Playa Vista, LLC, a Delaware
limited liability company;
Western Pacific Housing Poinsettia, L.P., a
California limited partnership;
Western Pacific Housing River Ridge, LLC, a Delaware
limited liability company;
Western Pacific Housing Robinhood Ridge, LLC, a
Delaware limited liability company;
Western Pacific Housing Santa Fe, LLC, a Delaware
limited liability company;
Western Pacific Housing Scripps, L.P., a California
limited partnership;
Western Pacific Housing Scripps II, LLC, a Delaware
limited liability company;
Western Pacific Housing Seacove, L.P., a California
limited partnership;
Western Pacific Housing Studio 528, LLC, a Delaware
limited liability company;
Western Pacific Housing Terra Bay Duets, LLC, a
Delaware limited liability company;
Western Pacific Housing Torrance, LLC, a Delaware
limited liability company;
Western Pacific Housing Torrey Commercial, LLC, a
Delaware limited liability company;
Western Pacific Housing Torrey Meadows, LLC, a
Delaware limited liability company;
Western Pacific Housing Torrey Multi-Family, LLC, a
Delaware limited liability company;
Western Pacific Housing Torrey Village Center, LLC,
a Delaware limited liability company;
Western Pacific Housing Vineyard Terrace, LLC, a
Delaware limited liability company;
Western Pacific Housing Windemere, LLC, a Delaware
limited liability company;
Western Pacific Housing Windflower, L.P., a
California limited partnership;
WPH Camino Ruiz, LLC, a Delaware limited liability
company;
and (ii) each of the Companys Subsidiaries which
becomes a guarantor of the Notes pursuant to the provisions of
the Indenture, in the case of (i) and (ii) until
subsequently released from its Guarantee pursuant to the
provisions of the Indenture.
Holder means the Person in whose name a Note
is registered in the books of the registrar for the Notes.
Indebtedness of any Person means, without
duplication,
(1) any liability of such Person (a) for borrowed
money or under any reimbursement obligation relating to a letter
of credit or other similar instruments (other than standby
letters of credit or similar instruments issued for the benefit
of or surety, performance, completion or payment bonds, earnest
money notes or similar purpose undertakings or indemnifications
issued by, such Person in the ordinary course of business),
(b) evidenced by a bond, note, debenture or similar
instrument (including a purchase money obligation) given in
connection with the acquisition of any businesses, properties or
assets of any kind or with services incurred in connection with
capital expenditures (other than any obligation to pay a
contingent purchase price as long as such obligation remains
contingent), or (c) in respect of Capitalized Lease
Obligations (to the extent of the capitalized amount thereof
determined in accordance with GAAP),
(2) any Indebtedness of others described in clause (1)
above that such Person has guaranteed to the extent of the
guarantee, and
(3) all Indebtedness of others described in clause (1)
above secured by a Security Interest on any property of such
Person, whether or not such Indebtedness is assumed by such
Person;
provided, that Indebtedness shall not include accounts
payable, liabilities to trade creditors of such Person or other
accrued expenses arising in the ordinary course of business or
obligations under Currency Agreements or Interest Protection
Agreements.
Interest Protection Agreement of any Person
means any interest rate swap agreement, interest rate collar
agreement, option or futures contract or other similar agreement
or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates with respect
to Indebtedness.
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Issue Date means the date on which the Notes
are originally issued under the Indenture.
Non-Recourse Indebtedness with respect to any
Person means Indebtedness of such Person for which (i) the
sole legal recourse for collection of principal and interest on
such Indebtedness is against the specific property identified in
the instruments evidencing or securing such Indebtedness (and
any accessions thereto and proceeds thereof) and such property
was acquired with the proceeds of such Indebtedness or such
Indebtedness was incurred within 180 days after the
acquisition of such property and (ii) no other assets of
such Person may be realized upon in collection of principal or
interest on such Indebtedness. Indebtedness which is otherwise
Non-Recourse Indebtedness will not lose its character as Non-
Recourse Indebtedness because there is recourse to the borrower,
any guarantor or any other Person for (i) environmental or
tax warranties and indemnities and such other representations,
warranties, covenants and indemnities as are customarily
required in such transactions, or (ii) indemnities for and
liabilities arising from fraud, misrepresentation,
misapplication or non-payment of rents, profits, insurance and
condemnation proceeds and other sums actually received by the
borrower from secured assets to be paid to the lender, waste and
mechanics liens.
Person means any individual, corporation,
partnership, limited liability company, joint venture,
incorporated or unincorporated association, joint stock company,
trust, unincorporated organization or government or any agency
or political subdivision thereof.
Publicly Traded Debt Securities means any
issue of debt securities of the Company or any of its
Subsidiaries originally issued in a public offering registered
with the Commission or in an offering pursuant to Rule 144A
under the Securities Act and of which issue at least
$50.0 million aggregate principal amount is outstanding.
Securities Act means the Securities Act of
1933, as amended.
Security Interest means any mortgage, pledge,
lien, or other security interest which secures the payment or
performance of an obligation.
Significant Subsidiary means any Subsidiary
of the Company which would constitute a significant
subsidiary as defined in
Rule 1-02
of
Regulation S-X
under the Securities Act and the Exchange Act (as such
definition is in effect on the Issue Date).
Subsidiary of any Person means any
corporation or other entity of which a majority of the Capital
Stock having ordinary voting power to elect a majority of the
Board of Directors or other persons performing similar functions
is at the time directly or indirectly owned or controlled by
such Person.
Successor has the meaning set forth in
Certain Covenants Limitations on
Mergers, Consolidations and Sale of Assets.
Trustee means the party named as such above
until a successor replaces such party in accordance with the
applicable provisions of the Indenture and thereafter means the
successor serving hereunder.
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DESCRIPTION
OF COMMON STOCK
Our authorized capital stock is 1,000,000,000 shares of
common stock, $.01 par value, and 30,000,000 shares of
preferred stock, $.10 par value. At April 30, 2009,
316,939,559 shares of common stock and no shares of
preferred stock were outstanding.
Holders of our common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of
stockholders. The vote of the holders of a majority of the stock
represented at a meeting at which a quorum is present is
generally required to take stockholder action, unless a greater
vote is required by law. The holders are not entitled to
cumulative voting in the election of directors. Directors are
elected by plurality vote. However, under our Corporate
Governance Principles, a nominee for director who receives a
greater number of withheld than for
votes in an uncontested election will tender his resignation for
the board of directors consideration and subsequent
approval or rejection. The holder or holders of a majority of
the outstanding shares of common stock will be able to elect our
entire board of directors. At our 2009 annual meeting of
stockholders held on January 29, 2009, the stockholders
voted to approve a stockholder proposal requesting that the
board of directors amend our governance documents to provide
that director nominees shall be elected by the affirmative vote
of the majority of votes cast at an annual meeting of
stockholders, with a plurality vote standard retained for
contested director elections. We intend to amend our bylaws to
implement the proposal prior to our next annual meeting.
Holders of common stock have no preemptive rights. They are
entitled to such dividends as may be declared by our board of
directors out of funds legally available for such purpose. The
common stock is not entitled to any sinking fund, redemption or
conversion provisions. On our liquidation, dissolution or
winding up, the holders of common stock are entitled to share
ratably in our net assets remaining after the payment of all
creditors and liquidation preferences of preferred stock, if
any. The outstanding shares of common stock are duly authorized,
validly issued, fully paid and nonassessable.
The transfer agent and registrar for the common stock is
American Stock Transfer & Trust Company, LLC,
which currently serves as trustee for our senior notes and
senior subordinated notes and will serve as trustee under the
indenture for the notes offered by this prospectus supplement.
The following provisions in our charter or bylaws may make a
takeover of our company more difficult:
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an article in our charter prohibiting stockholder action by
written consent;
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an article in our charter requiring the affirmative vote of the
holders of two-thirds of the outstanding shares of common stock
to remove a director;
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a bylaw limiting the persons who may call special meetings of
stockholders to our board of directors or a committee authorized
to call a meeting by the board or the bylaws; and
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bylaws providing time limitations for nominations for election
to the board of directors or for proposing matters which can be
acted upon at stockholders meetings.
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These provisions may delay stockholder actions with respect to
business combinations and the election of new members to our
board of directors. As such, the provisions could discourage
open market purchases of our common stock because a stockholder
who desires to participate in a business combination or elect a
new director may consider them disadvantageous. Additionally,
the issuance of preferred stock could delay or prevent a change
of control or other corporate action.
As a Delaware corporation, we are subject to Section 203 of
the Delaware General Corporation Law. In general,
Section 203 prevents an interested stockholder
from engaging in a business combination with us for
three years following the date that person became an interested
stockholder, unless:
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before that person became an interested stockholder, our board
of directors approved the transaction in which the interested
stockholder became an interested stockholder or approved the
business combination;
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upon completion of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of our voting stock
outstanding at the time the transaction commenced, excluding
stock held by persons who are both directors and officers of our
corporation or by certain employee stock plans; or
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on or following the date on which that person became an
interested stockholder, the business combination is approved by
our board of directors and authorized at a meeting of
stockholders by the affirmative vote of the holders of at least
662/3%
of our outstanding voting stock excluding shares held by the
interested stockholder.
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An interested stockholder is generally a person
owning 15% or more of our outstanding voting stock. A
business combination includes mergers, asset sales
and other transactions resulting in a financial benefit to the
interested stockholder.
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CERTAIN
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal
income tax consequences of the acquisition, ownership and
disposition of the notes and the shares of common stock into
which the notes may be converted. This summary is based on the
Internal Revenue Code of 1986, as amended (the
Code), applicable Treasury regulations and
administrative and judicial decisions as of the date hereof.
Legislative, judicial and administrative changes may occur,
possibly with retroactive effect, that could affect the accuracy
of the statements described herein. This summary is addressed
only to original purchasers of the notes for their original
offering price in this offering, deals only with notes or common
stock held as capital assets and does not purport to address all
United States federal income tax matters that may be relevant to
investors in special tax situations, such as insurance
companies, tax-exempt organizations, financial institutions,
dealers in securities or currencies, traders in securities that
elect to mark to market, holders of notes or common stock that
are held as a hedge or as part of a hedging, straddle or
conversion transaction, partnerships or other pass-through
entities or investors therein, persons subject to alternative
minimum tax, former citizens or residents of the United States,
or U.S. Holders (as defined below) whose functional
currency is not the United States dollar.
If a partnership (including an entity treated as a partnership
for United States federal income tax purposes) holds a note or
common stock, the treatment of a partner in the partnership will
generally depend upon the status of the partner and upon the
activities of the partnership. A holder of a note or common
stock that is a partnership, and the partners in such a
partnership, should consult their tax advisors about the United
States federal income tax consequences of holding and disposing
of the notes and common stock.
This discussion does not address any tax other than
U.S. federal income tax. Persons considering the purchase
of the notes should consult their own tax advisors concerning
the application of United States federal income tax laws, as
well as the laws of any state, local or foreign taxing
jurisdictions and the application of any United States federal
tax other than the income tax, including, but not limited to the
United States federal gift tax and estate tax, to their
particular situations.
We are taking the position and this discussion assumes that the
notes will not be treated as contingent payment debt instruments
under the applicable Treasury Regulations. We are taking this
position even though we may be required to pay additional
interest if we fail to timely file certain required documents
with the SEC, because we believe the likelihood that we will be
obligated to pay any such additional interest is remote, and
that any such payments would be considered incidental. Our
position is not binding on the Internal Revenue Service
(IRS). If the IRS were to successfully challenge our
position, a holder of the notes subject to U.S. federal
income tax may be required to accrue interest income based upon
a comparable yield, regardless of the holders
method of accounting. The comparable yield is the
yield at which we would issue a fixed rate non-convertible debt
instrument with no contingent payments, but with terms and
conditions similar to those of the notes, and such yield would
be higher than the stated coupon on the notes. In addition, any
gain on the sale, exchange, retirement or other taxable
disposition of the notes (including any gain realized on the
conversion of a note) would be recharacterized as ordinary
income.
Tax
Consequences to U.S. Holders
As used herein, the term U.S. Holder means a
beneficial owner of a note, or shares of common stock received
upon conversion thereof, that is, for U.S. federal income
tax purposes, (i) a citizen or individual resident of the
United States, (ii) a corporation (including an entity
treated as a corporation for United States federal income tax
purposes) created or organized in the United States, any state
thereof or the District of Columbia, (iii) an estate whose
income is subject to United States federal income tax regardless
of its source, or (iv) a trust if a United States court can
exercise primary supervision over the trusts
administration and one or more United States persons
(as defined under the Code) are authorized to control all
substantial decisions of the trust (and certain trusts that have
made a valid election to be treated as a United States person).
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Payments
of Interest
Interest paid on a note will be taxable to a U.S. Holder as
ordinary interest income at the time it accrues or is received
in accordance with the U.S. Holders method of
accounting for federal income tax purposes.
Sale,
Exchange or Retirement of the Notes (Other Than a
Conversion)
Except as described below under Conversion of
the Notes into Common Stock and
Conversion of the Notes into Common Stock and
Cash, upon the sale, exchange or retirement of a note
(including any purchase of notes by us in the case of a
fundamental change), a U.S. Holder will recognize taxable
gain or loss equal to the difference between the amount realized
on the sale, exchange or retirement and the
U.S. Holders adjusted tax basis in the note. For
these purposes, the amount realized does not include any amount
attributable to accrued interest. Amounts attributable to
accrued interest are treated as interest as described under
Payments of Interest above. A
U.S. Holders adjusted tax basis in a note will
generally equal the amount that the U.S. Holder paid for
the note.
Gain or loss realized on the sale, exchange or retirement of a
note will generally be capital gain or loss and will be
long-term capital gain or loss if at the time of sale, exchange
or retirement the note has been held for more than one year.
Long-term capital gains recognized by non-corporate
U.S. Holders currently are taxed at a maximum
15 percent federal rate (effective for tax years through
2010, after which the maximum rate is scheduled to increase to
20 percent). The deductibility of capital losses may be
subject to limitations.
Conversion
of the Notes into Common Stock
Except as discussed below, a U.S. Holder generally will not
recognize gain or loss upon the conversion of a note solely into
shares of our common stock. The fair market value of any common
stock received with respect to accrued interest will be taxed as
such, as discussed under Payments of
Interest above.
A U.S. Holders tax basis in the common stock received
upon a conversion of a note (other than common stock received
with respect to accrued interest) will equal the tax basis of
the note that was converted (excluding the portion of such tax
basis that is allocable to any cash in lieu of a fractional
share, as described in the paragraph below). A
U.S. Holders tax basis in the common stock received
with respect to accrued interest will equal the fair market
value of the stock received.
Receipt of cash in lieu of a fractional common share will
generally be treated as if such fractional common share were
issued and then sold back to us immediately thereafter, and a
U.S. Holder will recognize capital gain or loss upon such
sale in an amount equal to the difference between the amount of
cash received and the amount of adjusted tax basis allocable to
the fractional common share. A U.S. Holders tax basis
in a fractional share will be determined by allocating the
holders tax basis in the notes being converted between the
common stock received upon conversion and the fractional share,
in accordance with their respective fair market values.
The U.S. Holders holding period for the common stock
received will include the holders holding period for the
note converted, except that the holding period of any common
stock received with respect to accrued interest will commence on
the day after the date of receipt.
Conversion
of the Notes into Cash
If a U.S. Holder converts a note and receives from us
solely cash, the holder will recognize gain or loss in the same
manner as if such holder had disposed of the note in a taxable
disposition as described under Sale, Exchange
or Retirement of the Notes (Other Than a Conversion) above.
Conversion
of the Notes into Common Stock and Cash
If a U.S. Holder converts a note and receives from us a
combination of common stock and cash, we intend to take the
position (and the following discussion assumes except where
otherwise expressly noted) that
S-49
the conversion will be treated as a recapitalization for
U.S. federal income tax purposes, although the tax
treatment is uncertain.
Assuming such treatment is correct, a U.S. Holder will
recognize capital gain, but not loss, equal to the excess of the
sum of the fair market value of the common stock (including any
fractional share for which cash is received) and cash received
(other than amounts attributable to accrued interest, which will
be taxed as ordinary interest income to the extent not
previously so taxed, and any cash received in lieu of a
fractional share) over the holders adjusted tax basis in
the note, but in no event will the capital gain recognized
exceed the amount of cash received (excluding cash attributable
to accrued interest or received in lieu of a fractional share).
In such circumstances, a U.S. Holders tax basis in
the common stock received upon a conversion of a note (other
than common stock received with respect to accrued interest, but
including any basis allocable to a fractional share) will equal
the tax basis of the note that was converted, reduced by the
amount of cash received (excluding cash received in lieu of a
fractional share and cash attributable to accrued interest), and
increased by the amount of gain, if any, recognized as described
in the preceding paragraph. A U.S. Holders tax basis
in the common stock received with respect to accrued interest
will equal the fair market value of the stock received.
Receipt of cash in lieu of a fractional common share will
generally be treated as if such fractional common share were
issued and then sold back to us immediately thereafter, and a
U.S. Holder will recognize capital gain or loss upon such
sale in an amount equal to the difference between the amount of
cash received and the amount of adjusted tax basis allocable to
the fractional common share. A U.S. Holders tax basis
in a fractional share will be determined by allocating the
portion of the holders tax basis in the note being
converted that is allocated to common stock in accordance with
the preceding paragraph (including any basis allocable to a
fractional share) between the common stock received upon
conversion and the fractional share, in accordance with their
respective fair market values.
Capital gain recognized by U.S. Holders upon conversion
will be long-term capital gain if at the time of conversion the
notes have been held for more than one year. Long-term capital
gains recognized by non-corporate U.S. Holders currently
are taxed at a maximum 15 percent federal rate (effective
for tax years through 2010, after which the maximum rate is
scheduled to increase to 20 percent).
A U.S. Holders holding period for common stock
received upon conversion will include the period during which
such holder held the notes, except that the holding period of
any common stock received with respect to accrued interest will
commence on the day after the date of receipt.
The conversion of a note and consequent receipt of both common
stock and cash might alternatively be characterized as a sale of
a portion of the note for the cash received which would be
subjected to tax in the manner described under
Sale, Exchange or Retirement of the Notes
(Other Than a Conversion) above and as a conversion of a
portion of the note into common stock, which would be treated in
the manner described under Conversion of the
Notes Into Common Stock above. Under this alternative
characterization, a U.S. holder would not recognize gain or
loss with respect to our common stock received (other than stock
attributable to accrued interest and any fractional share deemed
sold for cash), and the U.S. Holders holding period
for such stock would include the period during which such holder
held the notes. In such case, the holders basis in the
note being converted would be allocated pro rata between the
common stock (other than any stock attributable to accrued
interest, but including any fractional share for which cash is
received) and cash received, in accordance with their fair
market values.
U.S. Holders should consult their tax advisors regarding
the tax treatment of the receipt of cash and common stock for
notes upon conversion.
Possible
Effect of a Consolidation or Merger
In certain situations, we may consolidate with or merge into
another entity (as described above under Description of
Notes Conversion Rights). Depending on the
circumstances, a change in the obligor of the notes as the
result of a consolidation or merger could result in a deemed
taxable exchange to a U.S. Holder
S-50
and the modified note could be treated as newly issued at that
time, potentially resulting in the recognition of taxable gain
or loss.
Constructive
Dividends
The conversion rate of the notes will be adjusted in certain
circumstances. See the discussion under the heading
Description of Notes Conversion
Rights Conversion Rate Adjustments and
Description of Notes Conversion
Rights Adjustment to Shares Delivered upon
Conversion upon Certain Corporate Transactions.
Adjustments (or failures to make adjustments to other classes of
outstanding convertible instruments, options or warrants) that
have the effect of increasing a U.S. Holders
proportionate interest in our assets or earnings may in some
circumstances result in a deemed distribution to a
U.S. Holder for U.S. federal income tax purposes.
Adjustments to the conversion rate made pursuant to a bona fide
reasonable adjustment formula that has the effect of preventing
the dilution of the interest of the holders of the notes,
however, will generally not be considered to result in a deemed
distribution to a U.S. Holder. Certain of the possible
conversion rate adjustments provided in the notes (including,
without limitation, adjustments in respect of taxable dividends
to holders of our common stock) will not qualify as being
pursuant to a bona fide reasonable adjustment formula. If such
adjustments are made, a U.S. Holder will be deemed to have
received a distribution even though the U.S. Holder has not
received any cash or property as a result of such adjustments.
Any deemed distributions will be taxable as a dividend, return
of capital, or capital gain in accordance with the earnings and
profits rules under the Code. It is not clear under existing law
whether a constructive dividend deemed paid to a non-corporate
U.S. Holder would be eligible for the preferential rates of
U.S. federal income tax applicable in respect of certain
dividends received. It is also unclear under existing law
whether corporate holders would be entitled to claim the
dividends received deduction with respect to any such
constructive dividends. Because a constructive dividend deemed
received by a U.S. Holder would not give rise to any cash
from which any applicable withholding tax could be satisfied, if
we pay backup withholding taxes on behalf of a U.S. Holder
(because such U.S. Holder failed to establish an exemption
from backup withholding), we may, at our option and pursuant to
certain provisions of the indenture, set-off any such payment
against payments of cash and common stock payable on the notes.
Taxation
of Distributions Paid On Common Stock
To the extent paid out of current or accumulated earnings and
profits, distributions paid on common shares, other than certain
pro rata distributions of common shares, will be treated as a
taxable dividend when received. If a distribution exceeds our
current and accumulated earnings and profits, the excess will be
first treated as a tax-free return of the
U.S. Holders investment, up to the
U.S. Holders tax basis in the common stock
(determined on a
share-by-share
basis). Any remaining excess will be treated as a capital gain.
Dividends received by non-corporate U.S. Holders in tax
years beginning prior to 2011 will be eligible to be taxed at
reduced rates if the U.S. Holders meet certain holding
period and other applicable requirements. Dividends received by
corporate U.S. Holders will be eligible for the
dividends-received deduction if the U.S. Holders meet
certain holding period and other applicable requirements.
Sale
or Other Disposition of Common Stock
For U.S. federal income tax purposes, gain or loss a
U.S. Holder realizes on the sale or other disposition of
common stock generally will be capital gain or loss, and
generally will be long-term capital gain or loss if the holding
period for the common stock is more than one year. The amount of
the U.S. Holders gain or loss will be equal to the
difference between the amount realized on the disposition and
the U.S. Holders adjusted tax basis in the common
stock disposed of. Long-term capital gains recognized by
non-corporate U.S. Holders currently are taxed at a maximum
15 percent federal rate (effective for tax years through
2010, after which the maximum rate is scheduled to increase to
20 percent). The deductibility of capital losses may be
subject to limitations.
S-51
Backup
Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with payments on the notes, dividends on the common stock and
the proceeds from a sale or other disposition of the notes or
the common stock. A U.S. Holder will be subject to
U.S. backup withholding on these payments if the
U.S. Holder fails to provide its taxpayer identification
number to the paying agent and comply with certain certification
procedures or otherwise establish an exemption from backup
withholding. The amount of any backup withholding from a payment
to a U.S. Holder will be allowed as a credit against the
U.S. Holders U.S. federal income tax liability
and may entitle the U.S. Holder to a refund, provided that
the required information is timely furnished to the IRS.
Tax
Consequences to
Non-U.S.
Holders
A
Non-U.S. Holder
is a beneficial owner of a note, or common stock received upon
conversion thereof, that is an individual, corporation, estate
or trust and is not a U.S. Holder.
Payments
on the Notes
Subject to the discussion below concerning backup withholding,
payments of interest on the notes that is not effectively
connected with the
Non-U.S. Holders
conduct of a trade or business in the United States to any
Non-U.S. Holder
will not be subject to U.S. federal withholding tax,
provided that,
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the
Non-U.S. Holder
does not own, actually or constructively, 10 percent or
more of the total combined voting power of all classes of our
stock entitled to vote and is not a controlled foreign
corporation related, directly or indirectly, to us through stock
ownership;
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the
Non-U.S. Holder
is not a bank receiving certain types of interest; and
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the certification requirement described below has been fulfilled
with respect to the beneficial owner.
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Interest that does not meet the foregoing requirements will be
subject to a 30% U.S. federal withholding tax unless
(i) such withholding tax is eliminated or reduced by an
applicable income tax treaty or (ii) such interest is
effectively connected with a U.S. trade or business of the
Non-U.S. Holder.
Interest on a note that is not effectively connected income will
not be exempt from withholding tax unless the beneficial owner
of the note certifies on a properly executed IRS
Form W-8BEN,
under penalties of perjury, that it is not a United States
person, and, if required, that it is eligible for the benefits
of an applicable income tax treaty.
If a
Non-U.S. Holder
of a note is engaged in a trade or business in the United
States, and if interest, on the note is effectively connected
with the conduct of this trade or business, the
Non-U.S. Holder,
although exempt from the withholding tax discussed in the
preceding paragraphs (provided that the
Non-U.S. Holder
provides us a properly executed IRS
Form W-8ECI
or W-8BEN),
will generally be taxed in the same manner as a U.S. Holder
(see Tax Consequences to U.S. Holders above),
subject to an applicable income tax treaty providing otherwise.
In addition, a corporate
Non-U.S. Holder
may be subject to a branch profits tax at a rate of
30 percent (or a lower treaty rate) with respect to its
effectively connected earnings and profits attributable to the
interest.
Sale,
Exchange or Other Disposition of Notes or Shares of Common
Stock
A
Non-U.S. Holder
generally will not be subject to U.S. federal income tax on
any gain recognized on a sale or other disposition of notes or
common stock, unless:
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the gain is effectively connected with a trade or business of
the
Non-U.S. Holder
in the United States,
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the
Non-U.S. Holder
is an individual who is present in the U.S. for at least
183 days in the taxable year of the disposition and certain
other requirements are met, or
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S-52
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we are or have been a U.S. real property holding
corporation (a USRPHC), as defined in the Code, at
any time within the five-year period preceding the disposition
or the
Non-U.S. Holders
holding period, whichever period is shorter, and either
(a) the notes or common stock has ceased to be traded on an
established securities market prior to the beginning of the
calendar year in which the sale or disposition occurs or
(b) the
Non-U.S. Holder
beneficially owns, or is deemed to own, more than 5 percent
of our common stock or more than 5 percent of the notes.
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If a
Non-U.S. Holder
is described in the first bullet point above, the
Non-U.S. Holder
will generally be taxed in the same manner as a U.S. Holder
(see Tax Consequences to U.S. Holders above),
subject to an applicable income tax treaty providing otherwise.
In addition, a corporate
Non-U.S. Holder
may be subject to a branch profits tax at a rate of
30 percent (or a lower treaty rate) with respect to its
effectively connected earnings and profits attributable to the
gain. If a
Non-U.S. Holder
is described in the second bullet point, the
Non-U.S. Holder
will be subject to a 30% flat rate tax on the gain (offset by
certain U.S. source capital losses) unless an applicable
income tax treaty provides otherwise.
Regarding the third bullet point, we believe we may currently
be, and we anticipate we may continue to be, a USRPHC, and in
any event we can give no assurance that in the future we will
not be a USRPHC. See Foreign Investment in Real Property
Tax Act, below.
Dividends
Dividends (including deemed dividends on the notes described
above under Tax Consequences to
U.S. Holders Constructive Dividends) paid
to a
Non-U.S. Holder
of common stock generally will be subject to withholding tax at
a 30 percent rate or a reduced rate specified by an
applicable income tax treaty. In order to obtain a reduced rate
of withholding, a
Non-U.S. Holder
will be required to provide a properly executed IRS
Form W-8BEN
certifying its entitlement to benefits under a treaty. In the
case of any constructive dividend, it is possible that the
U.S. federal withholding tax on the constructive dividend
would be withheld from interest, shares of common stock or sales
proceeds subsequently paid or credited to a
Non-U.S. Holder.
The withholding tax does not apply to dividends paid to a
Non-U.S. Holder
who provides a properly executed
Form W-8ECI,
certifying that the dividends are effectively connected with the
Non-U.S. Holders
conduct of a trade or business within the United States.
Instead, the effectively connected dividends will be subject to
regular U.S. income tax as if the
Non-U.S. Holder
were a U.S. Holder. A
non-U.S. corporation
receiving effectively connected dividends may also be subject to
an additional branch profits tax imposed at a rate
of 30 percent (or a lower treaty rate) on such
Non-U.S. Holders
earnings and profits attributable to such dividends.
Foreign
Investment in Real Property Tax Act
Under U.S. federal income tax laws enacted as part of the
Foreign Investment in Real Property Tax Act
(FIRPTA), any person that acquires a United
States real property interest (USRPI) (as
described below) from a
Non-U.S. Holder,
or that makes a distribution to a
Non-U.S. Holder
with respect to a USRPI, generally must deduct a
U.S. federal withholding tax equal to 10% of the gross
proceeds paid to the
Non-U.S. Holder
(or possibly, in the case of a distribution, equal to 30% if
such person follows certain procedures under U.S. Treasury
Regulations under section 1441 of the Code) (referred to as
FIRPTA withholding). In addition, a
Non-U.S. Holder
that disposes of a USRPI, or that receives a distribution with
respect to a USRPI, may be required to pay additional
U.S. federal income tax with respect to such disposition or
distribution to the extent that any FIRPTA withholding is not
sufficient to otherwise fully satisfy such
Non-U.S. Holders
tax liabilities (referred to as the FIRPTA tax). In
general, a
Non-U.S. Holder
that is subject to FIRPTA withholding or the FIRPTA tax will be
required to timely file a U.S. federal income tax return
reporting any required amounts as income effectively connected
with the conduct of a trade or business in the U.S. and pay
any FIRPTA tax due upon the filing of such return (or, depending
upon the circumstances, earlier through estimated payments).
For purposes of FIRPTA withholding and the FIRPTA tax, a USRPI
generally includes any interest (other than an interest solely
as a creditor) in a U.S. corporation, unless it is
established under specified procedures
S-53
that the U.S. corporation was not a USRPHC at any time
during the shorter of either (i) the
5-year
period ending on the date of the relevant disposition or
distribution or (ii) the period during which the applicable
Non-U.S. Holder
held an interest in the U.S. corporation. In general, a
U.S. corporation is classified as a USRPHC if the fair
market value of its interests in U.S. real property equals
or exceeds 50% of the sum of the fair market value of its
worldwide real property interests plus any other assets used or
held for use in its trade or business. However, even if a
U.S. corporation is generally classified as a USRPHC, an
exemption to FIRPTA withholding and the FIRPTA tax may be
available pursuant to U.S. Treasury Regulations issued
under section 897 and section 1445 of the Code. In
particular, although existing law is not entirely clear, under
U.S. Treasury Regulation
sections 1.897-1(c)(2)(iii)(A)
and 1.897-9T(b) an interest held by a
Non-U.S. Holder
generally will not be treated as a USRPI (and therefore an
exemption to FIRPTA withholding and the FIRPTA tax generally
will be available) if (i) a class of the
U.S. corporations convertible notes or stock is
regularly traded on an established securities market and
(ii) such
non-U.S. Holder
has never directly, indirectly, or constructively held more than
5% of the total fair market value of that class of notes or
stock (such a
Non-U.S. Holder
is referred to as a non-significant
Non-U.S. Holder).
For purposes of determining whether a
Non-U.S. Holder
is a non-significant
Non-U.S. Holder,
a number of special rules apply, including certain ownership
attribution rules.
Based on the current and potential future composition of our
assets, we believe that we may currently be a USRPHC and, even
if we are not currently a USRPHC, we can give no assurance that
we may not become a USRPHC in the future or that we may not have
been a USRPHC in the past. However, based on our expectation
that both the notes and our common stock will be regularly
traded on an established securities market by the end of 2009
and will remain so in the future, we intend to take the position
that (i) neither the notes nor our common stock will
constitute USRPIs to a non-significant
Non-U.S. Holder
and (ii) no FIRPTA withholding will be required (even if a
Non-U.S. Holder
is not a non-significant
Non-U.S. Holder).
However, it is possible the IRS could disagree with our
position, in which case we may be liable for our failure to
withhold amounts in respect of FIRPTA withholding and
Non-U.S. Holders
may be liable for FIRPTA tax, including interest and penalties
if they fail to timely file a U.S. federal income tax
return and pay such tax when due. Furthermore, purchasers may
generally be required to withhold amounts in respect of FIRPTA
withholding upon their acquisition of a note or common stock
from a
Non-U.S. Holder,
and may not agree with the position that we intend to take
regarding the applicability of the potential exceptions to
FIRPTA described above. If a
Non-U.S. Holder
does not qualify as a non-significant
Non-U.S. Holder
by providing timely certification in a manner acceptable to us
using forms effectively provided by us, or if we otherwise
determine in our sole discretion that a change in applicable
facts and circumstances or change in applicable law or guidance
or interpretation thereof has occurred, we generally intend to
withhold 10% of certain amounts payable to
Non-U.S. Holders
in respect of the notes or common stock (or possibly 30% with
respect to distributions pursuant to procedures under
section 1441 of the Code) in order to satisfy our FIRPTA
withholding obligations (including, without limitation, upon a
conversion of the notes).
Non-U.S. Holders
are urged to consult their own tax advisors as to whether the
sale, exchange, repurchase, redemption, or conversion of the
notes or possibly a sale, exchange, repurchase, or redemption of
the common stock, or whether any actual or deemed distributions,
may be subject to U.S. federal income tax under FIRPTA,
regardless of whether we or any other purchaser withholds in
order to satisfy FIRPTA withholding obligations. In addition,
Non-U.S. Holders
are urged to consult their own tax advisors regarding the tax
consequences of acquiring, owning and disposing of a note or
common stock, including any potential obligation of a purchaser
to withhold certain amounts under FIRPTA upon the acquisition of
a note or common stock. If an applicable exemption is available
(by reason of a
Non-U.S. Holder
qualifying as a non-significant
Non-U.S. Holder
or otherwise), any amounts withheld by us or other purchasers
generally will be refunded or credited against a
Non-U.S. Holders
U.S. federal income tax liability provided the required
forms and information are timely furnished to the IRS.
Backup
Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with payments on the notes and on the common stock. Unless the
Non-U.S. Holder
complies with certification procedures to establish that it is
not a
S-54
United States person, information returns may be filed with the
IRS in connection with the proceeds from a sale or other
disposition (including a retirement or redemption) of the notes
or common stock and the
Non-U.S. Holder
may be subject to United States backup withholding on payments
on the notes and on the common stock and on the proceeds from a
sale or other disposition (including a retirement or redemption)
of the notes or common stock. The certification procedures
required to claim the exemption from withholding tax on interest
described above will satisfy the certification requirements
necessary to avoid the backup withholding tax as well. The
amount of any backup withholding from a payment to a
Non-U.S. Holder
will be allowed as a credit against the
Non-U.S. Holders
U.S. federal income tax liability and may entitle the
Non-U.S. Holder
to a refund, provided that the required information is timely
furnished to the IRS.
S-55
UNDERWRITING
Citigroup Global Markets Inc. is acting as book running manager
of the offering and as representative of the underwriters named
below. Subject to the terms and conditions stated in the
underwriting agreement dated the date of this prospectus
supplement, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to that underwriter, the
aggregate principal amount of notes set forth opposite the
underwriters name:
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Underwriter
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Principal Amount of Notes
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Citigroup Global Markets Inc.
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$
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J.P. Morgan Securities Inc.
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UBS Securities LLC
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Wachovia Capital Markets, LLC
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Total
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$
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400,000,000
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The underwriters are committed to purchase all of the notes
offered by us (other than those covered by the over-allotment
option described below) if they purchase any notes. The
underwriting agreement also provides that if an underwriter
defaults, the purchase commitments of non-defaulting
underwriters may also be increased or the offering may be
terminated.
The underwriters propose to offer the notes directly to the
public at the initial public offering price set forth on the
cover page of this prospectus supplement and to certain dealers
at a discount from the initial public offering price of up
to % of the principal amount of the
notes. After the initial offering of the notes to the public,
the offering price and other selling terms may be changed by the
underwriters. Sales of notes made outside of the United States
may be made by affiliates of the underwriters.
The underwriters have an option to buy up to an additional
$60,000,000 aggregate principal amount of notes at the initial
offering price less the underwriters discount. Notes
issued pursuant to the exercise, if any, of this option, must be
issued not later than June 10, 2009. The underwriters may
exercise the option solely to cover over-allotments. If any
notes are purchased with this over-allotment option, the
underwriters will purchase notes in approximately the same
proportion as shown in the table above. If any additional notes
are purchased, the underwriters will offer the additional notes
on the same terms as those on which the notes are being offered.
The following table shows the per note and total public offering
price, underwriting discounts and commissions, and proceeds
before expenses to us of the offering. These amounts are shown
assuming both no exercise and full exercise of the
underwriters over-allotment option.
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Total
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Per Note
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No Exercise
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Full Exercise
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Public offering price(1)
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%
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$
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$
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Underwriting discounts and commissions
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%
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$
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$
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Proceeds, before expenses(1)
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%
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$
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$
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(1) |
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Plus accrued interest from May , 2009 if
settlement occurs after that date. |
The estimated offering expenses payable by us, exclusive of
underwriting discounts and commissions, are approximately
$1 million.
We have agreed with the underwriters not to sell, contract to
sell or otherwise dispose of any shares of common stock (other
than any shares issued upon conversion of the notes) or any
securities convertible into or exercisable or exchangeable for
common stock (other than the notes), or grant any options,
warrants or other rights to purchase common stock, for a period
of 60 days after the date of this prospectus supplement,
without the prior written consent of Citigroup Global Markets
Inc.; provided, however, that we are not prohibited from
(i) the grant of options pursuant to stock option or other
employee benefit plans, (ii) the issuance of common stock
upon exercise of options or other rights to acquire common stock
granted under stock option or other employee benefit plans, or
(iii) contracts for and the sale or issuance of common
stock or options, warrants or
S-56
other rights to purchase common stock in connection with the
acquisition of a business or property or assets by us or any of
our subsidiaries or in connection with any business combination.
Our directors and executive officers have entered into lock up
agreements with the underwriters pursuant to which our directors
and executive officers, for a period of 60 days after the
date of this prospectus supplement, may not, without the prior
written consent of Citigroup Global Markets Inc., (1) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend or otherwise transfer
or dispose of, directly or indirectly, any shares of our common
stock or any securities convertible into or exercisable or
exchangeable for common stock, (2) enter into any swap or
other arrangement that transfers, in whole or in part, any of
the economic consequences of ownership of the common stock,
whether any such transaction described in clause (1) or
(2) above is to be settled by delivery of common stock or
such other securities, in cash or otherwise, (3) make any
demand for or exercise any right with respect to the
registration of any shares of common stock or any security
convertible into or exercisable or exchangeable for common stock
or (4) publicly disclose the intention to take any action
described in clauses (1), (2) or (3) above.
Notwithstanding the above, the underwriters have agreed in the
underwriting agreement that the
lock-up
agreement will not apply with respect to (i) sales of any
shares of common stock issuable upon exercise of any options to
purchase common stock that will expire during the
60-day lock
up period; (ii) sales of common stock issued upon exercise
of outstanding options to purchase common stock in amounts not
to exceed the cost of covering the exercise price of such
options and any taxes associated with such exercise;
(iii) transfers to us of common stock in connection with
the exercise of outstanding options to purchase common stock
solely to pay the option exercise price or any taxes required to
be withheld by us; and (iv) transfers of shares of common
stock or any security convertible into common stock as a bona
fide gift or by will or intestacy, or to a trust, partnership or
other entity for the benefit of the director or officer or the
immediate family of the director or officer; provided
that any donee, distributee or transferee thereof shall
deliver a
lock-up
agreement in substantially the same form as the letter agreement
delivered by the director or officer and that the transfer shall
not involve any disposition for value; provided further,
that notwithstanding anything to the contrary in the lock up
agreement, the foregoing shall not restrict the sale of up to
100,000 shares of common stock by our Chairman of the Board
and up to 50,000 shares of common stock by each other
director or executive officer.
We have applied for listing of the notes, the related guarantees
and the shares of stock issuable upon conversion of the notes on
the New York Stock Exchange. The notes are a new issue of
securities and there is currently no trading market for the
notes. Each underwriter has advised us that it intends to make a
market in the notes, but no underwriter is obligated to do so.
Any underwriter may discontinue any market making in the notes
at any time in its sole discretion without notice. Accordingly,
we cannot assure you that a liquid trading market will develop
for the notes, that you will be able to sell your notes at a
particular time or that the prices you receive when you sell
will be favorable.
In connection with this offering, the underwriters may engage in
stabilizing transactions, which involves making bids for,
purchasing and selling notes in the open market for the purpose
of preventing or retarding a decline in the market price of the
notes while this offering is in progress. These stabilizing
transactions may include making short sales of the notes, which
involves the sale by the underwriters of a greater number of
notes than they are required to purchase in this offering, and
purchasing notes on the open market to cover positions created
by short sales. Short sales may be covered shorts,
which are short positions in an amount not greater than the
underwriters over allotment option referred to above, or
may be naked shorts, which are short positions in
excess of that amount. The underwriters may close out any
covered short position either by exercising their over allotment
option, in whole or in part, or by purchasing notes in the open
market. In making this determination, the underwriters will
consider, among other things, the price of notes available for
purchase in the open market compared to the price at which the
underwriters may purchase notes through the over allotment
option. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the notes in the open market that could
adversely affect investors who purchase in this offering. To the
extent that the underwriters create a naked short position, they
will purchase notes in the open market to cover the position. As
an additional means of facilitating this
S-57
offering, the underwriters may bid for, and purchase, shares of
common stock in the open market to stabilize the price of the
common stock. These activities may raise or maintain the market
price of the common stock above independent market levels or
prevent or retard a decline in the market price of the common
stock. The underwriters are not required to engage in these
activities and may end any of these activities at any time.
The underwriters have advised us that, pursuant to
Regulation M promulgated under the Securities Act, they may
also engage in other activities that stabilize, maintain or
otherwise affect the price of the notes, including the
imposition of penalty bids. This means that if the
representative of the underwriters purchase notes in the open
market in stabilizing transactions or to cover short sales, the
representative can require the underwriters that sold those
notes as part of this offering to repay the underwriting
discount received by them.
These activities may have the effect of raising or maintaining
the market price of the notes or preventing or retarding a
decline in the market price of the notes, and, as a result, the
price of the notes may be higher than the price that otherwise
might exist in the open market. If the underwriters commence
these activities, they may discontinue them at any time. The
underwriters may carry out these transactions in the over the
counter market or otherwise.
A prospectus supplement and accompanying prospectus in
electronic format may be made available on the web sites
maintained by one or more underwriters, or selling group
members, if any, participating in the offering. The underwriters
may agree to allocate an aggregate principal amount of notes to
underwriters and selling group members for sale to their online
brokerage account holders. Internet distributions will be
allocated by the representative to underwriters and selling
group members that may make Internet distributions on the same
basis as other allocations.
Certain of the underwriters and their affiliates have provided
in the past to us and our affiliates and may provide from time
to time in the future certain commercial banking (including
letter of credit arrangements), financial advisory, investment
banking and other services for us and such affiliates in the
ordinary course of their business, for which they have received
and may continue to receive customary fees and commissions. In
addition, from time to time, certain of the underwriters and
their affiliates may effect transactions for their own account
or the account of customers, and hold on behalf of themselves or
their customers, long or short positions in our debt or equity
securities or loans, and may do so in the future.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments the underwriters may be
required to make because of any of those liabilities.
We expect that delivery of the notes will be made against
payment therefor on or about the closing date specified on the
cover page of this prospectus supplement, which will be the
fifth business day following the date of pricing the notes (such
settlement cycle being referred to as T+5). Under
Rule 15c6-1
of the SEC under the Exchange Act, trades in the secondary
market generally are required to settle in three business days
unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade the notes on the date
of pricing or the next two succeeding business days will be
required, by virtue of the fact that the notes initially will
settle in T+5, to specify an alternate settlement cycle at the
time of any such trade to prevent a failed settlement.
Purchasers of the notes who wish to trade the notes on the date
of pricing or the next two succeeding business days should
consult their own advisors.
Other than in the United States, no action has been taken by us
or the underwriters that would permit a public offering of the
securities offered by this prospectus in any jurisdiction where
action for that purpose is required. The securities offered by
this prospectus may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering
material or advertisements in connection with the offer and sale
of any such securities be distributed or published in any
jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of that
jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about and to observe any
restrictions relating to the offering and the distribution of
this prospectus. This prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities offered
by this prospectus in any jurisdiction in which such an offer or
a solicitation is unlawful.
S-58
Notice to
Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State), from and including the date
on which the European Union Prospectus Directive (the EU
Prospectus Directive) is implemented in that Relevant
Member State (the Relevant Implementation Date) an
offer of securities described in this prospectus may not be made
to the public in that Relevant Member State prior to the
publication of a prospectus in relation to the notes which has
been approved by the competent authority in that Relevant Member
State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant
Member State, all in accordance with the EU Prospectus
Directive, except that it may, with effect from and including
the Relevant Implementation Date, make an offer of notes to the
public in that Relevant Member State at any time:
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to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
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to fewer than 100 natural or legal persons (other than qualified
investors as defined in the EU Prospectus Directive) subject to
obtaining the prior consent of the book-running manger for any
such offer; or
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in any other circumstances which do not require the publication
by the Issuer of a prospectus pursuant to Article 3 of the
Prospectus Directive.
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For the purposes of this provision, the expression an
offer of securities to the public in relation to any
securities in any Relevant Member State means the communication
in any form and by any means of sufficient information on the
terms of the offer and the securities to be offered so as to
enable an investor to decide to purchase or subscribe for the
securities, as the same may be varied in that Member State by
any measure implementing the EU Prospectus Directive in that
Member State and the expression EU Prospectus Directive means
Directive 2003/71/EC and includes any relevant implementing
measure in each Relevant Member State.
Notice to
Prospective Investors in the United Kingdom
This document is only being distributed to and is only directed
at (i) persons who are outside the United Kingdom or
(ii) to investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the Order) or
(iii) high net worth entities, and other persons to whom it
may lawfully be communicated, falling with Article 49(2)(a)
to (d) of the Order (all such persons together being
referred to as relevant persons). The securities are
only available to, and any invitation, offer or agreement to
subscribe, purchase or otherwise acquire such securities will be
engaged in only with, relevant persons. Any person who is not a
relevant person should not act or rely on this document or any
of its contents.
Notice to
Prospective Investors in France
Neither this prospectus supplement nor any other offering
material relating to the notes de-scribed in this prospectus
supplement has been submitted to the clearance procedures of the
Autorité des Marchés Financiers or of the
competent authority of another member state of the European
Economic Area and notified to the Autorité des
Marchés Financiers. The notes have not been offered or
sold and will not be offered or sold, directly or indirectly, to
the public in France. Neither this prospectus supplement nor any
other offering material relating to the notes has been or will
be:
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released, issued, distributed or caused to be released, issued
or distributed to the public in France; or
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used in connection with any offer for subscription or sale of
the notes to the public in France.
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S-59
Such offers, sales and distributions will be made in France only:
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to qualified investors (investisseurs qualifiés)
and/or to a
restricted circle of investors (cercle restreint
dinvestisseurs), in each case investing for their own
account, all as defined in, and in accordance with
articles L.411-2,
D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the
French Code monétaire et financier;
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to investment services providers authorized to engage in
portfolio management on behalf of third parties; or
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in a transaction that, in accordance with article
L.411-2-II-1°-or-2°-or 3° of the French Code
monétaire et financier and
article 211-2
of the General Regulations (Règlement
Général) of the Autorité des Marchés
Financiers, does not constitute a public offer (appel
public à lépargne).
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The notes may be resold directly or indirectly, only in
compliance with
articles L.411-1,
L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French
Code monétaire et financier.
Notice to
Prospective Investors in Hong Kong
The notes may not be offered or sold in Hong Kong by means of
any document other than (i) in circumstances which do not
constitute an offer to the public within the meaning of the
Companies Ordinance (Cap. 32, Laws of Hong Kong), or
(ii) to professional investors within the
meaning of the Securities and Futures Ordinance (Cap. 571, Laws
of Hong Kong) and any rules made thereunder, or (iii) in
other circumstances which do not result in the document being a
prospectus within the meaning of the Companies
Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement,
invitation or document relating to the notes may be issued or
may be in the possession of any person for the purpose of issue
(in each case whether in Hong Kong or elsewhere), which is
directed at, or the contents of which are likely to be accessed
or read by, the public in Hong Kong (except if permitted to do
so under the laws of Hong Kong) other than with respect to notes
which are or are intended to be disposed of only to persons
outside Hong Kong or only to professional investors
within the meaning of the Securities and Futures Ordinance (Cap.
571, Laws of Hong Kong) and any rules made thereunder.
Notice to
Prospective Investors in Singapore
This prospectus supplement has not been registered as a
prospectus with the Monetary Authority of Singapore.
Accordingly, this prospectus supplement and any other document
or material in connection with the offer or sale, or invitation
for subscription or purchase, of the notes may not be circulated
or distributed, nor may the notes be offered or sold, or be made
the subject of an invitation for subscription or purchase,
whether directly or indirectly, to persons in Singapore other
than (i) to an institutional investor under
Section 274 of the Securities and Futures Act,
Chapter 289 of Singapore (the SFA),
(ii) to a relevant person pursuant to Section 275(1),
or any person pursuant to Section 275(1A), and in
accordance with the conditions specified in Section 275 of
the SFA or (iii) otherwise pursuant to, and in accordance
with the conditions of, any other applicable provision of the
SFA, in each case subject to compliance with conditions set
forth in the SFA.
Where the notes are subscribed or purchased under
Section 275 of the SFA by a relevant person which is:
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a corporation (which is not an accredited investor (as defined
in Section 4A of the SFA)) the sole business of which is to
hold investments and the entire share capital of which is owned
by one or more individuals, each of whom is an accredited
investor; or
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a trust (where the trustee is not an accredited investor) whose
sole purpose is to hold investments and each beneficiary of the
trust is an individual who is an accredited investor, notes,
shares, debentures and units of shares and debentures of that
corporation or the beneficiaries rights and interest
(howsoever described) in that trust shall not be transferred
within six months after that corporation or that trust has
acquired the notes pursuant to an offer made under
Section 275 of the SFA except:
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to an institutional investor (for corporations, under Section
274 of the SFA) or to a relevant person defined in
Section 275(2) of the SFA, or to any person pursuant to an
offer that is made on terms that
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such shares, debentures and units of shares and debentures of
that corporation or such rights and interest in that trust are
acquired at a consideration of not less than S$200,000 (or its
equivalent in a foreign currency) for each transaction, whether
such amount is to be paid for in cash or by exchange of
securities or other assets, and further for corporations, in
accordance with the conditions specified in Section 275 of
the SFA;
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where no consideration is or will be given for the
transfer; or
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where the transfer is by operation of law.
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LEGAL
MATTERS
The validity of the notes offered by this prospectus supplement
and the common stock issuable upon conversion of the notes will
be passed upon for us by Gibson, Dunn & Crutcher LLP,
Dallas, Texas. Certain legal matters in connection with this
offering will be passed upon for the underwriters by Cahill
Gordon & Reindel LLP, New York, New York.
EXPERTS
The financial statements of D.R. Horton, Inc. as of
September 30, 2008 and for the year then ended and
managements assessment of the effectiveness of internal
control over financial reporting as of September 30, 2008
(which is included in Managements Report on Internal
Control over Financial Reporting) incorporated in this
prospectus supplement by reference to the annual report on
Form 10-K
of D.R. Horton, Inc. for the year ended September 30, 2008
have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
The consolidated financial statements of D.R. Horton, Inc. as of
September 30, 2007 and for the two years in the period
ended September 30, 2007 appearing in D.R. Horton,
Inc.s Annual Report
(Form 10-K)
for the year ended September 30, 2008 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon included
therein, and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
S-61
PROSPECTUS
D.R. Horton, Inc.
Debt Securities,
Preferred Stock, Depositary
Shares,
Common Stock,
Warrants,
Stock Purchase Contracts and
Stock Purchase Units
Trust Preferred
Securities of DRH Capital Trust I,
DRH Capital Trust II and DRH Capital Trust III
and Related Subordinated Trust Debt Securities
and Guarantees of D.R. Horton, Inc.
Units of
These Securities
We will provide specific terms of these securities in
supplements to this prospectus at the time we offer or sell any
of these securities. You should read this prospectus and any
supplement carefully before you invest.
Investing in these securities involves risks. See Risk
Factors beginning on page 1 and in the prospectus
supplement we will deliver with this prospectus.
Our common stock is listed on the New York Stock Exchange under
the symbol DHI.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This prospectus is dated June 13, 2006
You should rely only on the information contained in or
incorporated by reference in this prospectus. We have not
authorized anyone to provide you with different information. We
are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the
information contained in this prospectus is accurate as of any
date other than the date on the front of this prospectus.
TABLE OF
CONTENTS
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ii
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1
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6
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7
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9
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10
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10
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12
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13
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16
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19
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20
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20
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21
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30
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31
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31
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31
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31
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Unless the context otherwise requires, the terms the
Company, we and our refer to
D.R. Horton, Inc., a Delaware corporation, and its predecessors
and subsidiaries.
FORWARD-LOOKING
STATEMENTS
The statements contained in this prospectus and the information
incorporated by reference into this prospectus include
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on managements
beliefs as well as assumptions made by, and information
currently available to, management. These forward-looking
statements typically include the words anticipate,
believe, consider, estimate,
expect, forecast, goal,
intend, objective, plan,
projection, seek, strategy,
target or other words of similar meaning. These
forward-looking statements involve risks, uncertainties and
other factors that may cause our actual results to differ
materially from the expectations or results we discuss in the
forward-looking statements. These risks, uncertainties and other
factors include, but are not limited to:
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changes in general economic, real estate construction and other
business conditions;
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changes in interest rates, the availability of mortgage
financing or the effective cost of owning a home;
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the effects of governmental regulations and environmental
matters;
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our substantial debt;
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competitive conditions within our industry;
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the availability of capital;
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our ability to effect our growth strategies
successfully; and
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the uncertainties inherent in warranty and construction defect
claims matters.
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We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise. However, any further
disclosures made on related subjects in additional documents
incorporated into this prospectus by reference should be
consulted.
For further factors you should consider, please refer to the
Risk Factors section beginning on page 1 of
this prospectus and the Risk Factors and the
Managements Discussion and Analysis of Financial
Condition and Results of Operations sections in our annual
report on
Form 10-K
for the year ended September 30, 2005 and our quarterly
reports on
Form 10-Q
for the quarters ended December 31, 2005 and March 31,
2006.
ii
RISK
FACTORS
Before purchasing any securities we may offer, you should
consider all of the information set forth in this prospectus, in
the prospectus supplement we will deliver with this prospectus,
and in the information incorporated by reference. In particular,
you should evaluate the risk factors relating to our business
set forth below and the risk factors set forth in the prospectus
supplement we will deliver with this prospectus. It is
anticipated that the prospectus supplement will contain a
description of the risks relating to the securities we may offer
with the prospectus supplement.
Because
of the cyclical nature of our industry, future changes in
general economic, real estate construction or other business
conditions could adversely affect our business or our financial
results.
Cyclical Industry. The homebuilding industry
is cyclical and is significantly affected by changes in general
and local economic conditions, such as:
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employment levels;
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availability of financing for homebuyers;
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interest rates;
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consumer confidence;
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demographic trends; and
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housing demand.
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These may occur on a national scale or may affect some of the
regions or markets in which we operate more than others. If
adverse conditions affect any of our larger markets, they could
have a proportionately greater impact on us than on some other
homebuilding companies.
An oversupply of alternatives to new homes, such as rental
properties and used or foreclosed homes, including homes held
for sale by investors, could also depress new home prices and
reduce our margins on the sales of new homes.
Risks Related to National Security. Continued
military deployments in the Middle East and other overseas
regions, terrorist attacks, other acts of violence or threats to
national security, and any corresponding response by the United
States or others, or related domestic or international
instability, may adversely affect general economic conditions or
cause a slowdown of the national economy.
Inventory Risks. Inventory risks can be
substantial for our homebuilding business. Our long-term ability
to build homes depends upon our acquiring land suitable for
residential building at affordable prices in locations where our
potential customers want to live. We must anticipate demand for
new homes and continuously seek and make acquisitions of land
for replacement and expansion of land inventory within our
current markets and for expansion into new markets. In some
markets, this has become more difficult and costly.
Our current goal is to own or control approximately a three to
four year supply of land and building lots. The risks inherent
in controlling or purchasing and developing land increase as
consumer demand for housing decreases. Thus, we may have
acquired options on or bought and developed land at a cost we
will not be able to recover fully or on which we cannot build
and sell homes profitably. Our deposits for building lots
controlled under option or similar contracts may be put at risk.
The market value of undeveloped land, building lots and housing
inventories can also fluctuate significantly as a result of
changing market conditions. We cannot make any assurances that
the measures we employ to manage inventory risks and costs will
be successful.
In addition, inventory carrying costs can be significant and can
result in reduced margins or losses in a poorly performing
project or market. In the event of significant changes in
economic or market conditions, we may have to sell homes or land
for a lower profit margin or at a loss.
1
Supply Risks. The homebuilding industry has
from time to time experienced significant difficulties that can
affect the cost or timing of construction, including:
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shortages of qualified trades people;
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reliance on local subcontractors, who may be inadequately
capitalized;
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shortages of materials; and
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volatile increases in the cost of materials, particularly
increases in the price of lumber, drywall and cement, which are
significant components of home construction costs.
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Risks from Nature. Weather conditions and
natural disasters, such as hurricanes, tornadoes, earthquakes,
volcanic activity, droughts, floods and wildfires, can harm our
homebuilding business. These can delay home closings, adversely
affect the cost or availability of materials or labor, or damage
homes under construction. The climates and geology of many of
the states in which we operate, including California, Florida
and Texas, where we have some of our larger operations, present
increased risks of adverse weather or natural disaster.
Possible Consequences. As a result of the
foregoing matters, in the future, potential customers may be
less willing or able to buy our homes, or we may take longer or
incur more costs to build them. We may not be able to recapture
increased costs by raising prices in many cases because of
market conditions or because we fix our prices in advance of
delivery by signing home sales contracts. We may be unable to
change the mix of our home offerings or the affordability of our
homes to maintain our margins or satisfactorily address changing
market conditions in other ways. In addition, cancellations of
home sales contracts in backlog may increase beyond historical
rates as homebuyers cancel or do not honor their contracts.
Our financial services business is closely related to our
homebuilding business as it originates mortgage loans
principally to purchasers of the homes we build. A decrease in
the demand for our homes because of the foregoing matters could
also adversely affect the financial results of this segment of
our business. A return of consumer preferences for
adjustable-rate and other low-margin loans could also adversely
affect our financial services results. An increase in the
default rate on the mortgages we originate could adversely
affect the pricing we receive upon the sale of mortgages that we
originate in the future.
Future
increases in interest rates, reductions in mortgage availability
or increases in the effective costs of owning a home could
prevent potential customers from buying our homes and adversely
affect our business or our financial results.
Most of our customers finance their home purchases through
lenders providing mortgage financing. In recent years interest
rates have been at historical lows. Many homebuyers have also
chosen adjustable rate, interest only or other mortgages that
involve initial lower monthly payments. As a result, new homes
have been more affordable. Increases in interest rates or
decreases in the availability of mortgage financing, however,
could reduce the market for new homes. Potential homebuyers may
be less willing or able to pay the increased monthly costs or to
obtain mortgage financing that exposes them to interest rate
changes. Lenders may increase the qualifications needed for
mortgages or adjust their terms to address any increased credit
risk. Even if potential customers do not need financing, changes
in interest rates and mortgage availability could make it harder
for them to sell their current homes to potential buyers who
need financing. These matters could adversely affect the sales
or pricing of our homes and could also reduce the volume or
margins in our financial services business. The impact on our
financial services business could be compounded to the extent we
are unable to match interest rates and amounts on loans we have
committed to originate through the various hedging strategies we
employ.
In addition, we believe that the availability of FHA and VA
mortgage financing is an important factor in marketing some of
our homes. We also believe that the liquidity provided by Fannie
Mae and Freddie Mac to the mortgage industry is important to the
housing market. However, the federal government has sought to
limit the size of the home-loan portfolios and operations of
these two government-sponsored enterprises. Any limitations or
restrictions on the availability of the financing or on the
liquidity provided by them could adversely affect interest
rates, mortgage financing and our sales of new homes and
mortgage loans.
2
Significant expenses of owning a home, including mortgage
interest expense and real estate taxes, generally are deductible
expenses for an individuals federal, and in some cases
state, income taxes, subject to various limitations under
current tax law and policy. If the federal government or a state
government changes its income tax laws, as has been discussed,
to eliminate or substantially modify these income tax
deductions, the after-tax cost of owning a new home could
increase for many of our potential customers. The resulting loss
or reduction of homeowner tax deductions, if such tax law
changes were enacted without offsetting provisions, could
adversely impact demand for and sales prices of new homes.
Governmental
regulations could increase the cost and limit the availability
of our development and homebuilding projects or affect our
related financial services operations and adversely affect our
business or our financial results.
We are subject to extensive and complex regulations that affect
land development and home construction, including zoning,
density restrictions, building design and building standards.
These regulations often provide broad discretion to the
administering governmental authorities as to the conditions we
must meet prior to being approved, if approved at all. We are
subject to determinations by these authorities as to the
adequacy of water or sewage facilities, roads or other local
services. In addition, in many markets government authorities
have implemented no growth or growth control initiatives. Any of
these can limit, delay or increase the costs of development or
homebuilding.
New housing developments may be subject to various assessments
for schools, parks, streets and other public improvements, which
could cause an increase in the effective prices for our homes.
In addition, increases in property tax rates by local
governmental authorities, as experienced in response to reduced
federal and state funding, can adversely affect the ability of
potential customers to obtain financing or their desire to
purchase new homes.
We also are subject to a variety of local, state and federal
laws and regulations concerning protection of health, safety and
the environment. The impact of environmental laws varies
depending upon the prior uses of the building site or adjoining
properties and may be greater in areas with less supply where
undeveloped land or desirable alternatives are less available.
These matters may result in delays, may cause us to incur
substantial compliance, remediation and other costs, and could
prohibit or severely restrict development and homebuilding
activity in environmentally sensitive regions or areas.
Our financial services operations are also subject to numerous
federal, state and local laws and regulations. These include
eligibility requirements for participation in federal loan
programs and compliance with consumer lending and similar
requirements such as disclosure requirements, prohibitions
against discrimination and real estate settlement procedures.
They may also subject our operations to examination by the
applicable agencies. These may limit our ability to provide
mortgage financing or title services to potential purchasers of
our homes.
Our
substantial debt could adversely affect our financial
condition.
We have a significant amount of debt. As of March 31, 2006,
our consolidated debt was $5,523.7 million. In the ordinary
course of business, we may incur significant additional debt, to
the extent permitted by our revolving credit facility and our
indentures.
Possible Consequences. The amount of our debt
could have important consequences. For example, it could:
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limit our ability to obtain future financing for working
capital, capital expenditures, acquisitions, debt service
requirements or other requirements;
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require us to dedicate a substantial portion of our cash flow
from operations to payment of our debt and reduce our ability to
use our cash flow for other purposes;
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limit our flexibility in planning for, or reacting to, the
changes in our business;
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place us at a competitive disadvantage because we have more debt
than some of our competitors; and
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make us more vulnerable in the event of a downturn in our
business or in general economic conditions.
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Dependence on Future Performance. Our ability
to meet our debt service and other obligations will depend upon
our future financial performance. We are engaged in businesses
that are substantially affected by changes in economic
conditions. Our revenues and earnings vary with the level of
general economic activity in the markets we serve. Our
businesses are also affected by financial, political, business
and other factors, many of which are beyond our control. The
factors that affect our ability to generate cash can also affect
our ability to raise additional funds for these purposes through
the sale of debt or equity securities, the refinancing of debt,
or the sale of assets. Changes in prevailing interest rates may
affect our ability to meet our debt service obligations, because
borrowings under our credit facilities bear interest at floating
rates and our interest rate swap agreements fix our
interest rate for only a portion of these borrowings.
As of March 31, 2006, the scheduled maturities of principal
on our outstanding debt for the subsequent 12 months
totaled $711.1 million, including $675.0 million in
financial services debt that must be renewed annually. This
amount includes $340.0 million under our mortgage warehouse
loan facility that we renewed in April 2006 and
$335.0 million under our commercial paper conduit facility
that we plan to renew and extend prior to its maturity on
June 29, 2006. Based on the current level of operations, we
believe our cash flow from operations, available cash, available
borrowings under our credit facilities and our ability to access
the capital markets and to refinance or renew our credit
facilities in a timely manner will be adequate to meet our
future cash needs. We cannot, however, make any assurances that
in the future our business will generate sufficient cash flow
from operations or that borrowings or access to the capital
markets or refinancing or renewal facilities will be available
to us in amounts sufficient to enable us to pay or refinance our
indebtedness or to fund other cash needs.
Indenture and Revolving Credit Facility
Restrictions. Our revolving credit facility and
the indentures governing our senior subordinated notes impose
restrictions on our operations and activities. The most
significant restrictions relate to limits on investments, cash
dividends, stock repurchases and other restricted payments,
incurrence of indebtedness, creation of liens and asset
dispositions, and require maintenance of a maximum leverage
ratio, a minimum ratio of EBITDA to interest incurred, minimum
levels of tangible net worth and compliance with other financial
covenants. In addition, the indentures governing our senior
notes impose restrictions on the creation of liens. If we fail
to comply with any of these restrictions or covenants, the
trustees, the noteholders or the lending banks, as applicable,
could cause our debt to become due and payable prior to
maturity. If we do not maintain our current credit ratings,
available credit under our revolving credit facility is subject
to limitations based on specified percentages of unsold homes,
developed lots and lots under development included in inventory
and the amount of other senior unsecured indebtedness.
Change of Control Purchase Options. If a
change of control occurs as defined in the indentures governing
many other series of our senior and senior subordinated notes,
constituting $2,294.8 million principal amount in the
aggregate as of March 31, 2006, we would be required to
offer to purchase such notes at 101% of their principal amount,
together with all accrued and unpaid interest, if any. Moreover,
a change of control may also result in the acceleration of our
revolving credit facility. If purchase offers were required
under the indentures for these notes or our revolving credit
facility debt were accelerated, we can give no assurance that we
would have sufficient funds to pay the amounts that we would be
required to repurchase or repay. We currently would not have
sufficient funds available to purchase all of such outstanding
debt upon a change of control.
Impact of Financial Services Debt. Our
financial services business is conducted through subsidiaries
that are not restricted by our indentures or revolving credit
facility. The ability of our financial services segment to
provide funds to our homebuilding operations, however, is
subject to restrictions in its own credit facilities. These
funds would not be available to us upon the occurrence and
during the continuance of defaults under these facilities.
Moreover, our right to receive assets from these subsidiaries
upon liquidation or recapitalization will be subject to the
prior claims of the creditors of these subsidiaries. Any claims
we may have to funds from this segment would be subordinate to
subsidiary indebtedness to the extent of any security for such
indebtedness and to any indebtedness otherwise recognized as
senior to our claims.
4
Homebuilding
and financial services are very competitive, and competitive
conditions could adversely affect our business or our financial
results.
The homebuilding industry is highly competitive. Homebuilders
compete not only for homebuyers, but also for desirable
properties, financing, raw materials and skilled labor. We
compete with other local, regional and national homebuilders,
including those with a sales presence on the Internet, often
within larger subdivisions designed, planned and developed by
such homebuilders. The competitive conditions in the
homebuilding industry could result in:
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difficulty in acquiring suitable land at acceptable prices;
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increased selling incentives;
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lower sales or profit margins; or
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delays in construction of our homes.
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Our financial services business competes with other mortgage
lenders, including national, regional and local mortgage banks,
savings and loan associations and other financial institutions.
Mortgage lenders with greater access to capital markets or
different lending criteria may be able to offer more attractive
financing to potential customers.
If we are affected by these competitive conditions at increased
levels, our business and financial results could be adversely
affected.
Our
future growth may require additional capital, which may not be
available.
Our operations require significant amounts of cash, and our
requirements for capital typically increase in the third and
fourth quarters of our fiscal year. We may be required to seek
additional capital, whether from sales of equity or debt or
additional bank borrowings, for the future growth and
development of our business. We can give no assurance as to the
availability of such additional capital or, if available,
whether it would be on terms acceptable to us. Moreover, the
indentures for some of our outstanding public debt and the
covenants of our revolving credit facility contain provisions
that may restrict the debt we may incur in the future. If we are
not successful in obtaining sufficient capital, it could reduce
our sales and may adversely affect our future growth and
financial results.
We
cannot make any assurances that our growth strategies will be
successful.
Since 1993, we have acquired many homebuilding companies.
Although we have recently focused on internal growth, we may
make strategic acquisitions of homebuilding companies in the
future. Successful strategic acquisitions require the
integration of operations and management and other efforts to
realize the benefits that may be available. Although we believe
that we have been successful in doing so in the past, we can
give no assurance that we would be able to identify, acquire and
integrate successfully strategic acquisitions in the future.
Acquisitions can result in the dilution of existing stockholders
if we issue our common stock as consideration or reduce our
liquidity or increase our debt if we fund them with cash. In
addition, acquisitions can expose us to the risk of writing off
goodwill related to such acquisitions based on the subsequent
results of the reporting units to which the acquired businesses
were assigned. Moreover, we may not be able to implement
successfully our operating and growth strategies within our
existing markets.
Homebuilding
is subject to home warranty and construction defect claims in
the ordinary course of business that can be
significant.
As a homebuilder, we are subject to home warranty and
construction defect claims arising in the ordinary course of
business. As a consequence, we maintain product liability
insurance, obtain indemnities and certificates of insurance from
subcontractors generally covering claims related to workmanship
and materials, and create warranty and other reserves for the
homes we sell based on historical experience in our markets and
our judgment of the qualitative risks associated with the types
of homes built. Because of the uncertainties inherent to these
matters, we cannot provide assurance that our insurance
coverage, our subcontractor arrangements and our reserves will
be adequate to address all of our warranty and construction
defect claims in the future. Contractual indemnities can be
difficult to enforce, we may be responsible for applicable
self-insured retentions and some types of claims may not
5
be covered by insurance or may exceed applicable coverage
limits. Additionally, the coverage offered by and the
availability of product liability insurance for construction
defects is currently limited and costly. We have responded to
increases in insurance costs and coverage limitations by
increasing our self-insured retentions and claim reserves. There
can be no assurance that coverage will not be further restricted
or become more costly.
THE
COMPANY
D.R. Horton, Inc. is the largest homebuilding company in the
United States, based on the number of our domestic homes closed
during the 12 months ended September 30, 2005. We
construct and sell high quality single-family homes through our
operating divisions in 27 states and 82 metropolitan
markets of the United States, primarily under the name of D.R.
Horton, Americas Builder. D.R. Horton, Inc. is a
Fortune 500 company, and our common stock is included in
the S&P 500 Index and listed on the New York Stock Exchange
under the ticker symbol DHI.
Donald R. Horton began our homebuilding business in 1978. In
1991, we were incorporated in Delaware to acquire the assets and
businesses of our predecessor companies, which were residential
home construction and development companies owned or controlled
by Mr. Horton. In 1992, we completed our initial public
offering of our common stock. From inception, we have
consistently grown the size of our company by investing our
available capital into our existing homebuilding markets and
into
start-up
operations in new markets. Additionally, we have acquired
numerous other homebuilding companies, which have strengthened
our market position in existing markets and expanded our
geographic presence and product offerings in other markets. The
success of our organic growth strategies and our effective
acquisition strategy has enabled us to become the largest
homebuilding company in the United States, a distinction we have
maintained for our last four fiscal years. Our homes generally
range in size from 1,000 to 5,000 square feet and range in
price from $90,000 to $900,000. For the year ended
September 30, 2005, we closed 51,172 homes with an average
closing sales price of approximately $261,400. For the six
months ended March 31, 2006, we closed 22,461 homes with an
average closing sales price of approximately $278,800.
Through our financial services operations, we provide mortgage
banking and title agency services to homebuyers in many of our
homebuilding markets. DHI Mortgage, our wholly-owned subsidiary,
provides mortgage financing services, principally to purchasers
of homes we build and sell. Our subsidiary title companies serve
as title insurance agents by providing title insurance policies,
examination and closing services, primarily to purchasers of
homes we build and sell.
Our financial reporting segments consist of homebuilding and
financial services. Our homebuilding operations are by far the
most substantial part of our business, comprising approximately
98% of consolidated revenues and 96% of consolidated income
before income taxes for the year ended September 30, 2005
and the six months ended March 31, 2006 and 2005. Our
homebuilding segment generates the majority of its revenues from
the sale of completed homes, with a lesser amount from the sale
of land and lots. In addition to building traditional
single-family detached homes, the homebuilding segment also
builds attached homes, such as town homes, duplexes, triplexes
and condominiums (including some mid-rise buildings), which
share common walls and roofs. The sale of detached homes
generated approximately 83% of home sales revenues for the year
ended September 30, 2005, and approximately 81% and 85% of
home sales revenues for the six months ended March 31, 2006
and 2005, respectively. Our financial services segment generates
its revenues from originating and selling mortgages and
collecting fees for title insurance and closing services.
Financial information, including revenue, pre-tax income and
identifiable assets, for both of our reporting segments is
included in our consolidated financial statements, which are
incorporated by reference into this prospectus from our annual
report on
Form 10-K
for the year ended September 30, 2005 and from each of our
quarterly reports on
Form 10-Q
for the quarters ended December 31, 2005 and March 31,
2006.
For more information about our business, please refer to the
Business section in our annual report on
Form 10-K
for the year ended September 30, 2005, and the
Managements Discussion and Analysis of Financial
Condition and Results of Operations sections in our annual
report on
Form 10-K
for the year ended September 30, 2005 and each of our
quarterly reports on
Form 10-Q
for the quarters ended December 31, 2005 and March 31,
2006.
6
Our principal executive offices are at 301 Commerce Street,
Suite 500, Fort Worth, Texas 76102, our telephone
number is
(817) 390-8200,
and our Internet website address is www.drhorton.com.
Information on our Internet website is not part of this
prospectus.
Recent
Developments
Quarterly Cash Dividend. In April 2006, our
Board of Directors declared a cash dividend of ten cents ($0.10)
per share. The dividend represents an 11% increase over the nine
cents ($0.09) per share cash dividend declared in the same
quarter of fiscal 2005. The quarterly cash dividend, which
totaled $31.3 million, was paid on May 19, 2006.
Renewal of Mortgage Warehouse Loan Facility of Our
Financial Services Segment. On April 7,
2006, our mortgage subsidiary amended and restated its mortgage
warehouse loan facility to extend the maturity date to
April 6, 2007, and to increase the available capacity to
$670 million until May 1, 2006, and then to
$540 million thereafter, subject to increases upon consent
of the lenders to $750 million under the accordion feature
of the facility. The mortgage warehouse loan facility is secured
by mortgage loans held for sale and is not guaranteed by us or
any of the guarantors of our homebuilding debt.
Termination of Specified Covenants in Outstanding Senior
Notes. The indentures governing approximately
$2,000.0 million of our senior notes provide for the
termination of specified covenants when we have achieved
investment grade ratings from both Standard &
Poors Ratings Group and Moodys Investors Service
Inc. These covenants include restrictions on our stock
repurchases, cash dividends and other restricted payments,
incurrence of indebtedness and asset dispositions. We have had
the required rating from Moodys since November 2005, and
we received the required rating from Standard &
Poors in April 2006. As a result, the foregoing
restrictions have ceased to apply to these senior notes and will
not apply in the future even if our ratings change. However,
similar restrictions continue to apply to our senior
subordinated notes.
Issuance of Senior Notes. In April 2006, we
issued $750 million aggregate principal amount of our
senior notes, consisting of $250 million of our 6.0% senior
notes due 2011 and $500 million of our 6.5% senior
notes due 2016. The notes are unsecured, senior obligations of
our company and rank equally with all of our existing and future
unsecured and unsubordinated indebtedness, including our
revolving credit facility. The net proceeds from the April
offering were used to reduce borrowings under our revolving
credit facility.
Stock Option Grant. On May 2, 2006, the
Compensation Committee of our Board of Directors granted stock
options to our executive officers and other officers and certain
of our employees, and our Board of Directors granted stock
options to our outside directors, to purchase approximately
3.0 million shares of our common stock at a price of
$29.44 per share, the closing market price of our common
stock on the date of grant. Our future compensation expense
related to these stock option grants is expected to be
$27.7 million and will be recognized over a weighted
average period of 9.3 years.
Voluntary Redemption of 10.5% Senior Subordinated Notes
due 2011. On June 12, 2006, we provided a
final notice to the trustee for our 10.5% senior
subordinated notes due 2011 that we are voluntarily calling all
of these notes for full redemption on July 15, 2006 in
accordance with the terms of the indenture governing the notes.
The 10.5% senior subordinated notes will be redeemed at a
price of $1,052.50 per $1,000 note outstanding, which will
result in an aggregate redemption price of approximately
$152.4 million to be paid by us on July 15, 2006. In
addition, on July 15, 2006, we will pay accrued and unpaid
semi-annual interest of $52.50 per $1,000 note,
approximately $7.6 million, to holders of record as of
July 1, 2006.
THE
TRUSTS
We have created three Delaware statutory trusts pursuant to
three trust agreements executed by us as sponsor for each trust,
appointed trustees for each trust and filed a certificate of
trust for each trust with the Delaware Secretary of State. The
trusts are named DRH Capital Trust I, DRH Capital
Trust II and DRH Capital Trust III. The trust
agreement of each trust will be amended and restated prior to
the issuance and sale by such trust of its trust securities,
which consist of trust preferred securities and trust common
securities. The original trust agreement and the form of the
amended and restated trust agreement are filed as exhibits to
the registration statement of which this
7
prospectus forms a part. The trust agreement for each trust
states the terms and conditions for each trust to issue and sell
its trust securities.
Each trust will exist solely to:
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issue and sell its trust securities;
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use the proceeds from the sale of its trust securities to
purchase and hold a series of our subordinated trust debt
securities;
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maintain its status as a grantor trust for federal income tax
purposes; and
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engage in other activities that are necessary or incidental to
these purposes.
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We will purchase all of the trust common securities of each
trust if any such securities are sold. The trust common
securities will represent an aggregate liquidation amount equal
to at least 3% of each trusts total capitalization. The
trust common securities will have terms substantially identical
to, and will rank equal in priority of payment with, the trust
preferred securities. However, if an event of default under a
trust agreement occurs, cash distributions and liquidation,
redemption and other amounts payable on the trust common
securities will be subordinate to the trust preferred securities
in priority of payment.
We will guarantee the trust preferred securities as described
later in this prospectus.
Trustees appointed by us, as holder of the trust common
securities, will conduct each trusts business and affairs.
The trust agreements will govern the duties and obligations of
the trustees. Pursuant to each trust agreement, the number of
trustees will initially be four, with three different functions.
Two of the trustees, who are administrative trustees, will be
persons who are our employees or officers or are otherwise
affiliated with us. The third trustee, which is the Delaware
trustee, will be an individual resident of the State of Delaware
or a corporation which maintains a principal place of business
in the State of Delaware. The Delaware trustee will serve the
sole purpose of complying with certain Delaware laws. The fourth
trustee will be a bank or trust company unaffiliated with us and
will serve as property trustee under each trust agreement and as
indenture trustee for purposes of the Trust Indenture Act
of 1939. Currently, CT Corporation System acts as the Delaware
trustee and American Stock Transfer & Trust Company as
the property trustee. The property trustee will also act as
indenture trustee under the indenture and guarantee trustee
under the trust guarantee as described later in this section.
We, as the holder of all the trust common securities, will have
the right to appoint, remove or replace any trustee and to
increase or decrease the number of trustees, provided that the
number of trustees will be at least three, two of which will be
the administrative trustees and one of which will be the
Delaware trustee.
The property trustee will hold title to our subordinated trust
debt securities held by the trust for the benefit of the holders
of the trust securities. The property trustee will have the
power to exercise all rights, powers and privileges as the
holder of the subordinated trust debt securities under the
indenture pursuant to which the subordinated trust debt
securities will be issued. In addition, the property trustee
will maintain exclusive control of a segregated non-interest
bearing bank account to hold all payments made in respect of the
subordinated trust debt securities for the benefit of the
holders of the trust securities. The property trustee will make
payments of distributions and payments on liquidation,
redemption and otherwise to the holders of the trust securities
out of funds from the account. The guarantee trustee will hold
the guarantee by us of the trust securities for the benefit of
the holders of the trust preferred securities.
We will pay all fees and expenses related to each trust and each
offering of the related trust preferred securities and will pay
all ongoing costs and expenses of each trust, except such
trusts obligations under the related trust securities.
The rights of the holders of the trust preferred securities,
including economic rights, rights to information and voting
rights, are set forth in each trusts trust agreement and
the Delaware Statutory Trust Act and the
Trust Indenture Act. The principal place of business of
each trust is c/o D.R. Horton, Inc., 301 Commerce Street,
Suite 500, Fort Worth, Texas 76102. The telephone
number is 817-390-8200.
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Accounting
Treatment
Under the requirements of Financial Accounting Standards Board
Interpretation No. 46(R), Consolidation of Variable
Interest Entities, we expect the trusts will not be
consolidated in our consolidated financial statements.
Accordingly, we will recognize the aggregate principal amount of
our subordinated trust debt securities sold to a trust as a
liability on our balance sheet. Our financial statements will
include a note that will disclose, among other things, that the
assets of the trust consist of our subordinated trust debt
securities sold to the trust and will specify the designation,
principal amount, interest rate and maturity date of the
subordinated trust debt securities held by it. Because the
actual terms of an issuance of trust preferred securities could
affect the accounting treatment, the prospectus supplement
relating to an offering of trust preferred securities will
describe the accounting treatment expected to apply to such
securities.
SECURITIES
WE MAY OFFER
Types of
Securities
The types of securities that we may offer and sell from time to
time by this prospectus are:
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debt securities, which we may issue in one or more series and
which may include guarantees of the debt securities by most of
our subsidiaries;
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preferred stock, which we may issue in one or more series;
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depositary shares;
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common stock;
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warrants entitling the holders to purchase common stock,
preferred stock or debt securities;
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stock purchase contracts; or
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stock purchase units.
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In addition, from time to time by this prospectus, one or more
of the trusts may offer and sell trust preferred securities,
which will include our trust guarantees. The trusts will hold
our subordinated trust debt securities, which may be distributed
to holders of trust securities under specified circumstances.
We may also offer and sell units of the above securities, which
may or may not include trust preferred securities issued by one
or more of the trusts.
When we sell securities, we will determine the amounts of
securities we will sell and the prices and other terms on which
we will sell them. We may sell securities to or through
underwriters, through agents or dealers or directly to
purchasers.
Additional
Information
We will describe in a prospectus supplement, which we will
deliver with this prospectus, the terms of particular securities
which we may offer in the future. In each prospectus supplement
we will include the following information:
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the type and amount of securities which we propose to sell;
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the initial public offering price of the securities;
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the names of the underwriters, agents or dealers, if any,
through or to which we will sell the securities;
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the compensation, if any, of those underwriters, agents or
dealers;
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if applicable, information about securities exchanges or
automated quotation systems on which the securities will be
listed or traded;
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material United States federal income tax considerations
applicable to the securities;
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any material risk factors associated with the
securities; and
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any other material information about the offer and sale of the
securities.
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In addition, the prospectus supplement may also add, update or
change the information contained in this prospectus.
USE OF
PROCEEDS
Except as may be stated in the applicable prospectus supplement,
we intend to use the net proceeds from the sale of the
securities for general corporate purposes. These purposes may
include:
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reducing or repaying existing indebtedness, including our
revolving credit facility or outstanding debt securities;
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providing additional working capital;
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acquiring and developing land;
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constructing new homes; and
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acquiring companies in homebuilding and related businesses.
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SUMMARY
CONSOLIDATED FINANCIAL INFORMATION AND OPERATING DATA
The following summary consolidated financial information for the
five years ended September 30, 2005 is derived from our
audited consolidated financial statements, except as described
in the footnotes below. The following summary consolidated
financial information for the six months ended March 31,
2006 and 2005 is derived from our unaudited consolidated
financial statements. The data should be read in conjunction
with the consolidated financial statements, related notes,
managements discussion and analysis of financial condition
and results of operations, and other financial information
incorporated by reference into this prospectus. These historical
results are not necessarily indicative of the results to be
expected in the future. Interim results for the current year are
not necessarily indicative of the results that may be expected
for the entire year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
March 31,
|
|
|
Year Ended
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(In millions, except per share
amounts and number of homes)
|
|
|
Income statement
data(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding
|
|
$
|
6,368.3
|
|
|
$
|
5,301.0
|
|
|
$
|
13,628.6
|
|
|
$
|
10,658.0
|
|
|
$
|
8,552.1
|
|
|
$
|
6,625.2
|
|
|
$
|
4,383.6
|
|
Financial services
|
|
|
132.4
|
|
|
|
95.8
|
|
|
|
235.1
|
|
|
|
182.8
|
|
|
|
176.0
|
|
|
|
113.6
|
|
|
|
72.0
|
|
Gross
profit homebuilding
|
|
|
1,716.9
|
|
|
|
1,346.5
|
|
|
|
3,488.3
|
|
|
|
2,460.7
|
|
|
|
1,746.3
|
|
|
|
1,260.8
|
|
|
|
856.4
|
|
Income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homebuilding
|
|
|
1,021.9
|
|
|
|
832.7
|
|
|
|
2,273.0
|
|
|
|
1,508.2
|
|
|
|
914.7
|
|
|
|
591.1
|
|
|
|
380.8
|
|
Financial services
|
|
|
47.3
|
|
|
|
37.2
|
|
|
|
105.6
|
|
|
|
74.7
|
|
|
|
93.5
|
|
|
|
56.4
|
|
|
|
27.0
|
|
Income before cumulative effect of
change in accounting principle(2)
|
|
|
662.9
|
|
|
|
535.0
|
|
|
|
1,470.5
|
|
|
|
975.1
|
|
|
|
626.0
|
|
|
|
404.7
|
|
|
|
254.9
|
|
Cumulative effect of change in
accounting principle, net of income taxes(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Net income
|
|
|
662.9
|
|
|
|
535.0
|
|
|
|
1,470.5
|
|
|
|
975.1
|
|
|
|
626.0
|
|
|
|
404.7
|
|
|
|
257.0
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
March 31,
|
|
|
Year Ended
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(In millions, except per share
amounts and number of homes)
|
|
|
Income before cumulative effect of
change in accounting principle per share(4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2.12
|
|
|
|
1.72
|
|
|
|
4.71
|
|
|
|
3.14
|
|
|
|
2.11
|
|
|
|
1.51
|
|
|
|
1.12
|
|
Diluted(2)(5)
|
|
|
2.09
|
|
|
|
1.68
|
|
|
|
4.62
|
|
|
|
3.09
|
|
|
|
1.99
|
|
|
|
1.39
|
|
|
|
1.07
|
|
Net income per share(4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2.12
|
|
|
|
1.72
|
|
|
|
4.71
|
|
|
|
3.14
|
|
|
|
2.11
|
|
|
|
1.51
|
|
|
|
1.13
|
|
Diluted(5)
|
|
|
2.09
|
|
|
|
1.68
|
|
|
|
4.62
|
|
|
|
3.09
|
|
|
|
1.99
|
|
|
|
1.39
|
|
|
|
1.08
|
|
Selected operating
data(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
margin homebuilding
|
|
|
27.0
|
%
|
|
|
25.4
|
%
|
|
|
25.6
|
%
|
|
|
23.1
|
%
|
|
|
20.4
|
%
|
|
|
19.0
|
%
|
|
|
19.5
|
%
|
Number of homes closed
|
|
|
22,461
|
|
|
|
20,281
|
|
|
|
51,172
|
|
|
|
43,567
|
|
|
|
35,934
|
|
|
|
29,761
|
|
|
|
21,371
|
|
Net sales orders (homes)(6)
|
|
|
27,234
|
|
|
|
24,302
|
|
|
|
53,232
|
|
|
|
45,263
|
|
|
|
38,725
|
|
|
|
31,491
|
|
|
|
22,179
|
|
Net sales orders ($ value)(6)
|
|
$
|
7,530.0
|
|
|
$
|
6,754.4
|
|
|
$
|
14,643.4
|
|
|
$
|
11,406.2
|
|
|
$
|
9,162.3
|
|
|
$
|
6,885.9
|
|
|
$
|
4,502.6
|
|
Sales order backlog at end of
period (homes)(7)
|
|
|
24,017
|
|
|
|
21,205
|
|
|
|
19,244
|
|
|
|
17,184
|
|
|
|
15,488
|
|
|
|
12,697
|
|
|
|
9,263
|
|
Sales order backlog at end of
period ($ value)(7)
|
|
$
|
7,103.9
|
|
|
$
|
6,167.0
|
|
|
$
|
5,835.2
|
|
|
$
|
4,568.5
|
|
|
$
|
3,653.4
|
|
|
$
|
2,825.2
|
|
|
$
|
1,933.8
|
|
Other financial
data(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expensed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expensed directly
|
|
$
|
30.9
|
|
|
$
|
5.0
|
|
|
$
|
21.2
|
|
|
$
|
9.3
|
|
|
$
|
12.6
|
|
|
$
|
11.5
|
|
|
$
|
14.1
|
|
Amortized to cost of sales
|
|
|
104.4
|
|
|
|
98.9
|
|
|
|
225.0
|
|
|
|
249.0
|
|
|
|
219.4
|
|
|
|
136.2
|
|
|
|
91.4
|
|
Provision for income taxes
|
|
|
406.3
|
|
|
|
334.9
|
|
|
|
908.1
|
|
|
|
607.8
|
|
|
|
382.2
|
|
|
|
242.8
|
|
|
|
152.9
|
|
Depreciation and amortization
|
|
|
26.4
|
|
|
|
26.8
|
|
|
|
52.8
|
|
|
|
49.6
|
|
|
|
41.8
|
|
|
|
32.8
|
|
|
|
31.2
|
|
Interest incurred(8)
|
|
|
181.5
|
|
|
|
140.9
|
|
|
|
294.1
|
|
|
|
242.6
|
|
|
|
246.9
|
|
|
|
204.3
|
|
|
|
136.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
As of
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(In millions)
|
|
|
Balance sheet
data(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
10,852.4
|
|
|
$
|
7,926.7
|
|
|
$
|
8,486.8
|
|
|
$
|
6,567.4
|
|
|
$
|
5,082.3
|
|
|
$
|
4,343.1
|
|
|
$
|
2,804.4
|
|
Total assets
|
|
|
13,511.0
|
|
|
|
10,540.5
|
|
|
|
12,514.8
|
|
|
|
8,985.2
|
|
|
|
7,279.4
|
|
|
|
6,017.5
|
|
|
|
3,652.2
|
|
Notes payable
|
|
|
5,523.7
|
|
|
|
4,340.6
|
|
|
|
4,909.6
|
|
|
|
3,499.2
|
|
|
|
2,963.2
|
|
|
|
2,878.3
|
|
|
|
1,884.3
|
|
Stockholders equity
|
|
|
5,944.0
|
|
|
|
4,469.4
|
|
|
|
5,360.4
|
|
|
|
3,960.7
|
|
|
|
3,031.3
|
|
|
|
2,269.9
|
|
|
|
1,250.2
|
|
|
|
|
(1) |
|
On February 21, 2002, we acquired Schuler Homes in a
merger. The total merger consideration consisted of
20,079,532 shares of D.R. Horton, Inc. common stock (before
any of our stock splits), valued at $30.93 per share;
$168.7 million in cash; $802.2 million of assumed
Schuler debt, $238.2 million of which was paid at closing;
$218.7 million of assumed trade payables and other
liabilities; and $10.8 million of assumed obligations to
the Schuler entities minority interest holders.
Schulers revenues for the period February 22, 2002
through September 30, 2002 were $1,246.6 million. |
|
(2) |
|
Beginning in fiscal 2002, pursuant to our adoption of Statement
of Financial Accounting Standards No. 142, we no longer
amortize goodwill, but test it for impairment annually. If we
had not amortized goodwill in fiscal 2001, reported net income
and diluted net income per share (before cumulative effect of
change in accounting |
11
|
|
|
|
|
principle and adjusted to reflect the effects of the
three-for-two
common stock splits, effected as 50% stock dividends and paid on
April 9, 2002 and January 12, 2004, and the
four-for-three
common stock split, effected as a
331/3%
stock dividend and paid on March 16, 2005) would have
been: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Cumulative Effect
of
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Accounting
Principle
|
|
|
Diluted Income Before Cumulative
Effect of
|
|
|
|
(In millions)
|
|
|
Change in Accounting Principle
per Share
|
|
|
|
|
|
|
|
|
|
Excluding
|
|
|
Including
|
|
|
|
|
|
Excluding
|
|
|
|
Originally
|
|
|
|
|
|
Goodwill
|
|
|
Goodwill
|
|
|
|
|
|
Goodwill
|
|
|
|
Reported
|
|
|
Increase
|
|
|
Amortization
|
|
|
Amortization
|
|
|
Increase
|
|
|
Amortization
|
|
|
2001. . . . . . . . . . . . . . . . . . . . . .
|
|
$
|
254.9
|
|
|
$
|
6.0
|
|
|
$
|
260.9
|
|
|
$
|
1.07
|
|
|
$
|
0.03
|
|
|
$
|
1.10
|
|
|
|
|
(3) |
|
In fiscal 2001, we recorded a cumulative effect of a change in
accounting principle of $2.1 million, net of income taxes
of $1.3 million, as an adjustment to net income, related to
our adoption of Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and
Hedging Activities. |
|
(4) |
|
Per share amounts reflect the effects of the
three-for-two
stock splits of April 2002 and January 2004, and the
four-for-three
stock split of March 2005. |
|
(5) |
|
In October 2004, the Financial Accounting Standards Board
ratified EITF Issue
No. 04-8,
The Effect of Contingently Convertible Debt on Diluted
Earnings per Share
(EITF 04-8).
EITF 04-8
requires that shares underlying contingently convertible debt be
included in diluted earnings per share computations using the
if-converted method regardless of whether the market price
trigger or other contingent features have been met. The
effective date for
EITF 04-8
was for reporting periods ending after December 15, 2004.
EITF 04-8
also requires restatement of earnings per share amounts for
prior periods presented during which the instrument was
outstanding. In May 2001, we issued zero coupon convertible
senior notes, which were converted into shares of our common
stock in June 2003. During certain quarters of the years ended
September 30, 2003, 2002 and 2001, the market price trigger
was not met and the convertible shares were not included in the
computation of diluted net income per share. The adoption of
EITF 04-8
reduced our diluted net income per share for the years ended
September 30, 2003, 2002 and 2001 by $0.06, $0.05 and
$0.03, respectively (each adjusted to reflect the effects of the
three-for-two
common stock splits, effected as 50% stock dividends and paid on
April 9, 2002 and January 12, 2004, and the
four-for-three
common stock split, effected as a
331/3%
stock dividend and paid on March 16, 2005). |
|
(6) |
|
Represents homes placed under contract during the period, net of
cancellations. |
|
(7) |
|
Represents homes under contract but not yet closed at the end of
the period, many of which are subject to contingencies,
including mortgage loan approval, which can result in
cancellations. In the past, our backlog has been a reliable
indicator of the level of closings in our two subsequent fiscal
quarters, although a portion of the contracts in backlog will
not result in closings principally due to cancellations. We
cannot assure you that homes subject to pending sales contracts
will close. |
|
(8) |
|
Interest incurred consists of all interest costs, whether
expensed or capitalized, including amortization of debt issuance
costs, if applicable. |
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed
charges for the five years ended September 30, 2005 and for
the six months ended March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
March 31,
|
|
Year Ended
September 30,
|
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
2001
|
|
Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
|
|
|
6.39
|
|
|
|
8.60
|
|
|
|
7.39
|
|
|
|
4.95
|
|
|
|
3.81
|
|
|
|
3.69
|
|
For purposes of computing the ratio of earnings to fixed
charges, earnings consist of income, including distributions
received from equity investments, before income taxes,
cumulative effect of a change in accounting principle, interest
expensed, interest amortized to cost of sales and income
attributable to minority interests. Fixed charges consist of
interest incurred, whether expensed or capitalized, including
amortization of debt issuance costs, if applicable, and the
portion of rent expense deemed to represent interest.
12
DESCRIPTION
OF DEBT SECURITIES
We may issue debt securities under one or more indentures
entered into or to be entered into between us, most of our
subsidiaries if they guarantee the debt securities, and American
Stock Transfer & Trust Company, New York, New York, as
trustee, or another trustee chosen by us, qualified to act as
such under the Trust Indenture Act and appointed in a
supplemental indenture with respect to a particular series. The
indentures are governed by the Trust Indenture Act.
The following is a summary of the indentures. It does not
restate the indentures entirely. We urge you to read the
indentures. We have filed the indentures as exhibits to the
registration statement of which this prospectus is a part, and
you may inspect them at the office of the trustee, or as
described under Incorporation of Certain Documents By
Reference. References below to an indenture
are references to the applicable indenture, as supplemented,
under which a particular series of debt securities is issued.
Terms of
the Debt Securities
Our debt securities will be unsecured obligations of D.R.
Horton, Inc. We may issue them in one or more series.
Authorizing resolutions or a supplemental indenture will set
forth the specific terms of each series of debt securities. We
will provide a prospectus supplement for each series of debt
securities that will describe:
|
|
|
|
|
the title of the debt securities and whether the debt securities
are senior, senior subordinated, or subordinated debt securities;
|
|
|
|
the aggregate principal amount of the debt securities and any
limit upon the aggregate principal amount of the series of debt
securities;
|
|
|
|
the date or dates on which principal of the debt securities will
be payable and the amount of principal which will be payable;
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the rate or rates (which may be fixed or variable) at which the
debt securities will bear interest, if any, as well as the dates
from which interest will accrue, the dates on which interest
will be payable and the record date for the interest payable on
any payment date;
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the currency or currencies in which principal, premium, if any,
and interest, if any, will be payable;
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the place or places where principal, premium, if any, and
interest, if any, on the debt securities will be payable and
where debt securities which are in registered form can be
presented for registration of transfer or exchange; and the
identification of any depositary or depositaries for any global
debt securities;
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any provisions regarding our right to redeem or purchase debt
securities or the right of holders to require us to redeem or
purchase debt securities;
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the right, if any, of holders of the debt securities to convert
them into our common stock or other securities, including any
provisions intended to prevent dilution of the conversion rights;
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any provisions requiring or permitting us to make payments to a
sinking fund to be used to redeem debt securities or a purchase
fund to be used to purchase debt securities;
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the percentage of the principal amount at which debt securities
will be issued and, if other than the full principal amount
thereof, the percentage of the principal amount of the debt
securities which is payable if maturity of the debt securities
is accelerated because of a default;
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the terms, if any, upon which debt securities may be
subordinated to our other indebtedness;
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any additions to, modifications of or deletions from the terms
of the debt securities with respect to events of default or
covenants or other provisions set forth in the
indenture; and
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any other material terms of the debt securities, which may be
different from the terms set forth in this prospectus.
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Each prospectus supplement will describe, as to the debt
securities to which it relates, any guarantees by our direct and
indirect subsidiaries which may guarantee the debt securities,
including the terms of subordination, if any, of any such
guarantee.
The applicable prospectus supplement will also describe any
material covenants to which a series of debt securities will be
subject.
Events of
Default and Remedies
Unless otherwise described in the prospectus supplement, an
event of default with respect to any series of debt securities
will be defined in the indenture or applicable supplemental
indenture as being:
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our default in payment of the principal of or premium, if any,
on any of the debt securities of such series;
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default for 30 days in payment of any installment of
interest on any debt security of such series beyond any
applicable grace period;
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default by us or any guarantor subsidiary for 60 days after
notice in the observance or performance of any other covenants
in the indenture or applicable supplemental indenture relating
to such series; and
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bankruptcy, insolvency or reorganization of our company or our
significant guarantor subsidiaries.
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The indenture will provide that the trustee may withhold notice
to the holders of any series of debt securities of any default,
except a default in payment of principal, premium, if any, or
interest, if any, with respect to such series of debt
securities, if the trustee considers it in the interest of the
holders of such series of debt securities to do so.
The indenture will provide that if any event of default has
occurred and is continuing with respect to any series of debt
securities, the trustee or the holders of not less than 25% in
principal amount of such series of debt securities then
outstanding may declare the principal of all the debt securities
of such series to be due and payable immediately. However, the
holders of a majority in principal amount of the debt securities
of such series then outstanding by written notice to the trustee
and to us may waive any event of default with respect to such
series of debt securities, other than any event of default in
payment of principal or interest. Holders of a majority in
principal amount of the then outstanding debt securities of any
series may rescind an acceleration with respect to such series
and its consequences, except an acceleration due to nonpayment
of principal or interest on such series, if the rescission would
not conflict with any judgment or decree and if all existing
events of default with respect to such series have been cured or
waived.
The holders of a majority of the outstanding principal amount of
the debt securities of any series will have the right to direct
the time, method and place of conducting any proceedings for any
remedy available to the trustee with respect to such series,
subject to limitations specified in the indenture.
Defeasance
The indenture will permit us and our guarantor subsidiaries to
terminate all our respective obligations under the indenture as
they relate to any particular series of debt securities, other
than the obligation to pay interest, if any, on and the
principal of the debt securities of such series and certain
other obligations, at any time by:
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depositing in trust with the trustee, under an irrevocable trust
agreement, money or U.S. government obligations in an
amount sufficient to pay principal of and interest, if any, on
the debt securities of such series to their maturity; and
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complying with other conditions, including delivery to the
trustee of an opinion of counsel or a ruling received from the
Internal Revenue Service to the effect that holders will not
recognize income, gain or loss for federal income tax purposes
as a result of our exercise of such right and will be subject to
federal income tax on the same amount and in the same manner and
at the same times as would have been the case otherwise.
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In addition, the indenture will permit us and our guarantor
subsidiaries to terminate all of our respective obligations
under the indenture as they relate to any particular series of
debt securities, including the obligations to
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pay interest, if any, on and the principal of the debt
securities of such series and certain other obligations, at any
time by:
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depositing in trust with the trustee, under an irrevocable trust
agreement, money or U.S. government obligations in an
amount sufficient to pay principal of and interest, if any, on
the debt securities of such series to their maturity; and
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complying with other conditions, including delivery to the
trustee of an opinion of counsel or a ruling received from the
Internal Revenue Service to the effect that holders will not
recognize income, gain or loss for federal income tax purposes
as a result of our exercise of such right and will be subject to
federal income tax on the same amount and in the same manner and
at the same times as would have been the case otherwise, which
opinion of counsel is based upon a change in the applicable
federal tax law since the date such series of debt securities
are originally issued.
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Transfer
and Exchange
A holder will be able to transfer or exchange debt securities
only in accordance with the indenture. The registrar may require
a holder, among other things, to furnish appropriate
endorsements and transfer documents, and to pay any taxes and
fees required by law or permitted by the indenture.
Amendment,
Supplement and Waiver
Without the consent of any holder, we and the trustee may amend
or supplement the indenture, the debt securities or the
guarantees of debt securities to:
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cure any ambiguity, defect or inconsistency;
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create a series and establish its terms;
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provide for uncertificated debt securities in addition to or in
place of certificated debt securities;
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make any change that does not adversely affect the legal rights
of any holder; or
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delete a guarantor subsidiary which, in accordance with the
terms of the indenture, ceases to be liable on its guarantee of
debt securities.
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With the exceptions discussed below, we and the trustee may
amend or supplement the indenture, the debt securities or the
guarantees of a particular series with the consent of the
holders of at least a majority in principal amount of the debt
securities of such series then outstanding. In addition, the
holders of a majority in principal amount of the debt securities
of such series then outstanding may waive any existing default
under, or compliance with, any provision of the indenture
relating to a particular series of debt securities, other than
any event of default in payment of interest or principal. These
consents and waivers may be obtained in connection with a tender
offer or exchange offer for debt securities.
Without the consent of each holder affected, we and the trustee
may not:
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reduce the amount of debt securities of such series whose
holders must consent to an amendment, supplement or waiver;
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reduce the rate of or change the time for payment of interest;
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reduce the principal of or change the fixed maturity of any debt
security or alter the provisions with respect to redemptions or
mandatory offers to repurchase debt securities;
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make any debt security payable at a place or in money other than
that stated in the debt security;
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modify the ranking or priority of the debt securities or any
guarantee;
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release any guarantor from any of its obligations under its
guarantee or the indenture except in accordance with the
indenture; or
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waive a continuing default in the payment of principal of or
interest on the debt securities.
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The right of any holder to participate in any consent required
or sought pursuant to any provision of the indenture, and our
obligation to obtain any such consent otherwise required from
such holder, may be subject to the requirement that such holder
shall have been the holder of record of debt securities with
respect to which such consent is required or sought as of a date
identified by the trustee in a notice furnished to holders in
accordance with the indenture.
Concerning
the Trustee
In the ordinary course of its business, American Stock Transfer
and Trust Company, the trustee, provides, and may continue to
provide, service to us as transfer agent for our common stock
and trustee under indentures relating to our senior notes and
senior subordinated notes. The indenture contains, or will
contain, limitations on the rights of the trustee, should it
become our creditor, to obtain payment of claims in specified
cases or to realize on property received in respect of any such
claim as security or otherwise. The indenture permits, or will
permit, the trustee to engage in other transactions; however, if
it acquires any conflicting interest, it must eliminate such
conflict or resign.
The indenture provides, or will provide, that in case an event
of default occurs and is not cured, the trustee will be
required, in the exercise of its power, to use the degree of
care of a prudent person in similar circumstances in the conduct
of such persons own affairs. The trustee may refuse to
perform any duty or exercise any right or power under the
indenture, unless it receives indemnity satisfactory to it
against any loss, liability or expense.
Governing
Law
The laws of the State of New York govern, or will govern, the
indenture, the debt securities and the guarantees of the debt
securities.
DESCRIPTION
OF COMMON STOCK, PREFERRED STOCK AND DEPOSITARY SHARES
Our authorized capital stock is 1,000,000,000 shares of
common stock, $.01 par value, and 30,000,000 shares of
preferred stock, $.10 par value. At June 7, 2006,
312,857,403 shares of common stock and no shares of
preferred stock were outstanding.
Common
Stock
Holders of our common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of
stockholders. The vote of the holders of a majority of the stock
represented at a meeting at which a quorum is present is
generally required to take stockholder action, unless a greater
vote is required by law. The holders are not entitled to
cumulative voting in the election of directors. Directors are
elected by plurality vote. Accordingly, the holder or holders of
a majority of the outstanding shares of common stock will be
able to elect our entire board of directors.
Holders of common stock have no preemptive rights. They are
entitled to such dividends as may be declared by our board of
directors out of funds legally available for such purpose. The
common stock is not entitled to any sinking fund, redemption or
conversion provisions. On our liquidation, dissolution or
winding up, the holders of common stock are entitled to share
ratably in our net assets remaining after the payment of all
creditors and liquidation preferences of preferred stock, if
any. The outstanding shares of common stock are duly authorized,
validly issued, fully paid and nonassessable. There will be a
prospectus supplement relating to any offering of common stock
offered by this prospectus.
The transfer agent and registrar for the common stock is
American Stock Transfer & Trust Company, New York, New
York, which currently serves as trustee for our series of senior
notes and senior subordinated notes described in
Description of Debt
Securities Concerning the Trustee
and may also serve as trustee under other indentures for debt
securities offered by this prospectus.
The following provisions in our charter or bylaws may make a
takeover of our company more difficult:
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an article in our charter prohibiting stockholder action by
written consent;
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an article in our charter requiring the affirmative vote of the
holders of two-thirds of the outstanding shares of common stock
to remove a director;
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a bylaw limiting the persons who may call special meetings of
stockholders to our board of directors or a committee authorized
to call a meeting by the board or the bylaws; and
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bylaws providing time limitations for nominations for election
to the board of directors or for proposing matters which can be
acted upon at stockholders meetings.
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These provisions may delay stockholder actions with respect to
business combinations and the election of new members to our
board of directors. As such, the provisions could discourage
open market purchases of our common stock because a stockholder
who desires to participate in a business combination or elect a
new director may consider them disadvantageous. Additionally,
the issuance of preferred stock could delay or prevent a change
of control or other corporate action.
As a Delaware corporation, we are subject to Section 203 of
the Delaware General Corporation Law. In general,
Section 203 prevents an interested stockholder
from engaging in a business combination with us for
three years following the date that person became an interested
stockholder, unless:
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before that person became an interested stockholder, our board
of directors approved the transaction in which the interested
stockholder became an interested stockholder or approved the
business combination;
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upon completion of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of our voting stock
outstanding at the time the transaction commenced, excluding
stock held by persons who are both directors and officers of our
corporation or by certain employee stock plans; or
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on or following the date on which that person became an
interested stockholder, the business combination is approved by
our board of directors and authorized at a meeting of
stockholders by the affirmative vote of the holders of at least
662/3%
of our outstanding voting stock excluding shares held by the
interested stockholder.
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An interested stockholder is generally a person
owning 15% or more of our outstanding voting stock. A
business combination includes mergers, asset sales
and other transactions resulting in a financial benefit to the
interested stockholder.
Preferred
Stock
We may issue preferred stock in series with any rights and
preferences which may be authorized by our board of directors.
We will distribute a prospectus supplement with regard to each
particular series of preferred stock. Each prospectus supplement
will describe, as to the series of preferred stock to which it
relates:
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the title of the series of preferred stock;
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any limit upon the number of shares of the series of preferred
stock which may be issued;
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the preference, if any, to which holders of the series of
preferred stock will be entitled upon our liquidation;
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the date or dates on which we will be required or permitted to
redeem the preferred stock;
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the terms, if any, on which we or holders of the preferred stock
will have the option to cause the preferred stock to be redeemed
or purchased;
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the voting rights, if any, of the holders of the preferred stock;
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the dividends, if any, which will be payable with regard to the
series of preferred stock, which may be fixed dividends or
participating dividends and may be cumulative or non-cumulative;
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the right, if any, of holders of the preferred stock to convert
it into another class of our stock or securities, including
provisions intended to prevent dilution of those conversion
rights;
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any provisions by which we will be required or permitted to make
payments to a sinking fund to be used to redeem preferred stock
or a purchase fund to be used to purchase preferred
stock; and
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any other material terms of the preferred stock.
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Holders of shares of preferred stock will not have preemptive
rights.
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Depositary
Shares
General. We may, at our option, elect to offer
fractional shares of preferred stock, rather than full shares of
preferred stock. If we exercise this option, we will issue to
the public receipts for depositary shares, and each of these
depositary shares will represent a fraction (to be set forth in
the applicable prospectus supplement) of a share of a particular
series of preferred stock.
The shares of any series of preferred stock underlying the
depositary shares will be deposited under a deposit agreement
between us and a bank or trust company selected by us. The
depositary will have its principal office in the United States
and a combined capital and surplus of at least $50,000,000.
Subject to the terms of the deposit agreement, each owner of a
depositary share will be entitled, in proportion, to the
applicable fraction of a share of preferred stock underlying
that depositary share, to all the rights and preferences of the
preferred stock underlying that depositary share. Those rights
include dividend, voting, redemption and liquidation rights.
The depositary shares will be evidenced by depositary receipts
issued pursuant to the deposit agreement. Depositary receipts
will be distributed to those persons purchasing the fractional
shares of preferred stock underlying the depositary shares, in
accordance with the terms of the offering. Copies of the forms
of deposit agreement and depositary receipt will be filed as
exhibits to the registration statement. The following summary of
the deposit agreement, the depositary shares and the depositary
receipts is not complete. You should refer to the forms of the
deposit agreement and depositary receipts that will be filed
with the SEC in connection with the offering of the specific
depositary shares.
Pending the preparation of definitive engraved depositary
receipts, the depositary may, upon our written order, issue
temporary depositary receipts substantially identical to the
definitive depositary receipts but not in definitive form. These
temporary depositary receipts entitle their holders to all the
rights of definitive depositary receipts which are to be
prepared without unreasonable delay. Temporary depositary
receipts will then be exchangeable for definitive depositary
receipts at our expense.
Dividends and Other Distributions. The
depositary will distribute all cash dividends or other cash
distributions received with respect to the preferred stock to
the record holders of depositary shares relating to the
preferred stock in proportion to the number of depositary shares
owned by those holders.
If there is a distribution other than in cash, the depositary
will distribute property received by it to the record holders of
depositary shares that are entitled to receive the distribution,
unless the depositary determines that it is not feasible to make
the distribution. If this occurs, the depositary may, with our
approval, sell the property and distribute the net proceeds from
the sale to the applicable holders.
Redemption of Depositary Shares. If a series
of preferred stock represented by depositary shares is subject
to redemption, the depositary shares will be redeemed from the
proceeds received by the depositary resulting from the
redemption, in whole or in part, of that series of preferred
stock held by the depositary. The redemption price per
depositary share will be equal to the applicable redemption
fraction of the redemption price per share payable with respect
to that series of the preferred stock. Whenever we redeem shares
of preferred stock that are held by the depositary, the
depositary will redeem, as of the same redemption date, the
number of depositary shares representing the shares of preferred
stock so redeemed. If fewer than all the depositary shares are
to be redeemed, the depositary shares to be redeemed will be
selected by lot or pro rata as may be determined by the
depositary.
Voting the Preferred Stock. Upon receipt of
notice of any meeting at which the holders of the preferred
stock are entitled to vote, the depositary will mail the
information contained in such notice to the record holders of
the depositary shares underlying the preferred stock. Each
record holder of the depositary shares on the record date, which
will be the same date as the record date for the preferred
stock, will be entitled to instruct the depositary as to the
exercise of the voting rights pertaining to the amount of the
preferred stock represented by the holders depositary
shares. The depositary will then try, as far as practicable, to
vote the number of shares of preferred stock underlying those
depositary shares in accordance with such instructions. We will
agree to take all actions which may be deemed necessary by the
depositary to enable the depositary to do so. The depositary
will not vote the shares of preferred stock to the extent it
does not receive specific instructions from the holders of
depositary shares underlying the preferred stock.
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Amendment and Termination of the Depositary
Agreement. The form of depositary receipt
evidencing the depositary shares and any provision of the
deposit agreement may at any time be amended by agreement
between us and the depositary. However, any amendment which
materially and adversely alters the rights of the holders of
depositary shares will not be effective unless the amendment has
been approved by the holders of at least a majority of the
depositary shares then outstanding. The deposit agreement may be
terminated by us or by the depositary only if (a) all
outstanding depositary shares have been redeemed or
(b) there has been a final distribution of the underlying
preferred stock in connection with our liquidation, dissolution
or winding up and the preferred stock has been distributed to
the holders of depositary receipts.
Charges of Depositary. We will pay all
transfer and other taxes and governmental charges arising solely
from the existence of the depositary arrangements. We will also
pay charges of the depositary in connection with the initial
deposit of the preferred stock and any redemption of the
preferred stock. Holders of depositary receipts will pay other
transfer and other taxes and governmental charges and those
other charges, including a fee for the withdrawal of shares of
preferred stock upon surrender of depositary receipts, as are
expressly provided in the deposit agreement to be for their
accounts.
Miscellaneous. The depositary will forward to
holders of depositary receipts all reports and communications
from us that we deliver to the depositary and that we are
required to furnish to the holders of the preferred stock.
Neither we nor the depositary will be liable if either of us is
prevented or delayed by law or any circumstance beyond our
control in performing our respective obligations under the
deposit agreement. Our obligations and those of the depositary
will be limited to performance in good faith of our respective
duties under the deposit agreement. Neither we nor the
depositary will be obligated to prosecute or defend any legal
proceeding in respect of any depositary shares or preferred
stock unless satisfactory indemnity is furnished. We and the
depositary may rely upon written advice of counsel or
accountants, or upon information provided by persons presenting
preferred stock for deposit, holders of depositary receipts or
other persons believed to be competent and on documents believed
to be genuine.
Resignation and Removal of Depositary. The
depositary may resign at any time by delivering notice to us of
its election to resign. We may remove the depositary at any
time. Any resignation or removal will take effect upon the
appointment of a successor depositary and its acceptance of the
appointment. The successor depositary must be appointed within
60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and
surplus of at least $50,000,000.
DESCRIPTION
OF WARRANTS
We may issue warrants for the purchase of debt securities,
preferred stock, common stock, or units of two or more of these
types of securities. Each series of warrants will be issued
under a separate warrant agreement to be entered into between us
and a bank or trust company, as warrant agent. The warrant agent
will act solely as our agent in connection with the warrants and
will not assume any obligation or relationship of agency or
trust for or with any registered holders of warrants or
beneficial owners of warrants.
We will distribute a prospectus supplement with regard to each
issue of warrants. Each prospectus supplement will describe:
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in the case of warrants to purchase debt securities, the
designation, aggregate principal amount, currencies,
denominations and terms of the series of debt securities
purchasable upon exercise of the warrants and the price at which
you may purchase the debt securities upon exercise;
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in the case of warrants to purchase preferred stock, the
designation, number of shares, stated value and terms, such as
liquidation, dividend, conversion and voting rights, of the
series of preferred stock purchasable upon exercise of the
warrants and the price at which you may purchase such number of
shares of preferred stock of such series upon such exercise;
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in the case of warrants to purchase common stock, the number of
shares of common stock purchasable upon the exercise of the
warrants and the price at which you may purchase such number of
shares of common stock upon such exercise;
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the period during which you may exercise the warrants;
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any provision adjusting the securities that may be purchased on
exercise of the warrants, and the exercise price of the
warrants, to prevent dilution or otherwise;
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the place or places where warrants can be presented for exercise
or for registration of transfer or exchange; and
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any other material terms of the warrants.
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Warrants for the purchase of preferred stock and common stock
will be offered and exercisable for U.S. dollars only.
Warrants will be issued in registered form only. The exercise
price for warrants will be subject to adjustment as described in
the applicable prospectus supplement.
Prior to the exercise of any warrants to purchase debt
securities, preferred stock or common stock, holders of the
warrants will not have any of the rights of holders of the debt
securities, preferred stock or common stock purchasable upon
exercise, including:
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in the case of warrants for the purchase of debt securities, the
right to receive payments of principal of, any premium or
interest on the debt securities purchasable upon exercise or to
enforce covenants in the applicable indenture; or
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in the case of warrants for the purchase of preferred stock or
common stock, the right to vote or to receive any payments of
dividends on the preferred stock or common stock purchasable
upon exercise.
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DESCRIPTION
OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
We may issue stock purchase contracts, including contracts
obligating holders to purchase from us, and obligating us to
sell to the holders, a specified number of shares of common
stock at a future date or dates. The consideration per share of
common stock may be fixed at the time stock purchase contracts
are issued or may be determined by reference to a specific
formula set forth in the stock purchase contracts. The stock
purchase contracts may be issued separately, or as part of stock
purchase units consisting of a stock purchase contract and debt
securities, trust preferred securities or debt obligations of
third parties, including U.S. treasury securities, securing
the holders obligations to purchase the common stock under
the stock purchase contracts. The stock purchase contracts may
require us to make periodic payments to the holders of the stock
purchase units or vice versa, and such payments may be unsecured
or prefunded on some basis. The stock purchase contracts may
require holders to secure their obligations thereunder in a
specified manner.
The applicable prospectus supplement will describe the terms of
any stock purchase contracts or stock purchase units. The
description in the prospectus supplement will not necessarily be
complete, and reference will be made to the stock purchase
contract, and, if applicable, collateral or depositary
arrangements, relating to such stock purchase contracts or stock
purchase units. Material United States federal income tax
considerations applicable to the stock purchase units and the
stock purchase contracts will be discussed in the related
prospectus supplement.
DESCRIPTION
OF UNITS
As specified in the applicable prospectus supplement, units will
consist of one or more stock purchase contracts, warrants, debt
securities, debt securities guarantees, trust preferred
securities, guarantees of trust preferred securities, preferred
stock, common stock, or any combination thereof. You should
refer to the applicable prospectus supplement for:
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all terms of the units and of the stock purchase contracts,
warrants, debt securities, debt securities guarantees, trust
preferred securities, guarantees of trust preferred securities,
shares of preferred stock or shares of common stock or any
combination thereof comprising the units, including whether and
under what circumstances the securities comprising the units may
or may not be traded separately;
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a description of the terms of any unit agreement governing the
units; and
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a description of the provisions for the payment, settlement,
transfer or exchange of the units.
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DESCRIPTION
OF TRUST PREFERRED SECURITIES
Description
of Trust Securities
Each trust may issue only one series of trust preferred
securities having terms described in its related prospectus
supplement. Each trust agreement will be qualified as an
indenture under the Trust Indenture Act and will contain the
terms of the trust preferred securities. The property trustee
will act as indenture trustee for purposes of the Trust
Indenture Act.
We will set forth the terms of the trust preferred securities,
including distributions, redemption, voting, liquidation rights
and such other preferred, deferred or other special rights or
restrictions, in the trust agreement. In addition, the Trust
Indenture Act automatically makes some terms a part of the trust
agreement. The terms of the trust preferred securities will
correspond to the terms of the subordinated trust debt
securities held by the trust and described in the related
prospectus supplement.
The prospectus supplement relating to the trust preferred
securities of a trust will include the specific terms of the
series of trust preferred securities being issued, including:
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the distinctive designation of the trust preferred securities;
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the number of trust preferred securities issuable by the trust;
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the annual distribution rate, or method of determining such
rate, for trust preferred securities and the date or dates upon
which such distributions will be payable and the record date or
dates for the payment of such distributions;
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whether distributions on trust preferred securities will be
cumulative, and, in the case of trust preferred securities
having such cumulative distribution rights, the date or dates or
method of determining the date or dates from which distributions
on trust preferred securities will be cumulative;
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the amount or amounts which will be paid out of the assets of
the trust to the holders of trust preferred securities upon
voluntary or involuntary dissolution,
winding-up
or termination of the trust;
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the obligation or right, if any, of the trust to purchase or
redeem trust preferred securities and the price or prices at
which, the period or periods within which, and the terms and
conditions upon which trust preferred securities will be
purchased or redeemed, in whole or in part, pursuant to such
obligation or right;
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the voting rights, if any, of holders of trust preferred
securities in addition to those required by law, including the
number of votes per trust preferred security and any requirement
for approval by the holders of such trust preferred securities,
or of trust preferred securities issued by other trusts, or
both, as a condition to specified action or amendments to the
trust agreement;
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the terms for any conversion or exchange into other securities;
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the terms and conditions, if any, upon which the subordinated
trust debt securities owned by the trust may be distributed to
holders of trust preferred securities;
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if applicable, any securities exchange upon which the trust
preferred securities will be listed; and
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any other relevant rights, preferences, privileges, limitations
or restrictions of trust preferred securities not inconsistent
with the trust agreement or with applicable law.
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We will guarantee distributions on trust preferred securities to
the extent set forth below under Description of
Trust Guarantees. We will describe material United
States federal income tax considerations applicable to trust
preferred securities in a prospectus supplement relating to the
trust preferred securities.
Each trust will issue a series of trust common securities in
connection with the issuance of trust preferred securities.
Except for voting rights, the terms of trust common securities
will be substantially identical to the terms of trust preferred
securities. Trust common securities will rank equally with trust
preferred securities except that, upon an event of default under
the trust agreement, the rights of holders of trust common
securities to payments will
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be subordinated to the rights of holders of trust preferred
securities. The trust common securities will also carry the
right to vote to appoint, remove or replace any trustee of the
trust. We will own all of the trust common securities.
Enforcement
of Certain Rights by Holders of Trust Preferred
Securities
If an event of default as defined in the applicable trust
agreement occurs and is continuing, then the holders of trust
preferred securities of such trust would rely on the enforcement
by the property trustee of its rights as a holder of the
applicable series of subordinated trust debt securities against
us. In addition, so long as their directions do not conflict
with any rule of law or with such trust agreement, and could not
involve such property trustee in personal liability in
circumstances where reasonable indemnity would not be adequate,
the holders of a majority in aggregate liquidation amount of
trust preferred securities of such trust may direct the property
trustee as to:
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the time, method and place of conducting any proceeding for any
remedy available to such property trustee;
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the exercise of any trust or power conferred upon such property
trustee under such trust agreement; and
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the exercise of the remedies available to the property trustee
as a holder of subordinated trust debt securities.
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If such property trustee fails to enforce its rights under the
subordinated trust debt securities held by such trust, a holder
of trust preferred securities of such trust may, to the extent
permitted by law, institute a legal proceeding directly against
us to enforce such property trustees rights under such
trust agreement. In such case, the holder would not be required
to institute a legal proceeding against the property trustee,
the trust or any other person. In no event will such holder be
permitted or authorized to affect, disturb or prejudice the
rights of any other holder or to obtain or to seek to obtain
priority or preference over any other holder or to enforce any
right under such trust agreement, except in the manner described
in the trust agreement and for the equal and ratable benefit of
all such holders. Notwithstanding the foregoing, a holder of
trust preferred securities of such trust may institute a
proceeding directly against us for enforcement of payment to
such holder of the principal of or interest on the subordinated
trust debt securities held by such trust having a principal
amount equal to the aggregate stated liquidation amount of such
trust preferred securities held by such holder, on or after the
due dates specified or provided for in such subordinated trust
debt securities. In such case, the holder would not be required
to institute a legal proceeding against the property trustee,
the trust or any other person. In connection with such
proceeding, we will be subrogated to the rights of such holder
under the trust agreement to the extent of any payment made by
us to such holder.
Description
of Trust Guarantees
The following is a summary of information concerning the
guarantees of the trust preferred securities of each trust,
which we refer to as the trust guarantees. We will execute each
trust guarantee for the benefit of holders of trust preferred
securities. We will qualify each trust guarantee as an indenture
under the Trust Indenture Act. We will identify the trust
guarantee trustee for purposes of the Trust Indenture Act in a
prospectus supplement with respect to the trust preferred
securities.
The following summary does not purport to be complete and is
subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the form of trust guarantee,
which has been or will be filed as an exhibit to the
registration statement of which this prospectus forms a part.
The trust guarantee will be held by the trust guarantee trustee
for the benefit of holders of trust preferred securities.
General
To the extent set forth in the trust guarantee, we will agree to
pay in full the guarantee payments, described below, without
duplication of amounts theretofore paid by or on behalf of the
trust, as and when due regardless of any defense, right of set
off or counter-claim which we may have. With respect to trust
preferred securities issued by a trust, we will pay in full the
following payments or distributions as guarantee payments to the
extent the trust fails to pay or make such guarantee payments:
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any accrued and unpaid distributions on trust preferred
securities, to the extent such trust has funds legally and
immediately available therefor;
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the redemption price, to the extent such trust has funds legally
and immediately available therefor with respect to trust
preferred securities called for redemption; and
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upon voluntary or involuntary dissolution, winding up or
termination of such trust, other than in connection with the
distribution of subordinated trust debt securities to holders of
trust preferred securities or the redemption of all trust
preferred securities, the lesser of:
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the aggregate of the liquidation amount and all accrued and
unpaid distributions on such trust preferred securities to the
date of payment, to the extent such trust has funds legally and
immediately available therefor, and
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the amount of assets of the trust remaining available for
distribution to holders of trust preferred securities in
liquidation of the trust.
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We will determine the redemption price and liquidation amount at
the time the trust preferred securities are issued. We may
satisfy our obligation to make a guarantee payment by direct
payment of the required amounts to the holders of such trust
preferred securities or by causing the trust to pay such amounts
to such holders.
Each trust guarantee will not apply to any payment or
distribution except to the extent the applicable trust has funds
legally available for such payment or distribution. If we do not
make interest payments on the subordinated trust debt securities
purchased by a trust, such trust will not pay distributions on
such trust preferred securities issued by such trust and will
not have funds legally available. The trust guarantee, when
taken together with our obligations under the subordinated trust
debt securities, the applicable indenture and the trust
agreement, including our obligation to pay costs, expenses,
debt, and liabilities of such trust, other than with respect to
the trust securities, will be a full and unconditional
guarantee, on a subordinated basis, by us of payments due on the
trust preferred securities from the time of issuance.
Amendment
of Trust Guarantee; Assignment
Except for changes which do not materially adversely affect the
rights of holders of trust preferred securities, each trust
guarantee may be amended only with the approval of a majority in
liquidation amount of trust preferred securities issued by the
applicable trust. The manner of obtaining any such approval will
be as set forth in the applicable trust agreement. The trust
guarantee will bind the successors, assigns, receivers, trustees
and representatives of us and continue to benefit the trust
guarantee trustee and holders of trust preferred securities.
Except in connection with a consolidation, merger, conveyance,
transfer or lease involving us, permitted under the applicable
indenture, we may not assign our rights or delegate our
obligations under the trust guarantee.
Termination
of the Trust Guarantee
Each trust guarantee will terminate as to the trust preferred
securities issued by the applicable trust:
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upon full payment of the redemption price of all trust preferred
securities of such trust;
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upon distribution of subordinated trust debt securities held by
such trust to the holders of and in exchange for trust preferred
securities; or
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upon full payment of amounts payable in accordance with the
trust agreement upon liquidation of such trust.
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The trust guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of
trust preferred securities must repay any sums paid to them
under the trust preferred securities or trust guarantee.
Events
of Default
An event of default under a trust guarantee will occur if we
fail to make the payments required by the trust guarantee.
The holders of a majority in liquidation amount of trust
preferred securities relating to such trust guarantee have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to such trust guarantee
trustee or to direct the exercise of any trust or power
conferred upon such trust guarantee trustee
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under the trust guarantee. If the trust guarantee trustee fails
to enforce such trust guarantee, any holder of record of trust
preferred securities relating to such trust preferred guarantee
may institute a legal proceeding directly against us to enforce
the trust guarantee trustees rights, without first
instituting any other legal proceeding.
Status
of Trust Guarantee
The trust guarantee will constitute our unsecured obligation and
will rank:
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subordinate and junior in right of payment to all of our other
liabilities, including the subordinated trust debt securities,
except those made equal or subordinate by their terms;
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equal with the most senior preferred stock which may now or
hereafter be issued or guaranteed by us; and
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senior to our common stock.
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The terms of the trust preferred securities will provide that
each holder of trust preferred securities issued by such trust,
by acceptance thereof, agrees to the subordination provisions
and other terms of the related trust guarantee. Each trust
guarantee will constitute a guarantee of payment and not of
collection. This means that the guaranteed party may institute a
legal proceeding directly against the guarantor to enforce its
rights under such trust guarantee without instituting a legal
proceeding against any other person or entity. Each trust
guarantee will be deposited with the applicable trust guarantee
trustee to be held for the benefit of the holders of such trust
preferred securities. Except as otherwise noted herein, the
trust guarantee trustee has the right to enforce the trust
guarantee on behalf of the holders of the related trust
preferred securities. Except as described under
Termination of the Trust Guarantee above, the
trust guarantee will not be discharged except by payment of the
guarantee payments in full without duplication of amounts
theretofore paid by the trust.
Information
Concerning Trust Guarantee Trustee
The trust guarantee trustee, prior to the occurrence of a
default with respect to the trust guarantee and after the curing
of all such defaults that may have occurred, will undertake to
perform only such duties as are specifically set forth in the
trust guarantee and, during the continuance of any default, will
exercise the same degree of care as a prudent individual would
exercise in the conduct of such individuals own affairs.
Subject to such provisions, the trust guarantee trustee will be
under no obligation to exercise any of the powers vested in it
by the trust guarantee at the request of any holder of trust
preferred securities, unless offered reasonable indemnity
against the costs, expenses and liabilities which might be
incurred thereby. However, in any event, the trust guarantee
trustee must exercise the rights and powers vested in it by such
trust guarantee upon the occurrence of an event of default under
such trust guarantee. The trust guarantee trustee also serves as
property trustee.
Governing
Law
The trust guarantee will be governed by the laws of the State of
New York.
Agreement
as to Expenses and Liabilities
As will be required by the trust agreement, we will enter into
an agreement in which we irrevocably and unconditionally
guarantee to each person or entity to whom the trust becomes
indebted or liable the full payment of any indebtedness,
expenses or liabilities of the trust. This separate agreement as
to expenses and liabilities does not include obligations of the
trust to pay to the holders of the related trust securities or
other similar interests in the trust the amounts due such
holders pursuant to the terms of such trust securities or such
other similar interests, as the case may be.
Additional
Description of Subordinated Trust Debt Securities Issued to
the Trusts
Set forth below is a description of the terms of the
subordinated trust debt securities which each trust will hold as
trust assets. The subordinated trust debt securities may be
issued from time to time in one or more series under an
indenture between us and an indenture trustee, qualified to act
as such under the Trust Indenture Act and appointed in a
supplemental indenture with respect to a particular series. We
will identify the indenture trustee for purposes of
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the Trust Indenture Act in a prospectus supplement with respect
to the trust preferred securities. We will qualify each
subordinated trust debt securities indenture as an indenture
under the Trust Indenture Act. The following description does
not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the applicable indenture and
supplements creating and governing the subordinated trust debt
securities, which have been or will be filed as exhibits to the
registration statement of which this prospectus forms a part.
The terms of the subordinated trust debt securities will include
those stated in the indenture and the related supplemental
indenture and those made a part of the indenture by reference to
the Trust Indenture Act.
Upon a dissolution of a trust, the property trustee, following
satisfaction of liabilities to creditors of the trust in
accordance with the provisions of applicable law, may distribute
the subordinated trust debt securities held by such trust to the
holders of trust securities in liquidation of such trust.
If the property trustee distributes any subordinated trust debt
securities to holders of trust preferred securities, we will use
our best efforts to have such subordinated trust debt securities
traded on the same stock exchange, if any, as the related trust
preferred securities are traded.
General
Subordinated trust debt securities will be issued in a principal
amount equal to the aggregate stated liquidation amount of trust
preferred securities, plus our investment in trust common
securities.
The entire principal amount of the subordinated trust debt
securities held by each trust will mature and become due and
payable, together with any accrued and unpaid interest thereon,
including additional interest, if any, on the date set forth in
the applicable prospectus supplement.
If subordinated trust debt securities held by a trust are
distributed to holders of trust preferred securities of such
trust in liquidation of such holders interests in such
trust, such subordinated trust debt securities will initially be
issued as a global security. Under certain limited
circumstances, subordinated trust debt securities may be issued
in certificated form in exchange for a global security. In the
event subordinated trust debt securities are issued in
certificated form, such subordinated trust debt securities will
be in denominations as specified in the applicable prospectus
supplement and integral multiples thereof and may be transferred
or exchanged at the offices described therein. We will make
payments on subordinated trust debt securities issued as a
global security to the depositary for the subordinated trust
debt securities. In the event subordinated trust debt securities
are issued in certificated form, principal and interest will be
payable, the transfer of the subordinated trust debt securities
will be registrable and subordinated trust debt securities will
be exchangeable for subordinated trust debt securities of other
denominations of a like aggregate principal amount at the
corporate trust office of the indenture trustee in New York, New
York. In such an event, however, at our option, we may pay
interest by check mailed to the address of the persons entitled
thereto.
Certain
Covenants
We will covenant, as long as trust preferred securities of a
trust remain outstanding:
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to maintain 100% ownership of trust common securities of such
trust;
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not to cause such trust to terminate, except in connection with
a distribution of subordinated trust debt securities; and
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to use our reasonable efforts to cause such trust:
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to remain a statutory business trust, except in connection with
the distribution of subordinated trust debt securities held by
such trust to the holders of trust securities in liquidation of
such trust, the redemption of all trust securities, or certain
mergers, consolidations or amalgamations, each as permitted by
the trust agreement, and
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to otherwise continue to be classified as a grantor trust for
United States federal income tax purposes.
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Optional
Redemption
We will have the right to redeem the subordinated trust debt
securities, in whole or in part, from time to time, without
premium or penalty, on or after the date set forth in the
applicable prospectus supplement, upon not less than 30 or more
than 60 days notice, at a redemption price equal to a
premium on the principal amount to be redeemed plus any accrued
and unpaid interest, including additional interest, if any, to
the redemption date, as specified in the applicable prospectus
supplement. If a partial redemption of the trust preferred
securities resulting from a partial redemption of the
subordinated trust debt securities held by a trust would result
in the delisting of the trust preferred securities of such
trust, we may only redeem such subordinated trust debt
securities held by such trust in whole. In addition, if a change
in tax or securities laws occurs that adversely affects
specified tax or securities characteristics of the trust, upon
not less than 30 or more than 60 days notice, within
90 days after the occurrence of such event and subject to
the terms and conditions of the subordinated indenture, we may
redeem such subordinated trust debt securities, in whole, at a
price equal to 100% of the principal amount to be redeemed plus
any accrued but unpaid interest, including additional interest,
if any, to the redemption date. In the event of redemption of
such subordinated trust debt securities in part only, we will
issue new subordinated trust debt securities for the unredeemed
portion in the name or names of the holders who surrender their
unredeemed subordinated trust debt securities.
Interest
Each subordinated trust debt security will bear interest at the
rate set forth in the applicable prospectus supplement from the
original date of issuance, payable quarterly in arrears on the
interest payment dates which will be specified in the prospectus
supplement, to the person in whose name such subordinated trust
debt security is registered, subject to specified exceptions, on
the record date specified in the applicable prospectus
supplement.
The amount of interest payable for any period will be computed
on the basis of a
360-day year
of twelve
30-day
months. In the event that any date on which interest is payable
on the subordinated trust debt securities is not a business day,
then we will pay the interest payable on such date on the next
succeeding day which is a business day, and without any interest
or other payment in respect of any such delay, except that, if
such business day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding business day,
in each case with the same force and effect as if made on such
date.
Option
To Extend Interest Payment Period
Except to the extent set forth in the applicable prospectus
supplement, we will have the right at any time to defer payments
of interest on subordinated trust debt securities by extending
the interest payment period for up to 20 consecutive quarters.
At the end of such an extension period, we will pay all interest
then accrued and unpaid, including any additional interest,
together with interest thereon at the rate specified and to the
extent permitted by applicable law. We will covenant in the
applicable indenture for the benefit of the holders of a series
of subordinated trust debt securities, that, subject to the next
succeeding sentence:
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we will not declare or pay any dividend on, or make any
distributions with respect to, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of our capital
stock; and
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we will not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities
(including guarantees other than the trust guarantee) issued by
us which rank junior to the applicable series of subordinated
trust debt securities:
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if at such time we will have given notice of our election to
extend an interest payment period for a series of subordinated
trust debt securities and such extension shall be
continuing, or
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if at such time an event of default with respect to a series of
subordinated trust debt securities will have occurred and be
continuing.
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The preceding sentence, however, shall not restrict:
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any of the actions described in the preceding sentence resulting
from any reclassification of our capital stock or the exchange
or conversion of one class or series of our capital stock for
another class or series of our capital stock;
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repurchases, redemptions or other acquisitions of shares of our
capital stock in connection with any employment contract,
benefit plan or other similar arrangement with or for the
benefit of employees, officers or directors or a stock purchase
and dividend reinvestment plan;
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dividends or distributions in our capital stock; or
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the purchase of fractional interests in shares of our capital
stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged.
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Prior to the termination of any such extension period for a
series of subordinated trust debt securities, we may further
defer payments of interest on such subordinated trust debt
securities, by extending the interest payment period, provided
that such extension period together with all such previous and
further extensions thereof for such series of subordinated trust
debt securities may not exceed 20 consecutive quarters or extend
beyond the maturity of such series of subordinated trust debt
securities.
Upon the termination of any extension period for a series of
subordinated trust debt securities, and the payment of all
accrued and unpaid interest on the subordinated trust debt
securities then due, we may select a new extension period for
such series of subordinated trust debt securities, as if no
extension period had previously been declared, subject to the
above requirements. We will not be required to pay interest on a
series of subordinated trust debt securities during an extension
period until the end thereof.
If the property trustee is the sole holder of the subordinated
trust debt securities, we will give the administrative trustees
and the property trustee notice of our selection of such
extension period for such series of subordinated trust debt
securities one business day prior to the earlier of (1) the
next succeeding date on which distributions on the related trust
preferred securities are payable or (2) the date a trust is
required to give notice to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of such
trust preferred securities on the record date or the date such
distribution is payable, but in any event not less than one
business day prior to such record date. The administrative
trustees shall give notice of our selection of such extension
period to the holders of such trust preferred securities. If the
property trustee is not the sole holder of a series of
subordinated trust debt securities, we will give the holders of
such subordinated trust debt securities notice of our selection
of such extension period ten business days prior to the earlier
of (1) the interest payment date or (2) the date we
are required to give notice to the New York Stock Exchange or
other applicable self-regulatory organization or to holders of
such subordinated trust debt securities, but in any event at
least two business days before such record date.
We have no present intention to defer interest payments.
Additional
Interest
If a trust is required to pay any taxes, duties, assessments or
other governmental charges, other than withholding taxes,
imposed by the United States, or any other taxing authority, we
will pay as additional interest such additional amounts as shall
be required so that the net amounts received and retained by a
trust after paying any such charges will be equal to the amount
such trust would have received had no such charge been imposed.
Events
of Default Under Applicable Indenture
We will define an event of default with respect to any series of
subordinated trust debt securities in the indenture or
applicable supplemental indenture. An event of default may
include:
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our default in payment of the principal of or premium, if any,
on any of the subordinated trust debt securities of such series;
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default for 30 days in payment of any installment of
interest, including additional interest, on any subordinated
trust debt security of such series beyond a valid extension;
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default by us for 60 days after notice in the observance or
performance of any other covenants in the indenture or
applicable supplemental indenture relating to such
series; and
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voluntary or involuntary dissolution, winding up, termination,
bankruptcy, insolvency or reorganization of a trust, except in
connection with:
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the distribution of subordinated trust debt securities to
holders of trust securities in liquidation of a trust,
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the redemption of all outstanding trust securities of such
trust, or
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mergers or consolidations permitted by the trust agreement.
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The holders of not less than a majority in aggregate principal
amount of subordinated trust debt securities may waive any past
default, except (1) a default in payment of principal,
premium, interest or additional interest, unless such default
has been cured and a sum sufficient to pay all installments due
otherwise than by acceleration has been deposited with the
subordinated debt security trustee, or (2) a default in a
covenant or provision which under the applicable indenture may
not be modified or amended without the consent of each holder of
a subordinated trust debt security. The holders of trust
preferred securities in certain circumstances have the right to
direct the property trustee to exercise its rights as holder of
subordinated debt securities.
Payment
and Paying Agents
Payment of principal and premium, if any, on subordinated trust
debt securities will be made only if the holder of subordinated
trust debt securities surrenders them to the paying agent of the
subordinated trust debt securities.
Principal of and any premium and interest, if any, on
subordinated trust debt securities will be payable, subject to
any applicable laws and regulations, at the office of such
paying agent or paying agents as we may designate from time to
time pursuant to the subordinated trust debt security indenture.
Payment of interest on the subordinated trust debt securities on
any interest payment date will be made to the person in whose
name the subordinated trust debt security is registered at the
close of business on the regular record date for such interest
payment.
The indenture trustee will act as paying agent with respect to
the subordinated trust debt securities. We may at any time
designate additional paying agents or rescind the designation of
any paying agent or approve a change in the office through which
any paying agent acts, except that we will be required to
maintain a paying agent at the place of payment.
Consolidation,
Merger and Sale
The applicable indenture will provide that we will be permitted
to consolidate with, or sell or convey all or substantially all
of our assets to, or merge with or into, any other entity
provided that:
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either we shall be the continuing entity, or the successor
entity formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets
shall expressly assume our obligations under the trust guarantee
and the payment of the principal of, and premium, if any, and
interest on all of the subordinated trust debt securities and
the due and punctual performance and observance of all of the
covenants and conditions contained in the applicable indenture;
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immediately after giving effect to such transaction and treating
any indebtedness that becomes an obligation of ours or any
subsidiary as a result thereof as having been incurred by us or
such subsidiary at the time of such transaction, no event of
default under the applicable indenture or the trust guarantee,
and no event which, after notice or the lapse of time, or both,
would become such an event of default, shall have occurred and
be continuing; and
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an officers certificate and legal opinion covering such
conditions shall be delivered to the indenture trustee.
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The indenture will not otherwise contain any covenant which
restricts our ability to merge or consolidate with or into any
other person, sell or convey all or substantially all of our
assets to any person or otherwise engage in restructuring
transactions.
Information
Concerning Indenture Trustee for the Subordinated
Trust Debt Securities
The indenture trustee for the subordinated trust debt
securities, prior to default and after the curing of all
defaults, if any, will undertake to perform only such duties as
will be specifically set forth in the applicable indenture and,
after a default that has not been cured or waived, will exercise
the same degree of care as a prudent individual would exercise
in the conduct of his or her own affairs. Subject to such
provision, the indenture trustee
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will be under no obligation to exercise any of the powers vested
in it by the indenture at the request of any holder of
subordinated trust debt securities, unless offered reasonable
indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. However, the
foregoing will not relieve the indenture trustee, upon the
occurrence of an indenture event of default, from exercising the
rights and powers vested in it by the indenture. The indenture
trustee will not be required to expend or risk its own funds or
otherwise incur personal financial liability in the performance
of its duties if the indenture trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
Miscellaneous
We will have the right at all times to assign any of our rights
or obligations under the indenture to a direct or indirect
wholly-owned subsidiary of ours. However, in the event of any
such assignment, we will remain liable for all of such
obligations under the indenture. Subject to the foregoing, the
indenture will be binding upon and inure to the benefit of the
parties thereto and their respective successors and assigns. The
indenture will provide that it may not otherwise be assigned by
the parties thereto.
Effect of
Obligations under Subordinated Trust Debt Securities and
Trust Guarantee
As long as payments are made when due on subordinated trust debt
securities, the trust will have sufficient funds to be able to
make all appropriate payments on trust securities. This is
primarily because:
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the aggregate principal amount of the subordinated debt
securities will be equal to the sum of the aggregate stated
liquidation amount of such trust securities;
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the interest rate and interest and other payment dates on the
subordinated trust debt securities will match the distribution
rate and distribution and other payment dates for the trust
securities;
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we will pay for all costs and expenses of each trust; and
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the trust agreement will provide that the trustees may not cause
or permit the trust to, among other things, engage in any
activity that is not consistent with the purposes of the trust.
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We will guarantee payments of distributions and other payments
due on the trust preferred securities, to the extent funds are
available therefor and to the extent set forth under
Description of Trust Guarantees. If we do not
make interest payments on subordinated trust debt securities, it
is expected that the trust will not have sufficient funds to pay
distributions on its trust preferred securities. The trust
guarantee is a full and unconditional guarantee, but does not
apply to any payment unless the trust has sufficient funds for
such payment.
If we fail to make payments on subordinated trust debt
securities when due, taking into account any extension period,
the trust agreement will provide a mechanism whereby holders of
trust preferred securities may direct the property trustee to
enforce its rights, including proceeding directly against us. If
the property trustee fails to enforce its rights, a holder of
trust preferred securities may sue us directly to enforce those
rights, without first instituting legal proceedings against the
trust, the property trustee or any other person or entity.
If we fail to make payments under the trust guarantee, the trust
guarantee provides a mechanism whereby the holders of trust
preferred securities may direct the trust guarantee trustee to
enforce its rights. If the trust guarantee trustee fails to
enforce its rights, any holder of trust preferred securities may
institute a legal proceeding against us directly to enforce
those rights without first instituting legal proceedings against
the trust, the trust guarantee trustee or any other person or
entity.
Pursuant to an agreement as to expenses and liabilities to be
entered into by us under the trust agreement, we will
irrevocably and unconditionally guarantee to each person or
entity to whom the trust becomes indebted or liable the full
payment of any indebtedness, expenses or liabilities of the
trust other than obligations of the trust to pay to the holders
of the related trust securities or other similar interests in
the trust the amounts due such holders pursuant to the terms of
such trust securities or such other similar interests, as the
case may be.
The above mechanisms and obligations, taken together, are
equivalent to a full and unconditional guarantee by us of
payments due on trust preferred securities to the extent of
funds available to the trust.
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PLAN OF
DISTRIBUTION
Any of the securities being offered by this prospectus may be
sold:
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through agents;
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to or through underwriters;
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through dealers;
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directly by us to purchasers; or
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through a combination of any such methods of sale.
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The securities may be sold at a fixed price or prices which may
be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated
prices. The distribution of securities may be effected from time
to time in one or more transactions by means of one or more of
the following transactions, which may include cross or block
trades:
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transactions on the New York Stock Exchange or any other
organized market where the securities may be traded;
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in the
over-the-counter
market;
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in negotiated transactions;
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through put or call option transactions relating to the
securities;
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under delayed delivery contracts or other contractual
commitments; or
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a combination of such methods of sale.
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Agents designated by us from time to time may solicit offers to
purchase the securities. We will name any such agent involved in
the offer or sale of the securities and set forth any
commissions payable by us to such agent in the prospectus
supplement. Unless otherwise indicated in the prospectus
supplement, any such agent will be acting on a best efforts
basis for the period of its appointment. Any such agent may be
deemed to be an underwriter, as that term is defined in the
Securities Act, of the securities.
If underwriters are used in the sale of securities, securities
will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions.
Securities may be offered to the public either through
underwriting syndicates represented by one or more managing
underwriters or directly by one or more firms acting as
underwriters. If an underwriter or underwriters are used in the
sale of securities, we will execute an underwriting agreement
with such underwriter or underwriters at the time an agreement
for such sale is reached. We will set forth in the prospectus
supplement the names of the specific managing underwriter or
underwriters, as well as any other underwriters, and the terms
of the transactions, including compensation of the underwriters
and dealers. Such compensation may be in the form of discounts,
concessions or commissions. Underwriters and others
participating in any offering of securities may engage in
transactions that stabilize, maintain or otherwise affect the
price of such securities. We will describe any such activities
in the prospectus supplement. We may elect to list any class or
series of securities on any exchange, but we are not currently
obligated to do so. It is possible that one or more
underwriters, if any, may make a market in a class or series of
securities, but the underwriters will not be obligated to do so
and may discontinue any market making at any time without
notice. We cannot give any assurance as to the liquidity of the
trading market for any of the securities we may offer.
If a dealer is used in the sale of the securities, we or an
underwriter will sell such securities to the dealer, as
principal. The dealer may then resell such securities to the
public at varying prices to be determined by such dealer at the
time of resale. The prospectus supplement may set forth the name
of the dealer and the terms of the transactions.
We may directly solicit offers to purchase the securities, and
we may sell directly to institutional investors or others. These
persons may be deemed to be underwriters within the meaning of
the Securities Act with respect to
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any resale of the securities. The prospectus supplement will
describe the terms of any such sales, including the terms of any
bidding, auction or other process, if utilized.
Agents, underwriters and dealers may be entitled under
agreements which may be entered into with us to indemnification
by us against specified liabilities, including liabilities under
the Securities Act, or to contribution by us to payments they
may be required to make in respect of such liabilities. The
prospectus supplement will describe the terms and conditions of
such indemnification or contribution. Some of the agents,
underwriters or dealers, or their affiliates may be customers of
ours, or engage in transactions with or perform services for us
and our subsidiaries in the ordinary course of business.
LEGAL
MATTERS
Gibson, Dunn & Crutcher LLP, Dallas, Texas, has
rendered an opinion with respect to the validity of the
securities being offered by this prospectus, other than with
respect to trust preferred securities. We have filed the opinion
as an exhibit to the registration statement of which this
prospectus is a part. Morris, Nichols, Arsht & Tunnell
LLP, Wilmington, Delaware, has rendered an opinion with respect
to the validity of the trust preferred securities being offered
by this prospectus. We have filed the opinion as an exhibit to
the registration statement of which this prospectus is a part.
If counsel for any underwriters passes on legal matters in
connection with an offering made by this prospectus, we will
name that counsel in the prospectus supplement relating to that
offering.
EXPERTS
The consolidated financial statements of D.R. Horton, Inc.
appearing in D.R. Horton, Inc.s Annual Report
(Form 10-K)
for the year ended September 30, 2005 and D.R. Horton, Inc.
managements assessment of the effectiveness of internal
control over financial reporting as of September 30, 2005
included therein, have been audited by Ernst & Young
LLP, independent registered public accounting firm, as set forth
in their reports thereon included therein, and incorporated
herein by reference. Such consolidated financial statements and
managements assessment have been incorporated herein by
reference in reliance upon such reports given on the authority
of such firm as experts in accounting and auditing.
WHERE YOU
CAN FIND MORE INFORMATION
D.R. Horton, Inc. files annual, quarterly and current reports,
proxy statements and other information with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
as amended. You may read and copy this information at the Public
Reference Room of the SEC, 100 F Street, Washington, D.C.
20549, at prescribed rates. You may obtain information on the
operation of the Public Reference Room by calling the SEC at
(800) SEC-0330.
The SEC also maintains an internet world wide web site that
contains reports, proxy statements and other information about
issuers, like us, who file electronically with the SEC. The
address of that site is www.sec.gov.
You can also inspect reports, proxy statements and other
information about us at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
We, the trusts, and our guarantor subsidiaries have filed
jointly with the SEC a registration statement on
Form S-3
that registers the securities we are offering. The registration
statement, including the attached exhibits and schedules,
contains additional relevant information about us, the trusts,
our guarantor subsidiaries and the securities offered. The rules
and regulations of the SEC allow us to omit certain information
included in the registration statement from this prospectus.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference
information into this prospectus. This means that we can
disclose important information to you by referring you to
another document filed separately with the SEC. The
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information incorporated by reference is considered to be part
of this prospectus, except for any information that is
superseded by information that is included directly in this
document.