-----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, ORgYvr8UR3C0O8+66ujtf+/BmLyery+cXGVO90f/vt5bbwYGZ5mXSgJ5IIRsfmAg /M+xyC6YcvcGNzkWeCxExA== 0000950115-97-001624.txt : 19971022 0000950115-97-001624.hdr.sgml : 19971022 ACCESSION NUMBER: 0000950115-97-001624 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 REFERENCES 429: 333-35775 REFERENCES 429: 333-35775-01 FILED AS OF DATE: 19971021 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOLL CORP CENTRAL INDEX KEY: 0000836623 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 222485860 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-38347 FILM NUMBER: 97698677 BUSINESS ADDRESS: STREET 1: 3103 PHILMONT AVE CITY: HUNTINGDON VALLEY STATE: PA ZIP: 19006 BUSINESS PHONE: 2159388000 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: S-3 SEC ACT: SEC FILE NUMBER: 333-38347-01 FILM NUMBER: 97698678 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 S-3 1 INITIAL STATEMENT As filed with the Securities and Exchange Commission, via EDGAR, on October 21, 1997. Registration Nos. 333-__________ and 333-___________-01 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------- TOLL CORP. TOLL BROTHERS, INC. ----------------------------------------------------------- (Exact name of each registrant as specified in its charter) 23-2485860 - Toll Corp. Delaware 23-2416878 - Toll Brothers, Inc. ------------------- -------------------------------- (State or other (I.R.S. Employer jurisdiction of Identification Number) incorporation of each registrant) 3103 Philmont Avenue Huntingdon Valley, Pennsylvania 19006 (215) 938-8000 ------------------------------------------------------------------------ (Address, including zip code, and telephone number, including area code, of registrants' principal executive offices) Robert I. Toll Chairman of the Board and Chief Executive Officer Toll Brothers, Inc. 3103 Philmont Avenue Huntingdon Valley, Pennsylvania 19006 (215) 938-8000 ------------------------------------------------------------------------------ (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------- Copies to: Mark K. Kessler, Esquire Wolf, Block, Schorr and Solis-Cohen LLP Twelfth Floor Packard Building 111 South 15th Street Philadelphia, Pennsylvania 19102 (215) 977-2000 -------------------- Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are to be offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]_______________ If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]_______________ If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act, please check the following box. [X] --------------------
CALCULATION OF REGISTRATION FEE ============================================================================================================================== Proposed maximum Proposed maximum Title of each class of Amount to be offering price aggregate offering Amount of securities to be registered registered(1) per unit(2) price(2)(3) registration fee(8) - ------------------------------------------------------------------------------------------------------------------------------ Common Stock, $.01 par value(4)....... Preferred Stock, $.01 par value(5).... $289,000,000 100% $289,000,000 $87,576.00 Debt Securities(6).................... Guarantees(7)......................... ==============================================================================================================================
(1) In United States Dollars or the equivalent thereof in one or more foreign currencies or units of two or more foreign currencies or composite currencies, including the European Currency Unit. The aggregate initial offering price of all securities issued from time to time pursuant to this Registration Statement will not exceed $289,000,000. Such amount represents (i) the issue price of any Common Stock, (ii) the liquidation preference (or, if different, the issue price) of any Preferred Stock, and (iii) the principal amount of any Debt Securities issued at their principal amount or the issue price rather than the principal amount of any Debt Securities issued at an original issue discount. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. The proposed maximum offering price per unit will be determined from time to time by the registrant issuing such units or, in the case of an issuance of units which includes a Guarantee, by the Registrants. (3) No separate consideration will be received for (i) any Guarantee or any Common Stock, Preferred Stock or Debt Securities that may be issuable upon conversion of or in exchange for convertible or exchangeable Preferred Stock or Debt Securities (including any securities issuable upon stock splits or similar transactions pursuant to Rule 416 under the Securities Act of 1933). (4) Subject to Footnote (1), there are being registered hereunder an indeterminate number of shares of Common Stock as may be sold, from time to time, by Toll Brothers, Inc. There are also being registered hereunder an indeterminate number of shares of Common Stock as may be issuable upon conversion of, or in exchange for, or upon exercise of, convertible or exchangeable Debt Securities or Preferred Stock. (5) Subject to Footnote (1), there are being registered hereunder an indeterminate number of shares of Preferred Stock as may be sold, from time to time, by Toll Brothers, Inc. There are also being registered hereunder an indeterminate number of shares of Preferred Stock as may be issuable upon conversion of, or in exchange for, or upon exercise of, convertible or exchangeable Debt Securities or Preferred Stock. (6) Subject to Footnote (1), there is being registered hereunder an indeterminate principal amount of Debt Securities as may be sold, from time to time, by Toll Corp. There is also being registered hereunder an indeterminate principal amount of such Debt Securities as may be issuable upon conversion of, or in exchange for, or upon exercise of, convertible or exchangeable Debt Securities or Preferred Stock. (7) Each of the Debt Securities issued by Toll Corp. will be accompanied by a Guarantee to be issued by Toll Brothers, Inc. (8) The prospectus forming a part of this Registration Statement, as such prospectus may be amended or supplemented from time to time (the "Prospectus"), shall be deemed to relate to the $289,000,000 of Securities being registered pursuant to this Registration Statement and, pursuant to Rule 429 under the Securities Act of 1933, to $11,000,000 of securities registered pursuant to the Registration Statement on Form S-3 of the Registrants, Commission File Nos. 333-35775 and 333-35775-01 (the "Prior Registration Statement"). The amount of filing fees associated with such securities registered pursuant the Prior Registration Statement (calculated at 1/33 of one percent of the amount of securities registered, the fee in effect at the time of filing of the Prior Registration Statement) is approximately $3,333. -------------------- Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus also relates to securities registered pursuant to the Prior Registration Statement. -------------------- The Registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ PROSPECTUS SUBJECT TO COMPLETION, DATED OCTOBER 21, 1997 TOLL BROTHERS, INC. Common Stock Preferred Stock Guarantees TOLL CORP. Debt Securities Toll Brothers, Inc. (the "Company") may from time to time offer (i) shares (the "Common Shares") of its Common Stock, $.01 par value per share (the "Common Stock"), (ii) shares (the "Preferred Shares") of its Preferred Stock, $.01 par value per share (the "Preferred Stock"), and (iii) unconditional and irrevocable guarantees ("Guarantees") of debt securities issued by Toll Corp. ("Toll"), a wholly-owned subsidiary of the Company. Toll may offer from time to time debt securities (the "Debt Securities"), consisting of debentures, notes and/or other unsecured evidences of indebtedness in one or more series, guaranteed by the Company. The foregoing securities are collectively referred to as the "Securities." Any Securities may be offered with other Securities or separately (except for Guarantees, which may only be offered with Debt Securities). Securities may be sold for U.S. dollars, foreign currency or currency units, including the European Currency Unit; amounts payable with respect to any Securities may likewise be payable in U.S. dollars, foreign currency or currency units, including the European Currency Unit -- in each case, as the Company (or, in the case of Debt Securities, Toll) specifically designates. The Securities will be offered at an aggregate initial offering price not to exceed U.S. $300,000,000, or the equivalent thereof (based on the applicable exchange rate at the time of sale) if Debt Securities are issued in principal amounts denominated in one or more foreign currencies or currency units as shall be designated by Toll, at prices and on terms to be determined at the time of sale. This Prospectus will be supplemented by one or more Prospectus Supplements, which will set forth with regard to the particular Securities in respect of which this Prospectus is being delivered (i) in the case of Common Shares, the aggregate number of Common Shares offered, the public offering price and the other terms of the offering thereof, (ii) in the case of Preferred Shares, the aggregate number of Preferred Shares offered, the specific designation and stated value, any dividend, liquidation preference, redemption, sinking fund, voting or other rights, the terms for conversion into or exchange for other Securities, if any, including the terms of any Securities into or for which they are convertible or exchangeable, the initial public offering price and any securities exchange listings, and (iii) in the case of Debt Securities, the title, aggregate principal amount, currency or currencies of denomination, initial offering price, maturity, interest rate or rates, if any (which may be either variable or fixed), and/or the method of determination thereof, the time of payment of any interest, any terms for redemption, extension or early repayment, any provision for sinking fund payments, rank, any conversion or exchange -1- rights, whether such Debt Securities are issuable in individual registered form with or without coupons, any listing on a securities exchange, the net proceeds to the Company and any other specific terms, including any covenants, relating to such series of Debt Securities. The Prospectus Supplement will also contain information, as applicable, about certain United States Federal income tax considerations relating to the Securities in respect of which this Prospectus is being delivered. The Company or Toll may sell the Securities to or through dealers or underwriters, and also may sell the Securities directly to other purchasers or through agents. See "Plan of Distribution." If an agent of the Company or Toll or a dealer or an underwriter is involved in the sale of the Securities in respect of which this Prospectus is being delivered, the agent's commission or dealer's purchase price or underwriter's discount will be set forth in, or may be calculated from, the Prospectus Supplement. Any underwriters, dealers or agents participating in the offering of Securities may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended. See "Plan of Distribution" for possible indemnification arrangements for any agents, dealers or underwriters. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is _________, 1997. -2- Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. -3- AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy and information statements and other information can be inspected and copied at the public reference facilities maintained by the Commission, Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, DC 20549, and at the Regional Offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, at prescribed rates. The Commission maintains a Web site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding registrants, such as the Company, that file electronically with the Commission. The Common Stock is listed on the New York Stock Exchange and the Pacific Exchange. Reports, proxy and information statements and other information concerning the Company may be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005 and the Pacific Exchange, 301 Pine Street, San Francisco, California 94104. The Company and Toll have filed a Registration Statement on Form S-3 (herein, together with all amendments thereto, called the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with the Commission, with respect to the Securities covered by this Prospectus. Toll does not expect that it will be required to file reports with the Commission pursuant to Section 15(d) of the Exchange Act. In this regard, Toll will not make available annual reports to security holders. For further information with respect to Toll and the Company and the Securities offered hereby, reference is hereby made to the Registration Statement and exhibits thereto. Statements contained in this Prospectus concerning the provisions of certain documents are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. Copies of all or any part of the Registration Statement, including exhibits thereto, may be obtained, upon payment of the prescribed fees, at the offices of the Commission as set forth above. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The Company hereby incorporates by reference (i) the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1996 (ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended January 31, 1997, April 30, 1997 and July 31, 1997, (iii) the Company's Current Reports on Form 8-K dated June 20, 1997 and September 17, 1997, (iv) the description of the Company's Common Stock contained in its Registration Statement on Form 8-A dated June 19, 1986, and (v) the description of preferred stock purchase rights contained in the Company's registration statement on Form 8-A dated June 20, 1997. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Securities shall be deemed to be incorporated by reference in this Prospectus from the date of filing such documents -4- except as to any portion of any future annual or quarterly report to the Company's stockholders or proxy statement which is not deemed to be filed under those provisions. Any statement contained in this Prospectus, or in a document all or a portion of which is incorporated by reference herein, shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein (or in any other subsequently filed document which is also incorporated by reference herein) modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed to constitute a part of this Prospectus, except as so modified or superseded. The Company will provide without charge to each person, including any beneficial owner, to whom a Prospectus is delivered, on the written or oral request of any such person, a copy of any or all of the documents incorporated herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). All such requests should be addressed to: Joseph R. Sicree, Director of Investor Relations, Toll Brothers, Inc., 3103 Philmont Avenue, Huntingdon Valley, PA 19006, (215) 938-8000. THE COMPANY The Company designs, builds, markets and arranges financing for single-family detached and attached homes in middle and high income residential communities catering to both move-up and empty nester home buyers in fifteen states and six regions around the country. The Company operates predominantly in major suburban residential areas in southeastern Pennsylvania, central New Jersey, the Virginia and Maryland suburbs of Washington, D.C., the Boston, Massachusetts metropolitan area, southern Connecticut, Westchester County, New York, Orange County and Los Angeles County, California, the suburbs of Raleigh and Charlotte, North Carolina and Scottsdale, Arizona. It is also developing communities in Nassau County, New York, in northern Delaware, in McKinney, Texas, a northern suburb of Dallas, in Austin, Texas, in several markets on the west coast of and in southeast Florida, in Columbus, Ohio, and in Nashville, Tennessee. The Company has also acquired property in the San Francisco Bay area where it expects to begin offering homes for sale in 1998. In recognition of the Company's achievements, it has received numerous awards from national, state and local homebuilder publications and associations. In fiscal 1996, the Company was selected "America's Best Builder" by the National Association of Home Builders (the "NAHB") and Builder magazine in recognition of its excellent financial performance, unique custom-production system for building luxury homes in high volume and the excellence of its designs. The Company also received the National Housing Quality Award from the NAHB, which recognized the Company's outstanding commitment to total quality management and continuous improvement. In 1994, the Company was named a first place award winner in the "Build America Beautiful" Awards Program, sponsored by Better Homes and Gardens magazine, the NAHB and Keep America Beautiful, Inc. in recognition of the Company's programs to improve the handling of solid waste on construction sites. In addition, the Company was named "The Builder of the Year" in 1988 by Professional Builder magazine. Co-founded by Robert I. Toll and Bruce E. Toll, the Company commenced its business operations, through predecessor entities, in 1967. The Company is a Delaware corporation that -5- was formed in May 1986. Its principal executive offices are located at 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006, and its telephone number is (215) 938-8000. Toll Corp. ("Toll"), an indirect, wholly-owned subsidiary of the Company, was incorporated in Delaware in July 1987. Other than the financing of other subsidiaries of the Company by lending the proceeds of the offering of the Debt Securities and similar activities related to previous offerings of debt securities, Toll has no independent operations and generates no operating revenues. There is no present intention to have Toll engage in other activities. Toll's principal executive offices are located at 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006, and its telephone number is (215) 938-8000. THE HOUSING INDUSTRY Residential real estate developers, including the Company, are subject to various risks, both on the national and regional levels, such as economic recession, oversupply of homes, changes in governmental regulation, effects of environmental factors, increases in real estate taxes and costs of materials and labor, and the unavailability of construction funds or mortgage loans at rates acceptable to builders and home buyers. The Company's business and earnings are substantially dependent on its ability to obtain financing on acceptable terms for its development activities. Increases in interest rates could reduce the funds available to the Company for its future operations and would increase the Company's expenses. In addition, increases in interest rates may have an adverse effect upon the Company's sales and could affect the availability of home financing to present and potential customers of the Company. The housing industry has been subject to increasing environmental, building, zoning and sales regulation by various federal, state and local authorities. This regulation affects construction activities as well as sales activities and other dealings with consumers. For its development activities, the Company must obtain the approval of numerous governmental authorities, and changes in local circumstances or applicable law may necessitate the application for additional approvals or the modification of existing approvals. Expansion of regulation has increased the time required to obtain the necessary approvals to begin construction and has prolonged the time between the initial acquisition of land or land options and the commencement and completion of construction. USE OF PROCEEDS Except as otherwise set forth in the applicable Prospectus Supplement, the Company intends to use the net proceeds from the sale of the Securities for general corporate purposes including acquisition of residential development properties. The specific use of proceeds of any Securities issued hereunder will be more particularly set forth in the applicable Prospectus Supplement. -6- RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the Company's historical ratio of earnings to fixed charges for the five years ended October 31, 1996 and the nine months ended July 31, 1997:
Year Ended October 31, Nine Months ------------------------------------ Ended 1992 1993 1994 1995 1996 July 31, 1997 ---- ---- ---- ---- ---- ------------- Ratio, including collateralized mortgage financing(1) 2.63 2.72 3.37 3.82 3.87 3.30
- ---------- (1)For purposes of computing the ratio of earnings to fixed charges, earnings consist of income before income taxes, extraordinary gain (loss) and change in accounting plus interest expense and fixed charges except interest incurred. Fixed charges consist of interest incurred (whether expensed or capitalized), the portion of rent expense that is representative of the interest factor, and amortization of debt discount and issuance costs. DESCRIPTION OF DEBT SECURITIES AND GUARANTEES Debt Securities may be issued from time to time in one or more Series (as hereinafter defined) by Toll. All Series of Debt Securities will be offered together with unconditional Guarantees issued by the Company. The particular terms of each Series of Debt Securities, and the particular terms of the Guarantees offered in connection therewith, will be set forth in the Indenture (as hereinafter defined) and the Authorizing Resolution (as hereinafter defined) relating to such Series of Debt Securities and will be described in the applicable Prospectus Supplement. The Debt Securities will be issued pursuant to a resolution adopted by the Board of Directors (or an Officer or committee of Officers authorized by the Board of Directors) of both Toll and the Company (an "Authorizing Resolution") under an indenture (the "Indenture") to be entered into by the Company, Toll and one or more Trustees prior to the issuance of such Debt Securities. Information regarding the Trustee or Trustees with respect to any Series of Debt Securities issued under an Indenture will be included in the related Prospectus Supplement. The following is a summary of certain provisions of the Indenture and does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the Indenture, including the definitions therein of certain capitalized terms used in this Prospectus. Wherever particular Sections, Articles or defined terms of the Indenture are referred to herein or in a Prospectus Supplement, such Sections, Articles or defined terms are incorporated herein or therein by reference. The following sets forth certain general terms and provisions of the Debt Securities to which any Prospectus Supplement may relate. The particular terms of the Debt Securities offered by any Prospectus Supplement and the extent, if any, to which such general provisions may apply to the Debt Securities so offered, will be described in the Prospectus Supplement relating to such Debt Securities. To the extent reference is made herein or in a Prospectus Supplement to the terms of any Debt Securities, such -7- descriptions do not purport to be complete and are subject to and are qualified in their entirety by reference to, the Indenture pursuant to which such Debt Securities are issued and the applicable Authorizing Resolution. General The Debt Securities will represent general unsecured obligations of Toll. The Company will unconditionally guarantee the due and punctual payment of the principal of, premium, if any, and interest, if any, on the Debt Securities, when and as the same shall become due and payable, whether at maturity, by declaration of acceleration, call for redemption or otherwise (the "Guarantee"). See "Guarantee of Debt Securities". An Indenture will not limit the aggregate principal amount of Debt Securities which may be issued thereunder. Debt Securities may be issued thereunder from time to time in one or more Series. Because Toll has no independent operations and generates no operating revenues, funds required to pay the principal and interest on the Debt Securities will be derived from the Company and its other Subsidiaries (as defined in the Indenture). There are no legal or contractual restrictions on the Company's or such other Subsidiaries' ability to provide such funds. Unless otherwise provided in the applicable Authorizing Resolution and Prospectus Supplement, the payment of principal, premium, if any, and interest on the Debt Securities will be subordinated in right of payment, in the manner and to the extent set forth in the Indenture pursuant to which such Debt Securities are issued, to the prior payment in full of all senior indebtedness of Toll (referred to in the Indenture pursuant to which such Debt Securities are issued as "Senior Indebtedness of the Company", as further defined in the applicable Authorizing Resolution and Prospectus Supplement), whether outstanding on the date of such Indenture or thereafter created, incurred, assumed or guaranteed. Reference is made to the applicable Authorizing Resolution and Prospectus Supplement relating to the particular series (a "Series") of Debt Securities offered thereby for the following terms: (1) the title of the Series; (2) the aggregate principal amount of the Series; (3) the interest rate or method of calculation of the interest rate; (4) the date from which interest will accrue; (5) the Record Dates for interest payable on Debt Securities of the Series; (6) the dates when, places where and manner in which principal and interest are payable; (7) the Registrar and Paying Agent; (8) the terms of any mandatory or optional redemption by the issuer of such Series; (9) the terms of any redemption at the option of holders of such Debt Securities; (10) the denominations in which such Debt Securities are issuable; (11) whether such Debt Securities will be issued in registered or bearer form and the terms of any such forms of such Debt Securities; (12) whether any such Debt Securities will be represented by a Global Security (as hereinafter defined) and, if applicable, the terms of any Global Security (see "-- Registered Global Securities"); (13) the currencies (including any composite currency) in which principal or interest or both may be paid; (14) if payments of principal or interest may be made in a currency other than that in which such Debt Securities are denominated and the manner for determining such payments; (15) any provisions for electronic issuance of such Debt Securities or issuance of such Debt Securities in uncertificated form; (16) any Events of Default or covenants in addition to or in lieu of those set forth in this Prospectus; (17) whether and upon what terms such Debt Securities may be defeased; (18) the form of such Debt Securities and the Guarantees; (19) whether the Debt Securities of such Series will be convertible into or exchangeable for Common -8- Stock and the terms thereof (including without limitation the conversion price, the conversion period and any other provision in addition to or in lieu of those set forth in this Prospectus); (20) whether the Debt Securities and Guarantees of such Series shall be subordinated to any obligations of Toll or the Company, and the obligations to which any such subordination will apply; (21) any terms that may be required by or advisable under applicable law; and (22) any other terms of such Series of Debt Securities. In the event that any Debt Securities are to be issued at a discount, the terms of such Debt Securities, certain special federal income tax and other considerations applicable thereto will be described in the related Prospectus Supplement. Guarantee of Debt Securities The Guarantee will constitute the Company's unconditional guarantee of the due and punctual payment of the principal, premium, if any, and interest, if any, on the Debt Securities, when and as the same shall become due and payable, whether at maturity, by declaration of acceleration, call for redemption or otherwise. Unless otherwise provided in the applicable Authorizing Resolution and described in the related Prospectus Supplement, the payment of principal, premium, if any, and interest on the Debt Securities pursuant to the Guarantee will be subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full of all senior indebtedness of the Company (referred to in the Indenture as "Senior Indebtedness of the Guarantor", as further defined in the applicable Authorizing Resolution and Prospectus Supplement), whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Upon (i) the maturity of any senior indebtedness of the Company by lapse of time, acceleration (unless waived) or otherwise or (ii) any distribution of the assets of the Company upon any dissolution, winding up, liquidation or reorganization of the Company, the holders of senior indebtedness of the Company will be entitled to receive payment in full before the holders of any outstanding Debt Securities will be entitled to receive any payment on such Debt Securities pursuant to the Guarantee. If, in any of the situations referred to in clause (i) or (ii) above, a payment is made to the Trustee or to holders of the Debt Securities by the Company before all senior indebtedness of the Company has been paid in full or provision has been made for such payment, the payment to the Trustee or holders must be paid over to the holders of senior indebtedness of the Company. The Company's assets consist principally of the stock of its Subsidiaries. Therefore, its rights and the rights of its creditors, including the holders of Debt Securities under an Indenture, to participate in the assets of any Subsidiary (other than Toll) upon liquidation, recapitalization or otherwise will be subject to the prior claims of such Subsidiary's creditors (including the banks that have provided and are providing to one of the Subsidiaries a revolving credit facility under an agreement (the "Revolving Credit Agreement") pursuant to which the Company and the other Subsidiaries (including Toll) have guaranteed or will guarantee the obligations owing to such banks under the Revolving Credit Agreement), except to the extent that claims of the Company itself as a creditor of the Subsidiary may be recognized. -9- Conversion of Debt Securities If so indicated in the applicable Authorizing Resolution and Prospectus Supplement with respect to a particular Series of Debt Securities, such Series will be convertible into Common Stock of the Company or other securities (including rights to receive payments in cash or securities based on the value, rate or price of one or more specified commodities, currencies, currency units or indices) on the terms and conditions set forth in such Authorizing Resolution and Prospectus Supplement. Unless otherwise provided in the applicable Authorizing Resolution and described in the related Prospectus Supplement, holders of Debt Securities of any Series that are convertible will be entitled to convert the principal amount or a portion of such principal amount which is an integral multiple of $1,000 at any time prior to the date specified in the Debt Securities of such Series (subject, if applicable, to prior redemption at the option of Toll) into Common Shares at the conversion price set forth in the applicable Authorizing Resolution and Prospectus Supplement, subject to adjustment as described below. In the case of any Debt Security or portion thereof called for redemption, conversion rights expire at the close of business on the second business day preceding the redemption date. (Section 10.02). The Company will not be required to issue fractional shares of Common Stock upon conversion of the Debt Securities of a convertible Series but will pay a cash adjustment in lieu thereof. (Section 10.04). Except as otherwise provided in the Indenture, interest accrued shall not be paid on Debt Securities that are converted. (Section 10.03). The conversion price of the Debt Securities of a convertible Series will be subject to adjustment in certain events, including (i) the subdivision, combination or reclassification of the outstanding Common Stock of the Company, (ii) the issuance of Common Stock as a dividend or distribution on Common Stock, (iii) the issuance of rights or warrants (expiring within 45 days after the record date for such issuance) to all holders of Common Stock entitling them to acquire shares of Common Stock (or securities convertible into or exchangeable for Common Stock) at less than the then Current Market Price (as defined in the Indenture) of the Common Stock, or (iv) the distribution to all holders of Common Stock rights or warrants to subscribe for securities of the Company other than as referred to in (iii), or evidences of the Company's indebtedness or assets (excluding certain cash dividends and certain other dividends or distributions payable in stock or rights or warrants to subscribe to securities of the Company). There will be no upward adjustment in the conversion price except in the event of a reverse stock split. The Company is not required to make any adjustment in the conversion price of less than 1%, but the same will be carried forward and taken into account in the computation of any subsequent adjustment. (Section 10.05). Conversion price adjustments or omissions in making such adjustments may, under certain circumstances, be deemed to be distributions that could be taxable as dividends under the Internal Revenue Code to holders of Debt Securities or to holders of Common Stock. In case of any consolidation or merger to which the Company is a party (other than a merger or consolidation in which the Company is the continuing corporation), or any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, or any statutory exchange of securities with another corporation, there will be no -10- adjustments to the conversion price of the Debt Securities of any convertible Series as set forth above, but the holder of each such convertible Debt Security then outstanding will have the right to convert such Debt Security into the kind and amount of securities, cash or other property which such holder would have owned or have been entitled to receive immediately after such transaction had such Debt Security been converted immediately prior to the effective date of such transaction. (Section 10.10). Form, Exchange, Registration, Conversion, Transfer and Payment Unless otherwise indicated in the applicable Authorizing Resolution and Prospectus Supplement, each Series of Debt Securities will be issued in registered form only, without coupons. Unless otherwise indicated in the applicable Authorizing Resolution and Prospectus Supplement, payment of principal, premium, if any, and interest, if any, on the Debt Securities will be payable, and the exchange, conversion and transfer of Debt Securities will be registerable, at the office or agency of Toll maintained for such purposes and at any other office or agency maintained for such purposes. (Section 2.03). Subject to certain exceptions set forth in the Indenture, Toll may charge a reasonable fee for any registration of transfer or exchange of such Debt Securities (including payment of a sum sufficient to cover any tax or other governmental charge imposed or expenses incurred in connection therewith). (Section 2.06). All monies paid by Toll to the Trustee and Paying Agent for the payment of principal of, premium, if any, or interest on any Debt Security which remain unclaimed for two years after such principal, premium or interest has become due and payable may be repaid to Toll and thereafter the holder of such Debt Security may look only to Toll or, if applicable, the Company, for payment thereof. (Section 11.03). Registered Global Securities Unless otherwise indicated in the applicable Authorizing Resolution and Prospectus Supplement, the registered Debt Securities of a Series may be issued in the form of one or more registered global Debt Securities (the "Global Securities") that will be deposited with and registered in the name of a depositary (each, a "Depositary") or its nominee identified in the applicable Prospectus Supplement. In such case, one or more registered Global Securities will be issued, each in a denomination equal to the portion of the aggregate principal amount of outstanding registered Debt Securities of the series to be represented by such registered Global Security. Unless and until it is exchanged in whole or in part for Debt Securities in definitive registered form, a registered Global Security may not be transferred except as a whole by the Depositary for such registered Global Security to a nominee of such Depositary, or by such a nominee to such Depositary or to another nominee of such Depositary, or by such Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. The specific terms of the depositary arrangement with respect to any portion of a series of Debt Securities to be represented by a registered Global Security will be described in the applicable Prospectus Supplement. The Company anticipates that the following provisions will apply to all depositary arrangements. -11- Ownership of beneficial interests in a registered Global Security will be limited to persons that have accounts with the Depositary for such registered Global Security (collectively, the "participants") or persons holding interests through participants. Upon the issuance of a registered Global Security, the Depositary for such registered Global Security will credit, on its book-entry registration and transfer system, the participants' accounts with the respective principal amounts of the Debt Securities represented by such registered Global Security beneficially owned by such participants. The accounts to be credited shall be designated by any dealers, underwriters or agents participating in the distribution of such Debt Securities. Ownership of beneficial interests in such registered Global Security will be shown on, and the transfer of such ownership interests will be effected only through, records maintained by the Depositary for such registered Global Security (with respect to interests of participants) and on the records of participants (with respect to interests of persons holding through participants). The laws of certain states may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to own, transfer or pledge beneficial interests in registered Global Securities. So long as the Depositary for a registered Global Security, or its nominee, is the registered owner of such registered Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such registered Global Security for all purposes under the Indenture applicable thereto. Except as set forth below, owners of beneficial interests in a registered Global Security will not be entitled to have the Debt Securities represented by such registered Global Security registered in their names, will not receive or be entitled to receive physical delivery of such Debt Securities in definitive form and will not be considered the owners or holders thereof under the Indenture applicable thereto. Accordingly, each person owning a beneficial interest in a registered Global Security must rely on the procedures of the Depositary for such registered Global Security and, if such person is not a participant, on the procedures of the participant through which such person owns its interests, to exercise any rights of a holder under the Indenture applicable to such registered Global Security. The Company understands that under existing industry practices, if the Company requests any action of holders, or if an owner of a beneficial interest in a registered Global Security desires to give or take any action which a holder is entitled to give or take under the applicable Indenture, the Depositary for such registered Global Security would authorize the participants holding the relevant beneficial interests to give or take such action, and such participants would authorize beneficial owners owning through such participants to give or take such action or would otherwise act upon the instructions of beneficial owners holding through them. Principal, premium, if any, and interest payments on Debt Securities represented by a registered Global Security registered in the name of a Depositary, or its nominee, will be made to such Depositary or its nominee, as the case may be, as the registered owner of such registered Global Security. None of Toll, the Company, the Trustee under the applicable Indenture or any other agent of Toll or the Company or agent of such Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in such registered Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. -12- The Company expects that the Depositary for any Debt Securities represented by a registered Global Security, upon receipt of any payment of principal, premium or interest in respect of such registered Global Security, will immediately credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in such registered Global Security as shown on the records of such Depositary. The Company also expects that payments by participants to owners of beneficial interests in such registered Global Security held through such participants will be governed by standing customer instructions and customary practices, as is now the case with the securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. If the Depositary for any Debt Securities represented by a registered Global Security is at any time unwilling or unable to continue as Depositary or ceases to be a clearing agency registered under the Exchange Act, and a successor Depositary registered as a clearing agency under the Exchange Act is not appointed by the Company within 90 days, the Company will issue such Debt Securities in definitive form in exchange for such registered Global Security. In addition, the Company may at any time and in its sole discretion determine not to have any of the Debt Securities of a series represented by one or more registered Global Securities and, in such event, will issue Debt Securities of such series in definitive form in exchange for each registered Global Security representing such Debt Securities. Any Debt Securities issued in definitive form in exchange for a registered Global Security will be registered in such name or names as the Depositary shall instruct the Trustee. It is expected that such instructions will be based upon directions received by the Depositary from participants with respect to ownership of beneficial interests in such registered Global Security. Events of Default and Notice Thereof Unless otherwise indicated in the applicable Prospectus Supplement, the term "Event of Default" when used in the Indenture means any one of the following: failure by the Company or Toll to pay (whether or not prohibited by any subordination provisions) interest for 30 days or principal or premium, if any, when due on such Debt Securities; failure by the Company or Toll to perform any other covenant under the Indenture, the Guarantee or the Debt Securities for 60 days after receipt of notice by the Trustee or the holders of at least 25% in principal of the Debt Securities of the Series affected; default in the payment of indebtedness of the Company or Toll or any Subsidiary under the terms of the instrument evidencing or securing such indebtedness permitting the holder thereof to accelerate the payment of in excess of an aggregate of $2,000,000 in principal amount of such indebtedness (after the lapse of applicable grace periods) or, in the case of non-payment defaults, acceleration of any such indebtedness if such acceleration is not rescinded or annulled within ten days after such acceleration, provided that, subject to certain limitations as set forth in the Indenture, the term "indebtedness" shall not include an acceleration of or default on certain Non-Recourse Indebtedness (as hereinafter defined); entry of a final judgment for the payment of money in an amount in excess of $2,000,000 against Toll, the Company or any Subsidiary which remains undischarged, or unstayed for a period of 60 days after the date on which the right to appeal has expired, provided that the term "final judgment" shall not include a Non-Recourse Judgment (as hereinafter defined) unless the book value of all property (net of any previous write downs or reserves in respect of such property) subject to such Non-Recourse Judgment exceeds the amount of such Non-Recourse Judgment by more than $5,000,000; certain events of -13- bankruptcy, insolvency or reorganization with respect to the Company or Toll; or, the Guarantee ceasing (other than pursuant to its terms) to be in full force and effect. (Section 8.01). "Non-Recourse Indebtedness" means, as to the Indenture, indebtedness or other obligations secured by a lien on property to the extent that the liability for such indebtedness or other obligations is limited to the security of the property without liability on the part of the Company or any Subsidiary (other than the Subsidiary which holds title to such, property) for any deficiency. "Non-Recourse Judgment" means, as to the Indenture, a judgment in respect of indebtedness or other obligations secured by a lien on property to the extent that the liability for (i) such indebtedness or other obligations and (ii) such judgment is limited to such property without liability on the part of the Company or any Subsidiary (other than the Subsidiary which holds title to such property) for any deficiency. The Indenture will provide that if a default on a Series of Debt Securities occurs and is continuing and is known to the Trustee for such Series, the Trustee will, within 90 days after the occurrence of such Default, mail to the Holders of Debt Securities issued thereunder notice of the Default (the term "Default" to include the events specified above without grace or notice); provided that, except in the case of Default in the payment of principal of, or premium, if any, or interest on any of the Debt Securities, the Trustee shall be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interest of the Holders of such Debt Securities. (Section 9.05). If an Event of Default with respect to Debt Securities of any Series at the time outstanding (other than an Event of Default resulting from certain events of bankruptcy, insolvency or reorganization with respect to the Company or Toll) occurs and is continuing, either the Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Debt Securities of that Series may by notice to Toll (the "Acceleration Notice") declare the principal amount of and accrued and unpaid interest on all the Debt Securities of that Series to be due and payable if, with respect to Debt Securities of such Series: (i)(a) no designated senior debt of the Company or Toll (referred to in the Indenture as "Designated Senior Debt of the Guarantor" and "Designated Senior Debt of the Company", respectively, as such term is further defined in the applicable Authorizing Resolution and Prospectus Supplement) is outstanding or (b) if the Debt Securities of such Series are not subordinated to other indebtedness of Toll, immediately; or (ii) if Designated Senior Debt of the Company or Toll is outstanding and the Debt Securities of such Series are subordinated to other indebtedness of Toll, upon the earlier of (A) ten days after such Acceleration Notice is received by Toll or (B) the acceleration of any Senior Indebtedness of the Guarantor or Toll. If an Event of Default resulting from certain events of bankruptcy, insolvency or reorganization with respect to the Company or Toll occurs with respect to a Series of Debt Securities, the unpaid principal amount of and accrued and unpaid interest on the Debt Securities of such Series shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of Debt Securities. At any time after a declaration of acceleration with respect to Debt Securities of any Series has been made, but before a judgment or decree based on acceleration has been obtained, the holders of a majority in aggregate principal amount of outstanding Debt Securities of that Series may rescind such acceleration, provided that, among other things, all Events of Default -14- with respect to such Series, other than payment defaults caused by such acceleration, have been cured or waived as provided in the Indenture. (Section 8.02). Defaults with respect to a Series of Debt Securities (except a default in payment of principal of, or premium, if any, or interest on such Debt Securities, as the case may be) may be waived on behalf of all holders by the holders of a majority in outstanding principal amount of the Debt Securities of that Series issued under the Indenture, upon the terms and subject to the conditions provided in the Indenture. (Section 8.04). The Indenture includes a covenant that Toll and the Company will file annually with the Trustee a signed statement regarding compliance by the Company and Toll with the terms thereof and specifying any default of which the signers have knowledge. (Section 4.03). Additional Provisions The Indenture provides that, subject to the duty of the Trustee during default to act with the required standard of care, the Trustee will be under no obligation to perform any duty or to exercise any of its rights or powers under the Indenture, unless the Trustee shall have received indemnity satisfactory to it against any loss, liability or expense. (Section 9.01). Subject to such provisions for the indemnification of the Trustee and certain other conditions, the holders of a majority in aggregate principal amount of the outstanding Debt Securities of any Series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Debt Securities of that Series. (Section 8.05). No holder of any Debt Security of any Series will have any right to pursue any remedy with respect to the Indenture or the Debt Securities of that Series, unless: (i) such holder shall have previously given to the Trustee written notice of a continuing Event of Default; (ii) the holders of not less than 25% in aggregate principal amount of the outstanding Debt Securities of such Series make a written request to the Trustee to pursue the remedy; (iii) such holders shall have offered the Trustee indemnity satisfactory to it against any loss, liability or expense; (iv) the Trustee shall have failed to comply with such holders' request within 60 days after receipt of such written request and offer of indemnity; and (v) the Trustee shall not have received from the holders of a majority in principal amount of the outstanding Debt Securities of that Series a direction inconsistent with such request. (Section 8.06). However, the holder of any Debt Security will have an absolute right to receive payment of the principal of and interest on such Debt Security on or after the respective due dates expressed in such Debt Security and to bring suit for the enforcement of any such payment. (Section 8.07). Merger or Consolidation Neither the Company nor Toll shall consolidate with or merge into, or transfer all or substantially all of its assets to, any other Person unless (i) such other Person is a corporation organized and existing under the laws of the United States or a state thereof or the District of Columbia and expressly assumes by supplemental indenture all the obligations of the Company or Toll, as the case may be, under the Indenture and either the Guarantee or the Debt Securities, as the case may be; (ii) immediately after giving effect to such transaction no Default or Event of -15- Default (as defined in the Indenture) shall have occurred and be continuing, and (iii) the Consolidated Net Worth of the surviving corporation is equal to or greater than the Consolidated Net Worth of the Company or Toll, as the case may be. Thereafter, all such obligations of a predecessor corporation shall terminate. (Section 5.01). Modification of an Indenture The obligations of the Company and Toll and the rights of the holders of the Debt Securities may be modified under the Indenture with the consent of the holders of a majority in outstanding principal amount of any Series of Debt Securities affected by such modification; provided that no extension of the maturity of any Debt Securities, no reduction in the rate or extension of time of payment of interest thereon, no reduction of the principal amount thereof or premium thereon, no change in the redemption provisions, no change that adversely affects the right to convert or the conversion price for any Series of Debt Securities, no reduction of the percentage required for any such modification, no waiver of a default in the payment of the principal, premium, if any, or interest on any Series of Debt Securities, no modification of the subordination or guarantee provisions in a manner adverse to holders of any Series of Debt Securities, no change in the medium of payment other than stated in the Debt Securities and no change in the provisions regarding amendments to the Indenture or waiver of Defaults or Events of Default will be effective against any holders of any Series of Debt Securities without such holder's consent. (Section 12.02). Governing Law The Indenture, the Debt Securities and the Guarantee shall be governed by the laws of the State of New York. (Section 13.09). Satisfaction and Discharge of Indenture Unless otherwise provided in the applicable Authorizing Resolution and Prospectus Supplement, the Indenture will be discharged upon payment of all the Series of Debt Securities issued thereunder or upon deposit with the Trustee, within one year of the date of maturity or redemption of all of the Series of Debt Securities issued thereunder, of funds sufficient for such payment or redemption. Reports to Holders of Debt Securities The Company and Toll will file with the Trustee copies of their annual reports and other information, documents and reports as filed with the Commission. So long as the Company's obligations to file such reports or information with the Commission are suspended or terminated, the Company will file with the Trustee audited annual financial statements prepared in accordance with generally accepted accounting principles and unaudited condensed quarterly financial statements. Such financial statements shall be accompanied by management's discussion and analysis of the results of operations and financial condition of the Company for the period reported upon in substantially the form required under the rules and regulations of the Commission currently in effect. -16- DESCRIPTION OF CAPITAL STOCK The Company's authorized capital stock consists of 40,000,000 shares of Common Stock, $.01 par value per share, and 1,000,000 shares of Preferred Stock, $.01 par value per share; however, subject to the limitations and procedures described below, the Company's shareholders have authorized increases up to 60,000,000 shares of Common Stock and 15,000,000 shares of Preferred Stock. In March 1993, to reduce applicable state taxes on authorized shares of capital stock, the Company's shareholders approved a series of amendments to the Company's Certificate of Incorporation pursuant to which: (i) the authorized Common Stock was reduced from 60,000,000 shares to 40,000,000 shares and the authorized Preferred Stock was reduced from 15,000,000 shares to 1,000,000 shares; and (ii) the authorized Common Stock and Preferred Stock could subsequently be increased in five intermediate steps, over a five year period ending March 11, 1998 up to the original levels, upon the filing of the appropriate amendments by the Company's Board of Directors. If all such amendments are filed before March 11, 1998, the Company's authorized Common Stock and Preferred Stock will be restored to 60,000,000 shares and 15,000,000 shares, respectively. Common Stock Subject to the rights and preferences of any holders of Preferred Stock (no shares of which currently are outstanding), the holders of the Company's Common Stock are entitled to one vote per share, to receive such dividends as legally may be declared by the Board of Directors and to receive pro rata the net assets of the Company upon liquidation. There are no cumulative voting, preemptive, conversion or redemption rights applicable to the Common Stock. Persons casting a majority of the votes in the election of directors will be entitled to elect all of the directors. On June 12, 1997, the Board of Directors of the Company adopted a Stockholder Rights Plan providing that one right (a "Right") shall be attached to each share of the Company's common stock. Each Right entitles the registered holder to purchase from the Company a unit consisting of one one-thousandth of a share of Series A Junior Participating Preferred Stock of the Company at a purchase price of $100 per unit. Initially the Rights will be attached to all Common Stock certificates and no separate Rights Certificates will be distributed. The Rights will separate from the Common Stock and a distribution date will occur upon the earlier of ten days following a public announcement that a person or group of affiliated persons has acquired beneficial ownership of 15% or more of the outstanding shares of Common Stock or ten business days following the commencement of a tender offer that would result in a person or group beneficially owning 15% or more of such outstanding shares of Common Stock. The Rights are not excisable until the distribution date and will expire at the close of business on July 11, 2007. In the event any person or group (other than certain exempted persons) acquires 15% or more of the then outstanding shares of Common Stock (unless such acquisition is made pursuant to a tender offer for all outstanding shares, at a price determined by a majority of the independent directors of the Company who are Continuing Directors (as defined in the Plan)), each holder of a Right will thereafter have the right to receive, upon exercise, Common Stock having a value equal to two times the exercise price of the Right. At any time until ten days following such stock acquisition date, the Company may redeem the Rights at a price of $.001 per Right. A copy of the Rights Agreement was filed with the Securities and Exchange Commission as an -17- Exhibit to a Registration Statement on Form 8-A. This summary of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference. The Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange. The registrar and transfer agent for the Common Stock is Chase Mellon Shareholder Services, L.L.C. Preferred Stock General. The Company may issue, from time to time, shares of one or more series of Preferred Stock. The following description of the terms of the Preferred Stock sets forth certain general terms and provisions of the Preferred Stock to which any Prospectus Supplement may relate. The particular terms of any series of Preferred Stock offered by any Prospectus Supplement and the extent, if any, to which such general provisions may apply to the series of Preferred Stock so offered will be described in a Prospectus Supplement relating to such Preferred Stock. The following summary of certain provisions of the Preferred Stock does not purport to be complete and is subject to, and is qualified in its entirety by express reference to, the provisions of the Company's Certificate of Incorporation, as amended (the "Certificate of Incorporation"), and each Certificate of Designation relating to a specific series of the Preferred Stock (each, a "Certificate of Designation"), which will be in the form filed as an exhibit to, or incorporated by reference in, the Registration Statement at or prior to the time of issuance of such series of Preferred Stock. The Board of Directors of the Company is authorized to issue shares of Preferred Stock, in one or more series, and to fix for each such series voting powers and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions, as are permitted by the Delaware General Corporation Law. The Board of Directors of the Company is authorized to determine for each series of Preferred Stock, and the Prospectus Supplement shall set forth with respect to such series, the following: (i) the designation of such series and the number of shares that constitute such series; (ii) the dividend rate (or the method of calculation thereof), if applicable, on the shares of such series and the priority as to payment of dividends with respect to other classes or series of capital stock of the Company; (iii) the dividend periods (or the method of calculation thereof), if applicable; (iv) the voting rights, if any, of the shares; (v) the liquidation preference and the priority as to payment of such liquidation preference with respect to other classes or series of capital stock of the Company and any other rights of the shares of such series upon any liquidation or winding-up of the Company; (vi) whether or not and on what terms the shares of such series will be subject to redemption or repurchase at the option of the Company; (vii) whether and on what terms the shares of such series will be convertible into or exchangeable for other debt or equity securities; (viii) whether the shares of such series of Preferred Stock will be listed on a securities exchange; and -18- (ix) the other rights and privileges and any qualifications, limitations or restrictions of such rights or privileges of such series. Dividends. Holders of shares of Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the Company out of funds of the Company legally available therefor, cash dividends payable on such dates and at such rates, if any, per share set forth in the applicable Prospectus Supplement. Unless otherwise set forth in the applicable Prospectus Supplement, each series of Preferred Stock will rank junior as to dividends to any series of Preferred Stock that may be issued in the future that is expressly senior as to dividends to such earlier series of the Preferred Stock. If at any time the Company has failed to pay accrued dividends on any such senior series at the time dividends are payable on a junior series, the Company may not pay any dividend on such junior series of Preferred Stock or redeem or otherwise repurchase shares of such junior series of Preferred Stock until such accumulated but unpaid dividends on the senior series have been paid or set aside for payment in full by the Company. Unless otherwise set forth in the applicable Prospectus Supplement, no dividends (other than in Common Stock or other capital stock ranking junior to the Preferred Stock of any series as to dividends and upon liquidation) shall be declared or paid or set aside for payment, nor shall any other distribution be declared or made upon the Common Stock, or any other capital stock of the Company ranking junior to or on a parity with the Preferred Stock of such series as to dividends, nor shall any Common Stock or any other capital stock of the Company ranking junior to or on a parity with the Preferred Stock of such series as to dividends be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Company (except by conversion into or exchange for other capital stock of the Company ranking junior to the Preferred Stock of such series as to dividends) unless (i) if such series of Preferred Stock has a cumulative dividend, full cumulative dividends on the Preferred Stock of such series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for all past dividend periods and the then current dividend period or (ii) if such series of Preferred Stock does not have a cumulative dividend, full dividends on the Preferred Stock of such series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for the then current dividend period; provided, however, that any monies theretofore deposited in any sinking fund with respect to any Preferred Stock of the Company in compliance with the provisions of such sinking fund may thereafter be applied to the purchase or redemption of such Preferred Stock in accordance with the terms of such sinking fund, regardless of whether at the time of such application full cumulative dividends upon shares of the Preferred Stock outstanding on the last dividend payment date shall have been paid or declared and set apart for payment; and provided, further, that any such junior or parity Preferred Stock of the Company or Common Stock of the Company may be converted into or exchanged for stock of the Company ranking junior to the series of Preferred Stock then senior to such junior or parity Preferred Stock as to dividends. The amount of dividends payable for the initial dividend period or any period shorter than a full dividend period shall be computed on the basis of a 360-day year of twelve 30-day months. Accrued but unpaid dividends will not bear interest. -19- Convertibility. No series of Preferred Stock will be convertible into, or exchangeable for, other securities or property except as set forth in the applicable Prospectus Supplement. Redemption and Sinking Fund. No series of Preferred Stock will be redeemable or receive the benefit of a sinking fund except as set forth in the applicable Prospectus Supplement. Liquidation Rights. Unless otherwise set forth in the applicable Prospectus Supplement, in the event of any liquidation, dissolution or winding-up of the Company, the holders of shares of each series of Preferred Stock are entitled to receive out of assets of the Company available for distribution to stockholders, before any distribution of assets is made to holders of: (i) any other shares of Preferred Stock of the Company ranking junior to such series of Preferred Stock as to rights upon liquidation, dissolution or winding-up; or (ii) shares of Common Stock, liquidating distributions per share in the amount of the liquidation preference specified in the applicable Prospectus Supplement for such series of Preferred Stock plus any dividends accrued and accumulated but unpaid to the date of final distribution, but, in either case, the holders of each series of Preferred Stock will not be entitled to receive the liquidating distribution of, plus such dividends on, such shares until the liquidation preference of any shares of the Company's capital stock ranking senior to such series of the Preferred Stock as to the rights upon liquidation, dissolution or winding-up shall have been paid (or a sum set aside therefor sufficient to provide for payment) in full. If upon any liquidation, dissolution or winding-up of the Company, funds available for such purpose are insufficient to pay in full the amounts payable with respect to any series of the Preferred Stock, and any other Preferred Stock ranking as to any such distribution on a parity with such series of the Preferred Stock, the holders of such series of the Preferred Stock of the Company and such other parity Preferred Stock will share ratably in any such distribution of assets in proportion to the full respective preferential amounts to which they are entitled. Unless otherwise specified in a Prospectus Supplement for a series of Preferred Stock, after payment of the full amount of the liquidating distribution to which they are entitled, the holders of shares of Preferred Stock will not be entitled to any further participation in any distribution of assets by the Company. Neither a consolidation or merger of the Company with another corporation nor a sale of securities shall be considered a liquidation, dissolution or winding-up of the Company. Voting Rights. Holders of Preferred Stock will not have any voting rights except as set forth in the applicable Prospectus Supplement or as otherwise from time to time required by law. Miscellaneous. The holders of Preferred Stock will have no preemptive rights. The Preferred Stock, upon issuance against full payment of the purchase price therefor, will be fully paid and nonassessable. Shares of Preferred Stock redeemed or otherwise reacquired by the Company shall resume the status of authorized and unissued shares of Preferred Stock undesignated as to series, and shall be available for subsequent issuance. There are no restrictions on repurchase or redemption of the Preferred Stock on account of any arrearage on sinking fund installments except as may be set forth in an applicable Prospectus Supplement. Payment of dividends on any series of Preferred Stock may be restricted by loan agreements, indentures or other agreements entered into by the Company. The accompanying Prospectus Supplement will describe any material contractual restrictions on dividend payments. Such Prospectus Supplement will also describe any material United States federal income tax considerations applicable to the Preferred Stock. -20- No Other Rights. The shares of a series of Preferred Stock will not have any preferences, voting powers or relative, participating, optional or other special rights except as set forth above or in the applicable Prospectus Supplement, the Certificate of Incorporation or the applicable Certificate of Designation, or as otherwise required by law. Transfer Agent and Registrar. The transfer agent and registrar for each series of Preferred Stock will be designated in the applicable Prospectus Supplement. Classified Board of Directors and Restrictions on Removal Under the Company's Certificate of Incorporation, as amended, the Company's Board of Directors is divided into three classes of directors serving staggered terms of three years each. Each class is to be as nearly equal in number as possible, with one class being elected each year. The Certificate of Incorporation also provides that directors may be removed from office only for cause and only with the affirmative vote of 66 2/3% of the voting power of the voting stock; that any vacancy on the Board of Directors or any newly created directorship shall be filled by the remaining Directors then in office, though less than a quorum; and that advance notice of shareholder nominations for the elections of Directors shall be given in the manner provided by the By-Laws of the Company. The required 66 2/3% shareholder vote necessary to alter, amend or repeal these provisions of the Certificate of Incorporation, the related amendments to the By-Laws and all other provisions of the By-Laws, or to adopt any provisions relating to the classification of the Board of Directors and the other matters described above may make it more difficult to change the composition of the Company's Board of Directors and may discourage or make difficult any attempt by a person or group to obtain control of the Company. PLAN OF DISTRIBUTION The Company may sell the Common Shares and the Preferred Shares offered hereby: (i) directly to purchasers; (ii) through agents; (iii) through underwriters; (iv) through dealers; or (v) through a combination of any such methods of sale. Toll may sell the Debt Securities, together with Guarantees issued by the Company, being offered hereby: (i) directly to purchasers; (ii) through agents; (iii) through underwriters; (iv) through dealers; or (v) through a combination of any such methods of sale. The distribution of the Securities may be effected from time to time in one or more transactions: (a) at a fixed price or prices, which may be changed; (b) at market prices prevailing at the time of sale; (c) at prices related to such prevailing market prices; or (d) at negotiated prices. Offers to purchase Securities may be solicited directly by the Company or Toll, as the case may be, or by agents designated by the Company or Toll, as the case may be, from time to time. Any such agent, which may be deemed to be an underwriter as that term is defined in the Securities Act of 1933, involved in the offer or sale of the Securities in respect of which this Prospectus is delivered will be named, and any commissions payable by the Company or Toll, as the case may be, to such agent will be set forth, in the applicable Prospectus Supplement. If underwriters are utilized in the offer and sale of Securities in respect of which this Prospectus and an accompanying Prospectus Supplement are delivered, the name of each managing underwriter, if any, and any other underwriters and terms of the transaction, including any underwriting discounts and other items constituting compensation of the underwriters and dealers, if any, will be set forth in the applicable Prospectus Supplement relating to such offering and the Securities will be acquired by the underwriters for their own accounts and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. Underwriters, dealers and agents may be entitled, under agreements which may be entered into with the Company, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to reimbursement by the Company of certain expenses. -21- If a dealer is utilized in the sale of the Securities in respect of which this Prospectus is delivered, the Company and/or Toll 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 name of the dealer and the terms of the transaction will be set forth in the applicable Prospectus Supplement relating thereto. Offers to purchase the Securities may be solicited, and sales thereof may be made, by the Company and/or Toll directly to institutional investors or others, who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resales thereof. The terms of any such offer will be set forth in the applicable Prospectus Supplement relating thereto. If so indicated in the applicable Prospectus Supplement, the Company and/or Toll will authorize underwriters or other agents of the Company to solicit offers by certain institutional investors to purchase Securities from the Company and/or Toll pursuant to contracts providing for payment and delivery at a future date. Institutional investors with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such purchasers must be approved by the Company and/or Toll. The obligations of any purchaser under any such contract will not be subject to any conditions except that (i) the purchase of the Securities shall not at the time of delivery be prohibited under the laws of any jurisdiction to which such purchaser is subject and (ii) if the Securities are also being sold to underwriters, the Company shall have sold to such underwriters the Securities not subject to delayed delivery. Underwriters and other agents will not have any responsibility in respect of the validity or performance of such contracts. In addition, the Securities may be offered and sold by the holders thereof in one or more of the transactions described above, which transactions may be effected at any time and from time to time. Upon any such sale of Securities, the respective holders thereof and any broker, dealer or underwriter participating therewith may be deemed to be underwriters within the meaning of Section 2(11) of the Securities Act, and any commissions, discounts or concessions upon such sale, or any profit on the resale of such Securities, received thereby in connection with such sale may be deemed to be underwriting commissions or discounts under the Securities Act. The compensation, including commissions, discounts, concessions and other profits, received by any broker, dealer or underwriter in connection with the sale of any of such Securities may be less than or in excess of customary commissions. Certain of the underwriters, dealers or agents utilized by the Company and/or Toll in any offering hereby may be customers of, including borrowers from, engage in transactions with, and perform services for, the Company and/or Toll or one or more of their respective affiliates in the ordinary course of business. Underwriters, dealers, agents and other persons may be entitled, under agreements which may be entered into with the Company or Toll, as the case may be, to -22- indemnification against certain civil liabilities, including liabilities under the Securities Act of 1933. Until the distribution of the Securities is completed, rules of the Commission may limit the ability of the underwriters and certain selling group members, if any, to bid for and purchase the Securities. As an exception to these rules, the representatives of the underwriters, if any, are permitted to engage in certain transactions that stabilize the price of the Securities. Such transactions may consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Securities. If underwriters create a short position in the Securities in connection with the offering thereof (i.e, if they sell more Securities than are set forth on the cover page of the applicable Prospectus Supplement), the representatives of such underwriters may reduce that short position by purchasing Securities in the open market. Any such representatives also may elect to reduce any short position by exercising all or part of the over-allotment option, if any, described in the applicable Prospectus Supplement. Any such representatives also may impose a penalty bid on certain underwriters and selling group members. This means that if the representatives purchase Securities in the open market to reduce the underwriters' short position or to stabilize the price of the Securities, they may reclaim the amount of the selling concession from the underwriters and selling group members who sold those Securities as part of the offering thereof. In general, purchases of a security for the purpose of stabilization or to reduce a syndicate short position could cause the price of the security to be higher than it might otherwise be in the absence of such purchases. The imposition of a penalty bid might have an effect on the price of a security to the extent that it were to discourage resales of the security by purchasers in the offering. Neither the Company, Toll nor any of the underwriters, if any, makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Securities. In addition, neither the Company, Toll nor any of the underwriters, if any, makes any representation that the representatives of the underwriters, if any, will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. LEGAL MATTERS Certain legal matters relating to the validity of the Securities will be passed upon by Wolf, Block, Schorr and Solis-Cohen LLP, Philadelphia, Pennsylvania. EXPERTS The consolidated financial statements and schedule of the Company included in the Company's Annual Report (Form 10-K) for the year ended October 31, 1996, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein -23- and incorporated herein by reference. Such consolidated financial statements and schedule are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. -24- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following table sets forth an estimate of the costs and expenses, other than underwriting discounts and commissions, to be incurred by the Company in connection with the issuance and distribution of the securities being registered. Securities and Exchange Commission registration fee.................. $ 87,576 Printing and Engraving............................................... 150,000 Rating agency fees................................................... 60,000 Blue Sky fees and expenses........................................... 30,000 Legal fees and expenses.............................................. 300,000 Accounting fees and expenses......................................... 100,000 Trustee fees and expenses............................................ 20,000 Miscellaneous........................................................ 52,424 -------- Total........................................ $800,000 ======== All expenses, except the Securities and Exchange Commission registration fee are estimated. Item 15. Indemnification of Directors and Officers. For information regarding provisions under which a director or officer of Toll or the Company may be insured or indemnified in any manner against any liability which he may incur in his capacity as such, reference is made to Section 145 of the Delaware General Corporation Law, which provides in its entirety as follows: "(a) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe a person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or II-1 not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person's conduct was unlawful. (b) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders. (e) Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under II-2 any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under this section. (h) For purposes of this section, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (i) For purposes of this section, reference to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this section. (j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation's obligation to advance expenses (including attorneys' fees)." See also Article Six of the Company's Certificate of Incorporation, as amended, Article 8 of Toll's Certificate of Incorporation, as amended, Article VII of the Company's By-Laws, as amended, and Article VIII of Toll's By-Laws, as amended, pursuant to which each II-3 Registrant is granted the power to indemnify any director, officer, employee or agent of such Registrant. See also Section 6 of the Underwriting Agreement Basic Provisions, filed as Exhibit 1 hereto, pursuant to which the Underwriters agree to indemnify the Registrants and their respective directors, officers and controlling persons against certain liabilities, including liabilities under the Securities Act. See Item 17 of this Part II for further information concerning indemnification of directors, officers and controlling persons of the Company and Toll. Item 16. Exhibits 1 Form of Underwriting Agreement Basic Provisions. Incorporated by reference to Exhibit 1 to the Registrants' Registration Statement on Form S-3 (Commission File Nos. 33-51775 and 33-51775-01). 4.1 Form of Indenture among Toll Corp., as issuer, Toll Brothers, Inc., as guarantor, and one or more Trustees, including Form of Note and Form of Guarantee. 5 Opinion and Consent of Wolf, Block, Schorr and Solis-Cohen LLP. 12 Statement of Computation of Ratios of Earnings to Fixed Charges. 23.1 Consent of Wolf, Block, Schorr and Solis-Cohen LLP (included as part of Exhibit 5). 23.2 Consent of Ernst & Young LLP. 24 Powers of Attorney (included on signature pages of this Registration Statement). 25 Form T-1, Statement of Eligibility and Qualification under the Trust Indenture Act of 1939. Additional exhibits to this Registration Statement will be filed with or incorporated by reference in this Registration Statement in connection with future amendments to, or supplements to the prospectus forming a part of this Registration Statement. Item 17. Undertakings. (a) The undersigned Registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; II-4 (ii) to reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in such post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrants pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrants' annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the Securities being registered, the Registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the II-5 question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (d) The undersigned Registrants hereby undertake to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act. II-6 SIGNATURES AND POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Lower Moreland, Commonwealth of Pennsylvania, on October 20, 1997. TOLL CORP. By: /s/ Robert I. Toll -------------------------------------------------- Robert I. Toll, Chairman of the Board of Directors KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Robert I. Toll, Bruce E. Toll, Richard J. Braemer, Joel H. Rassman and Joseph R. Sicree his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents or any of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on October 20, 1997. Signature Title - --------- ----- /s/ Robert I. Toll Chairman of the Board, Chief - ----------------------------- Executive Officer and Director Robert I. Toll (Principal Executive Officer) /s/ Bruce E. Toll President, Chief Operating Officer, - ----------------------------- Secretary and Director Bruce E. Toll /s/ Joel H. Rassman Senior Vice President, Treasurer, - ----------------------------- Chief Financial Officer and Director Joel H. Rassman (Principal Financial Officer) /s/ Joseph R. Sicree Chief Accounting Officer - ----------------------------- (Principal Accounting Officer) Joseph R. Sicree II-7 SIGNATURES AND POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Lower Moreland, Commonwealth of Pennsylvania, on October 20, 1997. TOLL BROTHERS, INC. By: /s/ Robert I. Toll -------------------------------------------------- Robert I. Toll, Chairman of the Board of Directors KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Robert I. Toll, Bruce E. Toll, Richard J. Braemer, Joel H. Rassman and Joseph R. Sicree his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents or any of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on October 20, 1997. Signature Title - --------- ----- /s/ Robert I. Toll Chairman of the Board, Chief - ----------------------------- Executive Officer and Director Robert I. Toll (Principal Executive Officer) /s/ Bruce E. Toll President, Chief Operating Officer, - ----------------------------- Secretary and Director Bruce E. Toll /s/ Zvi Barzilay Executive Vice President, Director - ----------------------------- Zvi Barzilay Director - ----------------------------- Robert S. Blank II-8 /s/ Richard J. Braemer Director - ----------------------------- Richard J. Braemer Director - ----------------------------- Roger S. Hillas Director - ----------------------------- Carl B. Marbach /s/ Joel H. Rassman Senior Vice President, Treasurer, - ----------------------------- Chief Financial Officer, Director Joel H. Rassman (Principal Financial Officer) Director - ----------------------------- Paul Shapiro /s/ Joseph R. Sicree Chief Accounting Officer - ----------------------------- (Principal Accounting Officer) Joseph R. Sicree II-9 EX-4.1 2 DEBT SECURITIES EXHIBIT 4.1 TOLL CORP., as Issuer TOLL BROTHERS, INC., as Guarantor Debt Securities -------------------------- Indenture Dated as of [Name of Trustee] Trustee CROSS-REFERENCE TABLE TIA Section Section Indenture 310(a)(1).......................... 9.10 (a)(2).......................... 9.10 (a)(3).......................... N.A. (a)(4).......................... N.A. (b)............................. 9.08; 9.10; 13.02 (c)............................. N.A. 311(a)............................. 9.11 (b)............................. 9.11 (c)............................. N.A. 312(a)............................. 2.05 (b)............................. 13.03 (c)............................. 13.03 313(a)............................. 9.06 (b)(1).......................... N.A. (b)(2).......................... 9.06 (c)............................. 9.06; 13.02 (d)............................. 9.06 314(a)............................. 4.03; 13.02 (b)............................. N.A. (c)(1).......................... 13.04 (c)(2).......................... 13.04 (c)(3).......................... N.A. (d)............................. N.A. (e)............................. 13.05 (f)............................. N.A. 315(a)............................. 9.01(b) (b)............................. 9.05; 13.02 (c)............................. 9.01(a) (d)............................. 9.01(c) (e)............................. 8.11 316(a)(last sentence).............. 13.06 (a)(1)(A)....................... 8.05 (a)(1)(B)....................... 8.04 (a)(2).......................... N.A. (b)............................. 8.07 317(a)(1).......................... 8.08 (a)(2).......................... 8.09 (b)............................. 2.04 318(a)............................. 13.01 N.A. means Not Applicable. Note: This cross-reference table shall not, for any purpose, be deemed to be a part of the Indenture. -i- TABLE OF CONTENTS Article Section Heading Page 1 DEFINITIONS AND INCORPORATION BY REFERENCE 1.01. Definitions..................................... 1 1.02. Incorporation by Reference of Trust Indenture Act................................. 6 1.03. Incorporation by Reference of Provisions of Securities.................................... 6 1.04. Rules of Construction........................... 7 2 THE SECURITIES 2.01. Form and Dating................................. 7 2.02. Execution and Authentication.................... 9 2.03. Registrar and Paying Agent...................... 10 2.04. Paying Agent To Hold Money in Trust............. 10 2.05. Securityholder Lists............................ 10 2.06. Transfer and Exchange........................... 11 2.07. Replacement Securities.......................... 11 2.08. Outstanding Securities.......................... 11 2.09. Temporary Securities............................ 12 2.10. Cancellation.................................... 12 2.11. Defaulted Interest.............................. 12 2.12. Global Securities............................... 13 3 REDEMPTION 3.01. Notices to Trustee.............................. 13 3.02. Selection of Securities To Be Redeemed.......... 14 3.03. Notice of Redemption............................ 14 3.04. Effect of Notice of Redemption.................. 15 3.05. Deposit of Redemption Price..................... 15 3.06. Securities Redeemed in Part..................... 16 4 COVENANTS 4.01. Payment of Securities........................... 16 4.02. SEC Reports..................................... 16 4.03. Compliance Certificate.......................... 16 5 SUCCESSOR CORPORATION 5.01. When Company and the Guarantor May Merge, etc... 17 6 SUBORDINATION 6.01. Agreement To Subordinate........................ 17 6.02. Company Not To Make Payments with Respect to Securities in Certain Circumstances....... 18 -ii- Article Section Heading Page 6.03. Securities Subordinated to Prior Payment of All Senior Indebtedness of the Company on Dissolution, Liquidation or Reorganization of the Company................ 19 6.04. Securityholders To Be Subrogated to Rights of Holders of Senior Indebtedness of the Company...................................... 20 6.05. Obligation of the Company Unconditional......... 21 6.06. Knowledge of Trustee............................ 21 6.07. Application by Trustee of Monies Deposited with It...................................... 22 6.08. Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness of the Company........... 22 6.09. Securityholders Authorize Trustee To Effectuate Subordination of Securities....... 22 6.10. Right of Trustee To Hold Senior Indebtedness of the Company.................. 23 6.11. Article Six Not To Prevent Events of Default...................................... 23 7 GUARANTEE 7.01. Guarantee.......................................... 23 7.02. Agreement To Subordinate........................ 25 7.03. Guarantor Not To Make Payments with Respect to Securities in Certain Circumstances....... 26 7.04. Guarantee Subordinated to Prior Payment of All Senior Indebtedness of the Guarantor on Dissolution, Liquidation or Reorganization of the Guarantor.............. 27 7.05. Securityholders To Be Subrogated to Rights of Holders of Senior Indebtedness of the Guarantor.................................... 28 7.06. Obligation of the Guarantor Unconditional....... 29 7.07. Knowledge of Trustee............................ 30 7.08. Application by Trustee of Monies Deposited with It...................................... 30 7.09. Subordination Rights Not Impaired by Acts or Omissions of Guarantor or Holders of Senior Indebtedness of the Guarantor......... 30 -iii- Article Section Heading Page 7.10. Securityholders Authorize Trustee To Effectuate Subordination of Guarantee........ 31 7.11. Right of Trustee To Hold Senior Indebtedness of the Guarantor................ 31 7.12. Article 7 Not To Prevent Events of Default...... 31 7.13. Execution and Delivery of Guarantee............. 31 7.14. Subordination of Indebtedness Owed by the Company to the Guarantor..................... 32 7.15. Officers' Certificate........................... 32 8 DEFAULTS AND REMEDIES 8.01. Events of Default............................... 32 8.02. Acceleration.................................... 35 8.03. Other Remedies.................................. 36 8.04. Waiver of Past Defaults......................... 36 8.05. Control by Majority............................. 36 8.06. Limitation on Suits............................. 36 8.07. Rights of Holders To Receive Payment............ 37 8.08. Collection Suit by Trustee...................... 37 8.09. Trustee May File Proofs of Claim................ 37 8.10. Priorities...................................... 37 8.11. Undertaking for Costs........................... 38 9 TRUSTEE 9.01. Duties of Trustee............................... 38 9.02. Rights of Trustee............................... 40 9.03. Individual Rights of Trustee.................... 40 9.04. Trustee Disclaimer.............................. 40 9.05. Notice of Defaults.............................. 40 9.06. Reports by Trustee to Holders................... 41 9.07. Compensation and Indemnity...................... 41 9.08. Replacement of Trustee.......................... 42 9.09. Successor Trustee by Merger, etc................ 43 9.10. Eligibility; Disqualification................... 43 9.11. Preferential Collection of Claims Against Company....................................... 43 10 CONVERSION OF SECURITIES 10.01 Applicability of Article........................ 43 10.02. Conversion Privilege............................ 43 10.03. Manner of Exercise of Conversion Privilege...... 44 10.04. Payment in Lieu of Fractional Shares............ 45 10.05. Adjustment of Conversion Price.................. 46 10.06. Notice of Certain Corporate Action.............. 49 -iv- Article Section Heading Page 10.07. Guarantor To Provide Stock...................... 50 10.08. Taxes on Conversions............................ 51 10.09. Covenant as to Stock............................ 51 10.10. Consolidation or Merger......................... 51 10.11. Disclaimer of Responsibility for Certain Matters....................................... 52 11 DISCHARGE OF INDENTURE 11.01. Termination of the Company's and the Guarantor's Obligations...................... 53 11.02. Application of Trust Money...................... 54 11.03. Repayment to Company............................ 54 12 AMENDMENTS, SUPPLEMENTS AND WAIVERS 12.01. Without Consent of Holders...................... 55 12.02. With Consent of Holders......................... 55 12.03. Compliance with Trust Indenture Act............. 56 12.04. Revocation and Effect of Consents............... 56 12.05. Notation on or Exchange of Securities........... 56 12.06. Trustee To Sign Amendments, etc................. 57 13 MISCELLANEOUS 13.01. Trust Indenture Act Controls.................... 57 13.02. Notices......................................... 57 13.03. Communication by Holders with Other Holders..... 58 13.04. Certificate and Opinion as to Conditions Precedent..................................... 58 13.05. Statements Required in Certificate or Opinion....................................... 58 13.06. When Treasury Securities Disregarded............ 59 13.07. Rules by Trustee, Paying Agent, Registrar....... 59 13.08. Legal Holidays.................................. 59 13.09. Governing Law................................... 59 13.10. No Adverse Interpretation of Other Agreements.................................... 60 13.11. No Recourse Against Others...................... 60 13.12. Successors...................................... 60 13.13. Duplicate Originals............................. 60 13.14. Counterparts.................................... 60 Signatures ...................................................... 61 Exhibit A - Form of Security..................................... A-1 Exhibit B - Form of Guarantee.................................... B-1 -v- INDENTURE dated as of among TOLL CORP., a Delaware corporation (the "Company"), TOLL BROTHERS, INC., a Delaware corporation (the "Guarantor"), and (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's debt securities issued under this Indenture ("Securities"): ARTICLE 1. Definitions and Incorporation by Reference Section 1.01. Definitions. "Acceleration Notice" has the meaning provided in Section 8.02. "Affiliate" has the meaning provided in Rule 405 promulgated under the Securities Act of 1933, as amended and in effect on the date hereof. "Authorizing Resolution" means a resolution adopted by the Board of Directors or by an Officer or committee of Officers pursuant to Board delegation authorizing a Series of Securities. An Authorizing Resolution shall be so adopted by both the Company and the Guarantor. "Bankruptcy Law" has the meaning provided in Section 8.01. "Board of Directors" means the Board of Directors of the Company or the Guarantor, as the case may be, or any authorized committee of the Board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or the Guarantor, as the case may be, to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means a day that is not a Legal Holiday. "Capital Stock" means the classes of capital stock of a Person as they exist on the date of this Indenture or as they may be constituted from time to time and warrants, options and similar rights to acquire such capital stock. "Common Stock" means the Common Stock ($.01 par value) of the Guarantor as the same exists at the date of this Indenture as originally executed or as such stock may be constituted from time to time. "Company" means the party named as such in this Indenture until a successor replaces it and thereafter means the successor or any other obligor on the Securities. "Company" shall also mean the Guarantor in the event the Company fails to perform those duties required by Sections 312 through 317 of the TIA. "Consolidated Net Worth" of any Person means the consolidated stockholders' equity of such Person, as determined in accordance with generally accepted accounting principles. "Conversion Price" means the initial conversion price of Securities of a Series specified in the Authorizing Resolution establishing the terms of such Series Security, as adjusted in accordance with the provisions of Article 10. "Current Market Price" for any relevant date means, (a) except for purposes of Section 10.04, the average of the last reported sale prices of the Common Stock for the 30 consecutive Business Days commencing 45 Business Days before the day in question and (b) for purposes of Section 10.04 only, the last reported sale price of the Common Stock, in either such case as reported on the composite tape, or similar reporting system, for issues listed on the New York Stock Exchange (or if the Common Stock is not then listed on that exchange, for issues listed on such other national securities exchange upon which the Common Stock is listed as may be designated by the Board of Directors for the purposes hereof) or, if there is no such reported sale on the day or days in question, on the basis of the average of the closing bid and asked quotations as so reported, or, if the Common Stock is not listed on any national securities exchange, on the basis of the average of the high bid and low asked quotations on the day or days in question in the over-the-counter market as reported by the National Association of Securities Dealers' Automated Quotations System, or if not so quoted, as reported by National Quotation Bureau, -2- Incorporated, or any similar organization, or if not so reported as determined in good faith by the Board. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Debt of the Company" means any single issue of indebtedness of the Company constituting Senior Indebtedness of the Company which at the time of determination has an aggregate principal amount outstanding of at least $25,000,000 and is specifically designated in the instrument or instruments creating, governing or evidencing such Senior Indebtedness of the Company as "Designated Senior Debt of Toll Corp." (it being understood that the Company's guarantee of the Revolving Credit Agreement shall be considered a single issue of indebtedness of the Company for purposes of this definition). "Designated Senior Debt of the Guarantor" means any single issue of indebtedness of the Guarantor constituting Senior Indebtedness of the Guarantor which at the time of determination has an aggregate principal amount outstanding of at least $25,000,000 and is specifically designated in the instrument or instruments creating, governing or evidencing such Senior Indebtedness of the Guarantor as "Designated Senior Debt of Toll Brothers, Inc." (it being understood that the Guarantor's guarantee of the Revolving Credit Agreement shall be considered a single issue of indebtedness of the Guarantor for purposes of this definition). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Event of Default" has the meaning provided in Section 8.01. "Guarantee" has the meaning provided in Section 7.01. "Guarantor" means the party named as such in this Indenture until a successor replaces it and thereafter means the successor. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Indenture" means this Indenture as amended or supplemented from time to time. -3- "Interest Payment Date," when used with respect to any installment of interest payable on the Securities, has the meaning provided in Section 1 of the Securities. "Legal Holiday" has the meaning provided in Section 13.08. "Non-Recourse Indebtedness" means indebtedness or other obligations secured by a lien on property to the extent that the liability for such indebtedness or other obligations is limited to the security of the property without liability on the part of the Guarantor or any Subsidiary (other than the Subsidiary which holds title to such property) for any deficiency. "Non-Recourse Judgment" means a judgment in respect of indebtedness or other obligations secured by a lien on property to the extent that the liability for (i) such indebtedness or other obligations and (ii) such judgment is limited to such property without liability on the part of the Guarantor or any Subsidiary (other than the Subsidiary which holds title to such property) for any deficiency. "Officer" means the Chairman of the Board, the President, any Vice President, the Chief Accounting Officer, the Controller, the Treasurer or the Secretary of the Company or the Guarantor, as the case may be. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President or any Vice President, and by the Chief Accounting Officer, the Controller, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company or the Guarantor, as the case may be. See Sections 13.04 and 13.05. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be counsel to, but not an employee of, the Company or the Guarantor. See Sections 13.04 and 13.05. "Paying Agent" has the meaning provided in Section 2.03. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. -4- "principal" of a debt security means the principal of the security plus, when appropriate, the premium, if any, on the security. "Record Date" for the interest payable on any Interest Payment Date on the Securities has the meaning provided in Section 1 of the Securities. "Registrar" has the meaning provided in Section 2.03. "Restricted Subsidiary," if applicable, has the meaning provided in the Authorizing Resolution. ["Revolving Credit Agreement" means the Amended and Restated Revolving Credit Agreement dated as of November 1, 1993, among Toll Brothers, Inc., First Huntingdon Finance Corp., a Delaware corporation, such other entities in which Toll Brothers, Inc. owns capital stock that are named therein, PNC Bank, a national banking association, as Agent, and the banks named therein, as the same may be amended from time to time.]* "SEC" means the Securities and Exchange Commission. "Securities" means the securities as amended or supplemented from time to time that are authenticated and issued under this Indenture. "Senior Indebtedness of the Company," if applicable, has the meaning provided in the Authorizing Resolution. "Senior Indebtedness of the Guarantor," if applicable, has the meaning provided in the Authorizing Resolution. "Series" means a series of Securities or the Securities of a Series. "Special Record Date" has the meaning provided in Section 2.11. "Subsidiary" means any corporation of which at least a majority in interest of the outstanding stock having by the terms thereof voting power under ordinary circumstances to elect a majority of the directors of such corporation, irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency, is at the time, directly or indirectly, owned or controlled by the Guarantor. - ----------------- * If applicable. -5- "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of this Indenture and as it may be amended from time to time. "Trustee" means the party named as such in this Indenture until a successor replaces it and thereafter means the successor. "Trust Officer" when used with respect to the Trustee means any officer within the Corporate Trust Department (or any successor group) of the Trustee, including any Vice President, Second Vice President, Assistant Vice President, Trust Officer or any other officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. Section 1.02. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder or Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor on the indenture securities" means the Company, the Guarantor or any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them. Section 1.03. Incorporation by Reference of Provisions of Securities. Whenever this Indenture refers to a -6- provision of the Securities, the provision is incorporated by reference in and made a part of this Indenture. Section 1.04. Rules of Construction. Unless the context otherwise requires: 1. a term has the meaning assigned to it; 2. an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles at the time of the relevant computation; 3. "or" is not exclusive; 4. words in the singular include the plural, and in the plural include the singular; and 5. provisions apply to successive events and transactions. ARTICLE 2. The Securities Section 2.01. Form and Dating. The aggregate principal amount of Securities that may be issued under this Indenture is unlimited. The Securities may be issued from time to time in one or more Series. Each Series shall be created by an Authorizing Resolution or a supplemental indenture that establishes the terms of the Series, which may include the following: (1) the title of the Series; (2) the aggregate principal amount of the Series; (3) the interest rate or method of calculation of the interest rate; (4) the date from which interest will accrue; (5) the Record Dates for interest payable on Securities of the Series; (6) the dates when, places where and manner in which principal and interest are payable; -7- (7) the Registrar and Paying Agent; (8) the terms of any mandatory or optional redemption by the Company; (9) the terms of any redemption at the option of Holders; (10) the denominations in which Securities are issuable; (11) whether Securities will be issued in registered or bearer form and the terms of any such forms of Securities; (12) whether any Securities will be represented by a global Security and the terms of any such global Security; (13) the currencies (including any composite currency) in which principal or interest or both may be paid; (14) if payments of principal or interest may be made in a currency other than that in which Securities are denominated, the manner for determining such payments; (15) provisions for electronic issuance of Securities or issuance of Securities in uncertificated form; (16) any Events of Default or covenants in addition to or in lieu of those set forth in this Indenture; (17) whether and upon what terms Securities may be defeased; (18) the form of the Securities and the Guarantees, which, unless the Authorizing Resolution otherwise provides, shall be in the form of Exhibits A and B; (19) whether the Securities of such Series will be convertible into Common Stock of the Guarantor and the terms thereof (including without -8- limitation the Conversion Price, the conversion period and any other provision in addition to or in lieu of those set forth in this Indenture); (20) whether the Securities and Guarantees of such Series shall be subordinated to any obligations of the Company or the Guarantor, and the obligations to which such subordination will apply; (21) any terms that may be required by or advisable under applicable law; and (22) any other terms not inconsistent with this Indenture. All Securities of one Series need not be issued at the same time and, unless otherwise provided, a Series may be reopened for issuances of additional Securities of such Series pursuant to an Authorizing Resolution, an Officers' Certificate or in any indenture supplemental hereto. The creation and issuance of a Series and the authentication and delivery thereof are not subject to any conditions precedent. Section 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Securities. Two Officers of the Guarantor shall sign the notation of the Guarantee by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue upon a written order of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company. Each Security shall be dated the date of its authentication. -9- Section 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer, for exchange or, if applicable, for conversion (in the case of conversion, as agent for the Guarantor) ("Registrar") and an office or agency where Securities may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. The Company initially appoints the Trustee as Registrar and Paying Agent. Section 2.04. Paying Agent To Hold Money in Trust. Each Paying Agent shall hold in trust for the benefit of the Securityholders or the Trustee all money held by the Paying Agent for the payment of principal or interest on the Securities, and shall notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such payment. While any such default continues, the Trustee shall require a Paying Agent to pay all money held by it to the Trustee. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon doing so the Paying Agent shall have no further liability for the money. Section 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. -10- Section 2.06. Transfer and Exchange. Where a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register its transfer as requested if its reasonable requirements are met. Where Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit transfers and exchanges, the Trustee shall authenticate Securities at the Registrar's request. The Registrar need not transfer or exchange any Security selected for redemption, except the unredeemed part thereof if the Security is redeemed in part, or transfer or exchange any Securities for a period of 15 days before a selection of Securities to be redeemed. The Company may charge a reasonable fee for any transfer or exchange (including the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such transfer or exchange and any other expenses in connection therewith) but not for any exchange pursuant to Section 2.09, 3.06 or 12.05. This Section 2.06 is subject to Section 11 of the Securities. Section 2.07. Replacement Securities. If the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security and the Guarantor shall endorse the Guarantee thereon if the Trustee's reasonable requirements are met. An indemnity bond must be sufficient in the judgment of the Company, the Guarantor and the Trustee to protect the Company, the Guarantor, the Trustee, the Paying Agent, the Registrar or any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company may charge for its expenses in replacing a Security. Every replacement Security is an additional obligation of the Company and the Guarantor. Section 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those presented to it by the Company or its designee for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company, the Guarantor or one of their Affiliates holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof -11- satisfactory to it that the replaced Security is held by a bona fide purchaser. If the Paying Agent holds on a redemption date or maturity date money sufficient to pay Securities payable on that date, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. If a Security is called for redemption or if it matures in less than six months and if the Company has satisfied its obligation to pay the Security, the Company and the Trustee need not treat the Security as outstanding in determining whether Holders of the required principal amount of Securities have concurred in any direction, waiver or consent. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 2.09. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities and the Guarantor shall endorse the Guarantee thereon. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities and the Guarantor shall endorse the Guarantee thereon in exchange for temporary Securities. Section 2.10. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange, conversion or payment. The Trustee and no one else shall cancel and destroy all Securities surrendered for transfer, exchange, conversion, payment or cancellation. Unless the Authorizing Resolution so provides, the Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation. Section 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall pay the defaulted interest in any lawful manner. It may pay the defaulted interest, plus any interest payable on the -12- defaulted interest (to the extent lawful) if an Event of Default has occurred and is continuing, to the Persons who are Securityholders on a subsequent special record date (the "Special Record Date"). The Company shall fix the subsequent Special Record Date and payment date. At least 15 days before such Special Record Date, the Company shall give notice to the Trustee and shall mail to each Securityholder a notice that states the subsequent Special Record Date, the payment date, and the amount of defaulted interest to be paid. Section 2.12. Global Securities. Unless the Authorizing Resolution provides otherwise, the Company may issue some or all of the Securities of a Series in temporary or permanent global form. A global Security shall represent that amount of Securities of a Series as specified in the global Security or as endorsed thereon from time to time. At the Company's request, the Registrar shall endorse a global Security to reflect the amount of any increase or decrease in the Securities represented thereby. The Company may issue a global Security only to a depositary designated by the Company. A depositary may transfer a global Security only as a whole to its nominee or to a successor depositary. The Authorizing Resolution may establish, among other things, the manner of paying principal and interest on a global Security and whether and upon what terms a beneficial owner of an interest in a global Security may exchange such interest for definitive Securities. The Company and the Trustee shall not be responsible for any acts or omissions of a depositary, for any depositary records of beneficial ownership interests or for any transactions between the depositary and beneficial owners. ARTICLE 3. Redemption Section 3.01. Notices to Trustee. Securities of a Series that are redeemable prior to maturity shall be redeemable in accordance with their terms and, unless the Authorizing Resolution provides otherwise, in accordance with this Article. If the Company wants to redeem Securities pursuant to Paragraph 5 of the Securities, it shall notify the Trustee in -13- writing of the redemption date and the principal amount of Securities to be redeemed. Any such notice may be cancelled at any time prior to notice of such redemption being mailed to Holders. Any such cancelled notice shall be void and of no effect. If the Company wants to credit any Securities previously redeemed, retired or acquired against any redemption pursuant to Paragraph 6 of the Securities, it shall notify the Trustee of the amount of the credit and it shall deliver any Securities not previously delivered to the Trustee for cancellation with such notice. The Company shall give each notice provided for in this Section 3.01 at least 10 Business Days before the notice of any such redemption is to be mailed to Holders (unless a shorter notice shall be satisfactory to the Trustee). Section 3.02. Selection of Securities To Be Redeemed. If less than all the Securities of a Series are to be redeemed, the Trustee shall select the Securities to be redeemed, if the Securities of such Series are listed on a national securities exchange, in accordance with the rules of such exchange, or if the Securities of such Series are not so listed, on either a pro rata basis or by lot or by such method as the Trustee shall deem fair and appropriate. The Trustee shall make the selection from Securities outstanding and not previously called for redemption. Securities in denominations of $1,000 may only be redeemed in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. Section 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; -14- (3) the name and address of the Paying Agent; (4) in the event that any Security is to be redeemed in part only, the portion of the principal amount thereof to be redeemed and that on and after the redemption date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion thereof will be issued; (5) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that interest on Securities called for redemption ceases to accrue on and after the redemption date; (7) that the Securities are being redeemed pursuant to the mandatory redemption or the optional redemption provisions, as applicable; and (8) if applicable, the current Conversion Price and the date on which the right to convert the Securities into Common Stock will expire. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Section 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price, plus accrued interest to the redemption date. Section 3.05. Deposit of Redemption Price. Prior to the redemption date, the Company or its designee shall deposit with the Paying Agent money sufficient to pay the redemption price of and accrued and unpaid interest on all Securities to be redeemed on that date. Section 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Trustee shall authenticate for the Holder a new Security and the Guarantor shall endorse the Guarantee thereon equal in principal amount to the unredeemed portion of the Securities surrendered. -15- ARTICLE 4. Covenants Section 4.01. Payment of Securities. The Company shall pay the principal of and interest on Securities of a Series on the dates and in the manner provided in the Securities of the Series. An installment of principal or interest shall be considered paid on the date due if the Trustee or Paying Agent holds on that date immediately available legal tender funds designated for, available and sufficient to pay the installment. The Company shall pay interest on overdue principal at the rate borne by the Series; it shall pay interest on overdue installments of interest at the same rate to the extent lawful. Section 4.02. SEC Reports. Within 15 days after each of the Guarantor and the Company files with the SEC copies of its annual reports and other information, documents and reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which they are required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, the Guarantor and the Company shall file the same with the Trustee. If the Guarantor shall cease to be subject to the requirements of Section 13 or 15(d) of the Exchange Act, the Guarantor shall file with the Trustee, within 15 days after the last date on which it would have been required to make such a filing with the SEC, financial statements, including any notes thereto, and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," each comparable to that which the Guarantor would have been required to include in such annual reports, information, documents or other reports, if the Guarantor were then subject to the requirements of Section 13 or 15(d) of the Exchange Act. The Company and the Guarantor also shall comply with the other provisions of TIA Section 314(a). Section 4.03. Compliance Certificate. The Company and the Guarantor each shall deliver to the Trustee within 120 days after the end of their respective fiscal year an Officers' Certificate satisfying the requirements of Section 3.14(a)(4) of the TIA and stating whether or not the signers know of any Default or Event of Default. If they do know of such a Default or Event of Default, the certificate shall describe the Default or Event of Default. -16- ARTICLE 5. Successor Corporation Section 5.01. When the Company and the Guarantor May Merge, Etc. Neither the Company nor the Guarantor shall consolidate with or merge into, or transfer all or substantially all of its assets to, any other person unless (i) such other Person is a corporation organized and existing under the laws of the United States or a State thereof or the District of Columbia and expressly assumes by supplemental indenture all the obligations of the Company or the Guarantor under the Indenture and either the Securities or the Guarantee, as the case may be; (ii) immediately after giving effect to such transaction no Default or Event of Default shall have occurred and be continuing; and (iii) the Consolidated Net Worth of the surviving corporation is equal to or greater than the Consolidated Net Worth of the Company or the Guarantor, as the case may be, immediately prior to such merger or transfer of assets. Thereafter all such obligations of the predecessor corporation shall terminate. ARTICLE 6. Subordination Section 6.01. Agreement To Subordinate. The provisions of this Article 6 shall apply to the Securities of a Series to the extent specified in the Authorizing Resolution relating to such Series. Each reference in this Article 6 to "a Security" or "the Securities" refers to the Securities of each such Series so designated. The Company, for itself and its successors, and each Holder, by accepting Securities, agrees that the payment of the principal of, interest on or any other amounts due on the Securities are subordinated in right of payment, to the extent and in the manner stated in this Article 6, to the prior payment in full of all Senior Indebtedness of the Company. Each Holder by accepting Securities authorizes and directs the Trustee on behalf of such Holder to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Indebtedness of the Company and such Holder, the subordination provided in this Article 6 and appoints the Trustee attorney-in-fact for such Holder for such purpose. -17- This Article 6 shall constitute a continuing offer to all Persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Indebtedness of the Company, and such provisions are made for the benefit of the holders of Senior Indebtedness of the Company and such holders are made obligees hereunder and they and/or each of them may enforce such provisions. Section 6.02. Company Not To Make Payments with Respect to Securities in Certain Circumstances. a. Upon the maturity of any Senior Indebtedness of the Company by lapse of time, acceleration (unless waived) or otherwise, all principal thereof and interest thereon shall first be paid in full, or such payment duly provided for in cash or in a manner satisfactory to the holders of such Senior Indebtedness of the Company, before any payment is made on account of the principal of or interest on the Securities or to acquire any of the Securities. b. In the event that notwithstanding the provisions of this Section 6.02 the Company shall make any payment to the Trustee on account of the principal of or interest on the Securities after the happening of a default in payment of the principal of or interest on Senior Indebtedness of the Company, then, unless and until such default shall have been cured or waived or shall have ceased to exist, such payment (subject to the provisions of Sections 6.06 and 6.07) shall be held by the Trustee, in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Indebtedness of the Company (pro rata as to each of such holders on the basis of the respective amounts of Senior Indebtedness of the Company held by them) or their representative or the trustee under the indenture or other agreement (if any) pursuant to which Senior Indebtedness of the Company may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness of the Company remaining unpaid to the extent necessary to pay all Senior Indebtedness of the Company in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of the Senior Indebtedness of the Company. The Company shall give prompt written notice to the Trustee of any default in the payment of principal of or interest on any Senior Indebtedness of the Company. -18- Section 6.03. Securities Subordinated to Prior Payment of All Senior Indebtedness of the Company on Dissolution, Liquidation or Reorganization of the Company. Upon any distribution of assets of the Company in any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefits of creditors or otherwise): a. the holders of all Senior Indebtedness of the Company shall first be entitled to receive payment in full of the principal thereof and interest due thereon before the Holders of the Securities are entitled to receive any payment on account of the principal of or interest on the Securities; b. any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee on behalf of the Holders of the Securities would be entitled except for the provisions of this Article 6, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, shall be paid by the liquidating trustee or agent or other Person making such payment or distribution directly to the holders of the Senior Indebtedness of the Company or their representative, or to the trustee under any indenture under which Senior Indebtedness of the Company may have been issued (pro rata as to each such holder, representative or trustee on the basis of the respective amounts of unpaid Senior Indebtedness of the Company held or represented by each), to the extent necessary to make payment in full of all Senior Indebtedness of the Company remaining unpaid, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Indebtedness of the Company, except that Holders of the Securities would be entitled to receive securities that are subordinated to Senior Indebtedness of the Company to at least the same extent as the Securities; and c. in the event that notwithstanding the foregoing provisions of this Section 6.03, any payment or distribution of assets of the Company of any kind or character whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, shall be received by the Trustee or the Holders of the Securities on account of principal of or interest on the Securities before all Senior -19- Indebtedness of the Company is paid in full, or effective provision made for its payment, such payment or distribution (subject to the provisions of Sections 6.06 and 6.07) shall be received and held in trust for and shall be paid over to the holders of the Senior Indebtedness of the Company remaining unpaid or unprovided for or their representative, or to the trustee under any indenture under which such Senior Indebtedness of the Company may have been issued (pro rata as provided in subsection (b) above), for application to the payment of such Senior Indebtedness of the Company until all such Senior Indebtedness of the Company shall have been paid in full, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Indebtedness of the Company, except that Holders of the Securities would be entitled to receive securities that are subordinated to Senior Indebtedness of the Company to at least the same extent as the Securities. The Company shall give prompt written notice to the Trustee of any dissolution, winding up, liquidation or reorganization of the Company. Section 6.04. Securityholders To Be Subrogated to Rights of Holders of Senior Indebtedness of the Company. Subject to the payment in full of all Senior Indebtedness of the Company, the Holders of the Securities shall be subrogated equally and ratably to the rights of the holders of the Senior Indebtedness of the Company to receive payments or distributions of assets of the Company applicable to the Senior Indebtedness of the Company until all amounts owing on the Securities shall be paid in full, and for the purpose of such subrogation no payments or distributions to the holders of the Senior Indebtedness of the Company by or on behalf of the Company or by or on behalf of the Holders of the Securities by virtue of this Article 6 which otherwise would have been made to the Holders of the Securities shall, as among the Company, its creditors other than holders of the Senior Indebtedness of the Company and the Holders of the Securities, be deemed to be payment by the Company to or on account of the Senior Indebtedness of the Company, it being understood that the provisions of this Article 6 are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness of the Company, on the other hand. Section 6.05. Obligation of the Company Unconditional. Nothing contained in this Article 6 or elsewhere in -20- this Indenture or in any Security is intended to or shall impair, as between the Company and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of the Senior Indebtedness of the Company, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 6 of the holders of Senior Indebtedness of the Company in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any distribution of assets of the Company referred to in this Article 6, the Trustee, subject to the provisions of Sections 9.01 and 9.02, and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the liquidating trustee or agent or other Person making any distribution to the Trustee or the Holders of the Securities, for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness of the Company and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 6. Nothing contained in this Article 6 or elsewhere in this Indenture or in any Security is intended to or shall affect the obligation of the Company to make, or prevent the Company from making, at any time except during the pendency of any dissolution, winding up, liquidation or reorganization proceeding, and except during the continuance of any default specified in Section 6.02 (not cured or waived), payments at any time of the principal of or interest on the Securities. Section 6.06. Knowledge of Trustee. Notwithstanding any provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of monies to or by the Trustee until two business days after the Trustee shall have received written notice thereof from the Company, any -21- Securityholder or any Paying Agent or the holder or representative of any class of Senior Indebtedness of the Company. Section 6.07. Application by Trustee of Monies Deposited with It. If at least two business days prior to the date on which by the terms of this Indenture any monies deposited with the Trustee or any Paying Agent may become payable for any purpose (including, without limitation, the payment of either the principal of or the interest on any Security) the Trustee shall not have received with respect to such monies the notice provided for in Section 6.06, then the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it on or after such date. This Section shall be construed solely for the benefit of the Trustee and such Paying Agent and shall not otherwise affect the rights of holders of Senior Indebtedness of the Company. Section 6.08. Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness of the Company. No right of any present or future holders of any Senior Indebtedness of the Company to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. The holders of Senior Indebtedness of the Company may extend, renew, modify or amend the terms of the Senior Indebtedness of the Company or any security therefor and release, sell or exchange such security and otherwise deal freely with the Company, all without affecting the liabilities and obligations of the parties to this Indenture or the Holders. No provision in any supplemental indenture which affects the superior position of the holders of Senior Indebtedness of the Company shall be effective against the holders of Senior Indebtedness of the Company who have not consented thereto. Section 6.09. Securityholders Authorize Trustee To Effectuate Subordination of Securities. Each Holder of Securities by acceptance thereof authorizes and expressly directs the Trustee on its, his or her behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article 6 and appoints the Trustee its, his or her attorney-in-fact for such purpose, including, in the event -22- of any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of the Company, the immediate filing of a claim for the unpaid balance of its, his or her Securities in the form required in said proceedings and cause said claim to be approved. If the Trustee does not file a proper claim or proof of debt in the form required in such proceedings prior to 30 days before the expiration of the time to file such claim or claims, then the holders of Senior Indebtedness of the Company have the right to file and are hereby authorized to file an appropriate claim for and on behalf of the Holders of said Securities. Section 6.10. Right of Trustee To Hold Senior Indebtedness of the Company. The Trustee shall be entitled to all of the rights set forth in this Article 6 in respect of any Senior Indebtedness of the Company at any time held by it to the same extent as any other holder of Senior Indebtedness of the Company and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. Section 6.11. Article Six Not To Prevent Events of Default. The failure to make a payment on account of principal or interest by reason of any provision in this Article 6 shall not be construed as preventing the occurrence of an Event of Default under Section 8.01. ARTICLE 7. Guarantee Section 7.01. Guarantee. The Guarantor hereby unconditionally guarantees (such guarantee to be referred to herein as the "Guarantee") to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Securities or the obligations of the Company hereunder or thereunder, (i) the due and punctual payment of the principal of and any interest on the Securities, whether at maturity or on an Interest Payment Date, by acceleration or otherwise, and interest on the overdue principal of and interest, if any, on the Securities, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or under the Securities shall be promptly paid in full, all in accordance with the terms hereof and -23- thereof including all amounts payable to the Trustee under Section 9.07 hereof, and (ii) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, that the same shall be promptly paid in full when due or to be performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. If the Company fails to make any payment when due of any amount so guaranteed for whatever reason, the Guarantor shall be obligated to pay the same immediately. The Guarantor hereby agrees that its obligations hereunder shall be continuing, absolute and unconditional, irrespective of, and shall be unaffected by, the validity, regularity or enforceability of the Securities, this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities or the Trustee with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of the Guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, demand of performance, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, the benefit of discussion, protest, notice and all demand whatsoever and covenants that this Guarantee shall not be discharged except by complete performance of the obligations contained in the Securities, in this Indenture and in this Article 7. If any Securityholder or the Trustee is required by any court or otherwise to return to the Company or the Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or the Guarantor, any amount paid by the Company or the Guarantor to the Trustee or such Securityholder, this Article 7, to the extent theretofore discharged, shall be reinstated in full force and effect. The Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Securityholders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. The Guarantor further agrees that, as between the Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 8 for the purposes of the Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such obligations as provided in Article 8 such -24- obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purpose of this Article 7. In addition, without limiting the foregoing, upon the effectiveness of an acceleration under Article 8, the Trustee may make a demand for payment on the Securities under the Guarantee provided hereunder and not discharged. The Guarantor shall be subrogated to all rights of the Holder of any Securities against the Company in respect of any amounts paid to the Holder by the Guarantor pursuant to the provisions of this Guarantee; provided that the Guarantor shall not be entitled to enforce, or to receive any payments arising out of or based upon, such right of subrogation until the principal of and interest on all the Securities shall have been paid in full. The Guarantee set forth in this Section 7.01 shall not be valid or become obligatory for any purpose with respect to a Security until the certificate of authentication on such Security shall have been signed by the Trustee or any duly appointed agent. Section 7.02. Agreement To Subordinate. The provisions of this Article 7 shall apply to the Securities of a Series to the extent specified in the Authorizing Resolution relating to such Series. Each reference in this Article 7 to "a Security" or "the Securities" refers to the Securities of each such Series so designated. The Guarantor, for itself and its successors, and each Holder, by accepting the Securities, agrees that the payment of the principal of, interest on and any other amounts due on the Securities pursuant to the Guarantee are subordinated in right of payment, to the extent and in the manner stated in this Article 7, to the prior payment in full of all Senior Indebtedness of the Guarantor. Each Holder by accepting Securities authorizes and directs the Trustee on behalf of such Holder to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Indebtedness of the Guarantor and such Holder, the subordination provided in this Article 7 and appoints the Trustee attorney-in-fact for such Holder for such purpose. This Article shall constitute a continuing offer to all Persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Indebtedness of the Guarantor, and such provisions are made for the benefit of the -25- holders of Senior Indebtedness of the Guarantor, and such holders are made obligees hereunder and they and/or each of them may enforce such provisions. Section 7.03. Guarantor Not To Make Payments with Respect to Securities in Certain Circumstances. a. Upon the maturity of any Senior Indebtedness of the Guarantor by lapse of time, acceleration (unless waived) or otherwise, all principal thereof and interest thereon shall first be paid in full, or such payment duly provided for in cash or in a manner satisfactory to the holders of such Senior Indebtedness of the Guarantor, before any payment, pursuant to the Guarantee, is made on account of the principal of or interest on the Securities or to acquire any of the Securities. b. In the event that notwithstanding the provisions of this Section 7.03 the Guarantor shall make any payment to the Trustee on account of the principal of or interest on the Securities after the happening of a default in payment of the principal of or interest on Senior Indebtedness of the Guarantor, then, unless and until such default shall have been cured or waived or shall have ceased to exist, such payment (subject to the provisions of Sections 7.07 and 7.08) shall be held by the Trustee, in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Indebtedness of the Guarantor (pro rata as to each of such holders on the basis of the respective amounts of Senior Indebtedness of the Guarantor held by them) or their representative or the trustee under the indenture or other agreement (if any) pursuant to which Senior Indebtedness of the Guarantor may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness of the Guarantor remaining unpaid to the extent necessary to pay all Senior Indebtedness of the Guarantor in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of the Guarantor. The Guarantor shall give prompt written notice to the Trustee of any default in the payment of principal of or interest on any Senior Indebtedness of the Guarantor. Section 7.04. Guarantee Subordinated to Prior Payment of All Senior Indebtedness of the Guarantor on Dissolution, Liquidation or Reorganization of the Guarantor. Upon any distribution of assets of the Guarantor in any dissolution, -26- winding up, liquidation or reorganization of the Guarantor (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise): a. the holders of all Senior Indebtedness of the Guarantor shall first be entitled to receive payment in full of the principal thereof and interest due thereon before the Holders of the Securities are entitled to receive any payment on account of the principal of or interest on the Securities pursuant to the Guarantee; b. any payment or distribution of assets of the Guarantor of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee on behalf of the Holders of the Securities would be entitled except for the provisions of this Article 7, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Guarantor being subordinated to the payment of the Securities, shall be paid by the liquidating trustee or agent or other Person making such payment or distribution directly to the holders of the Senior Indebtedness of the Guarantor or their repre- sentative, or to the trustee under any indenture under which Senior Indebtedness of the Guarantor may have been issued (pro rata as to each such holder, representative or trustee on the basis of the respective amounts of unpaid Senior Indebtedness of the Guarantor held or represented by each), to the extent necessary to make payment in full of all Senior Indebtedness of the Guarantor remaining unpaid, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Indebtedness of the Guarantor, except that Holders of the Securities would be entitled to receive securities that are subordinated to Senior Indebtedness of the Guarantor to at least the same extent as the Securities; and c. in the event that, notwithstanding the foregoing provisions of this Section 7.04, any payment or distribution of assets of the Guarantor of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Guarantor being subordinated to the payment of the Securities, shall be received by the Trustee or the Holders of the Securities on account of principal of or -27- interest on the Securities before all Senior Indebtedness of the Guarantor is paid in full, or effective provision made for its payment, such payment or distribution (subject to the provisions of Sections 7.07 and 7.08) shall be received and held in trust for and shall be paid over to the holders of the Senior Indebtedness of the Guarantor remaining unpaid or unprovided for or their representative, or to the trustee under any indenture under which such Senior Indebtedness of the Guarantor may have been issued (pro rata as provided in subsection (b) above), for application to the payment of such Senior Indebtedness of the Guarantor until all such Senior Indebtedness of the Guarantor shall have been paid in full, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Indebtedness of the Guarantor, except that Holders of the Securities would be entitled to receive securities that are subordinated to Senior Indebtedness of the Guarantor to at least the same extent as the Securities. Upon any distribution of assets of the Guarantor referred to in this Article 7, the Trustee, subject to the provisions of Sections 9.01 and 9.02, and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the liquidating trustee or agent or other Person making any distribution to the Trustee or the Holders of the Securities, for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness of the Guarantor and other Indebtedness of the Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 7. The Guarantor shall give prompt written notice to the Trustee of any dissolution, winding up, liquidation or reorganization of the Guarantor. Section 7.05. Securityholders To Be Subrogated to Rights of Holders of Senior Indebtedness of the Guarantor. Subject to the payment in full of all Senior Indebtedness of the Guarantor, the Holders of the Securities shall be subrogated equally and ratably to the rights of the holders of the Senior Indebtedness of the Guarantor to receive payments or distributions of assets of the Guarantor applicable to the Senior Indebtedness of the Guarantor until all amounts owing on -28- the Securities shall be paid in full, and for the purpose of such subrogation no payments or distributions to the holders of the Senior Indebtedness of the Guarantor by or on behalf of the Guarantor or by or on behalf of the Holders of the Securities by virtue of this Article 7 which otherwise would have been made to the Holders of the Securities shall, as among the Guarantor, its creditors other than holders of Senior Indebtedness of the Guarantor and the Holders of the Securities, be deemed to be payment by the Guarantor to or on account of the Senior Indebtedness of the Guarantor, it being understood that the provisions of this Article 7 are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness of the Guarantor, on the other hand. Section 7.06. Obligation of the Guarantor Unconditional. Nothing contained in this Article 7 or elsewhere in this Indenture or in any Security is intended to or shall impair, as between the Guarantor and the Holders of the Securities, the obligation of the Guarantor, which is absolute and unconditional, to pay to the Holders of the Securities the principal of and interest on the Securities as and when the same shall become due and payable in accordance with the terms of the Guarantee, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Guarantor other than the holders of the Senior Indebtedness of the Guarantor, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture, subject to the rights, if any, under this Article 7 of the holders of Senior Indebtedness of the Guarantor in respect of cash, property or securities of the Guarantor received upon the exercise of any such remedy. Nothing contained in this Article 7 or elsewhere in this Indenture or in any Security is intended to or shall affect the obligation of the Guarantor to make, or prevent the Guarantor from making, at any time except during the pendency of any dissolution, winding up, liquidation or reorganization proceeding, and except during the continuance of any default specified in Section 7.03 (not cured or waived), payments at any time of the principal of or interest on the Securities pursuant to the Guarantee. Section 7.07. Knowledge of Trustee. Notwithstanding any provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which -29- would prohibit the making of any payment of monies to or by the Trustee until two Business Days after the Trustee shall have received written notice thereof from the Guarantor, any Securityholder or any Paying Agent or the holder or representative of any class of Senior Indebtedness of the Guarantor. Section 7.08. Application by Trustee of Monies Deposited with It. If at least two Business Days prior to the date on which by the terms of this Indenture any monies deposited with the Trustee or any Paying Agent may become payable for any purpose (including, without limitation, the payment of either the principal of or the interest on any Security) the Trustee shall not have received with respect to such monies the notice provided for in Section 7.07, then the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it on or after such date. This Section shall be construed solely for the benefit of the Trustee and such Paying Agent and shall not otherwise affect the rights of holders of Senior Indebtedness of the Guarantor. Section 7.09. Subordination Rights Not Impaired by Acts or Omissions of Guarantor or Holders of Senior Indebtedness of the Guarantor. No right of any present or future holders of any Senior Indebtedness of the Guarantor to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Guarantor with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. The holders of Senior Indebtedness of the Guarantor may extend, renew, modify or amend the terms of the Senior Indebtedness of the Guarantor, or any security therefor and release, sell or exchange such security and otherwise deal freely with the Guarantor, all without affecting the liabilities and obligations of the parties to the Indenture or the Holders. No provision in any supplemental indenture which affects the superior position of the holders of Senior Indebtedness of the Guarantor shall be effective against the holders of Senior Indebtedness of the Guarantor who have not consented thereto. Section 7.10. Securityholders Authorize Trustee To Effectuate Subordination of Guarantee. Each Holder of Securities by acceptance thereof authorizes and expressly directs the -30- Trustee on its, his or her behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article 7 and appoints the Trustee its, his or her attorney-in-fact for such purpose, including, in the event of any dissolution, winding up, liquidation or reorganization of the Guarantor (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of the Guarantor, the immediate filing of a claim for the unpaid balance, pursuant to the Guarantee, of its, his or her Securities, in the form required in said proceedings and cause said claim to be approved. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of Senior Indebtedness of the Guarantor have the right to file and are hereby authorized to file an appropriate claim for and on behalf of the Holders of said Securities. Section 7.11. Right of Trustee To Hold Senior Indebtedness of the Guarantor. The Trustee shall be entitled to all of the rights set forth in this Article 7 in respect of any Senior Indebtedness of the Guarantor at any time held by it to the same extent as any other holder of Senior Indebtedness of the Guarantor, and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. Section 7.12. Article 7 Not To Prevent Events of Default. The failure to make a payment on account of principal or interest by reason of any provision in this Article 7 shall not be construed as preventing the occurrence of an Event of Default under Section 8.01. Section 7.13. Execution and Delivery of Guarantee. To evidence the Guarantee set forth in this Article 7, the Guarantor hereby agrees that a notation of the Guarantee, substantially in the form of Exhibit B hereto, shall be endorsed on each Security authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of the Guarantor by the Chairman of the Board, its President or one of its Vice Presidents under a facsimile of its seal reproduced thereon. The Guarantor hereby agrees that its Guarantee shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of the Guarantee. -31- If an Officer whose signature is on this Indenture or on the Securities no longer holds that office at the time the Trustee authenticates the Security on which a notation of the Guarantee is endorsed, the Guarantee shall be valid nevertheless. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantor. Section 7.14. Subordination of Indebtedness Owed by the Company to the Guarantor. Any indebtedness owed by the Company to the Guarantor shall be subordinate to all obligations of the Company with respect to the Securities and this Indenture to the same extent as the Securities are subordinated to Senior Indebtedness of the Company. Section 7.15. Officers' Certificate. If there occurs an event referred to in the first sentence of Section 7.04(c) or the first sentence of Section 7.04, the Guarantor shall promptly give to the Trustee an Officers' Certificate (on which the Trustee may conclusively rely) identifying all holders of Senior Indebtedness of the Guarantor and the principal amount of Senior Indebtedness of the Guarantor then outstanding held by each such holder and stating the reasons why such Officers' Certificate is being delivered to the Trustee. ARTICLE 8. Defaults and Remedies Section 8.01. Events of Default. An "Event of Default" on a Series occurs if: (1) the Company or the Guarantor defaults in the payment of interest on any Security of the Series when the same becomes due and payable and the default continues for a period of 30 days whether or not such payment shall be prohibited by the provisions of Article 6 or Article 7; or (2) the Company or the Guarantor defaults in the payment of the principal of any Security of the Series when the same becomes due and payable at maturity or upon redemption, whether or not such payment shall be prohibited by the provisions of Article 6 or Article 7; or -32- (3) the Company or the Guarantor fails to comply with any of its other agreements in the Securities, the Guarantee or this Indenture applicable to the Series and and such failure continues for the period and after the notice specified below; or (4) there occurs a default in the payment of indebtedness of the Company, the Guarantor or any Subsidiary under the terms of the instrument evidencing or securing such indebtedness permitting the holder thereof to accelerate the payment of in excess of an aggregate of $2,000,000 in principal amount of such indebtedness (after the lapse of applicable grace periods) or, in the case of non-payment defaults, there occurs an acceleration of any such indebtedness if such acceleration is not rescinded or annulled within 10 days after such acceleration; provided, the term "indebtedness" as used in this Section 8.01(4) shall not include an acceleration of or default on Non-Recourse Indebtedness (a) if the Guarantor would be able to declare a dividend pursuant to the terms of such Series in the amount of the excess of the aggregate book value of all property (net of any previous write-downs or reserves in respect of such property) subject to the Non-Recourse Indebtedness being accelerated or in default over such Non-Recourse Indebtedness or (b) would consists of a purchase money obligation, provided such purchase money obligation does not exceed $2,000,000 in aggregate principal amount, whether or not the Guarantor is so diligently contesting); or (5) a final judgment for the payment of money in an amount in excess of $2,000,000 shall be entered against the Company, the Guarantor or any Subsidiary, and shall remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days after the date on which the right to appeal has expired; provided the term "final judgment" shall not include a Non-Recourse Judgment unless the book value of all property (net of any previous write-downs or reserves in respect of such property) subject to such -33- Non-Recourse Judgment exceeds the amount of such Non-Recourse Judgment by more than $5,000,000; or (6) the Company and the Guarantor 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; or (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) provides for relief against the Company and the Guarantor in an involuntary case, (B) appoints a Custodian of the Company and the Guarantor for all or substantially all of its property, or (C) orders the liquidation of the Company and the Guarantor and the order or decree remains unstayed and in effect for 90 days; or (8) the Guarantee shall for any reason (other than pursuant to its terms) cease to be in full force and effect. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or State law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. A default under clause (3) is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the Securities of the Series affected notify the Company of the default and the Company does not cure the default within 60 days after receipt of the notice. The notice must specify the default, demand that it be remedied and state that the notice is a "Notice of Default." -34- Section 8.02. Acceleration. If an Event of Default (other than an Event of Default under Section 8.01(6) or 8.01(7)) on a Series occurs and is continuing, the Trustee by notice to the Company [and the Person or Persons designated to receive notices for the Agent (or other Person acting on behalf of the banks) under the Revolving Credit Agreement],* or the Holders of at least 25% in principal amount of the outstanding Securities of the Series by notice to the Company, the Trustee and such Person or Persons (either such notice is referred to herein as an "Acceleration Notice") may declare the unpaid principal of and accrued and unpaid interest on all the Securities of the Series to be due and payable if, with respect to such Series, (i)(a) no Designated Senior Debt of the Company or the Guarantor is outstanding, or (b) if the Securities of the Series are not subordinated to other indebtedness of the Company, immediately, or (ii) if Designated Senior Debt of the Company or the Guarantor is outstanding and the Securities of the Series are subordinated to other indebtedness of the Company, upon the earlier of (A) ten days after such Acceleration Notice is received by the Company and (B) the acceleration of any Senior Indebtedness of the Company or the Guarantor. If an Event of Default specified in Section 8.01(6) or 8.01(7) occurs, the unpaid principal of and accrued and unpaid interest on the Securities then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. The Holders of a majority in principal amount of the Securities of the Series by notice to the Trustee may rescind such declaration or acceleration and its consequences if all existing Events of Default have been cured or waived (except nonpayment of principal or interest that has become due solely because of the acceleration) and if the rescission would not conflict with any judgment or decree. [The Company and the Guarantor (i) agree, promptly after execution of this Indenture, to notify the Trustee in writing of the Person or Persons referred to in the first sentence of this Section 8.02 and (ii) agree, promptly after any change thereof, to so notify the Trustee. Any failure by the Trustee or holders of Securities to give an Acceleration Notice to such Person or Persons will not affect the substance or validity of the Acceleration Notice provided that it is otherwise given in accordance with the first paragraph of this Section 8.02.]* Section 8.03. Other Remedies. If an Event of Default on a Series occurs and is continuing, the Trustee may - -------------------- * If applicable. -35- pursue any available remedy by proceeding at law or in equity to collect the payment of principal or interest on the Series or to enforce the performance of any provisions of the Securities or this Indenture and applicable to the Series. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. Section 8.04. Waiver of Past Defaults. Subject to Section 12.02, the Holders of a majority in principal amount of the Securities of a Series by notice to the Trustee may waive on behalf of all Holders of Securities of the Series an existing Default and its consequences. When a Default is waived, it is cured and stops continuing, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 8.05. Control by Majority. The Holders of a majority in principal amount of the Securities of a Series may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it with respect to such Series. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that is unduly prejudicial to the rights of another Securityholder, or that would involve the Trustee in personal liability. Section 8.06. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Series unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in principal amount of the Securities of the Series make a written request to the Trustee to pursue the remedy; -36- (3) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (5) during such 60-day period the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with such request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. Section 8.07. Rights of Holders To Receive Payment. Notwithstanding any other provisions of this Indenture, the right of any Holder of a Security to receive payment of principal of and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. Section 8.08. Collection Suit by Trustee. If an Event of Default in payment of interest or principal specified in Section 8.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company, the Guarantor or any other obligor on the Securities for the whole amount of principal and interest remaining unpaid. Section 8.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities, including the Guarantor), its creditors or its property. Section 8.10. Priorities. If the Trustee collects any money pursuant to this Article 8, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 9.07; -37- Second: to the holders of Senior Indebtedness of the Company as required by Article 6 and to the holders of Senior Indebtedness of the Guarantor as required by Article 7; Third: to Securityholders of the Series for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Series for principal and interest, respectively; and Fourth: to the Company, or its designee. The Trustee may fix a record date and payment date for any payment to Securityholders. Section 8.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 8.07, or a suit by Holders of more than 10% in principal amount of the Securities of the Series. ARTICLE 9. Trustee Section 9.01. Duties of Trustee. a. If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. b. Except during the continuance of an Event of Default: -38- (1) The Trustee need perform only those duties that are specifically set forth in this Indenture and no others. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. c. The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 8.05. d. Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. e. The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. f. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company or the Guarantor, as the case may be. g. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. -39- Section 9.02. Rights of Trustee. Subject to Section 9.01: a. The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. b. Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Certificate or Opinion. c. The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. d. The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. Section 9.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 9.10 and 9.11. Section 9.04. Trustee Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities other than its certificate of authentication. Section 9.05. Notice of Defaults. If a Default on a Series occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a default in payment of principal or interest on a Series, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders of the Series. -40- Section 9.06. Reports by Trustee to Holders. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Securityholder, if required by TIA Section 313(a), a brief report dated as of such May 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b) and Section 313(c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange on which the Securities are listed. The Company shall notify the Trustee when the Securities have been listed on any securities exchange. Section 9.07. Compensation and Indemnity. The Company and the Guarantor shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation hereunder shall not be limited by any law on compensation relating to the trustee of an express trust. The Company and the Guarantor shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred by it. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. The Company and the Guarantor shall indemnify and hold harmless the Trustee against any loss or liability incurred by it in the administration of this trust or the performance of its duties hereunder. The Trustee shall notify the Company and the Guarantor promptly of any claim for which it may seek indemnity. The Company and the Guarantor shall defend the claim and the Trustee shall cooperate in the defense. In the event that counsel to the Trustee shall advise counsel to the Company and the Guarantor that there may be defenses reasonably available to the Trustee different than or additional to those available to the Company and the Guarantor, then in such event the Trustee shall be permitted to employ counsel of its choosing at the expense of the Company and the Guarantor. The Company and the Guarantor need not pay for any settlement made without their consent. The Company and the Guarantor need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence, bad faith or with willful misconduct. To ensure the Company's and the Guarantor's payment obligations in this Section, the Trustee shall have a claim prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Securities. -41- When the Trustee incurs expenses or renders services after an Event of Default specified in Section 8.01(6) or (7) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. Section 9.08. Replacement of Trustee. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee to be removed and may appoint a successor Trustee with the Company's and the Guarantor's consent. The Company or the Guarantor may remove the Trustee if: 1. the Trustee fails to comply with Section 9.10; 2. the Trustee is adjudged a bankrupt or an insolvent; 3. a receiver or other public officer takes charge of the Trustee or its property; or 4. the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee (subject to the prior claim provided by Section 9.07). Any resignation or removal of the Trustee and any appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. The successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company of the Holders of a majority in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. -42- If the Trustee fails to comply with Section 9.10, any Securityholder may, subject to Section 8.11, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Section 9.09. Successor Trustee by Merger, etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. Section 9.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus of at least $15,000,000 as set forth in the most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b). Section 9.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. ARTICLE 10. CONVERSION OF SECURITIES Section 10.01. Applicability of Article. Securities of any Series which are convertible into Common Stock at the option of the Holder shall be convertible in accordance with their terms and unless the Authorizing Resolution provides otherwise, in accordance with this Article. Each reference in this Article 10 to "a Security" or "the Securities" refers to the Securities of the particular Series that is convertible into Common Stock. If more than one Series of Securities with conversion privileges are outstanding at any time, the provisions of this Article 10 shall be applied separately to each such Series. Section 10.02. Conversion Privilege. Subject to and upon compliance with the provisions of this Article 10, the Holder of any Security so designated shall have the right, at its, his or her option, at any time prior to the close of business on the date specified in the Securities of such Series (or if such Security or portion thereof is called for redemption -43- prior to such date, then in respect of such Security or portion thereof to and including but not after the close of business on the second day (or, if such day is not a Business Day, then on the next following Business Day) preceding the date fixed for such redemption) to convert the principal amount of any such Security, or any portion of such principal amount which is $1,000 or an integral multiple thereof, into that number of fully paid and non-assessable shares of the Guarantor's Common Stock (calculated as to each conversion to the nearest 1/100th of a share) obtained by dividing the principal amount of the Security or portion thereof to be converted by the Conversion Price and by surrender of the Security so to be converted in whole or in part, such surrender to be made in the manner provided in Section 10.03. Notwithstanding the previous sentence, if the Company shall fail to redeem a Security which has been called for redemption, the Holder of such Security shall retain the right to convert such Security as provided in this Article 10. Section 10.03. Manner of Exercise of Conversion Privilege. In order to exercise a conversion privilege, the Holder of any Security to be converted in whole or in part shall surrender such Security at any of the offices or agencies to be maintained for such purpose by the Company pursuant to Section 2.03, and shall give notice to the Company and the Guarantor in the form provided in the Security, duly executed, at such office or agency that the Holder elects to convert such Security or the portion thereof specified in said notice. Such notice shall also state the name or names, together with the address or addresses, in which the certificate or certificates for shares of Common Stock which shall be issuable on such conversion shall be issued. Each Security surrendered for conversion shall, unless the shares issuable on conversion are to be issued in the same name as the name in which such Security is registered, be accompanied by instruments of transfer, in form satisfactory to the Guarantor, duly executed by the Holder or its, his or her duly authorized attorney. Securities so surrendered during the period from the close of business on a Record Date, or the next preceding Business Day if such Record Date is not a Business Day, preceding any Interest Payment Date to the opening of business on such Interest Payment Date (excluding Securities or portions thereof called for redemption during such period) shall also be accompanied by payment in next-day funds or other funds acceptable to the Guarantor of an amount equal to the interest payable on such Interest Payment Date on the principal amount of such Security then being converted; provided, however, that, if the Company shall default -44- on the payment of said interest, said funds shall be returnable to the payor thereof. As promptly as practicable after the surrender of such Security, as aforesaid, the Guarantor shall issue and shall deliver at such office or agency to such Holder, or on its, his or her written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such Security or portion thereof in accordance with the provisions of this Article 10 and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be settled as provided in Section 10.04. In case any Security of a denomination greater than $1,000 shall be surrendered for partial conversion, the Company and the Guarantor shall execute and the Trustee shall authenticate and deliver to or upon the order of the Holder of the Security so surrendered, at the expense of the Company, a new Security or Securities and Guarantee or Guarantees in authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Security. Such conversion shall be deemed to have been effected immediately prior to the close of business on the date on which such Security shall have been surrendered and such notice received by the Company and the Guarantor as aforesaid, and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time and such conversion shall be at the Conversion Price in effect at such time, unless the stock transfer books of the Guarantor shall be closed on that date, in which event such Person or Persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date upon which such Security shall have been surrendered and such notice received by the Company and the Guarantor. Subject to the aforesaid requirement for a payment in the event of conversion after the close of business on a Record Date preceding an Interest Payment Date, no payment or adjustment shall be made on conversion for interest accrued on the Securities surrendered for conversion or for dividends on the Common Stock delivered on such conversion. Section 10.04. Payment in Lieu of Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Securities. Instead of any fractional interest in a share of Common Stock which would otherwise be deliverable upon the conversion of any Security or Securities, the Company -45- and/or the Guarantor shall make an adjustment therefor to the nearest 1/100th of a share in cash at the Current Market Price thereof at the close of business on the Business Day next preceding the day of conversion. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Securities, or specified portions thereof to be converted, so surrendered. Section 10.05. Adjustment of Conversion Price. The Conversion Price shall be adjusted from time to time as follows: a. In case the Guarantor shall hereafter (i) pay a dividend or make a distribution on its Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its Common Stock any shares of Capital Stock of the Guarantor, the Conversion Price in effect immediately prior to such action shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other Capital Stock of the Guarantor which he would have owned immediately following such action had such Security been converted immediately prior thereto. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this subsection (a), the Holder of any Security thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of Capital Stock or shares of Common Stock and other Capital Stock of the Guarantor, the Board of Directors (whose determination shall be conclusive and shall be described in a statement filed with the Trustee and with the Registrar) shall determine in an equitable manner the allocation of the adjusted Conversion Price between or among shares of such classes of Capital Stock or shares of Common Stock and other Capital Stock. b. In case the Guarantor shall hereafter issue rights or warrants to holders of its outstanding shares of -46- Common Stock generally entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price per share of the Common Stock on the record date mentioned below, the Conversion Price of the shares of Common Stock shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of issuance of such rights or warrants by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Current Market Price, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants. c. In case the Guarantor shall hereafter distribute to holders of its outstanding Common Stock generally evidences of its indebtedness or assets (excluding any cash dividend paid from retained earnings of the Guarantor and dividends or distributions payable in stock for which adjustment is made pursuant to subsection (a) of this Section 10.05) or rights or warrants to subscribe to securities of the Guarantor (excluding those referred to in subsection (b) of this Section 10.05), then in each such case the Conversion Price of the shares of Common Stock shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of such distribution by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock on the record date mentioned below less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive and shall be described in a statement filed with the Trustee and with the Registrar) of the portion of the evidences of indebtedness or assets so distributed to the holder of one share of Common Stock or of such subscription rights or warrants applicable to one share of Common Stock, and of which the denominator shall be such Current Market Price per share of Common Stock. Such adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. -47- d. In any case in which this Section 10.05 shall require that an adjustment be made immediately following a record date, the Guarantor may elect to defer (but only until five Business Days following the filing by the Company with the Trustee and the Registrar of the certificate of independent public accountants described in subsection (f) of this Section 10.05) issuing to the Holder of any Security converted after such record date the shares of Common Stock issuable upon such conversion over and above the shares of Common Stock issuable upon such conversion on the basis of the Conversion Price prior to adjustment. e. No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% of such price; provided, however, that any adjustments which by reason of this subsection (e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment, and provided further that adjustment shall be required and made in accordance with the provisions of this Article 10 (other than this subsection (e)), not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of Securities or Common Stock. All calculations under this Section 10.05 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 10.05 to the contrary notwithstanding, the Guarantor shall be entitled to make such reductions in the Conversion Price, in addition to those required by this Section 10.05, as it in its discretion shall determine to be advisable in order that any stock dividend, subdivision of shares, distribution of rights to purchase stock or securities, or distribution of securities convertible into or exchangeable for stock hereafter made by the Guarantor to its shareholders shall not be taxable. f. Whenever the Conversion Price is adjusted as herein provided, (i) the Company and the Guarantor shall promptly file with the Trustee and the Registrar a certificate of a firm of independent public accountants setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment and the manner of computing the same, -48- which certificate shall be conclusive evidence of the correctness of such adjustment and (ii) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall forthwith be given by the Company and the Guarantor to the Holders in the manner provided in Section 13.02. Subject to TIA Section 315(a), (c) and (d), the Trustee and any conversion agent shall be under no duty or responsibility with respect to any such certificate or the certificate provided for in Section 10.10 except to exhibit the same from time to time to any Holder of a Security desiring an inspection of such certificate. g. In the event that at any time as a result of an adjustment made pursuant to subsection (a) of this Section 10.05, the Holder of any Security thereafter surrendered for conversion shall become entitled to receive any shares of the Guarantor other than shares of Common Stock, thereafter the Conversion Price of such other shares so receivable upon conversion of any Security shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in this Article 10. Section 10.06. Notice of Certain Corporate Action. In the event: a. the Guarantor shall take any action which would require an adjustment in the Conversion Price pursuant to Section 10.05(c); or b. the Guarantor shall authorize the granting to the holders of its Common Stock (as a class) of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights; or c. there shall be any capital reorganization or reclassification of the Common Stock (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value of the Common Stock), or any consolidation or merger to which the Guarantor is a party or any statutory exchange of securities with another corporation and for which approval of any shareholders of the Guarantor is required, or any sale or transfer of all or substantially all of the assets of the Guarantor; or -49- d. there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Guarantor; then the Company and the Guarantor shall cause to be filed with the Trustee and the Registrar, and shall cause to be given to the Holders, in the manner provided in Section 13.02, at least 14 days prior to the applicable date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of such distribution or rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such distribution or rights are to be determined, or (ii) the date on which such reorganization, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice or any defect therein shall not affect the legality or validity of the proceedings described in subsection (a), (b), (c) or (d) of this Section 10.06. Section 10.07. Guarantor To Provide Stock. The Guarantor covenants that it will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock or its issued shares of Common Stock held in its treasury, or both, for the purpose of effecting conversions of Securities, the full number of shares of Common Stock deliverable upon the conversion of all outstanding Securities not theretofore converted. For purposes of this Section 10.07, the number of shares of Common Stock which shall be deliverable upon the conversion of all outstanding Securities shall be computed as if at the time of computation all outstanding Securities were held by a single Holder. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value (if any) of the shares of Common Stock deliverable upon conversions of the Securities, the Guarantor will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Guarantor may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price. -50- The Guarantor will endeavor to list the shares of Common Stock required to be delivered upon conversion of Securities prior to such delivery upon each national securities exchange, if any, upon which the outstanding Common Stock is listed at the time of such delivery. Prior to the delivery of any securities which the Guarantor shall be obligated to deliver upon conversion of the Securities, the Guarantor will endeavor to comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority. Section 10.08. Taxes on Conversions. The Company and/or the Guarantor will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversions of Securities pursuant hereto; provided, however, that neither the Company nor the Guarantor shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the Holder of the Securities to be converted and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Company and/or the Guarantor the amount of any such tax or has established, to the satisfaction of the Company and the Guarantor, that such tax has been paid. Section 10.09. Covenant as to Stock. The Guarantor covenants that all shares of Common Stock which may be delivered upon conversions of Securities will upon delivery be duly and validly issued and fully paid and non-assessable, free of all liens and charges and not subject to any preemptive rights. Section 10.10. Consolidation or Merger. Notwithstanding any other provision herein to the contrary, in case of any consolidation or merger to which the Guarantor is a party other than a merger or consolidation in which the Guarantor is the continuing corporation, or in case of any sale or conveyance to another corporation of the property of the Guarantor as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Guarantor), there shall be no adjustments under Section 10.05 but the Holder of each Security then outstanding shall have the right thereafter to convert such Security into the kind and amount of securities, cash or -51- other property which he would have owned or have been entitled to receive immediately after such consolidation, merger, statutory exchange, sale or conveyance had such Security been converted immediately prior to the effective date of such consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Article 10 with respect to the rights and interests thereafter of the Holders of the Securities, to the end that the provisions set forth in this Article 10 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the conversion of the Securities. Any such adjustment shall be made by and set forth in a supplemental indenture executed by the Company, the Guarantor and the Trustee and approved by a firm of independent public accountants, evidenced by a certificate to that effect; and any adjustment so approved shall for all purposes hereof conclusively be deemed to be an appropriate adjustment. The above provisions of this Section 10.10 shall similarly apply to successive consolidations, mergers, statutory exchanges, sales or conveyances. The Company shall give notice of the execution of such a supplemental indenture to the Holders of Securities in the manner provided in Section 13.02 within 30 days after the execution thereof. The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in such supplemental indenture relating either to the kind or amount of shares of stock or securities or property receivable by Holders upon the conversion of their Securities after any such consolidation, merger, statutory exchange, sale or conveyance, or to any adjustment to be made with respect thereto. Section 10.11. Disclaimer of Responsibility for Certain Matters. Neither the Trustee nor the Registrar shall at any time be under any duty or responsibility to any Holder of Securities to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. Neither the Trustee nor the Registrar shall be accountable with respect to the listing or registration referred to in -52- Section 10.07 or the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, which may at any time be issued or delivered upon the conversion of any Security; and neither the Trustee nor the Registrar makes any representation with respect thereto. Neither the Trustee nor the Registrar shall be responsible for any failure of the Guarantor to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property or to make any cash payment upon the surrender of any Security for the purpose of conversion or, subject to TIA Section 315(a), (c) and (d), to comply with any of the covenants contained in this Article 10. ARTICLE 11. Discharge of Indenture Section 11.01. Termination of the Company's and the Guarantor's Obligations. Securities of a Series may be defeased in accordance with their terms and, unless the Authorizing Resolution provides otherwise, in accordance with this Article. The Company may terminate all of its obligations under the Securities of a Series and this Indenture, to the extent its obligations under this Indenture relate to that Series, and the obligations of the Guarantor shall terminate if all Securities of a Series previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid) have been delivered to the Trustee for cancellation or if: 1. the Securities mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption; and 2. the Company irrevocably deposits in trust with the Trustee money sufficient to pay principal of and interest on the outstanding Securities to maturity or redemption, as the case may be. The Company may make the deposit only if Article 6 permits it. Immediately after making the deposit, the Company shall give notice of such event and proposed date of payment to each Securityholder. The Company's obligations and, to the extent applicable, the Guarantor's obligations, in Sections 2.03, 2.04, -53- 2.05, 2.06, 2.07, 4.01, 9.07, 9.08 and 11.03 and Article 10, however, shall survive until the Securities are no longer outstanding. Thereafter, the Company's obligations and, to the extent applicable, the Guarantor's obligations, in Sections 9.07 and 11.03 shall survive. After a deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities, the Guarantor's obligations under the Guarantee and their obligations under the Indenture except for those surviving obligations specified above. Section 11.02. Application of Trust Money. The Trustee shall hold in trust money deposited with it pursuant to Section 11.01. It shall apply the deposited money through the Paying Agent and in accordance with this Indenture to the payment of principal and interest on the Securities. Section 11.03. Repayment to Company. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest (including interest, if any, earned on such money) that remains unclaimed for two years; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once in a newspaper of general circulation in The City of New York or mail to each Holder notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to any of such money must look to the Company or, if applicable, the Guarantor for payment as general creditors unless applicable abandoned property law designates another person and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease. -54- ARTICLE 12. Amendments, Supplements and Waivers Section 12.01. Without Consent of Holders. The Company may amend or supplement this Indenture or the Securities without notice to or consent of any Securityholder: 1. to cure any ambiguity, defect or inconsistency; 2. to comply with Section 5.01; 3. to provide for uncertificated Securities in addition to or in place of certificated Securities; or 4. to make any change that does not adversely affect the rights of any Securityholder. Section 12.02. With Consent of Holders. The Company may amend or supplement this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities of all Series affected by the amendment voting as a class. The Holders of a majority in principal amount of the Securities may waive compliance by the Company with any provision of this Indenture or the Securities without notice to any Securityholder. However, without the consent of each Securityholder affected, an amendment, supplement or waiver, including a waiver pursuant to Section 8.04, may not: 1. reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver; 2. reduce the rate of or extend the time for payment of interest on any Security; 3. reduce the principal of or extend the fixed maturity of any Security or alter the redemption provisions with respect thereto; 4. waive a default in the payment of the principal of or interest on any Security; 5. modify the provisions of Article 6 (subordination) or Article 7 (guarantee) in a manner adverse to the Holders; -55- 6. make any security payable in money other than that stated in the Security; 7. if applicable, make any change that adversely affects the right to convert or the Conversion Price for any Security; or 8. make any change in Section 8.04 or 8.07 or this Section 12.02. After an amendment under this Section 12.02 becomes effective, the Company shall mail to the Holders a notice briefly describing the amendment. Section 12.03. Compliance with Trust Indenture Act. Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. Section 12.04. Revocation and Effect of Consents. A consent to an amendment, supplement or waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to the Security or portion of a Security of such Holder. The Trustee must receive the notice of revocation before the date the amendment, supplement or waiver becomes effective. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder unless it makes a change described in clauses (1) through (8) of Section 12.02. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security. Section 12.05. Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determine, the Company in exchange for the Security shall issue and the Trustee shall authenticate, a new Security that reflects the changed terms. -56- Section 12.06. Trustee To Sign Amendments, etc. The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article if the amendment, supplement or waiver does not adversely affect the rights or duties of the Trustee. If it does, the Trustee may but need not sign it. In signing any amendment, supplement or waiver, the trustee may rely on an Opinion of Counsel which shall state that such amendment, supplement or waiver is permitted under this Article 12. ARTICLE 13. Miscellaneous Section 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA or the TIA as amended after the date hereof, the required provision shall control. Section 13.02. Notices. Any notice or communication shall be sufficiently given if in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company or the Guarantor: Toll Brothers, Inc. 3103 Philmont Avenue Huntingdon Valley, Pennsylvania 19006 Attention: Chief Financial Officer with a copy to: Mark K. Kessler, Esquire Wolf, Block, Schorr and Solis-Cohen Twelfth Floor Packard Building 15th and Chestnut Streets Philadelphia, PA 19102 if to the Trustee: -57- The Company, the Guarantor or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to him at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. In addition, a copy of each such notice or communication shall be mailed to the Trustee at the address specified above. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. If the Company or the Guarantor mails a notice or communication to Securityholders, it shall mail a copy of such notice to the Trustee and each agent at the same time. Section 13.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Guarantor, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: 1. an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and 2. an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Section 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: -58- 1. a statement that the person making such certificate or opinion has read such covenant or condition; 2. a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 3. a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and 4. a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. Section 13.06. When Treasury Securities Disregarded. In determining whether the Holders of the required principal amount of Securities of a Series have concurred in any direction, waiver or consent, Securities of the Series owned by the Company or the Guarantor or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or the guarantor shall be disregarded, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities of the Series which the Trustee knows are so owned shall be so disregarded. Section 13.07. Rules by Trustee, Paying Agent, Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Paying Agent or Registrar each may make reasonable rules for its functions. Section 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday, a legal holiday or a day on which banking institutions are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. Section 13.09. Governing Law. The laws of the State of New York shall govern this Indenture, the Securities and the Guarantee without regard to principles of conflicts of law. -59- Section 13.10. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company, the Guarantor or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 13.11. No Recourse Against Others. All liability described in paragraph 20 of the Securities of any director, officer, employee or shareholder, as such, of the Company or the Guarantor is waived and released. Section 13.12. Successors. All agreements of the Company or the Guarantor in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. Section 13.13. Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 13.14. Counterparts. This Indenture may be executed in any number of counterparts, all of which shall together constitute one and the same instrument. This Indenture shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. -60- SIGNATURES Dated: TOLL CORP., as Issuer By: ----------------------------- Name: Title: (SEAL) Attest: --------------------------- Name: Title: Dated: TOLL BROTHERS, INC., as Guarantor By: ----------------------------- Name: Title: (SEAL) Attest: -------------------------- Name: Title: -61- Dated: [Name of Trustee] as Trustee By: ----------------------------- Name: Title: (SEAL) Attest: -------------------------- Name: Title: -62- No. EXHIBIT A TOLL CORP. promises to pay to or registered assigns the principal sum of [Dollars]* on [Title of Security] Interest Payment Dates: and Record Dates: and Authenticated: Dated: TOLL CORP. [Seal] By [Name of Trustee] as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: Authorized Signatory - ------------------------ * Or other currency. Insert corresponding provisions on reverse side of Security in respect of foreign currency denomination or interest payment requirement. A-1 (REVERSE OF SECURITY) TOLL CORP. [Title of Security] 1. Interest. Toll Corp. (the "Company"), a Delaware corporation, promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semi-annually on and of each year (the "Interest Payment Date"), commencing on . Interest on the Security will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from , provided that, if there is no existing default in the payment of interest, and if this Security is authenticated between a record date referred to on the face hereof (the "Record Date") and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on the Securities (except defaulted interest) to the persons who are registered holders of Securities at the close of business on the Record Date next preceding the Interest Payment Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by wire transfer or by its check payable in such money. It may mail an interest check to a holder's registered address. 3. Paying Agent and Registrar. Initially, [Name of Trustee] (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its subsidiaries may act as Paying Agent, Registrar or co-registrar. A-2 4. Indenture. The Company issued the Securities under an Indenture dated as of , among the Company, Toll Brothers, Inc. (the "Guarantor") and the Trustee, as supplemented by the Authorizing Resolutions approved by the Company and the Guarantor on (collectively, the "Indenture"). The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code {{77aaa-77bbbb) as in effect on the date of the Indenture and as may be amended from time to time. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of them. Payment of the Securities is guaranteed on a senior subordinated basis by the Guarantor (the "Guarantee"). 5. Optional Redemption.* The Company may redeem the Securities at any time on or after in whole, or from time to time in part, at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest to the redemption date: If redeemed during the 12-month period beginning , Year Percentage ............................... % ............................... % ............................... % ............................... % ............................... % and thereafter................. % 6. Mandatory Redemption.* The Company shall redeem % of the aggregate principal amount of Securities originally issued under the Indenture on each of , which redemptions are calculated to retire % of the Securities originally issued prior to maturity. Such redemptions shall be made at a redemption price equal to 100% of the principal amount thereof, together with accrued interest to the redemption date. The Company may reduce the principal amount of Securities to be redeemed pursuant to this Paragraph 6 by the principal amount of any Securities previously redeemed, retired or acquired, otherwise than pursuant to this Paragraph 6, that the Company has delivered to the Trustee for cancellation and not previously credited to the Company's obligations under this Paragraph 6. Each such Security shall be received and credited for such purpose by the Trustee at the redemption price and the amount of such mandatory redemption payment shall be reduced accordingly. 7. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Securities to be redeemed at its, his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part. On and after the redemption date interest ceases to accrue on Securities or portions of them called for redemption, provided that if the Company shall default in the payment of such Security at the redemption price - ----------------- * If applicable. A-3 together with accrued interest, interest shall continue to accrue at the rate borne by the Securities. 8. Selection. Selection of Securities for any redemption will be made by the Trustee, if the Securities are listed on a national securities exchange by the rules of such exchange or if the Securities are not so listed on either a pro rata basis or by lot or by any other method that the Trustee deems fair and appropriate. 9. Repurchase After a Change of Control.* In the event of a Change of Control (as defined in the Authorizing Resolution), each holder of the Securities will have the right, at such holder's option, subject to the terms and conditions of the Indenture, to require the Company to purchase all or any part of the Securities at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon, in accordance with the terms set forth in the Indenture. 10. Conversion* A Holder of a Security may convert it into Common Stock of the Guarantor at any time prior to the close of business on , or, if the Security is called for redemption, the Holder may convert it at any time before the close of business on the second Business Day before the date fixed for redemption. The initial Conversion Price is $ per share of Common Stock, subject to adjustment in certain events. The Company and/or the Guarantor will deliver a check in lieu of any fractional share. On conversion no payment or adjustment for interest accrued on the Securities will be made. To convert a Security a Holder must (1) complete and sign the conversion notice on the back of the Security, (2) surrender the Security to the Registrar (as agent for the Guarantor), (3) furnish appropriate endorsements and transfer documents if required by the Registrar and (4) pay any transfer or similar tax if required. A Holder may convert a portion of a Security if the portion is $1,000 or a whole multiple of $1,000. - ---------------------- * If applicable. A-4 11. Subordination.* The Securities will be subordinated in right of payment to the prior payment in full of all Senior Indebtedness of the Company (as defined in the Authorizing Resolution). The Securities will be senior in right of payment to certain specified obligations of the Company as set forth in the Authorizing Resolution. The Guarantee will be subordinated in right of payment to the prior payment in full of all Senior Indebtedness of the Guarantor (as defined in the Authorizing Resolution). The Guarantee will be senior in right of payment to certain specified obligations of the Guarantor as set forth in the Authorizing Resolution. 12. Denominations, Transfer, Exchange. The Securities are in registered form without coupons in denominations of $1,000 and integral multiples thereof. A holder may transfer or exchange Securities 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. The Registrar need not transfer or exchange any Securities selected for redemption. Also, it need not transfer or exchange any Securities for a period of 15 days before a selection of Securities to be redeemed is scheduled. 13. Person Deemed Owner. The registered holder of a Security may be treated as the owner of it for all purposes. 14. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company as its request. After that, holders entitled to the money must look to the Company or, if applicable, the Guarantor for payment unless an abandoned property law designates another person. 15. Discharge Prior to Redemption or Maturity. The Indenture will be discharged and cancelled except for certain Sections thereof, subject to the terms of the Indenture, upon the payment of all the Securities or upon the deposit with the Trustee, within not more than one year prior to the maturity or redemption of the Securities, of funds sufficient for such payment or redemption. In the case of such a deposit, Securityholders must look to the deposited money for payment. - -------------------- * If applicable. A-5 16. Amendment, Supplement, Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the Securities of all Series affected by the amendment voting as a class, and any past default or compliance with any provision may be waived with the consent of the holders of a majority in principal amount of the Securities. Without the consent of any Securityholder, the Company may amend or supplement the Indenture or the Securities to cure any ambiguity, defect or inconsistency; to comply with Article 5 of the Indenture (providing for the assumption of the obligations of the Company or the Guarantor under the Indenture by a successor corporation); to provide for uncertificated Securities in addition to or in place of certificated Securities; or to make any change that does not adversely affect the rights of any Securityholder. 17. Restrictive Covenants* The Securities are general unsecured obligations of the Company limited to $ principal amount. [Insert brief description of any covenants.] Once a year the Company must report to the Trustee on compliance with the limitations. 18. Successor Corporation. When a successor corporation assumes all the obligations of its predecessor under the Securities and the Indenture, the predecessor corporation will be released from those obligations. 19. Defaults and Remedies. An Event of Default is: (i) failure of the Company or the Guarantor to pay interest for 30 days or principal when due (whether or not prohibited by the subordination provision); (ii) failure of the Company or Guarantor to perform any other agreement for 60 days after notice; (iii) default in the payment of Indebtedness of the Company, the Guarantor or any Subsidiary under the terms of the instrument evidencing or securing such Indebtedness permitting the holder thereof to accelerate the payment of in excess of an aggregate of $2,000,000 in principal amount of such Indebtedness (after the lapse of applicable grace periods) or, in the case of non-payment defaults, acceleration of any such Indebtedness if such acceleration is not rescinded or annulled within 10 days after such acceleration, provided that, subject to the terms of the Indenture, the term "Indebtedness" shall not include an acceleration of or default on certain Non-Recourse Indebtedness (as defined in the Indenture); (iv) entry of a final judgment for the payment of money in an amount in excess of $2,000,000 shall be entered against the Company, the Guarantor or any Subsidiary which remains undischarged or - -------------------- * If applicable. A-6 unstayed for a period of 60 days after the date on which the right to appeal has expired; provided the term "final judgment" shall not include a Non-Recourse Judgment (as defined in the Indenture) unless the book value of all property (net of any previous write-downs or reserves in respect of such property) subject to such Non-Recourse Judgment exceeds the amount of such Non-Recourse Judgment by more than $5,000,000; (v) certain events of bankruptcy, insolvency or reorganization; or (vi) the Guarantee shall for any reason (other than pursuant to its terms) cease to be in full force and effect. The Indenture provides that the Trustee will, within 90 days after the occurrence of a Default, give the Holders notice of all uncured Defaults known to it (the term "Default" to include the events specified above, without grace or notice), provided that, except in the case of default in the payment of principal of or interest on any of the Securities, the Trustee shall be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interest of the Securityholders. In case an Event of Default (other than arising out of certain events of bankruptcy, insolvency or reorganization) occurs and is continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the Securities then outstanding, by notice in writing to the Company (and to the Trustee if given by the Securityholders), may declare the Securities to be due and payable (i) if (a) no Designated Senior Debt of the Company or the Guarantor is outstanding, or (b) if the Securities are not subordinated to other indebtedness of the Company, immediately, or (ii) if Designated Senior Debt of the Company or the Guarantor is outstanding and the Securities are subordinated to other indebtedness of the Company, upon the earlier of (A) ten days after such Acceleration Notice is received by the Company and (B) the acceleration of any Senior Indebtedness of the Company or the Guarantor. In case an Event of Default arising out of certain events of bankruptcy, insolvency or reorganization occurs and is continuing, the outstanding principal of and accrued interest on the Securities shall ipso facto become and be due and payable immediately, without declaration or any further act on the part of the Trustee or any Securityholder. Such declaration or acceleration and its consequences may be rescinded by holders of a majority in principal amount of the outstanding Securities of the affected Series if all A-7 existing Events of Defaults have been cured and waived (except non-payment of principal or interest that has become due solely because of the acceleration) and if the rescission would not conflict with any judgment or decree. Defaults (except, unless theretofore cured, a default in payment of principal of or interest on the Securities or a default with respect to a provision which cannot be modified under the terms of the Indenture without the consent of each Securityholder affected) may be waived by the holders of a majority in principal amount of outstanding Securities upon the conditions provided in the Indenture. The Indenture requires the Guarantor to file periodic reports with the Trustee as to the absence of defaults. 20. Trustee Dealings with Company. [Name of Trustee], the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company, the Guarantor or their affiliates, and may otherwise deal with the Company, the Guarantor or their affiliates, as if it were not Trustee. 21. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company or the Guarantor shall not have any liability for any obligations of the Company or the Guarantor under the Securities, the Guarantee or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 22. Authentication. This Security shall not be valid until the Trustee signs the certificate of authentication on the other side of this Security. 21. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in A-8 common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture. Requests may be made to: Secretary, Toll Brothers, Inc., 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006. A-9 ASSIGNMENT FORM If you the holder want to assign this Security, fill in the form below and have your signature guaranteed: I or we assign and transfer this Security to - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax ID number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint - -------------------------------------------------------------------------------- agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Date: Your Signature: --------------------- ------------------------------------- (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: ------------------------------------------------------------ NOTE: Signature(s) must be guaranteed by a member firm of a major stock exchange or a commercial bank or trust company. A-10 CONVERSION NOTICE* If you want to convert this Security pursuant to Article 10 of the Indenture, check the box: / / --- If you want to convert only part of this Security pursuant to Article 10 of the Indenture, state the amount: $ ---------------- If you want the stock certificate made out in another person's name, fill in the form below: (Insert other person's Social Security or Tax. I.D. Number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type other person's name, address and zip code) Date: Your Signature: ------------- --------------------------------------------- (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: ------------------------------------------------------------ NOTE: Signature(s) must be guaranteed by a member firm of a major stock exchange or a commercial bank or trust company. - ------------------------- * If applicable. A-11 EXHIBIT B GUARANTEE Toll Brothers, Inc. (hereinafter referred to as the "Guarantor," which term includes any successor person under the Indenture (the "Indenture") referred to in the Security upon which this notation is endorsed), has unconditionally guaranteed on a subordinated basis (i) the due and punctual payment of the principal of and interest on the Securities, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal of and interest, if any, on the Securities, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee under the Indenture and the Security all in accordance with the terms set forth in Article Seven of the Indenture and (ii) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. [The obligations of the Guarantor to the Holders of the Securities and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth and are expressly subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness of the Guarantor, to the extent and in the manner provided in Article Seven of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee and the subordination thereof therein made.]* No stockholder, officer, director or incorporator, as such, past, present or future, of the Guarantor shall have any personal liability under the Guarantee by reason of his or its status as such stockholder, officer, director or incorporator. - ------------------------- * If applicable. B-1 The Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which this Guarantee is endorsed shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. Guarantor TOLL BROTHERS, INC. By ----------------------------------- By ----------------------------------- (Seal) B-2 EX-5 3 OPINION LAW OFFICES WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP Twelfth Floor Packard Building 111 South 15th Street Philadelphia, PA 19102-2678 EXHIBIT 5 October 20, 1997 Toll Brothers, Inc. 3103 Philmont Avenue Huntingdon Valley, PA 19006 Toll Corp. 3103 Philmont Avenue Huntingdon Valley, PA 19006 RE: Toll Corp. Toll Brothers, Inc. Registration Statement on Form S-3 ---------------------------------- Gentlemen: As counsel for Toll Brothers, Inc., a Delaware corporation (the "Company") and Toll Corp., a Delaware corporation ("Toll"), we have reviewed a Registration Statement on Form S-3 (together with all exhibits thereto and documents incorporated by reference therein, the "Registration Statement") in the form proposed to be filed by the Company and Toll with the Securities and Exchange Commission (the "Commission"). The Registration Statement relates to the issuance and sale from time to time, pursuant to Rule 415 of the General Rules and Regulations of the Commission promulgated under the Securities Act of 1933, as amended (the "Securities Act"), of the following securities of the Company with an aggregate initial public offering price of up to $289,000,000 or the equivalent thereof in one or more foreign currencies or units of two or more foreign currencies or composite currencies including the European Currency Unit: (i) debt securities of Toll, consisting of debentures, notes and/or other unsecured evidences of indebtedness in one or more series (the "Debt Securities"), guaranteed by the Company, which in each case are to be issued under an indenture (an "Indenture" and, collectively with any other indentures relating to other Debt Securities, the "Indentures") to be entered into among the Company, Toll and an institution to be designated prior to the issuance of any Debt Securities under such Indenture to serve as trustee thereunder (a "Trustee" and, collectively with the trustees, if any, under other Indentures, the "Trustees"); (ii) Guarantees of the Company ("Guarantees") guaranteeing payment of the Debt Securities; (iii) shares of the Company's common stock, $.01 par value (the "Common Stock"); and (iv) shares of the Company's preferred stock, $.01 par value (the "Preferred Stock"), in one or more series. The Toll Brothers, Inc. Toll Corp. October 20, 1997 Page 2 Debt Securities, the Guarantees, the Common Stock and the Preferred Stock are collectively referred to herein as the "Offered Securities." This opinion is being delivered in accordance with the requirements of Item 601(b)(5) of Regulation S-K promulgated under the Securities Act. For the purpose of rendering this opinion, we have examined (i) the Registration Statement relating to the Offered Securities; (ii) the form of Indenture being filed as an exhibit to the Registration Statement; (iii) the Certificates of Incorporation of the Company and of Toll as currently in effect (the "Certificates of Incorporation"); (iv) the Bylaws of the Company and of Toll as currently in effect (the "Bylaws"); and (v) certain resolutions adopted by the Boards of Directors of the Company and of Toll (the "Boards of Directors") relating to the issuance of the Offered Securities. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and of Toll, and such agreements, certificates of public officials, certificates of officers or other representatives of the Company, Toll and others and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth herein. In our examination, we have assumed without independent verification (i) the legal capacity of all natural persons, (ii) the genuineness of all signatures, (iii) the authenticity of all documents submitted to us as originals, (iv) the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such latter documents and (v) the power and authority of all persons other than the Company and Toll signing such documents to execute, deliver and perform such documents, and the valid authorization, execution and delivery of such documents by such other persons. As to any facts material to the opinions expressed herein which were not independently established or verified, we have relied upon oral or written statements and representations of officers or other representatives of the Company and Toll and others. We are admitted to practice before the bar in the Commonwealth of Pennsylvania and in the States of New Jersey and Delaware and we do not express any opinion as to the laws of any other jurisdiction other than the federal laws of the United States of America to the extent referred to specifically herein. In rendering this opinion, we have assumed that there will be no changes in applicable law between the date of this opinion and any date of issuance or delivery of the Offered Securities, including without limitation, any securities that may be issued upon conversion or exchange of any of the Offered Securities. Based upon and subject to the foregoing and such examinations of law and such other matters as we have deemed relevant under the circumstances, it is our opinion that: 1. The form of Indenture filed as an exhibit to the Registration Statement (the "Basic Indenture") has been duly authorized by the Boards of Toll Brothers, Inc. Toll Corp. October 20, 1997 Page 3 Directors of the Company and of Toll. The Basic Indenture and each other Indenture in the form of the Basic Indenture, as modified in accordance with duly adopted resolutions of the Boards of Directors of the Company and of Toll to reflect the additional terms applicable to the Debt Securities to which such Indenture relates, when executed and delivered by the Company and Toll, will be a valid and binding agreement, enforceable against the Company and Toll in accordance with its terms, except to the extent that enforcement thereof may be limited by (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity), (c) requirements that a claim with respect to any Debt Securities denominated other than in United States dollars (or a judgment denominated other than in United States dollars in respect of such claim) be converted into United States dollars at a rate of exchange prevailing on a date determined pursuant to applicable law and (d) governmental authority to limit, delay or prohibit the making of payments outside the United States or in foreign currency or composite currency. 2. With respect to any series of Debt Securities (the "Offered Debt Securities"), when (i) if the Offered Debt Securities are to be sold pursuant to a firm commitment underwritten offering, the underwriting agreement with respect to the Offered Debt Securities (the "Debt Underwriting Agreement") has been duly authorized, executed and delivered by the Company and Toll and the other parties thereto; (ii) if the Offered Debt Securities are to be sold on an agency basis, the distribution agreement with respect to the Offered Debt Securities (the "Debt Distribution Agreement") has been duly authorized, executed and delivered by the Company and Toll and the other parties thereto; (iii) the Boards of Directors of the Company and of Toll, including any appropriate committees appointed thereby, and appropriate officers of the Company and of Toll have taken all necessary corporate action to approve the issuance and terms of the Offered Debt Securities and related matters; (iv) the terms of the Offered Debt Securities and of their issuance and sale have been duly established in conformity with the Indenture relating thereto so as not to violate any applicable law, the Certificate of Incorporation or Bylaws of the Company or of Toll or result in a default under or breach of any agreement or instrument binding upon the Company or Toll and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company or Toll; (v) the applicable Indenture has been duly executed and Toll Brothers, Inc. Toll Corp. October 20, 1997 Page 4 delivered by the Company, Toll and the Trustee thereunder; and (vi) the Offered Debt Securities have been duly executed and authenticated in accordance with the provisions of the applicable Indenture and duly delivered to the purchasers thereof upon payment of the agreed-upon consideration therefor as contemplated by the Registration Statement, the prospectus contained therein and the applicable prospectus supplement, the Offered Debt Securities, when issued and sold in accordance with the applicable Indenture and the related Debt Underwriting Agreement or Debt Distribution Agreement, if any, or any other duly authorized, executed and delivered applicable purchase agreement, will be valid and binding obligations of Toll, enforceable against Toll in accordance with their respective terms, except to the extent that enforcement thereof may be limited by (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity), (c) requirements that a claim with respect to any Offered Debt Securities denominated other than in United States dollars (or a judgment denominated other than in United States dollars in respect of such claim) be converted into United States dollars at a rate of exchange prevailing on a date determined pursuant to applicable law and (d) governmental authority to limit, delay or prohibit the making of payments outside the United States or in foreign currency or composite currency. We note that, as of the date hereof, a judgment for money in an action based on a Debt Security denominated in a foreign currency, currency unit or composite currency in a federal or state court in the United States ordinarily would be enforced in the United States only in United States dollars. The date used to determine the rate of conversion of the foreign currency, currency unit or composite currency in which a particular Debt Security is denominated into United States dollars will depend upon various factors, including which court renders the judgment. 3. With respect to the Guarantees relating to any Offered Debt Securities (the "Offered Guarantees"), when (i) the terms of the Offered Guarantees and of their issuance have been duly established in conformity with the Indenture relating thereto so as not to violate any applicable law, the Certificate of Incorporation or Bylaws of the Company or result in a default under or breach of any agreement or instrument binding upon the Company and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company; Toll Brothers, Inc. Toll Corp. October 20, 1997 Page 5 (ii) the Board of Directors of the Company, including any appropriate committee appointed thereby, and appropriate officers of the Company have taken all necessary corporate action to approve the issuance and terms of the Offered Guarantees and related matters; and (iii) the Offered Debt Securities to which the Offered Guarantees relate have been duly issued and sold and the purchase price therefore has been received by Toll, the Offered Guarantees will be valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except to the extent that enforcement thereof may be limited by (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity), (c) requirements that a claim with respect to any Offered Guarantees denominated other than in United States dollars (or a judgment denominated other than in United States dollars in respect of such claim) be converted into United States dollars at a rate of exchange prevailing on a date determined pursuant to applicable law and (d) governmental authority to limit, delay or prohibit the making of payments outside the United States or in foreign currency or composite currency. 4. With respect to any shares of Common Stock (the "Offered Common Stock"), when (i) if the Offered Common Stock is to be sold pursuant to a firm commitment underwritten offering, the underwriting agreement with respect to the Offered Common Stock (the "Common Stock Underwriting Agreement") has been duly authorized, executed and delivered by the Company and the other parties thereto; (ii) if the Offered Common Stock is to be sold on an agency basis, the distribution agreement with respect to the Offered Common Stock (the "Common Stock Distribution Agreement") has been duly authorized, executed and delivered by the Company and the other parties thereto; (iii) the Board of Directors of the Company, including any appropriate committee appointed thereby, and appropriate officers of the Company have taken all necessary corporate action to approve the issuance and terms of issuance of the shares of Offered Common Stock in conformity with the Certificate of Incorporation and Bylaws of the Company, so as not to violate any applicable law, the Certificate of Incorporation or Bylaws of the Company or result in a default under or breach of any agreement or instrument binding upon the Company and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company; and (iv) certificates representing the shares of the Offered Common Stock are duly executed, countersigned, registered and Toll Brothers, Inc. Toll Corp. October 20, 1997 Page 6 delivered upon payment of the agreed-upon consideration therefor, the shares of the Offered Common Stock, when issued and sold in accordance with the related Common Stock Underwriting Agreement or Common Stock Distribution Agreement, if any, or any other duly authorized, executed and delivered applicable purchase agreement, will be duly authorized, validly issued, fully paid and nonassessable, provided that the consideration therefor is not less than the par value thereof. 5. With respect to the shares of any series of Preferred Stock (the "Offered Preferred Stock"), when (i) if the Offered Preferred Stock is to be sold pursuant to a firm commitment underwritten offering, the underwriting agreement with respect to the shares of the Offered Preferred Stock (the "Preferred Stock Underwriting Agreement") has been duly authorized, executed and delivered by the Company and the other parties thereto; (ii) if the Offered Preferred Stock is to be sold on an agency basis, the distribution agreement with respect to the Offered Preferred Stock (the "Preferred Stock Distribution Agreement") has been duly authorized, executed and delivered by the Company and the other parties thereto; (iii) the Board of Directors of the Company, including any appropriate committee appointed thereby, and appropriate officers of the Company have taken all necessary corporate action to approve the issuance and terms of the shares of the Offered Preferred Stock and related matters, including the adoption of a certificate of designations for the Offered Preferred Stock in the form required by applicable law (the "Certificate of Designations"); (iv) the filing of the Certificate of Designations with the Secretary of State of the State of Delaware has duly occurred; (v) the terms of the Offered Preferred Stock and of their issuance and sale have been duly established in conformity with the Certificate of Incorporation, the Certificate of Designations and the Bylaws of the Company, so as not to violate any applicable law, the Certificate of Incorporation, the Certificate of Designations or the Bylaws of the Company or result in a default under or breach of any agreement or instrument binding upon the Company and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company; and (vi) certificates representing the shares of the Offered Preferred Stock are duly executed, countersigned, registered and delivered upon payment of the agreed-upon consideration therefor, the shares of the Offered Preferred Stock, when issued and sold in accordance with the related Preferred Stock Underwriting Agreement or Preferred Stock Distribution Agreement, if any, or any other duly authorized, executed and delivered applicable purchase agreement, will be duly authorized, validly issued, fully paid and nonassessable, provided that the consideration therefor is not less than the par value thereof. Toll Brothers, Inc. Toll Corp. October 20, 1997 Page 7 We hereby consent to the reference to our firm in the Registration Statement under the Prospectus captioned "Legal Matters" and to the inclusion of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act. Very truly yours, WOLF, BLOCK, SCHORR and SOLIS-COHEN LLP EX-12 4 RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 STATEMENT OF COMPUTATION OF RATIOS TOLL BROTHERS, INC. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES (Amounts in thousands, except ratios)
Year Ended October 31, Nine Months ------------------------------------------------------ Ended 1992 1993 1994 1995 1996 July 31, 1997 ------- ------- ------- -------- -------- ------------- Earnings: Income before income taxes and extraordinary gain (loss) and change in accounting ........................ $28,864 $43,928 $56,840 $ 79,739 $ 85,793 $68,535 Homebuilding: Interest expense: .................................... 16,048 17,129 20,136 22,473 24,646 20,083 Rent expense ......................................... 46 57 71 93 151 142 Amortization ......................................... 495 671 785 801 705 509 Collateralized mortgage financing: Interest expense ..................................... 2,989 1,469 624 376 300 176 Amortization ......................................... 240 199 157 29 -- -- ------- ------- ------- -------- -------- ------- $48,682 $63,453 $78,673 $103,511 $111,595 $89,445 ======= ======= ======= ======== ======== ======= Fixed charges: Homebuilding: Interest incurred: ................................... $14,757 $20,929 $21,701 $ 25,780 $ 27,695 $26,250 Rent expense ......................................... 46 57 71 93 151 142 Amortization ........................................... 495 671 785 801 705 509 Collateralized mortgage financing: Interest incurred .................................... 2,989 1,469 624 376 300 176 Amortization ......................................... 240 199 157 29 -- -- ------- ------- ------- -------- -------- ------- $18,527 $23,325 $23,338 $ 27,079 $ 28,851 $27,077 ======= ======= ======= ======== ======== ======= Ratio, including collateralized mortgage financing(1)... 2.63 2.72 3.37 3.82 3.87 3.30 ======= ======= ======= ======== ======== =======
- ---------- (1) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income before income taxes, extraordinary gain (loss) and change in accounting plus interest expense and fixed charges except interest incurred. Fixed charges consist of interest incurred (whether expensed or capitalized), the portion of rent expense that is representative of the interest factor, and amortization of debt discount and issuance costs. EX-23.2 5 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.2 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3 Nos. 333-00000 and 333-00000-01) and related Prospectus of Toll Corp. and Toll Brothers, Inc. for the registration of Debt Securities of Toll Corp. and Common Stock, Preferred Stock and Guarantees of Toll Brothers, Inc. and to the incorporation by reference therein of our report dated December 10, 1996, with respect to the consolidated financial statements and schedule of Toll Brothers, Inc. included in the Annual Report (Form 10-K) of Toll Brothers, Inc. for the year ended October 31, 1996, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Philadelphia, Pennsylvania October 16, 1997 EX-25 6 STATEMENT OF ELIGIBILITY AND QUALIFICATION =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------------- FORM T-1 ----------------------------- STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ----------------------------- NBD BANK --------------------------------------------------- (Exact name of Trustee as specified in its charter) 611 Woodward Avenue Detroit, Michigan 48226 38-0864715 --------------------- ---------- ------------------- (Address of principal (Zip Code) (I.R.S. Employer executive offices) Identification No.) TOLL CORP. --------------------------------------------------- (Exact name of obligor as specified in its charter) Delaware 23-2485860 ------------------------------- ------------------- (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) TOLL BROTHERS, INC. ----------------------------------------------------- (Exact name of guarantor 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) DEBT SECURITIES ------------------------------- (Title of Indenture Securities) =============================================================================== Item 1 GENERAL INFORMATION. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject: o State of Michigan Financial Institutions Bureau, Lansing, MI o Federal Reserve Bank of Chicago, Chicago, Illinois o Federal Deposit Insurance Corporation, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The Trustee is authorized to exercise corporate trust powers. Item 2 AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. No such affiliation exists. Item 3 Not applicable Item 4 TRUSTEESHIPS UNDER OTHER INDENTURES The Trustee also serves as Trustee under an Indenture dated as of March 15, 1993 under which the Company issued $75,000,000 9 1/2% Senior Subordinated Notes due 2003. The Trustee also serves as Trustee under an Indenture dated as of November 12, 1996 under which the Company issued $100,000,000 8 3/4% Senior Subordinated Notes due 2006, and $100,000,000 7 3/4% Senior Subordinated Notes due 2007. Item 5 through Item 15 Not applicable Item 16 LIST OF EXHIBITS: EXHIBIT (1) A COPY OF THE ARTICLES OF INCORPORATION OF THE TRUSTEE NOW IN EFFECT Incorporated by reference to Exhibit (1) to Item 16 of Form T-1 filed as Exhibit 25 to Registration Statement, Securities and Exchange Commission, Registration No. 33-51775.* EXHIBIT (2) CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS Incorporated by reference to Exhibit (2) to Item 16 of Form T-1 filed with Amendment No. 1, Securities and Exchange Commission, Registration No. 22-4501.* EXHIBIT (3) AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS Incorporated by reference to Exhibit (3) to Item 16 of Form T-1 filed with Amendment No. 1, Securities and Exchange Commission, Registration No. 22-4501.* 2 EXHIBIT (4) BY-LAWS OF THE TRUSTEE, AS PRESENTLY IN EFFECT Incorporated by reference to Exhibit (4) to Item 16 of Form T-1 filed as Exhibit 25 to Registration Statement, Securities and Exchange Commission, Registration No. 33-51775.* EXHIBIT (5) Not Applicable. EXHIBIT (6) CONSENT BY THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT. Incorporated by reference to Exhibit (6) to Item 16 of Form T-1, filed with Amendment No. 1, Securities and Exchange Commission, Registration No. 22-4501.* EXHIBIT (7) A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY. EXHIBIT (8) Not applicable. EXHIBIT (9) Not applicable. * Exhibits thus designated are incorporated herein by reference Exhibits bearing identical numbers in Item 16 of the Form T-1 filed by the Trustee with the Securities and Exchange Commission with the specific references noted. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, NBD Bank, a Michigan banking corporation organized and existing under the laws of the State of Michigan, has duly caused this Statement of Eligibility and Qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Detroit, State of Michigan on the 15th day of October, 1997. NBD BANK, Trustee By: /s/ James D. Khami ------------------------ James D. Khami Assistant Vice President 3 EXHIBIT 7 Charter No. 13671 Comptroller of the Currency District REPORT OF CONDITION CONSOLIDATING DOMESTIC AND FOREIGN SUBSIDIARIES OF THE NBD BANK in the State of Michigan, at the close of business on June 30, 1997 published in response to call made by Comptroller of the Currency, under title 12, United States Code, Section 161.
ASSETS Thousands of dollars ---------- Cash and balances due from depository institutions Noninterest-bearing balances and currency and coin......................... 1,909,459 Interest-bearing balances.................................................. 0 Securities: Held-to-maturity securities................................................ 0 Available-for-sale securities.............................................. 1,904,231 Federal funds sold and securities purchased under agreements to resell......... 835,150 Loans and lease financing receivables: Loans and leases, net of unearned income................................... 16,936,546 LESS: Allowance for loan and lease losses.................................. 276,101 Loans and leases, net of unearned income and allowance..................... 16,660,445 Assets held in trading accounts................................................ 84,677 Premises and fixed assets (including capitalized leases)....................... 332,160 Other real estate owned........................................................ 3,690 Investments in unconsolidated subsidiaries and associated companies............ -- Customers' liability to this bank on acceptances outstanding................... 57,768 Intangible assets.............................................................. 52,248 Other assets................................................................... 534,622 ----------- Total assets................................................................... 22,374,450 =========== LIABILITIES Deposits: In domestic offices......................................................... 16,914,136 Noninterest-bearing.................................................... 5,409,464 Interest-bearing....................................................... 11,504,672 In foreign offices, Edge and Agreement subsidiaries, and IBFs............... 208,166 Noninterest-bearing.................................................... 0 Interest-bearing....................................................... 208,166 Federal funds purchased and securities sold under agreements to repurchase..... 511,451 Demand notes issued to the U.S. Treasury....................................... 400,001 Trading liabilities............................................................ 40,978 Other borrowed money: With remaining maturity of one year or less............................ 898,572 With remaining maturity of more than one year through three years...... 55,957 With remaining maturity of more than three years....................... 4,966 Bank's liability on acceptances executed and outstanding....................... 57,768 Notes and debentures subordinated to deposits.................................. 700,000 Other liabilities.............................................................. 373,375 ----------- Total liabilities.............................................................. 20,165,370 ----------- EQUITY CAPITAL Common stock................................................................... 111,858 Surplus........................................................................ 646,600 Undivided profits and capital reserves......................................... 1,451,330 Net unrealized holding gains (losses) on available-for-sale securities......... (708) Cumulative foreign currency translation adjustments............................ 0 ----------- Total equity capital........................................................... 2,209,080 ----------- Total liabilities and equity capital........................................... 22,374,450 ===========
I, Jason N. Hansen, Vice President of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief. JASON N. HANSEN July 28, 1997 We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct. THOMAS H. JEFFS II VERNICE D. ANTHONY DON H. BARDEN Directors -----END PRIVACY-ENHANCED MESSAGE-----