-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D4J6s+3ZGK2MJbZVOXUzRGj/WDtkHNQ33jXsYdzkW1u7wboPqa0bE5yzsR45yMzs FHUeCo2CXuRMA/reFrJsyg== 0000794170-02-000004.txt : 20020415 0000794170-02-000004.hdr.sgml : 20020415 ACCESSION NUMBER: 0000794170-02-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020131 FILED AS OF DATE: 20020314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOLL BROTHERS INC CENTRAL INDEX KEY: 0000794170 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 232416878 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09186 FILM NUMBER: 02574834 BUSINESS ADDRESS: STREET 1: 3103 PHILMONT AVE CITY: HUNTINGDON VALLEY STATE: PA ZIP: 19006 BUSINESS PHONE: 2159388000 MAIL ADDRESS: STREET 1: 3103 PHILMONT AVENUE CITY: HUNTINGDON VALLEY STATE: PA ZIP: 19006 10-Q 1 edgarjan10q.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED January 31, 2002 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission file number 1-9186 TOLL BROTHERS, INC. (Exact name of registrant as specified in its charter) Delaware 23-2416878 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006 (Address of principal executive offices) (Zip Code) (215) 938-8000 (Registrant's telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.01 par value: 35,409,187 shares as of March 4, 2002
TOLL BROTHERS, INC. AND SUBSIDIARIES INDEX Page No. Statement of Forward-Looking Information 1 PART I. Financial Information ITEM 1. Financial Statements Condensed Consolidated Balance Sheets (Unaudited) as of January 31, 2002 and October 31, 2001 2 Condensed Consolidated Statements of Income (Unaudited) For the Three Months Ended January 31, 2002 and 2001 3 Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended January 31, 2002 and 2001 4 Notes to Condensed Consolidated Financial Statements (Unaudited) 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 10 PART II. Other Information 12 SIGNATURES 13
STATEMENT ON FORWARD-LOOKING INFORMATION Certain information included herein and in other Company reports, SEC filings, statements and presentations is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements concerning the Company's anticipated operating results, financial resources, changes in revenues, changes in profitability, interest expense, growth and expansion, ability to acquire land, ability to sell homes and properties, ability to deliver homes from backlog, ability to secure materials and subcontractors and stock market valuations. In some cases you can identify those so-called forward looking statements by words such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of those words or other comparable words. Such forward-looking information involves important risks and uncertainties that could significantly affect actual results and cause them to differ materially from expectations expressed herein and in other Company reports, SEC filings, statements and presentations. These risks and uncertainties include local, regional and national economic and political conditions, consequences of any future terrorist attacks such as those that occurred on September 11, 2001, the effects of governmental regulation, the competitive environment in which the Company operates, fluctuations in interest rates, changes in home prices, the availability and cost of land for future growth, the availability of capital, fluctuations in capital and securities markets, the availability and cost of labor and materials, and weather conditions. Additional information concerning potential factors that the Company believes could cause its actual results to differ materially from expected and historical results is included under the caption "Factors That May Affect Our Future Results" in Item 1 of our Annual Report on Form 10-K for the fiscal year ended October 31, 2001. If one or more of the assumptions underlying our forward-looking statements proves incorrect, then the Company's actual results, performance or achievements could differ materially from those expressed in, or implied by the forward-looking statements contained in this report. Therefore, we caution you not to place undue reliance on our forward-looking statements. This statement is provided as permitted by the Private Securities Litigation Reform Act of 1995.
PART 1. FINANCIAL INFORMATION ITEM 1. TOLL BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) January 31, October 31, 2002 2001 (Unaudited) ASSETS Cash and cash equivalents $ 273,552 $ 182,840 Inventory 2,276,803 2,183,541 Property, construction and office equipment, net 33,686 33,095 Receivables, prepaid expenses and other assets 94,708 91,784 Mortgage loans receivable 27,794 26,758 Investments in unconsolidated entities 13,457 14,182 $ 2,720,000 $ 2,532,200 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Loans payable $ 382,871 $ 387,466 Subordinated notes 819,602 669,581 Customer deposits 100,895 101,778 Accounts payable 132,963 132,970 Accrued expenses 224,685 229,671 Income taxes payable 84,343 98,151 Total liabilities $ 1,745,359 $ 1,619,617 Stockholders' equity: Preferred stock Common stock 369 369 Additional paid-in capital 105,385 107,014 Retained earnings 926,775 882,281 Treasury stock (57,888) (77,081) Total stockholders' equity 974,641 912,583 $ 2,720,000 $ 2,532,200
See accompanying notes
TOLL BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share data) (Unaudited) Three Months Ended January 31, 2002 2001 Revenues: Housing sales $ 482,702 $ 458,369 Land sales 6,423 10,907 Equity earnings of unconsolidated joint ventures 2,386 Interest and other 3,054 3,599 492,179 475,261 Costs and expenses: Housing sales 351,425 344,813 Land sales 4,217 8,540 Selling, general & administrative 52,398 46,949 Interest 14,155 11,764 422,195 412,066 Income before income taxes 69,984 63,195 Income taxes 25,490 23,270 Net income $ 44,494 $ 39,925 Earnings per share Basic $ 1.27 $ 1.10 Diluted $ 1.20 $ 1.01 Weighted average number of shares Basic 35,001 36,163 Diluted 37,122 39,415
See accompanying notes
TOLL BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Three months ended January 31, 2002 2001 Cash flows from operating activities: Net income $ 44,494 $ 39,925 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 2,903 2,265 Equity in the earnings of unconsolidated joint ventures (2,386) Deferred tax provision (1,414) 1,685 Changes in operating assets and liabilities: Increase in inventory (92,752) (136,047) Origination of mortgage loans (83,430) (26,186) Sale of mortgage loans 82,397 24,877 Increase in receivables, prepaid expenses and other assets (3,151) (5,800) (Decrease) increase in customer deposits (882) 603 Increase (decrease) in accounts payable and accrued expenses 1,860 (23,279) Decrease in current income taxes payable (8,096) (16,165) Net cash used in operating activities (58,071) (140,508) Cash flows from investing activities: Purchase of property, construction and office equipment, net (3,072) (3,396) Investments in unconsolidated entities (2,000) Distribution from unconsolidated entities 2,800 8,750 Net cash (used in) provided by investing activities (2,272) 5,354 Cash flows from financing activities: Proceeds from loans payable 96,540 40,000 Principal payments of loans payable (101,645) (42,268) Net proceeds from the issuance of subordinated debt 149,748 196,975 Proceeds from stock-based benefit plans 6,437 9,680 Purchase of treasury stock (25) (1,642) Net cash provided by financing activities 151,055 202,745 Increase in cash and cash equivalents 90,712 67,591 Cash and cash equivalents, beginning of period 182,840 161,860 Cash and cash equivalents, end of period $ 273,552 $ 229,451
See accompanying notes TOLL BROTHERS, INC. and SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for interim financial information. The October 31, 2001 balance sheet amounts and disclosures included herein have been derived from the October 31, 2001 audited financial statements of Toll Brothers, Inc. and Subsidiaries. Since the accompanying condensed consolidated financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements, it is suggested that they be read in conjunction with the financial statements and notes thereto included in the Company's October 31, 2001 Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the Company's financial position as of January 31, 2002 and the results of its operations and cash flows for the three months ended January 31, 2002 and 2001. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year. Certain amounts reported in prior periods have been reclassified for comparative purposes. Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" provides guidance on accounting for certain intangibles and eliminates the amortization of goodwill and certain other intangible assets. Intangible assets, including goodwill, that are not subject to amortization are required to be tested for impairment and possible write-down on an annual basis. The Company adopted SFAS 142 on November 1, 2001, the first day of its 2002 fiscal year. The Company had $9.4 million of goodwill at November 1, 2001. The adoption of SFAS 142 did not have a material impact on the Company's financial statements.
2. Inventory Inventory consisted of the following (amounts in thousands): January 31, October 31, 2002 2001 Land and land development costs $ 864,955 $ 833,386 Construction in progress 1,191,528 1,145,046 Sample homes 83,733 75,723 Land deposits and costs of future developments 90,942 89,360 Deferred marketing costs 45,645 40,026 $2,276,803 $2,183,541
Construction in progress includes the cost of homes under construction, land, land development costs and carrying costs of lots that have been substantially improved.
The Company capitalizes certain interest costs to inventories during the development and co Capitalized interest is charged to interest expense when the related inventory is delivered Interest incurred, capitalized and expensed is summarized as follows (amounts in thousands) Three months ended January 31, 2002 2001 Interest capitalized, beginning of period $ 98,650 $ 78,443 Interest incurred 22,870 16,913 Interest expensed (14,155) (11,764) Write-off to cost of sales ( 823) Interest capitalized, end of period $ 106,542 $ 83,592
3. Earnings Per Share Information pertaining to the calculation of earnings per share for the three months e is as follows (amounts in thousands): 2002 2001 Basic weighted average shares 35,001 36,163 Common stock equivalents 2,121 3,252 Diluted weighted average shares 37,122 39,415
4. Subordinated Notes In November 2001, the Company issued $150,000,000 of 8.25% Senior Subordinated Notes due December 2011. The Company has used the proceeds for general corporate purposes including the acquisition of inventory. 5. Stock Repurchase Program The Company's Board of Directors has authorized the repurchase of up to 5,000,000 shares of its common stock, par value $.01, from time to time, in open market transactions or otherwise, for the purpose of providing shares for the Company's various employee benefit plans. As of January 31, 2002, the Company had repurchased approximately 2,062,000 shares under the program. 6. Subsequent Event On March 4, 2002, the Company's Board of Directors declared a two-for-one split of its common stock which will be effected in the form of a stock dividend. Record holders of the Company's common stock as of the close of business on March 14, 2002 will be entitled to one additional share for each share held as of that time. The new shares will be distributed on March 28, 2002. 7. Supplemental Disclosure to Statements of Cash Flows
The following are supplemental disclosures to the statements of cash flows (amounts in thousands): Three months ended January 31, 2002 2001 Supplemental disclosures of cash flow information: Interest paid, net of capitalized amounts $ 3,574 $ 3,045 Income taxes paid $ 35,000 $ 37,750 Supplemental disclosures of non-cash activities: Cost of residential inventories acquired through seller financing $ 510 $ 4,500 Income tax benefit relating to exercise of employee stock options $ 4,298 $ 4,312 Stock bonus award $ 6,853 $ 4,413
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICIES Basis of Presentation The Company's financial statements include the accounts of Toll Brothers, Inc. and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in 20% to 50% owned partnerships and affiliates are accounted for on the equity method. Income Recognition Revenue and cost of sales are recorded at the time each home, or lot, is closed and title and possession have been transferred to the buyer. Land, land development and related costs are amortized to the cost of homes closed based upon the total number of homes to be constructed in each community. Home construction and related costs are charged to the cost of homes closed under the specific identification method. Land, common development and related costs of master planned communities are allocated to individual communities within the master planned community on a relative sales value basis. Joint Venture Accounting The Company has entered into three joint ventures to develop and sell land that was owned or is currently owned by its venture partners. The Company recognizes its share of earnings from the sale of lots to other builders. The Company does not recognize earnings from lots it purchases from the ventures, but reduces its cost basis in the lots by its share of the earnings on those lots. The Company has agreed to purchase 180 lots from one of the ventures, 46 lots from another and has the right to purchase up to 385 lots from the third. In addition, the Company effectively owns one-third of Toll Brothers Realty Trust (the "Trust"), an entity that was formed to take advantage of commercial real estate opportunities that may present themselves from time to time. The Company is committed to invest an additional $9.2 million in the Trust if required. The Company provides development finance and administrative services to the Trust and receives fees from it under various agreements. The Company also owns 50% of a joint venture that is currently selling and building an active adult, age-qualified community. The Company's total commitment to these entities is not material to its financial position. These investments are accounted for on the equity method.
RESULTS OF OPERATIONS The following table sets forth, for the three months ended January 31, 2002 and 2001, certain income statement items related to the Company's operations (amounts in millions): Three months ended January 31, 2002 2001 $ % $ % Housing sales Revenues 482.7 458.4 Costs 351.4 72.8 344.8 75.2 Land sales Revenues 6.4 10.9 Costs 4.2 65.7 8.5 78.3 Equity earnings in unconsolidated joint venture 2.4 Other 3.1 3.6 Total revenue 492.2 475.3 Selling, general & administrative expenses* 52.4 10.6 46.9 9.9 Interest expense* 14.2 2.9 11.8 2.5 Total costs and expenses* 422.2 85.8 412.1 86.7 Income before income taxes* 70.0 14.2 63.2 13.3
Note: Amounts may not add due to rounding *Percentages are based on total revenues. HOUSING SALES Housing revenues for the three months ended January 31, 2002 increased $24.3 million, or 5%, over housing revenues for the three months ended January 31, 2001. This increase was primarily the result of an increase in the average price of the homes delivered. The increase in the average price of the homes delivered was principally the result of increases in the base sales prices of our homes and a shift in the location of homes delivered to more expensive areas. The aggregate sales value of contracts signed during the three months ended January 31, 2002 amounted to $485.2 million, an 8% increase over the same period in fiscal 2001. This increase is primarily the result of a 5% increase in the number of homes for which new contracts were signed and a 3% increase in the average price of the homes under those contracts (due primarily to increases in base selling prices and a shift in the location of homes sold to more expensive areas). At January 31, 2002, the backlog of homes under contract but not delivered amounted to $1.41 billion (2,662 homes), as compared to $1.41 billion (2,727 homes) at October 31, 2001 and $1.42 billion (2,678 homes) backlog at January 31, 2001. Housing costs as a percentage of housing sales decreased from 75.2% to 72.8% in fiscal 2002 as compared to the comparable period of fiscal 2001. The decrease was primarily the result of sales prices of homes increasing faster than cost increases, lower land and land improvement costs, improved operating efficiencies and lower inventory write-offs. The Company incurred $1.3 million in write-offs in the three-month period of fiscal 2002 as compared to $2.7 million in the comparable period of fiscal 2001. The Company continues to increase the number of communities from which it is selling. At January 31, 2002 it had 165 selling communities as compared to 145 at January 31, 2001 and expects to have 175 by October 31, 2002. Demand for homes continues to strengthen. Customer deposits for the month of February 2002 were up 31% in the aggregate over February 2001 and 18% higher on a per community basis. Deposits are non-binding agreements signed by a home buyer which reserve a home site and fix the home price for a short period of time. Not all deposits result in signed, binding agreements of sale, and therefore, deposits are not included in backlog. Because it takes, on average, more than ten months from the time the Company receives a deposit until it delivers the home, deposits considered in the context of the Company's experience, are an indication of the level of business that the Company can anticipate in fiscal 2003. Based upon the strength of demand and the increased number of selling communities, the Company believes revenues for fiscal 2003 could exceed $2.5 billion. LAND SALES The Company operates a land development and sales operation in Loudoun County, Virginia and is also developing several master planned communities in which it may sell land to other builders. The amount of land sales will vary from quarter to quarter depending upon the scheduled timing of the delivery of the land parcels. Land sales amounted to $6.4 million for the three months ended January 31, 2002, a 41% decrease over the comparable quarter of 2001. The decrease in land sales was due to fewer lots being available for sale at South Riding, offset in part by increased sales of lots in the Company's other master planned communities. Cost of sales as a percentage of land sales declined from 78.3% in 2001 to 65.7% in 2002. This decrease was the result of lower cost land as a percentage of sales price being delivered in 2002 as compared to 2001. INTEREST AND OTHER INCOME For the three months ended January 31, 2002, other income decreased by $545,000 as compared to the three months ended January 31, 2001. This decrease was primarily the result of a decrease in interest income due to lower interest rates and a decrease in income from the Company's ancillary businesses offset in part by increased income from forfeitures of customer deposits. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") SG&A spending increased by $5.4 million, or 12%, in the three months ended January 31, 2002 as compared to the three months ended January 31, 2001. As a percentage of total revenues, SG&A increased to 10.6% for the first quarter of fiscal 2002 as compared to 9.9% for the first quarter of fiscal 2001. This increase was primarily due to the higher number of communities open for sale during the first quarter of fiscal 2002 compared to the first quarter of fiscal 2001. The Company had 165 selling communities at January 31, 2002 as compared to 145 at January 31, 2001. INTEREST EXPENSE The Company determines interest expense on a specific lot-by-lot basis for its homebuilding operations and on a parcel-by-parcel basis for its land sales. As a percentage of total revenues, interest expense will vary depending on many factors including the period of time that the land was owned, the length of time that the homes delivered during the period were under construction, and the interest rates and the amount of debt carried by the Company in proportion to the amount of its inventory during those periods. Interest expense as a percentage of revenues was higher in the first quarter of fiscal 2002 compared to the same period of fiscal 2001. INCOME TAXES Income taxes were provided at an effective rate of 36.4% and 36.8% for the first quarter of fiscal 2002 and the first quarter of fiscal 2001, respectively. The decrease in the 2002 rate is the result of higher tax free interest income during the 2002 quarter as compared to the 2001 quarter. CAPITAL RESOURCES AND LIQUIDITY Funding for the Company's operations has been principally provided by cash flows from operations, unsecured bank borrowings and the public debt and equity markets. Cash flow from operations, before inventory additions, has improved as operating results have improved. The Company anticipates that the cash flow from operations, before inventory additions, will continue to be strong but will be dependent on the level of revenues from the delivery of homes and land sales. The Company has used the cash flow from operations, bank borrowings and public debt to acquire additional land for new communities, to fund additional expenditures for land development and construction needed to support the Company's continuing expansion of the number of communities in which it is offering homes for sale, to repurchase Company stock and to reduce debt. The Company expects that inventories will continue to increase and is currently negotiating and searching for additional opportunities to obtain control of land for future communities. The Company has a $535 million unsecured revolving credit facility with 16 banks, of which $445 million extends through March 2006 and $90 million extends through February 2003. As of January 31, 2002, the Company had $80 million of loans and approximately $52.5 million of letters of credit outstanding under the facility. The Company believes that it will be able to fund its activities through a combination of existing cash resources, cash flow from operations and other sources of funds similar in nature to those the Company has accessed in the past. In November 2001, the Company issued $150 million of 8.25% Senior Subordinated Notes due 2011 to the public. The Company has used the proceeds for general corporate purposes including the acquisition of inventory. HOUSING DATA
New Contracts Three months ended January 31, 2002 2001 units $000 units $000 Northeast (MA, RI, NH, CT, NY, NJ) 190 $ 108,121 180 $ 92,759 Mid-Atlantic (PA, DE, MD, VA) 319 145,780 309 146,397 Midwest (OH, IL, MI) 78 37,655 109 45,829 Southeast (FL, NC, TN) 115 55,176 76 40,153 Southwest (AZ, NV, TX) 116 53,604 111 59,604 West Coast (CA) 110 84,827 98 63,256 928 $ 485,163 883 $ 447,998
New contract amounts for the three months ended January 31, 2002 and 2001 include $1,796,000 (6 homes) and $4,333,000 (15 homes), respectively, from an unconsolidated 50% owned joint venture.
Closings Three months ended January 31, 2002 2001 units $000 units $000 Northeast (MA, RI, NH, CT, NY, NJ) 223 $ 115,604 244 $ 118,685 Mid-Atlantic (PA, DE, MD, VA) 328 153,480 304 139,806 Midwest (OH, IL, MI) 112 55,019 92 39,865 Southeast (FL, NC, TN) 131 52,591 113 50,536 Southwest (AZ, NV, TX) 109 57,356 128 55,795 West Coast (CA) 76 48,652 90 53,682 979 $ 482,702 971 $ 458,369
Backlog at January 31, 2002 2001 units $000 units $000 Northeast (MA, RI, NH, CT, NY, NJ) 618 $ 323,117 659 $ 341,660 Mid-Atlantic (PA, DE, MD, VA) 824 384,521 684 325,811 Midwest (OH, IL, MI) 282 129,473 315 149,535 Southeast (FL, NC, TN) 312 153,999 275 136,248 Southwest (AZ, NV, TX) 349 183,810 400 213,136 West Coast (CA) 277 234,729 345 254,542 2,662 $1,409,649 2,678 $1,420,932
Backlog amounts at January 31, 2002 and 2001 include $5,396,000 (17 homes) and $10,116,000 (35 homes), respectively, from an unconsolidated 50% owned joint venture. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the Company's market risk from October 31, 2001. For more information regarding the Company's market risk, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2001. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a)Exhibits: 3.1 *Restated Certificate of Incorporation dated July 1, 1986 ( as previously filed with the Commission as Exhibit 3.1 to the Registrant's Form 10-K for the fiscal year ended October 31, 1989). 3.2 *Amendment to the Restated Certificate of Incorporation dated March 7, 1989. 3.3 *Amendment to the Restated Certificate of Incorporation dated March 11, 1993 (as previously filed with the Commission as Exhibit 3.3 to the Registrant's Form 10-Q for the quarter ended January 31, 1993). 3.4 *Amendment to the Restated Certificate of Incorporation dated June 12, 1997 (as previously filed with the Commission as Exhibit 3.4 to the Registrant's Form 10-K for the fiscal year ended October 31, 2001). 3.5 *Amendment to the Restated Certificate of Incorporation dated January 8, 1998 (as previously filed with the Commission as Exhibit 3.4 to the Registrant's Form 10-K for the fiscal year ended October 31, 2001. 3.6 *Amendment to the Restated Certificate of Incorporation dated March 7, 2002. *Filed electronically herewith (b) Reports on Form 8-K: During the quarter ended January 31, 2002 the Company filed Current Reports on Form 8-K on November 29, 2001 and December 6, 2001, reporting under items 5 and 7, for the purpose of filing documents pertaining to Toll Corp.'s issuance of $150,000,000 of 8.25% Senior Subordinated Notes due 2011 guaranteed on a senior subordinated basis by Toll Brothers, Inc.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TOLL BROTHERS, INC. (Registrant) Date: March 14, 2002 By: /Joel H. Rassman Joel H. Rassman Senior Vice President, Treasurer and Chief Financial Officer Date: March 14, 2002 By: /Joseph R. Sicree Joseph R. Sicree Vice President - Chief Accounting Officer (Principal Accounting Officer)
EX-3.1 3 exhibit3-1.txt RESTATED CERTIFICATE OF INCORPORATION OF TOLL BROTHERS, INC. This document is being filed to restate integrate and further amend the Certificate of Incorporation of Toll Brothers, Inc., as filed with the Secretary of State of Delaware on May 28, 1986. The Restated Certificate of Incorporation was duly adopted in accordance with Sections 245 and 241 of the General Corporation Law of the State of Delaware. Article One The name of the corporation is Toll Brothers, Inc. Article Two The address of its registered office in the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. Article Three The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. Article Four The corporation is authorized to issue two (2) classes of stock, to wit: (a) Common Stock. The total number of shares of common Stock which the corporation shall have authority to issue is Thirty Million ($30,000,000), and the par value of each such share is One Cent ($.01). (b) Preferred Stock. The total number of shares of Preferred Stock which the corporation shall have authority to issue is Fifteen Million ($15,000,000), and the par value of each such share is One Cent ($.01). The Board of Directors is authorized, subject to the limitations prescribed by law, and the provisions of this Article Four, to provide by adopting a resolution or resolutions, a certificate of which action shall be filed and recorded in accordance with the General Corporation Law of the State of Delaware, for the issuance of the Preferred Stock in one or more series, each with such designations, powers, preferences and rights of the shares, and the qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the certificate or certificates establishing the series of Preferred Stock. Article Five The business and affairs of the corporation shall be managed by the Board of Directors. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-laws of the corporation. The number of Directors shall be fixed from time to time by, or in the manner provided in, the By-laws of the corporation and may be increased or decreased as therein provided. Directors of the corporation need not be elected by ballot unless required by the By-laws. Article Six Part I Right To Indemnification Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative ("proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of this corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, however, that the corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if the initiation of such proceeding (or part thereof) was authorized or approved by the Board of Directors of the corporation. Such right shall be a contract right and shall include the right to have the corporation pay, or repay such person for, expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Article Six or otherwise. The financial ability of any such person to make such repayment shall not be a prerequisite to the making of such payment of or for expenses. Part II Right of Claimant To Bring Suit If a claim (including a request for expenses) under Part I of this Article Six is not paid in full by the corporation within ninety days after a written request has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful, in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standards of conduct set forth in said law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant had not met the applicable standard of conduct. The provisions of this Part II of this Article Six shall be applicable to all actions, suits or proceedings commenced after its adoption, whether such arise out of acts or omissions which occurred prior or subsequent to such adoption and shall continue as to a person who has ceased to be a Director, officer, employee or agent of, or to render services for or at the request of, the corporation or as the case may be, its parent, or subsidiaries and shall inure to the benefit of the heirs, executors and administrators of such a person. Part III Independent Legal Counsel Independent legal counsel may be appointed by the Board of Directors, even if a quorum of disinterested Directors is not available, or by a person designated by the Board of Directors. If independent legal counsel, so appointed, shall determine in a written opinion that indemnification is proper under this Article Six, indemnification shall be made without further action of the Board of Directors. Part IV Non-Exclusivity of Rights The rights conferred on any person by Parts I and II of this Article Six shall not be exclusive of any other right, which such person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, as amended and restated, by-law, agreement, or vote of stockholders or disinterested directors or otherwise. Part V Insurance The corporation may maintain insurance, at its expense, to protect itself and any such director, officer, employee, agent or other person, or all of them, of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. Article Seven A Director of this corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the Director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. Article Eight Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. Article Nine The initial members of the Board of Directors shall be Robert I. Toll.Bruce E. Toll and Andrew D. Steiner. I, the undersigned, being the Chairman of the Board, do make, file and record this Restated Certificate of Incorporation, do certify that the facts herein stated are true, that as of the date set forth below, the corporation has not received any payment for any of its stock, and that this Certificate of Amendment to the Certificate of Incorporation has been duly adopted in accordance with the provisions of section 241(b) of the General Corporation Law of Delaware and accordingly, have hereto set my hand and seal this 1st day of 186: July, 1986. /s/ Robert I. Toll Robert I. Toll Chairman of the Board /s/ Bruce E. Toll ATTEST: Bruce E. Toll Secretary DSB:829607.1/TOL002-051098 - 4 - DSB:829607.1/TOL002-051098 - 2 - EX-3.2 4 exhibit3-2.txt CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION Toll Brothers, Inc., a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the "Company"), DOES HEREBY CERTIFY THAT: FIRST: At a meeting held on January 10, 1989, the Board of Directors of the Company adopted resolutions that declared advisable the following amendments to the Company's Certificate of Incorporation and directed that said amendments be submitted to the Company's shareholders for their consent and approval at the Annual Meeting of Shareholders on March 7, 1989. The amendments amend Article Five of the Company's Certificate of Incorporation by deleting the first paragraph of Article Five and replacing it with the following: Part I - Powers of the Board The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the By-Laws of the corporation. Any By-Laws which the Directors make under the power conferred hereby may not be altered, amended or repealed, nor may any provisions inconsistent therewith be adopted by the stockholders, without the affirmative vote of the holders of at least 66-2/3% of the voting power of the voting stock of the corporation entitled to vote generally in the election of directors, voting together as single class. In addition, the amendments add "Part II - Number of Directors and Ballots" as a new heading before the second paragraph of Article Five, and add the following new Parts to Article Five: Part III Classification of the Board The Directors shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as reasonably possible, as shall be provided in the manner specified in the By- Laws of the corporation, one class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1990, another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1991, and another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1992, with each class to hold office until its successor is elected and qualified. At each annual meeting of the stockholders of the corporation, the successors of the class of Directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Part IV Removal of Directors Any Director may be removed from office only for cause and only by the affirmative vote of the holders of 66-2/3% of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of Directors, voting together as a single class. Part V Vacancies and Newly Created Directorships Newly created directorships resulting from any increase in the number of Directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors. Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until successors for such Director's class shall have been elected and qualified. Part VI Notice of Stockholder Nominations Advance notice of stockholder nominations for the election of Directors shall be given in the manner provided in the By-Laws of the corporation. Part VII Ability to Alter, Amend or Repeal Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 66-2/3% of the combined voting power of all shares of the corporation entitled to vote generally in the election of Directors, voting together as a single class, shall be required to alter, amend or repeal this Article Five or to adopt any provision inconsistent herewith. SECOND: At the Annual Meeting of Shareholders, held on March 7, 1989, more than two-thirds of the outstanding stock entitled to vote thereon approved the foregoing amendments to the Company's Certificate of Incorporation. THIRD: The aforesaid amendments were duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, the Company has caused its corporate seal to be hereunto affixed and this certificate to be signed, under penalty of perjury, by Robert I. Toll, its Chairman of the Board and Chief Executive Officer, and attested by Bruce E. Toll, its Secretary, on March 7, 1989, and does confirm that this Certificate of Amendment is the act and deed of the Company and that the statements made herein are true. TOLL BROTHERS, INC. By: /s/ Robert I. Toll Robert I. Toll Chairman of the Board and Chief Executive Officer Attest: By: /s/ Bruce E. Toll Bruce E. Toll, Secretary (Corporate Seal) DSB:829713.1/TOL002-051098 - 3 - DSB:829713.1/TOL002-051098 EX-3.3 5 exhibit3-3.txt CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF TOLL BROTHERS, INC. Toll Brothers, Inc., a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the "Company") DOES HEREBY CERTIFY THAT: FIRST: At a meeting of the Board of Directors of the Company held on December 10, 1992, the Board of Directors of the Company adopted resolutions that declared advisable and recommended to the stockholders of the Company the following amendment to the Company's Certificate of Incorporation and directed that said amendment be submitted to the Company's stockholders for their consent and approval at the Annual Meeting of Shareholders on March 11, 1993. The amendment amends Article Four of the Company's Certificate of Incorporation by deleting it in its entirety and replacing it with the following: "Article Four The corporation is authorized to issue 41,000,000 shares of capital stock, consisting of two (2) classes of stock, to wit: (a) Common Stock. The total number of shares of Common Stock which the corporation shall have authority to issue is Forty Million (40,000,000) shares and the par value of each of such shares is One Cent ($.01) amounting in the aggregate to Four Hundred Thousand Dollars ($400,000). (b) Preferred Stock. The total number of shares of Preferred Stock which the corporation shall authority to issue is One Million (1,000,000), and the par value of each such share is One Cent ($.01) amounting in the aggregate to Ten Thousand Dollars ($10,000). The Board of Directors is authorized, subject to the limitations prescribed by law and the provisions of this Article Four, to provide by adopting a resolution or resolutions, a certificate of which action shall be filed and recorded in accordance with the Corporation Law of the State of Delaware, for the issuance of the Preferred Stock in one or more series, each with such designations, powers, preferences and rights of the shares, and the qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the certificate or certificates establishing the series of Preferred Stock." SECOND: At the Annual Meeting of Shareholders on March 11, 1993, held pursuant to the notice required by Section 222 of the Delaware General Corporation Law, not less than a majority of the outstanding shares of stock entitled to vote thereon approved the foregoing amendment to the Company's Certificate of Incorporation. THIRD: The aforesaid amendment was duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, the Company has caused its corporate seal to be hereunto affixed and this certificate to be signed, under penalty of perjury, by Robert I. Toll, its Chairman of the Board and Chief Executive Officer, and attested by Bruce E. Toll, its Secretary, on March 11, 1993, and does confirm that this Certificate of Amendment is the act and deed of the Company and that the statements made herein are true. TOLL BROTHERS, INC. By: /s/ Robert I. Toll Robert I. Toll Chairman of the Board and Chief Executive Officer Attest: By: /s/ Bruce E. Toll Bruce E. Toll, Secretary (Corporate Seal DSB:829618.1/TOL002-051098 - 3 - DSB:829618.1/TOL002-051098 DSB:829618.1/TOL002-051098 - 2 - EX-3.4 6 exhibit3-4.txt CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of TOLL BROTHERS, INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware, the undersigned officers of Toll Brothers, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation of the Corporation, the Board of Directors on June 12, 1997 adopted the following resolution creating a series of 60,000 shares of Preferred Stock designated as Series A Junior Participating Preferred Stock: RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Certificate of Incorporation, a series of Preferred Stock of the Corporation be and it hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" and the number of shares constituting such series shall be 60,000. Section 2. Dividends and Distributions. (A) The holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $0.01 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $0.01 per share, of the Corporation (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Corporation shall at any time after June 12, 1997 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the outstanding shares of Series A Junior Participating Preferred Stock as provided in Paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the outstanding shares of Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than thirty (30) days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that such voting right shall not be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock. (iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to such holder at such holder's last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than twenty (20) days and not later than sixty (60) days after such order or request, or in default of the calling of such meeting within sixty (60) days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this Paragraph (C)(iii), no such special meeting shall be called during the period within sixty (60) days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this Paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the Certificate of Incorporation or By-laws of the Corporation irrespective of any increase made pursuant to the provisions of Paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the Certificate of Incorporation or By-laws of the Corporation). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (D) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 hereof are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received an amount equal to $100,000 per share of Series A Junior Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable. Section 9. Amendment. The Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class. Section 10. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this 12th day of June 1997. TOLL BROTHERS, INC. By: /s/ Bruce E. Toll Name: Bruce E. Toll Title: President Attest: /s/ Joseph R. Sicree Joseph R. Sicree Assistant Secretary DSB:829633.1/TOL002-051098 - 7 - DSB:829633.1/TOL002-051098 EX-3.5 7 exhibit3-5.txt CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF TOLL BROTHERS, INC. Toll Brothers, Inc., a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the "Company") DOES HEREBY CERTIFY THAT: FIRST: At a meeting of the Board of Directors of the Company held on December 10, 1992, the Board of Directors of the Company adopted resolutions that declared advisable and recommended to the stockholders of the Company the following amendment to the Company's Certificate of Incorporation and directed that said amendment be submitted to the Company's stockholders for their consent and approval at the Annual Meeting of Shareholders on March 11, 1993. The amendment amends the introductory paragraph and subparagraph (a) of Article Four of the Company's Certificate of Incorporation to read as follows: "Article Four The corporation is authorized to issue 46,000,000 shares of capital stock, consisting of two (2) classes of stock, to wit: (a) Common Stock. The total number of shares of Common Stock which the corporation shall have authority to issue is Forty-Five Million (45,000,000) shares and the par value of each of such shares is One Cent ($.01) amounting in the aggregate to Four Hundred and Fifty Thousand Dollars ($450,000)." SECOND: At the Annual Meeting of Shareholders on March 11, 1993, held pursuant to the notice required by Section 222 of the Delaware General Corporation Law, not less than a majority of the outstanding shares of stock entitled to vote thereon approved the foregoing amendment to the Company's Certificate of Incorporation. THIRD: The aforesaid amendment was duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, the Company has caused its corporate seal to be hereunto affixed and this certificate to be signed, under penalty of perjury, by Robert I. Toll, its Chairman of the Board and Chief Executive Officer, and attested by Bruce E. Toll, its Secretary, on January 8, 1998, and does confirm that this Certificate of Amendment is the act and deed of the Company and that the statements made herein are true. TOLL BROTHERS, INC. By: /s/ Robert I. Toll Robert I. Toll Chairman of the Board and Chief Executive Officer Attest: By: /s/ Bruce E. Toll Bruce E. Toll, Secretary (Corporate Seal) DSB:829659.1/TOL002-051098 DSB:829659.1/TOL002-051098 - 2 - DSB:829659.1/TOL002-051098 EX-3.6 8 exhibit3-6.txt CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF TOLL BROTHERS, INC. Toll Brothers, Inc., a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the "Company") DOES HEREBY CERTIFY THAT: FIRST: At a meeting of the Board of Directors of the Company held on December 14, 2000, the Board of Directors of the Company adopted resolutions that declared advisable and recommended to the stockholders of the Company the following amendment to the Company's Certificate of Incorporation and directed that said amendment be submitted to the Company's stockholders for their consent and approval at the Annual Meeting of Stockholders on March 22, 2001. The amendment amends Article Four of the Company's Certificate of Incorporation to read in its entirety as follows: "Article Four The corporation is authorized to issue 101,000,000 shares of capital stock, consisting of two (2) classes of stock, to wit: (a) Common Stock. The total number of shares of Common Stock which the corporation shall have authority to issue is One Hundred Million (100,000,000) shares and the par value of each of such shares is One Cent ($.01) amounting in the aggregate to One Million Dollars ($1,000,000). (b) Preferred Stock. The total number of shares of Preferred Stock which the corporation shall have authority to issue is One Million (1,000,000), and the par value of each such share is One Cent ($.01) amounting in the aggregate to Ten Thousand Dollars ($10,000). The Board of Directors is authorized, subject to the limitations prescribed by law and the provisions of this Article Four, to provide by adopting a resolution or resolutions, a certificate of which action shall be filed and recorded in accordance with the General Corporation Law of the State of Delaware, for the issuance of the Preferred Stock in one or more series, each with such designations, powers, preferences and rights of the shares, and the qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the certificate or certificates establishing the series of Preferred Stock." SECOND: At the Annual Meeting of Stockholders on March 22, 2001, held pursuant to the notice required by Section 222 of the Delaware General Corporation Law, not less than a majority of the outstanding shares of stock entitled to vote thereon approved the foregoing amendment to the Company's Certificate of Incorporation. THIRD: The aforesaid amendment was duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, the Company has caused its corporate seal to be hereunto affixed and this certificate to be signed, under penalty of perjury, by Joseph R. Sicree, its Vice President, and attested by Michael I. Snyder, its Secretary, on March 4, 2002, and does confirm that this Certificate of Amendment is the act and deed of the Company and that the statements made herein are true. TOLL BROTHERS, INC. By: /s/ Joseph R. Sicree Joseph R. Sicree Vice President Attest: By: /s/ Michael I. Snyder Michael I. Snyder, Secretary (Corporate Seal) DSB:828383.2/TOL002-092626 DSB:828383.2/TOL002-092626 - 2 - DSB:828383.2/TOL002-092626 -----END PRIVACY-ENHANCED MESSAGE-----