<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________.
Commission File Number 1-5899
U.S. HOME CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 21-0718930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 West Loop South, Houston, Texas 77027
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 877-2311
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO ________
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution o f securities under a
plan confirmed by a court. YES X NO ________
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at September 30, 1996
Common stock, $.01 par value 11,448,088 shares
<PAGE> 2
U.S. HOME CORPORATION
---------------------
INDEX
-----
Page
Number
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--
September 30, 1996 and December 31, 1995 3
Consolidated Condensed Statements of
Operations--Three and Nine Months Ended
September 30, 1996 and 1995 5
Consolidated Condensed Statements of
Cash Flows--Nine Months Ended
September 30, 1996 and 1995 6
Notes to Consolidated Condensed
Financial Statements 7
Review by Independent Public Accountants 10
Report of Independent Public Accountants 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
Part II. Other Information
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
ASSETS
------
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
HOUSING:
Cash (including restricted funds) ......... $ 12,702 $ 5,110
Receivables, net .......................... 45,054 33,454
Single-Family Housing Inventories ......... 714,843 632,035
Option Deposits on Real Estate ............ 70,191 63,375
Other Assets .............................. 49,991 43,437
-------- --------
892,781 777,411
-------- --------
FINANCIAL SERVICES:
Cash (including restricted funds) ......... 5,104 5,456
Residential Mortgage Loans ................ 44,683 43,292
Other Assets .............................. 16,115 15,925
-------- --------
65,902 64,673
-------- --------
$958,683 $842,084
======== ========
The accompanying notes are an integral part of these balance sheets.
<PAGE> 4
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30, December 31,
1996 1995
------------ -------------
HOUSING: (Unaudited)
Accounts Payable ......................... $ 102,066 $ 88,234
Accrued Expenses and Other Current
Liabilities ............................ 68,096 46,070
Revolving Credit Facility ................ 16,000 24,000
Senior and Convertible Subordinated
Debt and Notes Payable ................. 364,450 300,599
--------- ---------
550,612 458,903
--------- ---------
FINANCIAL SERVICES:
Accrued Expenses and Other
Current Liabilities .................... 18,743 18,818
Revolving Credit Facility ................ 28,386 35,371
--------- ---------
47,129 54,189
--------- ---------
Total Liabilities ...................... 597,741 513,092
--------- ---------
STOCKHOLDERS' EQUITY:
Convertible Preferred Stock,
$25 per share redemption value,
authorized 207,206 and 403,597
shares at September 30, 1996 and
December 31, 1995, outstanding
122,863 and 319,254shares at
September 30, 1996 and December 31, 1995 3,072 7,981
Common Stock, $.01 par value, authorized
50,000,000 shares, outstanding
11,448,088 and 11,243,147 shares at
September 30, 1996 and December 31, 1995 114 112
Capital In Excess of Par Value ........... 353,704 348,577
Retained Earnings ........................ 6,147 (25,367)
Unearned Compensation on Restricted
Stock .................................. (2,095) (2,311)
--------- ---------
Total Stockholders' Equity ............. 360,942 328,992
--------- ---------
$ 958,683 $ 842,084
========= =========
The accompanying notes are an integral part of these balance sheets.
<PAGE> 5
<TABLE>
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ---------------
1996 1995 1996 1995
-------- --------- -------- --------
HOUSING:
<S> <C> <C> <C> <C>
Operating Revenues .................. $312,275 $282,422 $868,610 $798,113
-------- -------- -------- --------
Operating Costs and Expenses -
Cost of products sold ............. 261,709 237,900 729,644 671,910
Selling, general and administrative 32,867 29,920 93,390 87,312
-------- -------- -------- --------
294,576 267,820 823,034 759,222
-------- -------- -------- --------
Housing Operating Income ............ 17,699 14,602 45,576 38,891
-------- -------- -------- --------
FINANCIAL SERVICES:
Operating Revenues .................. 5,397 4,286 15,060 11,075
-------- -------- -------- --------
Operating Costs and Expenses -
General and administrative ........ 3,625 2,862 9,838 8,247
Interest .......................... 345 283 1,170 449
-------- -------- -------- --------
3,970 3,145 11,008 8,696
-------- -------- -------- --------
Financial Services Operating
Income ............................ 1,427 1,141 4,052 2,379
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES ............ 19,126 15,743 49,628 41,270
PROVISION FOR INCOME TAXES ............ 6,981 5,904 18,114 15,477
-------- -------- -------- --------
NET INCOME ............................ $ 12,145 $ 9,839 $ 31,514 $ 25,793
======== ======== ======== ========
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary ........................... $ 1.03 $ .83 $ 2.63 $ 2.22
======== ======== ======== ========
Fully diluted ..................... $ .91 $ .72 $ 2.34 $ 1.91
======== ======== ======== ========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 6
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1996 1995
--------- ---------
Net Cash Used by Operating Activities ............. $(39,051) $(42,963)
-------- --------
Net Cash Flows From Investing Activities:
Purchase of property, plant and equipment,
net of disposals .............................. (2,120) (1,920)
Proceeds from investments in mortgages .......... 1,543 1,386
Decrease (increase) in restricted cash .......... 179 (264)
Other ........................................... (405) (666)
-------- --------
Net cash used by investing activities ........... (803) (1,464)
-------- --------
Net Cash Flows From Financing Activities:
Repayment of revolving credit facilities,
net of proceeds ............................... (14,985) 49,616
Net proceeds from sale of 7.95% senior notes .... 73,406 --
Repayment of notes and mortgage notes payable ... (11,149) (5,790)
-------- --------
Net cash provided by financing activities ....... 47,272 43,826
-------- --------
Net Increase (Decrease) in Cash ................... 7,418 (601)
Cash At Beginning of Period ....................... 6,228 2,050
-------- --------
Cash At End of Period ............................. $ 13,646 $ 1,449
======== ========
Supplemental Disclosure:
Interest paid, before amount capitalized -
Housing ....................................... $ 18,656 $ 18,026
Financial Services ............................ 1,152 403
-------- --------
$ 19,808 $ 18,429
======== ========
Income taxes paid ............................... $ 9,589 $ 1,454
======== ========
The accompanying notes are an integral part of these statements.
<PAGE> 7
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1996
(Dollars in Thousands)
(Unaudited)
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated condensed balance sheet as of
December 31, 1995, which has been derived from audited financial
statements, and the accompanying unaudited consolidated condensed
financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
those rules and regulations. Although the Company believes that the
disclosures made are adequate to ensure that the information
presented is not misleading, it is suggested that these
consolidated condensed financial statements should be read in
conjunction with the financial statements and notes thereto
included in the Company's latest Annual Report on Form 10-K.
The preparation of consolidated condensed financial statements
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
any contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period.
Management's estimates and assumptions are reflective of, among
other things, prevailing market conditions, expected market
conditions based on published economic forecasts, current operating
strategies and the availability of capital which are all subject to
change. Changes to the aforementioned or other conditions could in
turn cause changes to such estimates and assumptions and, as a
result, actual results could differ from the original estimates.
In the opinion of the Company, the accompanying consolidated
condensed financial statements contain all adjustments (all of
which were normal and recurring adjustments) necessary to present
fairly the Company's financial position as of September 30, 1996
and December 31, 1995 and its results of operations for the three
and nine month periods ended September 30, 1996 and 1995 and cash
flows for the nine month periods ended September 30, 1996 and 1995.
Because of the seasonal nature of the Company's business, the
results of operations for the three and nine month periods ended
September 30, 1996 and 1995 are not necessarily indicative of the
results for the full year.
<PAGE> 8
(2) INVENTORIES
The components of single-family housing inventories are as follows:
September 30, December 31,
1996 1995
------------ ------------
Housing completed and under construction $294,315 $238,508
Models ................................. 67,951 63,475
Finished lots .......................... 129,432 129,260
Land under development ................. 69,509 50,714
Land held for development or sale ...... 153,636 150,078
-------- --------
$714,843 $632,035
======== ========
(3) REVOLVING CREDIT FACILITIES, SENIOR AND CONVERTIBLE SUBORDINATED DEBT
AND NOTES PAYABLE
Housing -
Revolving credit facility, senior and convertible subordinated debt
and notes payable consist of the following:
September 30, December 31,
1996 1995
------------- ------------
Revolving credit facility ...... $ 16,000 $ 24,000
-------- --------
7.95% Senior notes due 2001 .... 75,000 --
9.75% Senior notes due 2003 .... 200,000 200,000
4.875% Convertible subordinated
debentures due 2005 .......... 80,000 80,000
Notes and mortgage notes payable 9,450 20,599
-------- --------
364,450 300,599
-------- --------
$380,450 $324,599
======== ========
The Company has a three-year unsecured revolving credit facility
(the "Credit Facility") with a group of banks. The Credit Facility
provides up to a maximum of $130,000 of which up to $20,000 may be
used for letter of credit obligations, subject to a borrowing base
limitation. The amount available for borrowing under the Credit
Facility is based on housing inventories, land, finished lots and
closing proceeds receivable less outstanding senior debt borrowings
(as defined), including amounts outstanding under the Credit
Facility; as the amount invested in these categories changes, the
<PAGE> 9
amount of available borrowings will increase or decrease. At
September 30, 1996, $107,760 of the Credit Facility was available
for borrowing. Borrowings bear interest at a premium over the
Eurodollar rate or a bank corporate base rate announced by the
agent bank. The Credit Facility, as amended on September 25, 1996,
expires on September 29, 1999, but may be extended annually for
successive one-year periods with the consent of the banks and
contains numerous real estate and financial covenants, including
restrictions on incurring additional debt, creation of liens and
the levels of land and housing inventories maintained by the
Company and a prohibition on the payment of dividends, other than
stock dividends. In September 1996, the Company amended the Credit
Facility to, among other things, extend the expiration date one
year to September 29, 1999, and modify the borrowing base
provisions to increase the availability for borrowing.
On February 16, 1996, the Company completed the sale of $75,000
principal amount of its 7.95% senior notes ("Senior Notes") due
March 1, 2001. Interest on the Senior Notes is payable on March 1
and September 1 of each year. The indenture relating to the Senior
Notes contains certain covenants, including a minimum tangible net
worth requirement and a limitation on the incurrence of additional
debt.
Financial Services -
Financial Services revolving credit facility consists of an
agreement with a financial institution whereby the Company's
mortgage banking subsidiary, U.S. Home Mortgage Corporation
("Mortgage"), may borrow up to $45,000 under a revolving line of
credit (the "Mortgage Credit Facility") secured by residential
mortgage loans and mortgage notes receivable. The Mortgage Credit
Facility is not guaranteed by the Company, was amended and renewed
in August 1996, matures on August 31, 1997 and bears interest
at a premium over the London Interbank Offered Rate.
<PAGE> 10
(4) HOUSING INTEREST
A summary of housing interest for the three and nine month periods
ended September 30, 1996 and 1995 follows:
Three Month Period
------------------------
1996 1995
--------- ----------
Capitalized at beginning of period $ 62,165 $ 57,638
Capitalized ...................... 8,526 8,375
Included in cost of sales ........ (8,008) (6,604)
Included in other ................ (22) (1)
-------- --------
Capitalized at end of period ..... $ 62,661 $ 59,408
======== ========
Nine Month Period
-----------------------
1996 1995
--------- ---------
Capitalized at beginning of period $ 59,898 $ 56,082
Capitalized ...................... 24,853 24,172
Included in cost of sales ........ (22,064) (20,335)
Included in other ................ (26) (511)
-------- --------
Capitalized at end of period ..... $ 62,661 $ 59,408
======== ========
(5) INCOME PER SHARE
The following weighted average number of common and common
equivalent shares were used to compute income per share for the
three and nine month periods ended September 30, 1996 and 1995:
Three Month Period Nine Month Period
---------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Primary 11,788,111 11,908,385 11,977,570 11,607,984
Fully diluted 14,041,632 14,250,376 14,231,091 14,267,372
The weighted average number of common and common equivalent shares
outstanding for primary income per share includes the dilutive
effect of the convertible redeemable preferred stock and Class B
warrants and the assumed exercise of stock options. Fully diluted
income per share includes the assumed conversion of the convertible
subordinated debentures.
<PAGE> 11
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, have performed a
review of the consolidated condensed balance sheet as of September 30,
1996 and the related consolidated condensed statements of operations
for the three and nine month periods ended September 30, 1996 and 1995
and cash flows for the nine month periods ended September 30, 1996 and
1995 included in this report. Such review was made in accordance with
standards established by the American Institute of Certified Public
Accountants.
<PAGE> 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO U.S. HOME CORPORATION:
We have reviewed the accompanying consolidated condensed balance sheet of
U.S. Home Corporation (a Delaware corporation) and subsidiaries as of
September 30, 1996, and the related consolidated condensed statements of
operations for the three and nine month periods ended September 30, 1996
and 1995 and cash flows for the nine month periods ended September 30, 1996
and 1995. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of U.S. Home Corporation and
subsidiaries as of December 31, 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year
then ended (not presented herein), and in our report dated February 1,
1996, we expressed an unqualified opinion on those statements. In our
opinion, the information set forth in the accompanying consolidated
condensed balance sheet as of December 31, 1995, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which
it has been derived.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
Houston, Texas
October 25, 1996
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Housing
-------
The following table sets forth certain financial information for the
periods indicated (dollars in thousands, except average sales price):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenues -
Single-family homes ....... $308,727 $280,223 $859,285 $788,002
Land and other ............ 3,548 2,199 9,325 10,111
-------- -------- -------- --------
Total ................... $312,275 $282,422 $868,610 $798,113
======== ======== ======== ========
Single-family homes -
Gross margin amount ....... $ 50,518 $ 45,396 $138,289 $126,340
Gross margin percentage ... 16.4% 16.2% 16.1% 16.0%
Units delivered ........... 1,848 1,743 5,213 4,991
Average sales price ....... $167,100 $160,800 $164,800 $157,900
New orders taken .......... 1,669 1,612 6,147 5,757
Backlog at end of period .. 3,665 3,317
Selling, general and
administrative expenses as
a percentage of housing
revenues .................. 10.5% 10.6% 10.8% 10.9%
Interest expense -
Paid and accrued .......... $ 8,526 $ 8,375 $ 24,853 $ 24,172
Capitalized ............... $ 8,526 $ 8,375 $ 24,853 $ 24,172
Percent capitalized ....... 100.0% 100.0% 100.0% 100.0%
Capitalized interest included
in cost of products sold .. $ 8,008 $ 6,604 $ 22,064 $ 20,335
Revenues -
Revenues from sales of single-family homes for the three and nine month
periods ended September 30, 1996 increased 10% and 9% compared to the three
and nine month periods ended September 30, 1995. The increase resulted from
6% and 4% increases in the number of housing units delivered and 4%
increases for both periods in the average sales price. The increase in the
average sales prices in 1996 was primarily due to price increases.
New orders taken for the three and nine month periods ended September 30,
1996 increased 4% and 7% compared to the same period in 1995. See Part II,
"Item 5 - Other Information" on page 16 for a table of unit activity by
state for the three and nine month periods ended September 30, 1996 and
1995.
<PAGE> 14
Financial Services
------------------
Revenues -
Revenues for the financial services segment for the periods indicated were
as follows (dollars in thousands):
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
U.S. Home Mortgage Corporation and
Subsidiary ...................... $ 4,265 $ 3,629 $12,092 $ 8,783
Other financial services operations 1,132 657 2,968 2,292
------- ------- ------- -------
$ 5,397 $ 4,286 $15,060 $11,075
======= ======= ======= =======
The increases in U.S. Home Mortgage Corporation and subsidiary's
("Mortgage") revenues for the three and nine month periods ended September
30, 1996 when compared to the three and nine month periods ended September
30, 1995 were primarily due to an increase in mortgage loan originations
and income from the sale of mortgage loans and servicing rights.
Financial Condition and Liquidity
Housing
-------
The Company's most significant needs for capital resources are land and
finished lot purchases, land development and housing construction. The
Company's ability to generate cash adequate to meet these needs is
principally achieved from the sale of homes and the margins thereon, the
utilization of Company-owned lots and borrowings under its financing
facilities.
Access to quality land and lot locations is an integral part of the
Company's success. Typically, in order to secure the rights to quality
locations and provide sufficient lead time for development, the Company
must acquire land rights well in advance of when orders for housing units
are expected to occur. The Company attempts to minimize its exposure to the
cyclical nature of the housing market and its use of working capital by
employing rolling lot options, which enable the Company to initially pay a
small portion of the total lot cost and then purchase the lots on a
scheduled basis. The increase in land inventories in 1996 from 1995 was
primarily the result of increased activities, including the increase in the
Company's retirement and active-adult communities.
In February 1996, the Company sold $75 million principal amount of its
7.95% senior notes due 2001. The net proceeds thereof were used to repay
the outstanding balance under the Credit Facility and for working capital
and general corporate purposes. See Note 3 of Notes to Consolidated
Condensed Financial Statements.
<PAGE> 15
The Company has financed, and expects to continue to finance, its working
capital needs from operations and borrowings, including those made under
the Company's unsecured revolving credit facility ("Credit Facility"). The
Credit Facility (and previous credit facilities) has enabled the Company to
meet peak operating needs. In September 1996, the Company amended the
Credit Facility to extend its maturity date one year to September 29, 1999
and to amend certain other covenants. See Note 3 of Notes to Consolidated
Condensed Financial Statements.
The net cash provided or used by the operating, investing and financing
activities of the housing operations for the nine month periods ended
September 30, 1996 and 1995 is summarized below (dollars in thousands):
1996 1995
-------- ---------
Net cash provided (used) by:
Operating activities ........ $(40,327) $(32,927)
Investing activities ........ (2,608) (2,090)
Financing activities ........ 54,257 33,246
-------- --------
Net increase (decrease) in cash $ 11,322 $ (1,771)
======== ========
Housing operations are, at any time, affected by a number of factors,
including the number of housing units under construction and housing units
delivered. Housing operating activities for 1996 used more cash than in
1995 primarily due to an increase in housing construction and land asset
activities offset in part by increased profitability, a decrease in housing
proceeds receivable and the timing of payments related to these activities.
Cash flow from housing financing activities for 1996 provided cash
reflecting the sale of the Company's 7.95% senior notes, partially offset
by the repayment of the outstanding amount under the Credit Facility, while
1995 provided cash reflecting primarily net borrowings under the Company's
previous revolving credit facility.
The Company's fedeal income tax returns for the years ending December 31,
1992 and 1993 are currently being examined by the Internal Revenue Service.
The Company believes that cash flow from operations and amounts available
under the Credit Facility will be sufficient to meet its working capital
obligations and other needs. However, should the Company require capital in
excess of that which is currently available there can be no assurance that
it will be available.
Financial Services
------------------
Mortgage's activities represent a substantial portion of the financial
services segment's activities. As loan originations by Mortgage are
primarily from housing units delivered by the Company's home building
operations, Mortgage's financial condition and liquidity are to a
significant extent dependent upon the financial condition of the Company.
<PAGE> 16
Financial services operating activities are affected primarily by
Mortgage's loan originations which result in the sale of mortgage loans and
related servicing rights to third party investors. Cash flows from
financial services operating activities are also affected by the timing of
the sales of loans and servicing rights which generally are sold to
investors within 30 days after homes are delivered. In this regard, cash
flows from financial services operating activities for 1996 used less cash
compared to 1995 primarily because the increase in residential mortgage
loan receivables in 1996 was less than the increase in residential mortgage
loan receivables in 1995.
The Company finances its financial services operations primarily from
internally generated funds, such as from the origination and sale of
residential mortgage loans and related servicing rights, and short-term
debt. As more fully discussed in Note 3 of Notes to Consolidated Condensed
Financial Statements, the short-term debt consists of a $45 million secured
revolving line of credit (the "Mortgage Credit Facility") which matures on
August 31, 1997. While the Mortgage Credit Facility contains numerous
covenants, including a debt to tangible net worth ratio and a minimum
tangible net worth requirement, these covenants are not anticipated to
significantly limit Mortgage's operations.
The Company has no obligation to provide funding to its financial services
operations, nor does it guarantee any of its financial services
subsidiaries' debt. The Company believes that the internally generated
funds and the Mortgage Credit Facility will be sufficient to provide for
Mortgage's working capital needs.
<PAGE> 17
Part II. OTHER INFORMATION
Item 5. Other Information
Additional Operating Data -
The following table provides information (expressed in number of
housing units) with respect to new orders taken, deliveries to
purchasers of single-family homes and backlog by state for the
three and nine month periods ended September 30, 1996 and 1995:
States New Orders Deliveries
-------------------- ------- ------- ------- -------
1996 1995 1996 1995
Three Month Period -
Arizona ......... 192 296 221 230
California ...... 113 123 139 160
Colorado ........ 329 277 320 310
Florida ......... 448 429 520 466
Indiana/Ohio .... 36 31 43 22
Maryland/Virginia 76 105 102 109
Minnesota ....... 60 73 77 78
Nevada .......... 64 78 91 93
New Jersey ...... 128 101 151 88
Texas ........... 223 99 184 187
----- ----- ----- -----
1,669 1,612 1,848 1,743
===== ===== ===== =====
States New Orders Deliveries Backlog
------------------- -------------- ------- ------- ------ ------
1996 1995 1996 1995 1996 1995
Nine Month Period -
Arizona ......... 686 839 737 624 334 478
California ...... 430 449 370 392 171 143
Colorado ........ 1,146 975 876 851 732 514
Florida ......... 1,776 1,755 1,582 1,671 1,180 1,230
Indiana/Ohio .... 161 95 103 38 120 67
Maryland/Virginia 313 330 255 263 171 149
Minnesota ....... 251 276 222 205 148 158
Nevada .......... 302 266 278 221 143 135
New Jersey ...... 399 240 322 210 260 199
Texas ........... 683 532 468 516 406 244
----- ----- ----- ----- ----- -----
6,147 5,757 5,213 4,991 3,665 3,317
===== ===== ===== ===== ===== =====
<PAGE> 18
Cautionary Disclosure Regarding Forward-Looking Statements -
Certain statements in the Company's press releases, oral
communications and filings with the Securities and Exchange
Commission that are not historical facts are, or may be considered
to be, forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such matters
involve risks and uncertainties, including general economic
conditions, fluctuations in interest rates, the impact of
competitive products and prices, the supply of raw materials and
prices, levels of consumer confidence and other risks referred to
under the caption "Other Information -- Cautionary Disclosure
Regarding Forward-Looking Statements" in the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3.1 - Certificate of Retirement, dated as of
September 11, 1995
Exhibit 3.2 - Certificate of Retirement, dated as of
July 31, 1996
Exhibit 10.1 - Second Amendment to Credit Agreement, dated as of
September 25, 1996, between U.S. Home Corporation
and First National Bank of Chicago, as Agent
Exhibit 10.2 - Second Amendment to First Amended and Restated
Warehousing Credit and Security Agreement (single-
family mortgage loans), dated as of August 30,
1996, between U.S. Home Mortgage Corporation and
Residential Funding Corporation
Exhibit 10.3 - Corrected Copy of Amended and Restated Employment
and Consulting Agreement, dated October 17, 1995,
between U.S. Home Corporation and Robert J. Strudler
Exhibit 10.4 - Corrected Copy of Amended and Restated Employment
and Consulting Agreement, dated October 17, 1995,
between U.S. Home Corporation and Isaac Heimbinder
Exhibit 11 - Computation of Income Per Common Share
Exhibit 15 - Letter with respect to unaudited interim financial
information
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No Current Report on Form 8-K was filed by the Company during
July, August or September 1996.
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. HOME CORPORATION
Date: October 28, 1996 /s/ Isaac Heimbinder
------------------------------------
Isaac Heimbinder
President, Co-Chief Executive Officer
and Chief Operating Officer
Date: October 28, 1996 /s/ Chester P. Sadowski
------------------------------------
Chester P. Sadowski
Vice President, Controller
and Chief Accounting Officer
<PAGE> 20
INDEX OF EXHIBITS
-----------------
Sequential
Exhibit Numbered
Number Page
- ------- ----------
3.1 Certificate of Retirement, dated as of September 11, 1995
3.2 Certificate of Retirement, dated as of July 31, 1996
10.1 Second Amendment to Credit Agreement, dated as of
September 25, 1996, between U.S. Home Corporation and
First National Bank of Chicago, as Agent
10.2 Second Amendment to First Amended and Restated Warehousing
Credit and Security Agreement (single-family mortgage loans),
dated as of August 30, 1996, between U.S. Home Mortgage
Corporation and Residential Funding Corporation
10.3 Corrected Copy of Amended and Restated Employment and
Consulting Agreement, dated October 17, 1995, between
U.S. Home Corporation and Robert J. Strudler
10.4 Corrected Copy of Amended and Restated Employment and
Consulting Agreement, dated October 17, 1995, between
U.S. Home Corporation and Isaac Heimbinder
11 Computation of Income Per Common Share
15 Letter with respect to unaudited interim financial
information
27 Financial Data Schedule
<PAGE> 21
EXHIBIT 3.1
U.S. HOME CORPORATION
CERTIFICATE OF RETIREMENT
(pursuant to Section 243 of the
General Corporation Law of the State of Delaware)
U.S. Home Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the
Corporation a resolution was duly adopted which identified shares of the
capital stock of the Corporation, which, to the extent hereinafter set
forth, have the status of retired shares (the "Retired Shares").
SECOND: The Retired Shares which were converted into an
equal number of shares of common stock, .01 par value per share, as of June
30, 1995, are identified as being an aggregate of Two Million Four Hundred
Seventy-Four Thousand Three Hundred Fifty-Eight (2,474,358) shares of
Convertible Redeemable Preferred Stock with a par value of $0.10 per share.
THIRD: That the Restated Certificate of Incorporation of
the Corporation, as filed on June 18, 1993, as amended (the "Restated
Certificate"), prohibits the reissue of the shares of Convertible Redeemable
Preferred Stock when so retired and provides that such shares will be
restored to the status of authorized but unissued shares of Preferred Stock
of the Corporation without designation as to series; and pursuant to the
provisions of Section 243 of the General Corporation Law of the State of
Delaware, upon the effective date of the filing of this Certificate as
therein provided, it shall have the effect of amending the Restated
Certificate so as to reduce the authorized number of shares of the
Convertible Redeemable Preferred Stock to the extent of Two Million Four
Hundred Seventy-Four Thousand Three Hundred Fifty-Eight (2,474,358) shares,
being the total number of shares retired. As a result of such amendment,
the aggregate number of authorized shares of Preferred Stock shall not be
reduced and the authorized number of shares of Convertible Redeemable
Preferred Stock shall be Four Hundred Twenty-Five Thousand Seven Hundred
Sixty-Five (425,765).
FOURTH: The capital of the Corporation shall not be
reduced by or in connection with the retirement of the shares of Convertible
Redeemable Preferred Stock.
<PAGE> 22
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be signed by Isaac Heimbinder, President, this 11th day of
September, 1995.
By: \s\ Isaac Heimbinder
--------------------------
ISAAC HEIMBINDER
President
<PAGE> 23
EXHIBIT 3.2
U.S. HOME CORPORATION
CERTIFICATE OF RETIREMENT
(Pursuant to Section 243 of the
General Corporation Law of the State of Delaware)
U.S. Home Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of
the Corporation a resolution was duly adopted which identified shares
of the capital stock of the Corporation, which, to the extent hereinafter
set forth, have the status of retired shares (the "Retired Shares").
SECOND: As of June 30, 1996, the Retired Shares which
were converted into an equal number of shares of the Corporation's common
stock, $.01 par value per share, since the Corporation's previous filing of
a Certificate of Retirement with the Secretary of State of the State of
Delaware on September 14, 1995, are identified as being an aggregate of Two
Hundred Nineteen Thousand Five Hundred Forty-One (219,541) shares of
Convertible Redeemable Preferred Stock, $0.10 par value per share.
THIRD: That the Restated Certificate of Incorporation of
the Corporation, as filed on June 18, 1993 with the Secretary of State of
the State of Delaware, as amended (the "Restated Certificate"), prohibits
the reissue of the shares of Convertible Redeemable Preferred Stock when so
retired and provides that such shares will be restored to the status of
authorized but unissued shares of preferred stock of the Corporation
without designation as to series; and pursuant to the provisions of Section
243 of the General Corporation Law of the State of Delaware, upon the
effective date of the filing of this Certificate, it shall have the effect
of amending the Restated Certificate so as to reduce the authorized number
of shares of the Convertible Redeemable Preferred Stock to the extent of
Two Hundred Nineteen Thousand Five Hundred Forty-One (219,541) shares,
being the total number of shares retired pursuant to this Certificate of
Retirement. As a result of such amendment, the aggregate number of
authorized but unissued shares of Preferred Stock shall not be reduced and
the authorized number of shares of Convertible Redeemable Preferred Stock
shall be reduced to Two Hundred Seven Thousand Two Hundred Six (207,206)
shares.
FOURTH: The capital of the Corporation shall not be
reduced by or in connection with the retirement of the shares of Convertible
Redeemable Preferred Stock.
<PAGE> 24
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be signed by Isaac Heimbinder, its President, this 31st day
of July, 1996.
By: \s\ Isaac Heimbinder
------------------------
ISAAC HEIMBINDER
President
<PAGE> 25
EXHIBIT 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT
SECOND AMENDMENT TO CREDIT AGREEMENT ("Amendment"), dated
as of September 25, 1996, among U.S. HOME CORPORATION, a Delaware
corporation (the "Borrower"), the Lenders that are parties to the Credit
Agreement (as hereinafter defined) and THE FIRST NATIONAL BANK OF CHICAGO,
as Agent (the "Agent").
RECITALS:
A. The Borrower, the Lenders and the Agent have
previously entered into that certain Credit Agreement dated as of September
29, 1995, and that certain Consent and First Amendment to Credit Agreement
dated as of February 9, 1996 (such Credit Agreement, as so amended, being
herein referred to as the "Credit Agreement").
B. The parties hereto desire to amend the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, the parties hereto, intending to be
legally bound, agree as follows:
1. DEFINITIONS
1.1 In addition to the terms defined herein, capitalized
terms used in this Amendment shall have the respective meanings ascribed
thereto in the Credit Agreement.
1.2 Article I of the Credit Agreement is amended by
amending and restating or adding, as the case may be, the definitions set
forth below:
"Borrowing Base" means, with respect to an
Inventory Valuation Date for which it is to be
determined, an amount equal to the sum of the following
assets of the Borrower and the Guarantors: (i) the
Receivables, multiplied by ninety percent (90%), (ii) the
book value of Housing Units Under Contract, multiplied by
eighty percent (80%), (iii) the book value of Inventory
Housing Units, multiplied by seventy percent (70%), but
not exceeding thirty percent (30%) of Total Senior Loan
Commitments, and (iv) the sum (but not exceeding
thirty-three and one-third (33 1/3%) percent of Total
Senior Loan Commitments) of (A) the book value of
Finished Lots, multiplied by fifty percent (50%) and (B)
the book value of Owned Land, multiplied by twenty-five
percent (25%).
<PAGE> 26
"Consolidated Senior Debt Borrowings" means, at
any date, with respect to the Borrower and the
Guarantors, on a consolidated basis, the outstanding
balance of all obligations described in clauses (i), (iv)
or (viii) of the definition of "Indebtedness" (including
the Obligations) calculated in accordance with Agreement
Accounting Principles but excluding (i) Indebtedness of
the Borrower to a Guarantor, a Guarantor to the Borrower
or a Guarantor to another Guarantor, and (ii) the
Convertible Subordinated Notes and any other Subordinated
Indebtedness.
"Facility Termination Date" means September 29,
1999, as the same may be extended as provided in Section
2.20.
"Owned Land" means land (other than Finished
Lots) owned or held by the Borrower or any Guarantor for
development or sale or land under development.
"Total Senior Loan Commitments" means, at any
date, on a consolidated basis for the Borrower and the
Guarantors, (i) the sum of (a) all outstanding
obligations described in clauses (i), (iv) and (viii) of
the definition of "Indebtedness" to Persons that are not
the Borrower, Subsidiaries of the Borrower or Affiliates
of the Borrower or of any of its Subsidiaries, plus (b)
all bona fide, binding but unfunded commitments
(including the Commitments) of banks or other financial
institutions with respect to the borrowing by the
Borrower or any Guarantor of obligations of the type
referred to in clause (a) above, except to the extent
that such commitments are subject to conditions that have
not been satisfied (other than customary conditions that
the Borrower and the Guarantors can reasonably be
expected to satisfy in the ordinary course of business),
less (ii) the sum of the outstanding amounts of the
Convertible Subordinated Notes and all other Subordinated
Indebtedness, all as determined in accordance with
Agreement Accounting Principles.
2. EXTENSION
The parties hereto acknowledge and agree that, pursuant
to Section 2.20 of the Credit Agreement, the Facility Termination Date has
been extended to September 29, 1999.
<PAGE> 27
3. AMENDMENT OF SECTION 8.6
3.1 Clause (ix) of Section 8.6 of the Credit Agreement
is hereby amended and restated in its entirety as follows:
(ix) Investments in Non-Borrowing Subsidiaries to the
extent permitted under the provisions of Section 7.2 and
other loans or advances to Non-Borrowing Subsidiaries
that are neither made nor outstanding at any time at
which any Loans (excluding Facility Letters of Credit)
are outstanding hereunder.
3.2 Section 8.6 of the Credit Agreement is further
amended by inserting the following clauses (xv) and (xvi) at the end
thereof:
(xv) The repurchase, repayment, prepayment, redemption or
other acquisition of any of the Convertible Subordinated
Notes involving expenditures not to exceed $15,000,000 in
the aggregate and as otherwise permitted under Section
8.11 hereof.
(xvi) Investments permitted under Section 8.9 hereof.
4. AMENDMENT OF SECTION 8.9
4.1 Section 8.9 of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
8.9 Redemption. The Borrower will not purchase
or redeem any of its capital stock heretofore or
hereafter issued, except that the Borrower may purchase
or redeem its capital stock (i) to the extent that the
consideration for such redemption or purchase is limited
to capital stock of the Borrower or (ii) if the
consideration for such purchase or redemption is other
than capital stock of the Borrower and does not exceed,
in the aggregate for all such purchases and redemptions
from and after the date hereof, $5,000,000; provided that
this Section 8.9 shall not prohibit the Borrower from
repurchasing, repaying, prepaying, redeeming or otherwise
acquiring Convertible Subordinated Notes to the extent
permitted under Section 8.6(xv) hereof.
<PAGE> 28
5. AMENDMENT OF SECTION 8.11
5.1 Section 8.11 of the Credit Agreement is hereby
amended and restated in its entirety to read as follows:
8.11. Subordinated Indebtedness. The Borrower
will not, nor will it permit any Significant Guarantor
to, make any amendment or modification to the
subordination provisions of any indenture, note or other
agreement evidencing or governing any Subordinated
Indebtedness, or directly or indirectly voluntarily
prepay, defease or in substance defease, purchase,
redeem, retire or otherwise acquire, any Subordinated
Indebtedness; provided, however, that the foregoing shall
not prohibit (i) the conversion of the Convertible
Subordinated Notes in accordance with the Indenture dated
as of November 3, 1993 or an amendment permitting such
conversion at a lower conversion price than is therein
provided, (ii) the repayment or prepayment of
Subordinated Indebtedness solely from the net proceeds of
other Subordinated Indebtedness or from capital stock or
(iii) the Borrower from repurchasing, repaying,
prepaying, redeeming, or otherwise acquiring Convertible
Subordinated Notes to the extent permitted by Section
8.6(xv) hereof.
6. CHANGE IN SCHEDULES
The Borrower (i) furnished, on the date hereof, to the
Agent a revised Schedule "6.8", and (ii) hereby certifies that such revised
Schedule is true, correct and complete in all material respects on the date
hereof. Such revised Schedule "6.8" shall be substituted for Schedule "6.8"
to the Credit Agreement.
7. ADDITIONAL REQUIREMENTS
On or before the execution and delivery of this
Amendment, the Borrower shall:
7.1 deliver to the Agent the Consent of the Guarantors
in the form attached to this Amendment;
7.2 deliver to the Agent the favorable opinion of the
Borrower's counsel, Kaye, Scholer, Fierman, Hays & Handler, substantially
in the form of Exhibit "A" to this Amendment; and
7.3 pay to the Agent the fees provided for in Section
2.20 of the Credit Agreement.
<PAGE> 29
8. MISCELLANEOUS
8.1 This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one agreement,
and any of the parties hereto may execute this Amendment by signing any
such counterpart.
8.2 In all respects, including all matters of
construction, validity and performance, this Amendment shall be construed
in accordance with the internal laws (and not the laws of conflicts) of the
State of Illinois, but giving effect to federal laws applicable to national
banks.
IN WITNESS WHEREOF, this Amendment has been duly executed
as of the date first above written.
U.S. HOME CORPORATION
By: \s\ Thomas A. Napoli
----------------------------------
Thomas A. Napoli
Vice President - Finance and Chief
Financial Officer
LENDERS:
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: \s\ James D. Benko
--------------------------------
Name: James D. Benko
Title: Assistant Vice President
GUARANTY FEDERAL BANK, F.S.B.
By: \s\ Randy Reid
--------------------------------
Name: Randy Reid
Title: Vice President
<PAGE> 30
CREDIT LYONNAIS NEW YORK BRANCH
By: \s\ Robert Ivosevich
---------------------------------
Name: Robert Ivosevich
Title: Senior Vice President
BANK ONE, ARIZONA, NA
By: \s\ Rhonda R. Williams
---------------------------------
Name: Rhonda R. Williams
Title: Vice President
COMERICA BANK, a Michigan corporation
By: \s\ David J. Campbell
---------------------------------
Name: David J. Campbell
Title: Vice President
<PAGE> 31
CONSENT OF GUARANTORS
The undersigned, being the Guarantors under the
above-referenced Credit Agreement, do hereby consent to the foregoing
Second Amendment to Credit Agreement.
CANTERBURY CORPORATION
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
COUNTRYPLACE GOLF COURSE, INC.
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
HOMECRAFT CORPORATION
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
IMPERIAL HOMES CORPORATION
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
LODGE HOLDINGS CORP.
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
<PAGE> 32
OCEANPOINTE DEVELOPMENT CORPORATION
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
ORRIN THOMPSON CONSTRUCTION COMPANY
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
ORRIN THOMPSON HOMES CORP.
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
PAPARONE CONSTRUCTION CO.
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
RUTENBERG HOMES, INC. (FLORIDA)
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
<PAGE> 33
RUTENBERG HOMES, INC. (TEXAS)
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
STONEY CORPORATION
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
USH CAPITAL CORPORATION
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
USH CROSSCREEK, INC.
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
USH EQUITY CORPORATION
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
<PAGE> 34
U.S. HOME CORPORATION OF NEW YORK
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
U.S. HOME OF ARIZONA CONSTRUCTION CO.
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
U.S. HOME OF COLORADO REAL ESTATE, INC.
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
U.S. HOME REALTY CORPORATION
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
U.S. HOME REALTY, INC. (MARYLAND)
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
U.S. HOME REALTY, INC. (TEXAS)
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
<PAGE> 35
U.S. HOME AND DEVELOPMENT CORPORATION
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
U.S.H. CORPORATION OF NEW YORK
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
U.S.H. LOS PRADOS, INC.
By: /s/ Thomas A. Napoli
____________________________________
Thomas A. Napoli
Vice President
<PAGE> 36
Exhibit A
[Kaye, Scholer, Fierman, Hays & Handler, LLP]
September 25, 1996
The First National Bank of Chicago,
as Agent
One First National Plaza
Chicago, Illinois 60670
Ladies and Gentlemen:
We have acted as counsel to U.S. Home Corporation, a
Delaware corporation (the "Borrower"), in connection with the preparation,
execution and delivery of the Second Amendment to Credit Agreement, dated
September 25, 1996 (the "Second Amendment"), among the Borrower, the
lenders named therein and you, as agent (the "Agent"). Capitalized terms
used but not defined herein have the meanings set forth in the Credit
Agreement, dated as of September 29, 1995, among the Borrower, certain
lenders and the Agent, as amended from time to time.
We have examined such documents, instruments, records and
certificates of public officials and officers of the Borrower, and have
reviewed such questions of law, as we have deemed necessary or appropriate
as a basis for the opinion set forth below. As to any facts material to our
opinion, we have relied upon such documents, instruments, certificates and
records.
Based on the foregoing, and subject to the limitations,
qualifications and exceptions set forth herein, in our opinion, the Second
Amendment has been duly authorized, executed and delivered by the Borrower.
The opinion set forth above is subject to the following
assumptions and qualifications:
We have assumed the Borrower is a corporation validly
existing and in good standing under the laws of Delaware. We have also
assumed the genuineness of all signatures, other than those of officers of
the Borrower, the authenticity of all documents submitted to us as
originals, and the conformity with the original documents of all documents
submitted to us as reproduced copies, and the authenticity of all such
latter documents.
Our opinion is limited to the Delaware General
Corporation Law.
Our opinion is rendered solely for your information in
connection with the foregoing, and may not be relied upon by any other
person or for any other purpose without our prior written consent.
Very truly yours,
/s/ Kaye, Scholer, Fierman, Hays and Handler
<PAGE> 37
EXHIBIT 10.2
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED
WAREHOUSING CREDIT AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO FIRST AMENDED AND RESTATED WAREHOUSING CREDIT
AND SECURITY AGREEMENT (this "Amendment") is entered into as of this 29th
day of August 1996, by and between U.S. HOME MORTGAGE CORPORATION, a
Florida corporation (the "Company") and RESIDENTIAL FUNDING CORPORATION, a
Delaware corporation (the "Lender").
WHEREAS, the Company and the Lender have entered into a single family
revolving warehouse facility with a present Commitment Amount of Forty-Five
Million Dollars ($45,000,000), to finance the origination and acquisition
of Mortgage Loans as evidenced by a Warehousing Promissory Note in the
principal sum of Forty-Five Million Dollars ($45,000,000), dated as of
December 27, 1995, a Sublimit Promissory Note in the principal sum of
Fifteen Million Dollars ($15,000,000), dated as of December 27, 1995, (the
"Notes"), and by a First Amended and Restated Warehousing Credit and
Security Agreement dated as of August 31, 1995, as the same may have been
amended or supplemented (the "Agreement");
WHEREAS, the Company has requested the Lender extend the period for
which the Commitment under the Agreement has been made and to amend the
Agreement to allow for the warehousing of FmHA Mortgage Loans and the
Lender has agreed to such extension and amendment subject to the terms and
conditions of this Amendment;
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants, agreements and conditions hereinafter set forth and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined shall
have their respective meanings set forth in the Agreement.
2. The effective date ("Effective Date") of this Amendment shall be,
the date on which the Company has complied with all the terms and
conditions of this Amendment.
3. Section 1.1 of the Agreement shall be amended by adding the
following definitions in the appropriate alphabetical order:
"FmHA" means the Farmers Home Administration and any successor
thereto.
"FmHA Mortgage Loan" means a Mortgage Loan secured by a First
Mortgage and with respect to which ninety percent (90%) of the
principal amount of each Mortgage Loan is guaranteed by FmHA.
<PAGE> 38
"HUD 203(K) Mortgage Loan" means an FHA insured Mortgage Loan
secured by a First Mortgage, a portion of which will be used for the
purpose of rehabilitating and/or repairing the related single family
property, and which satisfies the definition of "rehabilitation loan"
under 24 C.F.R. Section 203.50(a).
"RFC Mortgage Loan" means a Mortgage Loan covered by a Purchase
Commitment issued by RFC.
"Second Mortgage Loan" means a closed-end Mortgage Loan secured
by a Second Mortgage.
"Title I Mortgage Loan" means an FHA co-insured Mortgage Loan
secured by a Mortgage which is underwritten in accordance with HUD
underwriting standards for the Title I Property Improvement Program as
set forth in and which is reported for insurance under the Mortgage
Insurance Program authorized and administered under Title I of the
National Housing Act of 1934, as amended and the regulations
promulgated thereunder.
4. Section 1.1 of the Agreement shall be amended to delete the
definitions of "Adjusted Tangible Net Worth," "Approved Custodian,"
"Collateral Value," "Conforming Mortgage Loan," "Conventional Mortgage
Loan," "Debt," "Fair Market Value," "Nonconforming Mortgage Loan" and
"Operating Account" in their entirety, replacing them with the following
definitions:
"Adjusted Tangible Net Worth" means with respect to any Person at
any date, the Tangible Net Worth of such Person at such date,
excluding capitalized excess servicing fees and capitalized servicing
rights, plus one percent (1%) of the Adjusted Servicing Portfolio, and
plus deferred taxes arising from capitalized excess servicing fees and
capitalized servicing rights.
"Approved Custodian" means a pool custodian or other Person which
is deemed acceptable to the Lender from time to time in its sole
discretion to hold a Mortgage Loan for inclusion in a Mortgage Pool or
to hold a Mortgage Loan as agent for an Investor who has issued a
Purchase Commitment for such Mortgage Loan.
"Collateral Value" means (a) with respect to any Mortgage Loan as
of the date of determination, the lesser of (i) the amount of any
Advance made against such Mortgage Loan under Section 2.1(c) hereof;
or (ii) the Fair Market Value of such Mortgage Loan; or (b) in the
event Pledged Mortgages have been exchanged for Pledged Securities,
the Fair Market Value of such Pledged Securities; or (c) with respect
to cash, the amount of such cash.
<PAGE> 39
"Conforming Mortgage Loan" means a First Mortgage Loan which is
either (a) an FHA insured (other than a Title I Mortgage Loan or HUD
203(K) Mortgage Loan) or VA guaranteed Mortgage Loan or (b) a
Conventional Mortgage Loan which is underwritten substantially in
accordance with FNMA or FHLMC underwriting standards, and the
principal amount of which is less than or equal to the maximum amount
eligible for purchase by FNMA or FHLMC.
"Conventional Mortgage Loan" means a First Mortgage Loan, other
than an FHA insured, VA guaranteed Mortgage Loan or FmHA guaranteed
Mortgage Loan.
"Debt" means, with respect to any Person, at any date (a) all
indebtedness or other obligations of such Person which, in accordance
with GAAP, would be included in determining total liabilities as shown
on the liabilities side of a balance sheet of such Person at such
date; and (b) all indebtedness or other obligations of such Person for
borrowed money or for the deferred purchase price of property or
services; provided that for purposes of this Agreement, there shall be
excluded from Debt at any date loan loss reserves, Subordinated Debt
not due within one year of such date, and deferred taxes arising from
capitalized excess servicing fees and capitalized servicing rights.
"Fair Market Value" means at any time for a Mortgage Loan or the
related Mortgage-backed Security (if such Mortgage Loan is to be used
to back a Mortgage-backed Security), (a) if such Mortgage Loan or the
related Mortgage-backed Security is covered by a Purchase Commitment,
the Committed Purchase Price, or (b) otherwise, the market price for
such Mortgage Loan or Mortgage-backed Security, determined by the
Lender
based on market data for similar Mortgage Loans or Mortgage-backed
Securities and such other criteria as the Lender deems appropriate.
"Nonconforming Mortgage Loan" means a Conventional Mortgage Loan
which is not a Conforming Mortgage Loan or a Jumbo Mortgage Loan,
which has a credit risk rating C- or better (determined using the
underwriting standards of the Investor to which such Mortgage Loan is
to be sold under a Purchase Commitment, provided such underwriting
standards comply with industry standards in the sole judgment of the
Lender), and which is underwritten and approved for purchase by an
Investor prior to funding if its original principal amount exceeds Six
Hundred Thousand Dollars ($600,000).
"Operating Account" means a demand deposit account maintained at
the Funding Bank in the name of the Company and designated for funding
that portion of each Mortgage Loan not funded by an Advance made
against such Mortgage Loan and for returning any excess payment from
an Investor for a Pledged Mortgage or Pledged Security.
5. The definition of "Maturity Date" in Section 1.1 of the Agreement
shall be amended by inserting the date "August 31, 1997" in place of
"August 31, 1996" wherever it appears in such definition.
<PAGE> 40
6. Section 2.1(b) (3) of the Agreement shall be deleted in its
entirety and the following is substituted in lieu thereof:
(3) No Advance shall be made against a Home Equity
Loan, a Title I Mortgage Loan or a HUD 203(K) Mortgage Loan.
7. Section 2.1(c) (1) of the Agreement shall be deleted in its
entirety and the following shall be substituted in lieu thereof:
(1) For a Conforming Mortgage Loan, a Jumbo
Mortgage Loan or an FmHA Mortgage Loan pledged
hereunder, other than an RFC Mortgage Loan,
ninety-eight percent (98%) of the lesser of (A)
the Mortgage Note Amount or (B) the product of the
weekly Weighted Average Purchase Commitment Price
at the time of the Advance multiplied by the
Mortgage Note Amount.
8. Section 2.1(c) of the Agreement shall be further amended by adding
the following Section 2.1(c)(5) at the end thereof:
(5) For an RFC Mortgage Loan pledged hereunder, one
hundred percent (100%) of the lesser of (i) the Mortgage
Note Amount or (ii) the Committed Purchase Price.
9. Sections 2.2(d) and 2.2(e) of the Agreement shall be deleted in
their entirety and the following shall be substituted in lieu thereof:
2.2(d) The Company shall hold in trust for the Lender, and the
Company shall deliver to the Lender promptly upon request, or within
one hundred twenty (120) days from the date an Advance was made
against such Pledged Mortgage and the Pledged Mortgage is not being
held by an Investor for purchase or has not been redeemed from pledge,
the following: (1) the originals of the Collateral Documents for which
copies are required to be delivered to the Lender pursuant to Exhibit
D-SF, Exhibit D-SF/CONSTRUCTION or Exhibit D-UNI, (2) the original
lender's ALTA Policy of Title Insurance or an equivalent thereto, and
(3) any other documents relating to a Pledged Mortgage which the
Lender may request, including, without limitation, documentation
evidencing the FHA Commitment to Insure or the FmHA Guaranty or VA
Guaranty of any Pledged Mortgage which is either FHA insured, FmHA
guaranteed or VA guaranteed, the appraisal, Private Mortgage Insurance
Certificate, if applicable, the Regulation Z Statement, certificates
of casualty or hazard insurance, credit information on the maker of
each such Mortgage Note, a copy of a HUD-1 or corresponding purchase
advice and other documents of all kinds which are customarily desired
for inspection or transfer incidental to the purchase of any Mortgage
Note by an Investor and any additional documents which are customarily
executed by the seller of a Mortgage Note to an Investor.
2.2(e) To make an Advance, the Lender shall cause the Funding
Bank to credit an account of the Company with the Funding Bank, which
account shall be under the exclusive control of the Lender, upon
compliance by the Company with the terms of this Agreement. The Lender
shall determine in its sole discretion the method by which an Advance
is made.
<PAGE> 41
10. Section 2.3 of the Agreement shall be deleted in its entirety and
the following shall be substituted in lieu thereof:
2.3 Notes. The Company's Obligations in respect of Ordinary
Warehousing Advances and Nonconforming Advances shall be evidenced by
a Warehousing Promissory Note of the Company substantially in the form
of Exhibit A-1 attached hereto, and the Company's Obligations in
respect of Construction Advances, Unimproved Advances and Advances
made against FmHA Mortgage Loans shall be evidenced by a Sublimit
Promissory Note of the Company substantially in the form of Exhibit
A-2 attached hereto, each note dated as of the date hereof
(Warehousing Promissory Note and Sublimit Promissory Note are
collectively referred to as the "Notes"). The terms "Warehousing
Promissory Note", "Sublimit Promissory Note," "Note" or "Notes" shall
include all extensions, renewals and modifications of the Notes and
all substitutions therefor. All terms and provisions of the Notes are
hereby incorporated herein.
11. Section 2.4 of the Agreement shall be deleted in its entirety and
the following shall be substituted in lieu thereof:
2.4 Interest.
2.4(a) Except as otherwise provided in Section 2.4(g) hereof, the
unpaid amount of each Ordinary Warehousing Advance and each Advance
against an FmHA Mortgage Loan (net of applicable Buydown) shall bear
interest, from the date of such Ordinary Warehousing Advance, until
paid in full, at the Ordinary Warehousing Rate.
2.4(b) Except as otherwise provided in Section 2.4(g) hereof, the
unpaid amount of each Nonconforming Advance (net of applicable
Buydown) shall bear interest, from the date of such Nonconforming
Advance, until paid in full, at the Nonconforming Rate.
2.4(c) Prior to the occurrence of an Event of Default, the unpaid
amount of (i) each Construction Advance (net of applicable Buydown)
shall bear interest, from the date of such Construction Advance until
paid in full, at the Construction Rate, and (ii) each Unimproved
Advance (net of applicable Buydown) shall bear interest, from the date
of such Unimproved Advance until paid in full, at the Unimproved Rate.
2.4(d) The Company is entitled to receive a benefit in the form
of an "Earnings Credit" on the portion of the Eligible Balances
maintained in time deposit accounts with a Designated Bank, and the
Company is entitled to receive a benefit in the form of an "Earnings
Allowance" on the portion of the Eligible Balances maintained in
demand deposit accounts with a Designated Bank. Any Earnings Allowance
shall be used first and any Earnings Credit shall be used second as a
credit against accrued Miscellaneous Charges and fees, including, but
not limited to Commitment Fees, Usage Fees and Warehousing Fees, and
may be used, at the Lender's option, to reduce accrued interest. Any
Earnings Allowance not used during the month in which the benefit was
received shall be accumulated for use and must be used during the
calendar year in which the benefit was received. Any Earnings Credit
<PAGE> 42
not used during the month in which the benefit was received shall be
used to provide a cash benefit to the Company. The Lender's
determination of the Earnings Credit and the Earnings Allowance for
any month shall be determined by the Lender in its sole discretion and
shall be conclusive and binding absent manifest error. In no event
shall the benefit received by the Company exceed the Depository
Benefit.
Either party hereto may terminate the benefits provided for in
this Section effective immediately upon Notice to the other party, if
the terminating party shall have determined (which determination shall
be conclusive and binding absent manifest error) at any time that any
applicable law, rule, regulation, order or decree or any
interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof, or
compliance by such party with any request or directive (whether or not
having the force of law) of any such authority, shall make it unlawful
or impossible for such party to continue to offer or receive the
benefits provided for in this Section.
2.4(e) Interest shall be computed on the basis of a 360-day year
and applied to the actual number of days elapsed in each interest
calculation period and shall be payable monthly in arrears, on the
first day of each month, commencing with the first month following the
Closing Date and on the Maturity Date.
2.4(f) If, for any reason, no interest is due on an Advance, the
Company agrees to pay to the Lender an administrative fee equal to one
day of interest on such Advance at the rate applicable to such
Advances under the applicable section hereof, as in effect on the date
of such Advance. Administrative and other fees shall be due and
payable in the same manner as interest is due and payable hereunder.
2.4(g) Upon demand of the Lender and upon Notice to the Company,
after the occurrence and during the continuation of an Event of
Default the unpaid amount of each Advance shall bear interest until
paid in full at a per annum rate of interest (the "Default Rate")
equal to four percent (4%) in excess of the rate of interest otherwise
applicable to such Advance pursuant to any other subsection of this
Section 2.4 or, if no rate is applicable, the highest rate then
applicable to any outstanding Advance.
<PAGE> 43
12. Section 2.5(d)(6) of the Agreement shall be deleted in its
entirety and the following shall be substituted in lieu thereof:
(6) On the date on which a Pledged Mortgage is determined to
have been originated based on untrue, incomplete or inaccurate
information, whether or not the Company had knowledge of such
misrepresentation or incorrect information, or the Pledged
Mortgage is (i) in the case of an Unimproved Mortgage Loan,
delinquent (without giving effect to any grace period) and
remains delinquent for a period of thirty (30) days or more, and
(ii) in all other cases, defaulted and remains in default for a
period of sixty (60) days or more.
13. Section 2.8(a) of the Agreement shall be deleted in its entirety
and the following shall be substituted in lieu thereof:
2.8(a) The Company agrees to pay to the Lender a Commitment Fee
in the amount of one-tenth of one percent (1/10%) per annum of the
lesser of Fifteen Million Dollars ($15,000,000) or the Commitment
Amount, which Commitment Fee may be paid quarterly in advance and
shall be computed on the basis of a 365-day year and applied to the
actual number of days elapsed in such calendar quarter. The Company
shall make quarterly payments of the Commitment Fee on the first (1st)
day of each calendar quarter. If the Maturity Date is other than the
last day of a calendar quarter, the Company shall pay the prorated
portion of the quarterly Commitment Fee due from the beginning of the
then current calendar quarter to and including the Maturity Date. For
the purposes hereof, calendar quarters shall be defined as the three
(3) month periods beginning on each April 1, July 1, October 1 and
January 1. The Company shall not be entitled to a reduction in the
amount of the Commitment Fee, in the event the Commitment Amount is
reduced or in the event that the Commitment is terminated at the
request of the Company or as a result of an Event of Default. If the
Commitment terminates at the request of the Company or as a result of
an Event of Default, the unpaid balance of the Commitment Fee shall be
due and payable in full on the date of such termination.
14. Section 2.10 of the Agreement shall be deleted in its entirety and
the following shall be substituted in lieu thereof:
2.10 Miscellaneous Charges. The Company agrees to reimburse the
Lender for miscellaneous charges and expenses (collectively,
"Miscellaneous Charges") incurred by or on behalf of the Lender in
connection with the handling and administration of Advances, and to
reimburse the Lender for Miscellaneous Charges incurred by or on
behalf of the Lender in connection with the handling and
administration of the Collateral. For the purposes hereof,
Miscellaneous Charges shall include, but not be limited to, charges
for wire transfers, check processing charges, charges for security
delivery fees, charges for overnight delivery of Collateral to
Investors, Funding Bank's service charges and Designated Bank's
service charges. Miscellaneous Charges are due when incurred, but
shall not be delinquent if paid within fifteen (15) days after receipt
of an invoice or an account analysis statement from the Lender.
<PAGE> 44
15. Section 3.1(c) of the Agreement shall be deleted in its entirety
and the following shall be substituted in lieu thereof:
3.1(c) All private mortgage insurance and all commitments issued
by the FHA, FmHA or VA to insure or guarantee any Mortgage Loans
included in the Pledged Mortgages; all Purchase Commitments held by
the Company covering the Pledged Mortgages or the Pledged Securities
and all proceeds resulting from the sale thereof to Investors pursuant
thereto; and all personal property, contract rights, servicing and
servicing fees and income or other proceeds, amounts and payments
payable to the Company as compensation or reimbursement, accounts and
general intangibles of whatsoever kind relating to the Pledged
Mortgages, the Pledged Securities, said FHA commitments, FmHA
commitments or VA commitments and the Purchase Commitments, and all
other documents or instruments relating to the Pledged Mortgages and
the Pledged Securities, including, without limitation, any interest of
the Company in any fire, casualty or hazard insurance policies and any
awards made by any public body or decreed by any court of competent
jurisdiction for a taking or for degradation of value in any eminent
domain proceeding as the same relate to the Pledged Mortgages.
16. Section 5.13 of the Agreement shall be amended to add the following
Section 5.13(f) at the end thereof:
5.13(f) Lender in good standing under the FmHA loan guarantee
program eligible to originate, purchase, hold, sell and service
FmHA-guaranteed Mortgage Loans.
17. Section 5.15(e) of the Agreement shall be deleted in its entirety
and the following shall be substituted in lieu thereof:
5.15(e) The Company has complied and will continue to comply with
all laws, rules and regulations in respect of the FHA insurance, FmHA
guaranty or VA guaranty of each Mortgage Loan included in the Pledged
Mortgages designated by the Company as an FHA insured, FmHA guaranteed
Mortgage Loan or VA guaranteed Mortgage Loan, and such insurance or
guarantee is and will continue to be in full force and effect. All
such FHA insured, FmHA guaranteed Mortgage Loans and VA guaranteed
Mortgage Loans comply and will continue to comply in all respects with
all applicable requirements for purchase under the FNMA standard form
of selling contract for FHA insured, FmHA guaranteed loans and VA
guaranteed loans and any supplement thereto then in effect.
18. Section 6.13(b) of the Agreement shall be deleted in its entirety
and the following shall be substituted in lieu thereof:
6.13(b) Service or cause to be serviced all Mortgage Loans in
accordance with the standard requirements of the issuers of Purchase
Commitments covering the same and all applicable FHA, FmHA and VA
requirements, including without limitation taking all actions
necessary to enforce the obligations of the obligors under such
Mortgage Loans. The Company shall service or cause to be serviced all
Mortgage Loans backing Pledged Securities in accordance with
applicable governmental requirements and requirements of issuers of
Purchase Commitments covering the same. The Company shall hold all
escrow funds collected in respect of Pledged Mortgages and Mortgage
Loans backing Pledged Securities in trust, without commingling the
same with non-custodial funds, and apply the same for the purposes for
which such funds were collected.
<PAGE> 45
19. Upon execution of this Amendment, the Company agrees to pay to the
Lender the pro rata Commitment Fee on the Commitment Amount for the month
of September 1996.
20. The Sublimit Promissory Note is amended and restated in its
entirety as set forth in the First Amended and Restated Sublimit Promissory
Note, in the form of Exhibit A-2 attached to this Amendment. All references
in this Amendment and in the Agreement to the Sublimit Promissory Note
shall be deemed to refer to the First Amended and Restated Sublimit
Promissory Note delivered in connection with this Amendment.
21. Exhibits C-SF and D-SF to the Agreement are hereby deleted in
their entirety and replaced with the new Exhibits C-SF and D-SF attached to
this Amendment. All references in the Agreement to Exhibits C-SF and D-SF
shall be deemed to refer to the new Exhibits C-SF and D-SF.
22. Exhibit I-SF to the Agreement is deleted in its entirety and
replaced with the new Exhibit I-SF attached to this Amendment. All
references in this Amendment and the Agreement to Exhibit I-SF shall be
deemed to refer to the new Exhibit I-SF.
23. The Company shall deliver to the Lender (a) an executed original
of this Amendment; (b) an executed First Amended and Restated Sublimit
Promissory Note; (c) an executed Certificate of Secretary with corporate
resolutions; (d) executed UCC-3 financing statements; (e) a current
certified tax, lien and judgment search of the appropriate public records
for the Company, including a search of Uniform Commercial Code financing
statements, which search shall not have disclosed the existence of any
prior Lien on the Collateral other than in favor of the Lender or as
permitted hereunder; (f) current Certificates of Good Standing of the
Company; (g) current insurance information; and (h) a Two Hundred Fifty
Dollar ($250) document production fee.
24. The Company represents, warrants and agrees that (a) there exists
no Default or Event of Default under the Loan Documents, except for
Defaults with respect to the JRH Eastridge Partners Mortgage Loan and the
Paradise Valley Partners, LLC Mortgage Loan which have been disclosed to
the Lender, (b) the Loan Documents continue to be the legal, valid and
binding agreements and obligations of the Company enforceable in accordance
with their terms, as modified herein, (c) the Lender is not in default
under any of the Loan Documents and the Company has no offset or defense to
its performance or obligations under any of the Loan Documents, (d) the
representations contained in the Loan Documents remain true and accurate in
all respects, and (e) there has been no material adverse change in the
financial condition of the Company from the date of the Agreement to the
date of this Amendment.
25. Except as hereby expressly modified, the Agreement shall otherwise
be unchanged and shall remain in full force and effect, and the Company
ratifies and reaffirms all of its obligations thereunder.
<PAGE> 46
26. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Lender have caused this
Amendment to be duly executed on their behalf by their duly authorized
officers as of the day and year above written.
U.S. HOME MORTGAGE CORPORATION
By: /s/ Thomas A. Napoli
----------------------------------
Thomas A. Napoli
Its: Vice President
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: /s/ Donna A. West
----------------------------------
Its: Director
<PAGE> 47
STATE OF Texas )
) ss
COUNTY OF Harris)
On August 30, 1996, before me, a Notary Public, personally appeared
Thomas A. Napoli, the Vice President of U.S. HOME MORTGAGE CORPORATION,
a Florida corporation, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Brenda Grable
-----------------------------------
Brenda Grable
Notary Public
(SEAL) My Commission Expires: 7-1-97
STATE OF Florida )
) ss
COUNTY OF Breward )
On, September 4, 1996, before me, a Notary Public, personally
appeared Donna A. West, the Director of RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Marsha S. Grabin
------------------------------
Marsha S. Grabin
(SEAL) Notary Public
My Commission Expires: 9-15-98
<PAGE> 48
EXHIBIT A-2
FIRST AMENDED AND RESTATED SUBLIMIT PROMISSORY NOTE
$45,000,000 Date: August 29, 1996
FOR VALUE RECEIVED, the undersigned, U.S. HOME MORTGAGE CORPORATION, a
Florida corporation (herein called the "Company"), hereby promises to pay
to the order of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation
(the "Lender" or, together with its successors and assigns, the "Holder")
whose principal place of business is 8400 Normandale Lake Blvd., Suite 600,
Minneapolis, Minnesota 55437, or at such other place as the Holder may
designate from time to time, the principal sum of Forty-Five Million
Dollars ($45,000,000) or so much thereof as may be outstanding from time to
time pursuant to the Agreement described below, and to pay interest on said
principal sum or such part thereof as shall remain unpaid from time to
time, from the date of each Advance until repaid in full, and all other
fees and charges due under the Agreement, at the rate and at the times set
forth in the Agreement. All payments hereunder shall be made in lawful
money of the United States and in immediately available funds.
This Note is given to evidence an actual warehouse facility in the
above amount and is the Sublimit Promissory Note referred to in that
certain First Amended and Restated Warehousing Credit and Security
Agreement (the "Agreement") dated August 31, 1995, between the Company and
the Lender, as the same may be amended or supplemented from time to time,
and is entitled to the benefits thereof. Reference is hereby made to the
Agreement (which is incorporated herein by reference as fully and with the
same effect as if set forth herein at length) for a description of the
Collateral, a statement of the covenants and agreements, a statement of the
rights and remedies and securities afforded thereby and other matters
contained therein. Capitalized terms used herein, unless otherwise defined
herein, shall have the meanings given them in the Agreement. Without
limiting the generality of the foregoing, this Note, together with the
Sublimit Promissory Note, evidences a single line of credit, and the Lender
has not committed to make Advances with an aggregate principal amount
exceeding the Commitment Amount, notwithstanding the fact that the sum of
the principal amount of the Notes may exceed the Commitment Amount.
This Note is given in replacement for, and not in satisfaction of,
that certain Sublimit Promissory Note dated December 27, 1995, and issued
by the Company to evidence its Obligations under the Agreement (the
"Existing Note"). All amounts owed by the Company under the Existing Note
(including, without limitation, the unpaid principal thereunder, interest
accrued thereon and fees accrued under the Agreement, whether or not yet
due and owing) as of the date hereof, shall be owed hereunder.
<PAGE> 49
This Note may be prepaid in whole or in part at any time without
premium or penalty.
Should this Note be placed in the hands of attorneys for collection,
the Company agrees to pay, in addition to principal and interest, fees and
charges due under the Agreement, any and all costs of collecting this Note,
including reasonable attorneys' fees and expenses.
The Company hereby waives demand, notice, protest and presentment.
This Note shall be construed and enforced in accordance with the laws
of the State of Minnesota, without reference to its principles of conflicts
of law.
IN WITNESS WHEREOF, the Company has executed this Note as of the day
and year first above written.
U.S. HOME MORTGAGE CORPORATION,
a Florida corporation
By:
Its:
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On , 1996, before me, a Notary Public,
personally appeared , the
of U.S. HOME MORTGAGE CORPORATION, a Florida corporation,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
<PAGE> 50
EXHIBIT I-SF
OFFICER'S CERTIFICATE
Reference is made to that certain First Amended and Restated
Warehousing Credit and Security Agreement (Single Family Mortgage Loans)
between U.S. HOME MORTGAGE CORPORATION, a Florida corporation (the
"Company"), and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation
(the "Lender"), dated as of August 31, 1995 (as the same may be amended,
modified, supplemented, renewed or restated from time to time, the
"Agreement"). All capitalized terms used herein and all Section numbers
given herein refer to those terms and Sections set forth in the Agreement.
This Officer's Certificate is submitted to the Lender pursuant to Section
6.2(c) of the Agreement.
The undersigned hereby certifies to the Lender that as of the close of
business on , 19 ("Statement Date",) and with respect to the Company and
its Subsidiaries on a consolidated basis:
1. As illustrated in the attached calculations supporting this Officer's
Certificate, the Company met the covenants set forth in Sections 7.6
and 7.7, or if the Company did not meet any of such covenants, a
detailed explanation is attached setting forth the nature and period
of the existence of the Default and the action the Company has taken,
is taking, and proposes to take with respect thereto.
2. No Servicing Contracts have been sold or pledged by the Company except
as permitted under the terms of the Agreement.
3. No recourse Servicing Contracts have been acquired by the Company.
4. No payments in advance of the scheduled maturity date have been made
with respect to any Subordinated Debt. The Company has incurred no
Debt required to be subordinated pursuant to Section 6.10.
5. The Company was in compliance with the applicable HUD, GNMA or
Investor net worth requirements, and in good standing with FmHA, VA,
HUD, GNMA and each Investor.
6. I have reviewed the terms of the Agreement and have made, or caused to
be made under my supervision, a review in reasonable detail of the
transactions and conditions of the Company (and, if applicable, its
Subsidiaries) and such review has not disclosed the existence, and I
have no knowledge of the existence, of any Default or Event of Default,
or if any Default or Event of Default existed or exists, a detailed
explanation is attached specifying the nature and period of the
existence of the Default and the action the Company has taken, is
taking and proposes to take with respect thereto.
<PAGE> 51
7. Pursuant to Section 6.2 of the Agreement, enclosed are the financial
statements of the Company as of the Statement Date. The financial
statements for the period ending on the Statement Date fairly present
the financial condition and results of operations of the Company (and,
if applicable, its Subsidiaries) as at the Statement Date.
Dated:
U.S. HOME MORTGAGE CORPORATION
By:
Its:
<PAGE> 52
CALCULATIONS SUPPORTING OFFICER'S CERTIFICATE
Company Name: U.S. HOME MORTGAGE CORPORATION and its Subsidiaries
Statement Date:
All financial calculations set forth herein are as of the Statement Date.
I. TANGIBLE NET WORTH
A. Tangible Net Worth of the Company is:
Excess of total assets over total liabilities:$ ________________
Plus: Loan loss reserves: $ ________________
Plus: Subordinated Debt not due within
one year of the Statement Date
(or any portion thereof): $ ________________
Minus: Advances to owners, officers or
Affiliates: $ ________________
Minus: Investments in Affiliates: $ ________________
Minus: Assets pledged to secure liabilities
not included in Debt: $ ________________
Minus: Intangible assets: $ ________________
Minus: Any other HUD nonacceptable assets: $ ________________
Minus: Other assets unacceptable to the
Lender: $ ________________
TANGIBLE NET WORTH $ ______________
B. Requirements of Section 7.7 of the Agreement:
MINIMUM TANGIBLE NET WORTH OF $6,000,000.
C. Covenant Satisfied:____ Covenant Not Satisfied:____
II. DEBT OF THE COMPANY
Total liabilities $ ________________
Minus: Loan loss reserves: $ ________________
Minus: Subordinated Debt not due within one year
of the Statement Date (or any portion
thereof): $ ________________
Minus: Deferred taxes arising from
capitalized excess servicing fees
and capitalized servicing rights: $ ________________
DEBT $ _________________
<PAGE> 53
III. RATIO OF DEBT TO TANGIBLE NET WORTH
A. The ratio of Debt to Tangible Net Worth (IV to I.A) is:
____________ to 1
B. Requirements of Section 7.6 of the Agreement:
The ratio of Debt to Tangible Net Worth shall not exceed 10 to 1.
C. Covenant Satisfied:____ Covenant Not Satisfied:____
<PAGE> 54
EXHIBIT D-SF
PROCEDURES AND DOCUMENTATION FOR WAREHOUSING
SINGLE FAMILY MORTGAGE LOANS
The following procedures and documentation requirements must be
observed in all respects by the Company. All documents must be satisfactory
to the Lender in its sole discretion. Terms used below, which are not
otherwise defined, shall have the meanings given them in the Agreement. The
HUD, FNMA and FHLMC form numbers referred to herein are for convenience
only and the Company shall use the equivalent forms required at the time of
delivery of the Mortgage Loans or Mortgage-backed Securities. All Requests
for Advance and Collateral Documents, should be submitted to the Lender in
a top tabbed, legal size manila file folder, hole-punched and acco-fastened
in the order specified in the Request for Advance. Each folder should be
labelled with the mortgagor name(s), Company loan number and Company name.
If a Wet Settlement Advance is being requested, the Request for Advance and
required Collateral Documents should be submitted in accordance with the
above instructions. The remaining Collateral Documents should be submitted
with a cover letter identifying the mortgagor name(s) and Company loan
number.
I. Prior to making a Wet Settlement Advance, the Lender must
receive the following:
(1) Estimate of the amount of the requested Advance one (1) Business
Day prior to such Advance.
(2) Copy of settlement or funding check issued to the escrow/title
company, if applicable.
(3) Original Request for Advance against Single Family Mortgage Loans
(Exhibit C-SF) and one (1) copy of same.
(4) Copy of the Purchase Commitment or satisfactory evidence thereof.
(5) Bailee Pledge Agreement (only required for Wet Settlement Advance)
(Exhibit M).
(6) A copy of the HUD-1 Settlement Statement or equivalent (Home
Equity Loans and Title I Mortgage Loans only).
(7) A copy of HUD 203(K) Maximum Mortgage Worksheet (HUD 203(K)
Mortgage Loans only).
The following must be received by the Lender within five (5) Business
Days of the date of the Wet Settlement Advance:
(8) Original signed Mortgage Note, endorsed by the Company in blank
with corresponding interim endorsements, if applicable, and one
copy of same.
<PAGE> 55
(9) Copy of the Mortgage certified true by the escrow/title company.
(10) Copies of all interim assignments of the Mortgage certified true
by the escrow/title company (recorded or sent for recordation).
Mortgage Note must bear corresponding endorsements.
(11) An assignment of the Mortgage to the Lender in recordable form
but unrecorded.
(12) Completed Company Worksheet Concerning Applicability of Section
32 of Regulation Z (12 CFR Section 226.32) and, if Section 32
applies, copies of the disclosure and other related documentation
delivered to the mortgagor, or executed by the mortgagor,
evidencing compliance with Section 32 (if applicable).
II. Prior to the making of an Advance (other than a Wet Settlement Advance),
the Lender must receive all of the Collateral Documents listed in
Section I above.
III. The Lender exclusively shall deliver the Mortgage Notes and other
original Collateral Documents evidencing Pledged Mortgages or Pledged
Securities and related pool documents to the Investor or pool
custodian, unless otherwise agreed in
writing.
A. The following procedures are to be followed for deliveries of Pledged
Mortgages:
No later than one (1) Business Day prior to the requested shipment
date and no later than one (1) Business Day prior to the expiration
date of the Purchase Commitment, the Lender must receive the
following:
(1) Signed shipping instructions for the delivery of the Pledged
Mortgages including the following:
(a) Name and address of the office of the Investor to which the
loan documents are to be shipped, the desired shipping date
and the preferred method of delivery;
(b) Instructions for endorsement of the Mortgage Note;
(c) Names of mortgagor(s), Mortgage Note Amounts of Pledged
Mortgages to be shipped and the Company's loan number; and
(d) Commitment number and expiration date of the Purchase
Commitment.
(2) For deliveries of Pledged Mortgages to FNMA for cash purchase,
the following additional documents are required:
(a) Copy of Loan Schedule (FNMA Form 1068 or 1069) showing the
Lender's designated FNMA payee code as recipient of the loan
purchase proceeds.
<PAGE> 56
(3) For deliveries of Pledged Mortgages to FHLMC for cash purchase,
the following additional documents are required:
(a) Original completed Warehouse Lender Release of Security
Interest (FHLMC Form 996) to be executed by the Lender,
designating the Lender as the Warehouse Lender and showing
the Cash Collateral Account designated by the Lender as the
receiving account for loan purchase proceeds.
(b) Copy of Wire Transfer Authorization for a Cash Warehouse
Delivery (FHLMC Form 987), designating the Lender as the
Warehouse Lender and showing the Cash Collateral Account
designated by the Lender as the receiving account for loan
purchase proceeds.
B. In the event Pledged Mortgages are delivered to a pool custodian,
other than an Approved Custodian, payment of the related Advance is
required within two (2) Business Days of shipment.
The following procedures are to be followed for deliveries of Pledged
Mortgages to Approved Custodians:
No later than one (1) Business Day prior to the requested shipment
date and no later than one (1) Business Day prior to required delivery
date to the Approved Custodian, the Lender must receive the following:
(1) Signed shipping instructions for the delivery of the Pledged
Mortgages to the Approved Custodian including the following:
(a) Name and address of the office of the Approved Custodian to
which the loan documents are to be shipped, the desired
shipping date and the preferred method of delivery;
(b) Instructions for endorsement of the Mortgage Note;
(c) Names of mortgagor(s) and Mortgage Note Amounts of Pledged
Mortgages to be shipped and the Company's loan number; and
(d) Commitment number and expiration date of the Purchase
Commitment for the Pledged Securities.
(2) For FNMA Mortgage-backed Securities issuance, the following
additional documents are required:
(a) Copy of Schedule of Mortgages (FNMA Form 2005 or 2025).
(b) Copy of Delivery Schedule (FNMA Form 2014), instructing FNMA
to issue the Mortgage-backed Securities in the name of the
Company with the Lender as pledgee and to deliver the
Mortgage-backed Securities to the Lender's custody account
at The Chase Manhattan Bank (CHASE NYC/GEOCUST/MR9229490)
and bearing the following instructions: "These instructions
may not be changed without the prior written consent of
Residential Funding Corporation, Preston A. Lyvers,
Director or Patti Erfan, Director."
<PAGE> 57
(3) For FHLMC Mortgage-backed Securities issuance, the following
additional documents are required:
(a) Copy of Settlement Information and Delivery Authorization
(FHLMC Form 939), designating the Lender as the Warehouse
Lender and instructing FHLMC to deliver the Mortgage-backed
Securities to the Lender's custody account at The Chase
Manhattan Bank (CHASE NYC/GEOCUST/MR9229490).
(b) Original Warehouse Lender Release of Security Interest
(FHLMC Form 996) to be executed by the Lender, designating
the Lender as the Warehouse Lender and instructing FHLMC to
deliver the Mortgage-backed Securities to the Lender's
custody account at The Chase Manhattan Bank (CHASE
NYC/GEOCUST/MR9229490).
(4) For GNMA Mortgage-backed Securities issuance, the following
additional documents are required:
(a) Signed original Schedule of Mortgages (HUD Form 11706).
(b) Signed original Schedule of Subscribers (HUD Form 11705)
instructing GNMA to issue the Mortgage-backed Securities in
the name of the Company and designating The Chase Manhattan
Bank as Agent for the Lender as the subscriber, using the
following language: THE CHASE MANHATTAN BANK AS AGENT FOR
RESIDENTIAL FUNDING CORPORATION SEG ACCT MANUF/CUST/MR9229490).
The following instructions must also be included on the form:
"These instructions may not be changed without the prior
written consent of Residential Funding Corporation, Preston A.
Lyvers, Director or Patti Erfan, Director."
(c) Completed original Release of Security Interest (HUD Form
11711A) to be executed by the Lender.
(5) No later than two (2) Business Days prior to the Settlement Date
for the Mortgage-backed Securities, the Lender must receive
signed Securities Delivery Instructions form attached hereto as
Schedule I.
Upon instruction by the Company, the Lender will complete the endorsement
of the Mortgage Note and make arrangements for the delivery of the original
Collateral Documents evidencing Pledged Mortgages or Pledged Securities and
related original pool documents with the appropriate bailee letter to the
Investor, Approved
Custodian, or other pool custodian. Upon receipt of Mortgage-backed
Securities, the Lender will cause such Mortgage-backed Securities to be
delivered to the Investor which issued the Purchase Commitment.
Mortgage-backed Securities will be released to the Investor only upon
payment of the purchase proceeds to the Lender. Cash proceeds of sales of
Pledged Mortgages and Pledged Securities shall be applied to related
Advances outstanding under the Commitment. Provided no Default exists, the
Lender shall return any excess proceeds of the sale of Mortgage Loans or
Mortgage-backed Securities to the Company, unless otherwise instructed in
writing.
<PAGE> 58
SCHEDULE I
RESIDENTIAL FUNDING CORPORATION
WAREHOUSING LENDING DIVISION
Security Delivery Instructions
INSTRUCTIONS MUST BE RECEIVED TWO (2) BUSINESS DAYS IN ADVANCE OF
PICK-UP/DELIVERY
BOOK-ENTRY DATE: ______________________ SETTLEMENT DATE:
ISSUER:________________________________ SECURITY: $
NO. OF CERTIFICATES: __________________ 1)
2)
3)
CUSIP #______________
Pool #_______________ MI#______________ Coupon Rate:
Issue Date:(M/D/Y) _________________________ Maturity Date:(M/D/Y)
POOL TYPE (circle one):
GNMA: GNMA I GNMA II
FHLMC: FIXED ARM DISCOUNT NOTE
FNMA: FIXED ARM DISCOUNT NOTE DEBENTURES REMIC
- ----------------------------------------------------------------------------
DELIVER TO:_______________________________ ( ) Versus Payment
_______________________________ DVP AMT. $
_______________________________ ( ) Free Delivery
DELIVER TO:_______________________________ ( ) Versus Payment
_______________________________ DVP AMT. $
_______________________________ ( ) Free Delivery
DELIVER TO:_______________________________ ( ) Versus Payment
_______________________________ DVP AMT. $
_______________________________ ( ) Free Delivery
- ----------------------------------------------------------------------------
AUTHORIZED SIGNATURE:
TITLE:
<PAGE> 59
EXHIBIT 10.3
AMENDED AND RESTATED
EMPLOYMENT AND CONSULTING AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AND CONSULTING AGREEMENT,
dated as of October 17, 1995, by and between U.S. Home Corporation (the
"Company"), and Robert J. Strudler (the "Executive").
WHEREAS, the Company and the Executive are parties to an
Employment and Consulting Agreement, dated May 12, 1986, as amended by (i)
the First Amendment to Employment and Consulting Agreement, dated February
8, 1990, (ii) the Second Amendment to Employment and Consulting Agreement,
dated December 6, 1990, and (iii) the Third Amendment to Employment and
Consulting Agreement, dated May 25, 1993 (collectively, the "Agreement").
WHEREAS, the Company and the Executive desire to amend
and restate the Agreement as hereinafter provided.
WHEREAS, Section 7(c) of the Agreement permits such
amendment by written agreement of both parties.
NOW, THEREFORE, the Company and the Executive agree to
amend and restate the Agreement as follows:
1. Employment and Duties. The Company shall employ the
Executive, and the Executive shall be employed by the Company, as Chairman
and Co-Chief Executive Officer, at the Company's headquarters in Houston,
Texas (or such other location as shall be mutually satisfactory to the
Executive and the Company) for the term of this Agreement. In these
capacities, the Executive shall devote substantially all of his business
time and energies to the business of the Company and shall perform such
services as shall from time to time be assigned to him by the Board of
Directors of the Company.
2. Term. The term of the Executive's employment hereunder
shall continue until June 20, 1999; provided, however, that, unless either
party otherwise elects by notice in writing delivered to the other at least
90 days prior to June 20, 1999, or any subsequent anniversary of June 20,
1999, such term shall be automatically renewed for successive one-year
terms unless sooner terminated by the Executive's voluntary resignation or
otherwise terminated pursuant to the terms of this Agreement (the
"Employment Term").
3. Compensation and Benefits.
(a) Compensation. During each calendar year of the
Employment Term, the Company shall pay the Executive: (i) a base salary at
a rate of $425,000 per year (the "Base Salary"), payable in substantially
equal biweekly installments, and (ii) any cash bonus to which he is entitled
<PAGE> 60
pursuant to the provisions of Appendix A hereto, payable as promptly as
practicable after the end of each such calendar year, but in any event
by April 15 of the following year. Notwithstanding the foregoing, if the
Executive's applicable employee remuneration (as defined in Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code")) for any
taxable year would exceed the higher of $1 million or the maximum amount
deductible by the Company under Section 162(m) for such taxable year, the
amount otherwise payable shall be reduced to the higher of $1 million or the
maximum amount deductible under Section 162(m) and the excess shall be
deferred until the expiration of the Employment Term and shall be payable
in a cash lump sum on April 16 of the first year of the Consultation Period.
The deferred compensation shall accrue interest at the same rate charged the
Company from time to time under the Credit Agreement, dated as of September
29, 1995, among the Company, the First National Bank of Chicago, as agent,
and certain lenders named therein, as amended, restated, supplemented or
otherwise modified from time to time, or any successor facility. The
Executive's Base Salary and bonus shall be reviewed at least annually by the
Board of Directors of the Company, or pursuant to its delegation, and (i) at
a minimum, the Board shall increase the Base Salary annually commencing with
the 1996 calendar year by an amount determined by multiplying the current
Base Salary by the percentage increase in the Consumer Price Index --
U.S. City Average published by the Bureau of Labor Statistics of the United
States Department of Labor (or if that Index is no longer published by any
substantially equivalent successor thereto) (the "Consumer Price Index") in
the preceding calendar year, and (ii) the Board may increase the bonus from
time to time.
(b) Stock Options. On October 17, 1995, the
Executive was granted an option (the "Option") to purchase 50,000 shares of
the Company's common stock, $.01 par value per share (the "Common Stock"),
pursuant to the Company's 1993 Employee's Stock Option Plan. Such Option
shall be an "incentive stock option" within the meaning of Section 422 of the
Code to the extent permitted by Section 422(d) of the Code; to the extent
not permitted by Section 422(d), the remaining portion of the Option shall
be a nonqualified stock option. The Option shall be for a term of ten years
from, and shall be exercisable immediately at the fair market value of the
Common Stock on, the date of grant.
(c) Retirement Benefit.
(i) In consideration of the Executive's past
services to the Company, the Executive shall be entitled to a retirement
benefit, payable monthly for his life, in an amount equal to 50 percent
of his highest monthly Base Salary during the Employment Term. Such
payments shall commence on the first day of the month coincident with or
<PAGE> 61
next following the later of the Executive's attainment of age 58 or the
end of the Employment Term (the "Commencement Date"); provided, however,
that if the Employment Term terminates prior to his attainment of age 58,
the Executive may elect by written notice to the Company to have such
payments commence on the first day of any month after such termination
of employment (the "Early Commencement Date") in a monthly amount equal
to the monthly amount that the Executive would have received at the
Commencement Date, reduced by one-third of one percent (.33%) per month
for each month by which the Early Commencement Date precedes the Commencement
Date. The amount of each payment hereunder shall be increased on each
January 1 following the Early Commencement Date or Commencement Date,
as applicable, by an amount determined by multiplying the amount of
each monthly payment made in the preceding year by the percentage increase,
if any, in the cost of living from the preceding January 1, as reflected by
the Consumer Price Index. The Executive's election to have his retirement
benefit payments commence on the Early Commencement Date shall not affect
the Company's obligation to pay consulting fees to the Executive in
accordance with Section 4 hereof.
The retirement benefit shall be an
unconditional, but unsecured, general credit obligation of the Company to the
Executive, and nothing contained in this Agreement, and no action taken
pursuant to it, shall create or be construed to create a trust of any kind
between the Company and the Executive. The Executive shall have no right,
title or interest whatever in or to any investments which the Company may
make (including, but not limited to, an insurance policy on the life of
the Executive) to aid it in meeting its obligations hereunder.
(ii) From time to time, the Company shall make
such contributions to the trust established under the Trust Agreement dated
as of December 18, 1986 (the "1986 Trust") between the Company, as grantor,
and William E. Reichard, as successor trustee, to provide a sufficient
reserve for the discharge of its obligation to pay the retirement benefit to
the Executive as provided in clause (i) of this Section 3(c) and clauses (ii)
and (iii) of Section 5(a) hereof.
(d) Expense Reimbursement. The Company shall
promptly pay, or reimburse the Executive for, all ordinary and necessary
business expenses incurred by him in the performance of his duties hereunder,
provided that the Executive properly accounts for them in accordance with
Company policy.
<PAGE> 62
(e) Other Benefit Plans, Fringe Benefits, and
Vacations
(i) The Executive shall be eligible to
participate in each of the Company's present employee benefit plans,
policies or arrangements and any such plans, policies or arrangements
that the Company may maintain or establish during the Employment Term and
receive all fringe benefits and vacations for which his position makes him
eligible in accordance with the Company's usual policies and the terms
and provisions of such plans, policies or arrangements.
(ii) The Company shall not terminate or
change, in such a way as to adversely affect the Executive's rights or reduce
his benefits, any employee benefit plan, policy or arrangement now in effect
or which may hereafter be established and in which the Executive is eligible
to participate, including, without limitation, the Company's profit sharing,
life insurance, disability and stock option plans, unless a plan, policy
or arrangement providing the Executive with at least equivalent rights
and benefits has been established.
(iii) From and after the last day of the
Employment Term, the Executive shall be entitled to participate in each of
the Company's employee benefit plans, policies or arrangements which provide
medical coverage and similar benefits to the Company's executive officers
(the "Company Medical Plan") on the same basis as the Company's other
executive officers. The Company shall bear the cost of medical coverage and
benefits during the Consultation Period (as defined below); thereafter,
the Executive shall bear such cost. After the Executive is eligible for
Medicare and the Company becomes a secondary payor (or its equivalent)
pursuant to Medicare or other applicable law, the Company shall provide
secondary medical coverage and benefits. If continued coverage under the
Company Medical Plan is not possible under the terms of any insurance policy
or applicable law following the Employment Term, the Company shall provide
the Executive with coverage equivalent to that provided to the Company's
other executive officers under a policy or arrangement acceptable to the
Executive. In the event of the Executive's death before the end of the
Consultation Period, the Company shall continue to provide such primary
and secondary medical coverage, as applicable, and benefits to the
Executive's spouse and dependents for the remainder of the Consultation
Period on the same basis as provided to the Company's other executive
officers.
4. Consultation Period. From and after the last day of
the Employment Term and for a period of five years thereafter
(the "Consultation Period"), the Executive shall serve as a consultant to
the Company with respect to such business matters and at such times (not
more than four days per month and not more than two consecutive days per
week) as the Company may reasonably request within Harris County, Texas;
provided, however, that if the Consultant does not reside in Harris County,
he may perform his consulting duties hereunder at his then place of
residence and shall be required to come to Harris County not more than one
day in each calendar month. During the Consultation Period, the Company
shall pay the Executive (in addition to any other amounts to which he is
<PAGE> 63
entitled pursuant to this Agreement) a consulting fee, in substantially
equal biweekly installments, at the rate of $139,854 per year increased by
an amount determined by multiplying $139,854 by the percentage increase, if
any, in the cost of living between January 1, 1995 and the January 1
immediately preceding the date of commencement of the Consultation Period,
as reflected by the Consumer Price Index. The amount of the consulting fee
shall be increased on each January 1 during the Consultation Period by an
amount determined by multiplying the amount of the consulting fee paid in
the preceding year by the percentage increase, if any, in the cost of
living from the preceding January 1, as reflected by the Consumer Price
Index. During the Consultation Period, the Executive shall be reimbursed up
to an amount not to exceed $50,000 during each year of the Consultation
Period for any expenses incurred by the Executive for (i) the maintenance
of an office that shall be located other than at the Company's offices and
(ii) secretarial assistance, such expenses to be billed and paid monthly.
During the Consultation Period, the Executive shall not be required to
undertake any assignment inconsistent with the dignity, importance and
scope of his prior positions or with his physical and mental health at the
time. It is expressly understood between the parties that during the
Consultation Period, the Executive shall be an independent contractor and
shall not be subject to the direction, control, or supervision of the
Company. The provisions of Sections 5, 6 and 7 hereof shall continue to
apply to the Executive during the Consultation Period.
. 5. Termination.
(a) Death and Disability
(i) The Executive's employment hereunder shall
terminate upon his death or upon his becoming Totally Disabled. For purposes
of this Agreement, the Executive shall be "Totally Disabled" if he is
physically or mentally incapacitated so as to render him incapable of
performing his usual and customary duties as an executive (for the
Company or otherwise). The Executive's receipt of Social Security disability
benefits shall be deemed conclusive evidence of Total Disability for purposes
of this Agreement; provided, however, that in the absence of his receipt of
such Social Security benefits, the Board of Directors of the Company may,
in its sole discretion, but based upon appropriate medical evidence,
determine that the Executive is Totally Disabled.
(ii) In the event that the Executive is Totally
Disabled before his retirement benefit pursuant to Section 3(c) hereof has
commenced to be distributed (whether or not he is in the employ of the
Company at the time he is so Totally Disabled), such benefit shall commence
to be distributed to him on the first day of the month next following his
Total Disability, as if such payments had commenced at his Commencement
Date.
<PAGE> 64
(iii) In the event of the Executive's death (while
Totally Disabled or otherwise) after his retirement benefit has commenced to
be distributed pursuant to Section 3(c) hereof or subparagraph (ii) above,
as applicable, the Company shall continue to pay such retirement benefit
to his Beneficiary for her life. If the Executive's retirement benefit
pursuant to Section 3(c) hereof has not commenced to be distributed on the
date of his death, such benefit shall commence to be distributed to his
Beneficiary for her life on the first day of the month next following
his date of death, as if such payments had commenced at his
Commencement Date. For purposes of this Agreement, the Executive's
"Beneficiary" shall be deemed to be his spouse; if his spouse predeceases
him (or if he is not married at the time of his death), his Beneficiary
shall be deemed to be his estate which shall receive, in lieu of the
payments otherwise payable to the Executive's spouse hereunder, a lump
sum cash payment equal to the actuarial present value (determined on the
basis of a 6 percent per annum interest rate assumption and no decrement
for mortality) of the payments that would have been made to a spouse for her
life, assuming that such spouse was three years younger than the Executive
on his date of death. If the Executive predeceases his spouse, upon her
death, a lump sum cash payment equal to the amount of any cash and present
value of all property (including any annuity contracts) owned by the
1986 Trust as of the date of her death shall be paid by the Company to his
spouse's estate or any beneficiary or beneficiaries designated in her last
will and testament as soon as practicable after such calculation is
completed. The acturial present value of any annuity contracts shall be
calculated by the insurance company that issued such contract or, if any
such insurance company cannot supply such present value, by an enrolled
actuary.
(b) The Executive's employment hereunder may be
terminated for Cause. For purposes of this Agreement, the term "Cause" shall
mean (i) the Executive's continuing willful failure to perform his duties
hereunder (other than as a result of total or partial incapacity due to
physical or mental illness), (ii) gross negligence or malfeasance by the
Executive in the performance of his duties hereunder, (iii) an act or
acts on the Executive's part constituting a felony under the laws of the
United States or any state thereof which results or was intended to
result directly or indirectly in gain or personal enrichment by the
Executive at the expense of the Company, or (iv) breach of the
provisions of Section 6(b) hereof.
(c) Without Cause. If the Executive's employment
or his retention as a consultant hereunder is terminated without Cause, as
soon as practicable (but not later than 30 days) after such termination,
he shall receive a lump sum cash payment equal to the sum of: (i) an amount
equal to his highest monthly Base Salary during the Employment Term prior
to such termination multiplied by the number of months remaining in the
Employment Term (but by not less than thirty-six months if such termination
occurs during the Employment Term); (ii) if such termination occurs during
<PAGE> 65
the Employment Term, an amount equal to the bonuses paid pursuant to
Section 3(a)(ii) hereof and Appendix A hereto or otherwise, whether or not
deferred, in respect of the most recently completed three calendar years;
(iii) an amount equal to the actuarial present value (determined on the
basis of a 6 percent per annum interest rate assumption and no decrement
for mortality) of the retirement benefit payments payable to him under
Section 3(c), commencing on the Commencement Date (or, if such payments
have commenced, such actuarial present value of the remaining payments);
and (iv) an amount equal to the consulting fees due him under Section 4 for
the term or remainder of the Consultation Period.
(d) Change in Control.
(i) If a Change in Control Event (as defined in
Appendix B hereto) occurs, the Executive shall (A) if he so elects by written
notice to the Company within 360 days after such Change in Control Event,
be entitled to terminate his employment, if not already terminated by the
Company, and, in either event, receive the amounts set forth in
paragraph (c) above (excluding the amount of the retirement benefit
described in Section 5(c)(iii)) within the time period specified in
subparagraph (iii) below, as if the Company had terminated his employment
without Cause, and (B) if he so elects by written notice to the Company
within 360 days after the occurrence of such Change in Control Event,
cause the Company to purchase the Executive's principal residence at its
fair market value. For purposes of this Agreement, such fair market value
shall be determined by two independent real estate firms, one of which
shall be selected by the Executive and one by the Company. If such real
estate firms fail to agree on such fair market value, the two firms so
selected shall select a third firm mutually acceptable to them and such
third firm's determination of fair market value shall be binding for all
purposes.
(ii) Notwithstanding anything to the contrary
herein, if the aggregate amounts payable pursuant to subparagraph (i)
of paragraph (d) hereof would cause any payment under such subparagraph
(i) to be subject to an excise tax as an "excess parachute payment"
under Section 4999 of the Code, such aggregate amounts payable hereunder
shall be reduced by the smallest amount necessary to ensure that
no payment hereunder shall be so treated under such Section 4999. Prior
to effecting such reduction, the Company shall give the Executive 30
days' written notice of the fact, amount and basis of such reduction, as
well as a determination of the shortest period of time over which such
aggregate amounts may be paid and not be treated as "excess parachute
payments." The Executive shall then have 30 days within which to elect in
writing to (A) receive a lump sum payment, reduced pursuant to the first
sentence hereof, or (B) receive the aggregate amounts payable pursuant to
subparagraph (i) hereof in annual installments over the time period set
forth in the Company's notice. In making the determinations called for
in this subparagraph (ii), the parties hereto shall rely conclusively
<PAGE> 66
on (1) the opinion of Hay-Huggins, or such other consulting firm as the
Company shall designate (with the written consent of the Executive)
within one year of the date hereof as to the amount of the Executive's
compensation which constitutes "reasonable compensation" for purposes of
Section 280G of the Code, and (2) the opinion of Kwasha Lipton, or such
other actuarial firm as the Company shall designate (with the written
consent of the Executive) within one year of the date hereof as to any
present value calculations under Section 280G of the Code. The Company
shall bear all costs associated with obtaining such opinions.
(iii) The amounts payable pursuant to this
paragraph (d) shall be paid (or commence to be paid) to the Executive not
later than 10 days after he notifies the Company under subparagraph (ii)
above whether he wishes to receive such amounts in a lump sum or in
installments or, if no notice is given by the Company under subparagraph
(ii) above, within 30 days after the Executive gives notice to the Company
under subparagraph (i) above.
(iv) In addition to all other rights granted
him under this paragraph (d), if a Control Change (as defined in paragraph
(c) of Appendix B hereto) occurs, the Executive shall be entitled to elect
to terminate his employment with the Company upon written notice to the
Company, effective not more than 10 days after such election. In such
event, (A) the Consultation Period shall commence immediately upon
termination of employment and shall cease five years thereafter, (B) the
Executive shall be entitled to elect at any time to have payment of his
retirement benefit commence on the Early Commencement Date in an amount
determined in accordance with the provisions of Section 3(c) hereof, and
(C) the Company shall promptly, but not later than 10 days after such
election, transfer sufficient assets to the 1986 Trust so that the assets
of the 1986 Trust are then sufficient to discharge the obligations for the
consulting fees and retirement benefits due him in full.
6. Covenants.
(a) Confidentiality. The Executive acknowledges
that he has acquired and will acquire confidential information respecting
the business of the Company. Accordingly, the Executive agrees that,
without the written consent of the Company as authorized by its Board of
Directors, he will not, at any time, willfully disclose any such
confidential information to any unauthorized third party with an
intent that such disclosure will result in financial benefit to the
Executive or to any person other than the Company. For this purpose,
information shall be considered confidential only if such information is
uniquely proprietary to the Company and has not been made publicly
available prior to its disclosure by the Executive.
<PAGE> 67
(b) Competitive Activity. Until the end of the
Consultation Period, the Executive shall not, without the consent of the
Board of Directors of the Company, directly or indirectly, knowingly engage
or be interested in (as owner, partner, shareholder, employee, director,
officer, agent, consultant or otherwise), with or without compensation, any
business which (i) is in competition with any line of business being actively
conducted by the Company or any of its affiliates or subsidiaries during
the Employment Term or Consultation Period, or (ii) shall hire any person
who was employed by the Company or any of its affiliates or subsidiaries
within the six-month period preceding such hiring, except for any employee
whose annual rate of compensation is not in excess of $55,000. Nothing
herein, however, shall prohibit the Executive from acquiring or holding
not more than one percent of any class of publicly traded securities of
any such business.
(c) Remedy for Breach. The Executive acknowledges
that the provisions of this Section 6 are reasonable and necessary for the
protection of the Company and that the Company will be irrevocably damaged
if such covenants are not specifically enforced. Accordingly, the Executive
agrees that, in addition to any other relief to which the Company may be
entitled, the Company shall be entitled to seek and obtain injunctive
relief (without the requirement of any bond) from a court of competent
jurisdiction for the purposes of restraining the Executive from any
actual or threatened breach of such covenants. Notwithstanding anything to
the contrary herein, the provisions of this Section 6 shall cease to apply
to the Executive if his employment hereunder terminates without Cause or
following a Change in Control Event. In addition, in the event that
the Executive breaches the provisions of this Section 6 during the
Consultation Period, the Company's sole remedy shall be to terminate the
Executive for Cause.
7. Miscellaneous.
(a) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware
applicable to agreements made and to be performed in that State.
(b) Notices. Any notice, consent or other
communication made or given in connection with this Agreement shall be in
writing and shall be deemed to have been duly given when delivered by
United States registered or certified mail, return receipt requested, to
the parties at the following addresses or at such other address as a party
may specify by notice to the other.
To the Executive:
11110 Greenbay
Houston, Texas 77024
<PAGE> 68
To the Company:
U.S. Home Corporation
1800 West Loop South
Houston, Texas 77252
Attention: Secretary
(c) Entire Agreement; Amendment. This Agreement
shall supersede any and all existing agreements between the Executive and
the Company or any of its affiliates or subsidiaries relating to the
terms of his employment. It may not be amended except by a written
agreement signed by both parties.
(d) Waiver. The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion shall not be
considered a waiver thereof or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.
(e) Assignment. Except as otherwise provided in
this paragraph, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, representatives,
successors and assigns. This Agreement shall not be assignable by the
Executive, and shall be assignable by the Company only to any corporation
or other entity resulting from the reorganization, merger or consolidation
of the Company with any other corporation or entity or any corporation or
entity to which the Company may sell all or substantially all of its assets,
and it must be so assigned by the Company to, and accepted as binding upon
it by, such other corporation or entity in connection with any such
reorganization, merger, consolidation or sale.
(f) Litigation Costs. In the event that the
Executive shall successfully prosecute a judicial proceeding to enforce any
provision of this Agreement, in addition to any other relief awarded the
Executive by the court in such action, the parties agree that the
judgment rendered shall award the Executive all of his attorneys'
fees, disbursements and other costs incurred by the Executive in
prosecuting such suit.
(g) Separability. If any provision of this
Agreement is invalid or unenforceable, the balance of the Agreement shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.
<PAGE> 69
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amended and Restated Employment and Consulting Agreement and
Appendices A and B thereto as evidence of their adoption this 17th day of
October, 1995.
U.S. HOME CORPORATION
By \s\ Isaac Heimbinder
----------------------------------------
Name: Isaac Heimbinder
Title: President, Co-Chief
Executive Officer and
Chief Operating Officer
EXECUTIVE:
By \s\ Robert J. Strudler
---------------------------------------
Name: Robert J. Strudler
<PAGE> 70
Appendix A
This Appendix A is attached to and shall form a part of
the Amended and Restated Employment and Consulting Agreement, dated October
17, 1995, by and between U.S. Home Corporation (the "Company"), and Robert
J. Strudler (the "Executive").
(a) The Executive's bonus, if any, for each calendar year
during the Employment Term commencing with the 1995 calendar year shall be
an amount equal to:
(i) one-half (1/2) of one percent (1%) of the first
$10,000,000 of the Company's Pre-Tax Income for such year, plus
(ii) three-fourths (3/4) of one percent (1%) of the
next $10,000,000 of the Company's Pre-Tax Income for such year, plus
(iii) one percent (1%) of the Company's Pre-Tax Income
for such year in excess of $20,000,000.
(b) In the event that the Executive's employment hereunder
is terminated for any reason prior to the end of a calendar year, including
the expiration of the Employment Term, his bonus for such year shall be an
amount, estimated in good faith by the Board of Directors of the Company
based on reasonable assumptions and projections, but without the benefit
of the report referred to in paragraph (c) below, equal to the bonus
otherwise determined pursuant to this Appendix A, multiplied by a fraction,
the numerator of which is the number of calendar months during such year
in which the Executive was employed by the Company for at least one business
day, and the denominator of which is 12.
(c) For purposes of this Agreement, the Company's
"Pre-Tax Income" for any year shall mean the income of the Company and its
consolidated and unconsolidated subsidiaries for such year, as reported by
the Company and certified by its independent certified public accountants,
except that no deduction shall be made for the bonus payable pursuant to
this Appendix A and Section 3(a)(ii) hereof for such year or for Federal
income and State and local franchise, gross receipts, or income taxes.
U.S. HOME CORPORATION
By \s\ Isaac Heimbinder
------------------------------
Name: Isaac Heimbinder
Title: President, Chief
Executive Officer and
Chief Operating Officer
EXECUTIVE:
By \s\ Robert J. Strudler
------------------------------
Name: Robert J. Strudler
<PAGE> 71
Appendix B
This Appendix B is attached to and shall form a part of
the Amended and Restated Employment and Consulting Agreement, dated October
17, 1995, by and between U.S. Home Corporation (the "Company"), and Robert
J. Strudler (the "Executive").
(a) For purposes of this Agreement, a "Change in Control
Event" shall occur when a "Control Change" (as defined in paragraph (c)
below) is followed within two years by a "Material Change" (as defined in
paragraph (b) below).
(b) A "Material Change" shall occur if:
(i) the Executive's employment hereunder is
terminated without Cause;
(ii) the Company makes any change in the Executive's
functions, duties or responsibilities from the position that the Executive
occupied on the date hereof or, if this Agreement has been renewed or
extended, the date of the last renewal or extension, but only if such change
would cause:
(A) the Executive to report to anyone other
than the Board of Directors of the Company,
(B) the Executive to no longer be the Chairman
of the Board of Directors and Co-Chief Executive Officer of the Company,
(C) even if the Executive maintains the
positions of Chairman of the Board of Directors and Co-Chief Executive
Officer, his responsibilities to be reduced from those in effect on the
date hereof or the date of the last renewal or extension of this Agreement,
as applicable, or to no longer be commensurate with those of the Co-Chief
Executive Officer of a company with gross annual sales of at least $800
million, or
(D) the Executive's position with the Company
to become one of lesser importance or scope;
(iii) the Company assigns or reassigns the Executive
(without his written permission) to another place of employment which is
more than 10 miles from his place of employment on the date hereof or the
date of the last renewal or extension of this Agreement, as applicable, and
which is not the corporate headquarters of the Company; or
(iv) the Company reduces the Executive's Base Salary
or otherwise breaches the terms of this Agreement.
(c) A "Control Change" shall occur if:
(i) a report on Schedule 13D is filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing that
any person (within the meaning of Section 13(d) of the Exchange Act),
other than the Company (or one of its subsidiaries) or any employee
benefit plan sponsored by the Company (or one of its subsidiaries), is the
<PAGE> 72
beneficial owner, directly or indirectly, of 15 percent or more of the
combined voting power of the then-outstanding securities of the Company;
(ii) any person (within the meaning of Section 13(d)
of the Exchange Act), other than the Company (or one of its subsidiaries)
or any employee benefit plan sponsored by the Company (or one of its
subsidiaries), shall purchase securities pursuant to a tender offer or
exchange offer to acquire any common stock of the Company (or securities
convertible into common stock) for cash, securities or any other
consideration, provided that after consummation of the offer, the person
in question is the beneficial owner (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of 15 percent or more of
the combined voting power of the then-outstanding securities of the
Company (as determined under paragraph (d) of Rule 13d-3 under the Exchange
Act, in the case of rights to acquire common stock);
(iii) the stockholders of the Company shall approve
(A) any consolidation or merger of the Company (1) in which the Company
is not the continuing or surviving corporation, (2) pursuant to which
shares of common stock of the Company would be converted into cash,
securities or other property, or (3) with a corporation which prior to such
consolidation or merger owned 15 percent or more of the cumulative voting
power of the then-outstanding securities of the Company, or (B) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Company; or
(iv) there shall have been a change in a majority
of the members of the Board of Directors of the Company within a 12-month
period, unless the election or nomination for election by the Company's
stockholders of each new director during such 12-month period was approved
by the vote of two-thirds of the directors then still in office who were
directors at the beginning of such 12-month period.
(d) Notwithstanding the foregoing, the issuance by the
Company of shares of Common Stock of the Company, $.01 par value per share,
convertible preferred stock of the Company, $.10 par value per share, and
Class B Warrants aggregating 15% or more of the combined voting power of
the Company to any one beneficial owner (as such term is used in Rule 13d-3
under the Securities Exchange Act of 1934, as amended) who is a holder of
claims or interests pursuant to the First Amended Consolidated Plan of
Reorganization of the Company and certain of its affiliates, as modified,
filed with the United States Bankruptcy Court for the Southern District of
New York (the "USH Plan") in exchange for such claims or interests shall
not be deemed to constitute a Control Change unless such person
subsequently increases its percentage beneficial ownership above the
percentage amount received pursuant to the USH Plan. Shares of common
stock, preferred stock and Class B Warrants acquired pursuant to the USH
Plan by creditors or stockholders for their claims or interests, though
<PAGE> 73
less than 15% of the combined voting power of the Company, shall be
included in determining whether a person through acquisition of additional
shares, whether through purchase, exchange or otherwise, on or after the
Effective Date has subsequently become the beneficial owner of 15% or more
of the combined voting power of the Company, which shall, in such event,
constitute a Control Change.
U.S. HOME CORPORATION
By \s\ Isaac Heimbinder
------------------------------
Name: Isaac Heimbinder
Title: President, Co-Chief
Executive Officer and
Chief Operating Officer
EXECUTIVE:
By \s\ Robert J. Strudler
-------------------------------
Name: Robert J. Strudler
<PAGE> 74
EXHIBIT 10.4
AMENDED AND RESTATED EMPLOYMENT
AND CONSULTING AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AND CONSULTING AGREEMENT,
dated as of October 17, 1995, by and between U.S. Home Corporation (the
"Company"), and Isaac Heimbinder (the "Executive").
WHEREAS, the Company and the Executive are parties to an
Employment and Consulting Agreement, dated May 12, 1986, as amended by (i)
the First Amendment to Employment and Consulting Agreement dated February
8, 1990, (ii) the Second Amendment to Employment and Consulting Agreement,
dated December 6, 1990, and (iii) the Third Amendment to Employment and
Consulting Agreement, dated May 25, 1993 (collectively, the "Agreement").
WHEREAS, the Company and the Executive desire to amend
and restate the Agreement as hereinafter provided.
WHEREAS, Section 7(c) of the Agreement permits such
amendment by written agreement of both parties.
NOW, THEREFORE, the Company and the Executive agree to
amend and restate the Agreement as follows:
1. Employment and Duties. The Company shall employ the
Executive, and the Executive shall be employed by the Company, as
President, Co-Chief Executive Officer and Chief Operating Officer at the
Company's headquarters in Houston, Texas (or such other location as shall
be mutually satisfactory to the Executive and the Company) for the term of
this Agreement. In these capacities, the Executive shall devote
substantially all of his business time and energies to the business of the
Company and shall perform such services as shall from time to time be
assigned to him by the Board of Directors of the Company.
2. Term. The term of the Executive's employment hereunder
shall continue until June 20, 1999; provided, however, that, unless either
party otherwise elects by notice in writing delivered to the other at least
90 days prior to June 20, 1999, or any subsequent anniversary of June 20,
1999, such term shall be automatically renewed for successive one-year
terms unless sooner terminated by the Executive's voluntary resignation or
otherwise terminated pursuant to the terms of this Agreement (the
"Employment Term").
3. Compensation and Benefits.
(a) Compensation. During each calendar year of the
Employment Term, the Company shall pay the Executive: (i) a base salary
at a rate of $415,000 per year (the "Base Salary"), payable in
substantially equal biweekly installments, and (ii) any cash bonus to which
he is entitled pursuant to the provisions of Appendix A hereto, payable as
<PAGE> 75
promptly as practicable after the end of each such calendar year, but
in any event by April 15 of the following year. Notwithstanding the
foregoing, if the Executive's applicable employee remuneration (as defined
in Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code")) for any taxable year would exceed the higher of $1 million or the
maximum amount deductible by the Company under Section 162(m) for such
taxable year, the amount otherwise payable shall be reduced to the higher
of $1 million or the maximum amount deductible under Section 162(m) and
the excess shall be deferred until the expiration of the Employment Term
and shall be payable in a cash lump sum on April 16 of the first year of
the Consultation Period. The deferred compensation shall accrue interest
at the same rate charged the Company from time to time under the Credit
Agreement, dated as of September 29, 1995, among the Company, the
First National Bank of Chicago, as agent, and certain lenders named therein,
as amended, restated, supplemented or otherwise modified from time to
time, or any successor facility. The Executive's Base Salary and bonus
shall be reviewed at least annually by the Board of Directors of the
Company, or pursuant to its delegation, and (i) at a minimum, the Board
shall increase the Base Salary annually commencing with the 1996 calendar
year by an amount determined by multiplying the current Base Salary by the
percentage increase in the Consumer Price Index -- U.S. City Average
published by the Bureau of Labor Statistics of the United States Department
of Labor (or if that Index is no longer published, by any substantially
equivalent successor thereto) (the "Consumer Price Index") in the preceding
calendar year and (ii) the Board may increase the bonus from time to time.
(b) Stock Options. On October 17, 1995, the
Executive was granted an option (the "Option") to purchase 50,000 shares of
the Company's common stock, $.01 par value per share (the "Common Stock"),
pursuant to the Company's 1993 Employee's Stock Option Plan. Such Option
shall be an "incentive stock option" within the meaning of Section 422 of
the Code to the extent permitted by Section 422(d) of the Code; to the
extent not permitted by Section 422(d), the remaining portion of the Option
shall be a nonqualified stock option. The Option shall be for a term of ten
years from, and shall be exercisable immediately at the fair market value
of the Common Stock on, the date of grant.
(c) Retirement Benefit.
(i) In consideration of the Executive's past
services to the Company, the Executive shall be entitled to a retirement
benefit, payable monthly for his life, in an amount equal to 50 percent
of his highest monthly Base Salary during the Employment Term. Such
payments shall commence on the first day of the month coincident with
or next following the later of the Executive's attainment of age 58 or
the end of the Employment Term (the "Commencement Date"); provided,
however, that if the Employment Term terminates prior to his attainment
of age 58, the Executive may elect by written notice to the Company to have
such payments commence on the first day of any month after such
termination of employment (the "Early Commencement Date") in a monthly
amount equal to the monthly amount that the Executive would have received
<PAGE> 76
at the Commencement Date, reduced by one-third of one percent (.33%) per
month for each month by which the Early Commencement Date precedes the
Commencement Date. The amount of each payment hereunder shall be
increased on each January 1 following the Early Commencement Date or
Commencement Date, as applicable, by an amount determined by
multiplying the amount of each monthly payment made in the preceding year
by the percentage increase, if any, in the cost of living from the
preceding January 1, as reflected by the Consumer Price Index. The
Executive's election to have his retirement benefit payments commence on
the Early Commencement Date shall not affect the Company's obligation to
pay consulting fees to the Executive in accordance with Section 4 hereof.
The retirement benefit shall be an
unconditional, but unsecured, general credit obligation of the Company to
the Executive, and nothing contained in this Agreement, and no action
taken pursuant to it, shall create or be construed to create a trust
of any kind between the Company and the Executive. The Executive shall
have no right, title or interest whatever in or to any investments which
the Company may make (including, but not limited to, an insurance policy
on the life of the Executive) to aid it in meeting its obligations hereunder.
(ii) From time to time, the Company shall
make such contributions to the trust established under the Trust Agreement
dated as of December 18, 1986 (the "1986 Trust") between the Company, as
grantor, and William E. Reichard, as successor trustee, to provide a
sufficient reserve for the discharge of its obligation to pay the retirement
benefit to the Executive as provided in clause (i) of this Section 3(c) and
clauses (ii) and (iii) of Section 5(a) hereof.
(d) Expense Reimbursement. The Company shall promptly
pay, or reimburse the Executive for, all ordinary and necessary business
expenses incurred by him in the performance of his duties hereunder,
provided that the Executive properly accounts for them in accordance with
Company policy.
(e) Other Benefit Plans, Fringe Benefits, and Vacations.
(i) The Executive shall be eligible to participate
in each of the Company's present employee benefit plans, policies or
arrangements and any such plans, policies or arrangements that the
Company may maintain or establish during the Employment Term and receive
all fringe benefits and vacations for which his position makes him eligible
in accordance with the Company's usual policies and the terms and
provisions of such plans, policies or arrangements.
(ii) The Company shall not terminate or change, in
such a way as to adversely affect the Executive's rights or reduce his
benefits, any employee benefit plan, policy or arrangement now in
effect or which may hereafter be established and in which the Executive is
eligible to participate, including, without limitation, the Company's
profit sharing, life insurance, disability and stock option plans, unless
a plan, policy or arrangement providing the Executive with at least
equivalent rights and benefits has been established.
<PAGE> 77
(iii) From and after the last day of the Employment
Term, the Executive shall be entitled to participate in each of the
Company's employee benefit plans, policies or arrangements which provide
medical coverage and similar benefits to the Company's executive officers
(the "Company Medical Plan") on the same basis as the Company's other
executive officers. The Company shall bear the cost of medical coverage and
benefits during the Consultation Period (as defined below); thereafter,
the Executive shall bear such cost. After the Executive is eligible for
Medicare and the Company becomes a secondary payor (or its equivalent)
pursuant to Medicare or other applicable law, the Company shall provide
secondary medical coverage and benefits. If coverage under the Company
Medical Plan is not possible under the terms of any insurance policy
or applicable law following the Employment Term, the Company shall provide
the Executive with coverage equivalent to that provided to the Company's
other executive officers under a policy or arrangement acceptable to the
Executive. In the event of the Executive's death before the end of the
Consultation Period, the Company shall continue to provide such primary and
secondary medical coverage, as applicable, and benefits to the Executive's
spouse and dependents for the remainder of the Consultation Period on the
same basis as provided to the Company's other executive officers.
4. Consultation Period. From and after the last day of
the Employment Term and for a period of five years thereafter (the
"Consultation Period"), the Executive shall serve as a consultant to the
Company with respect to such business matters and at such times (not more
than four days per month and not more than two consecutive days per week)
as the Company may reasonably request within Harris County, Texas,
provided, however, that if the Consultant does not reside in Harris County,
he may perform his consulting duties hereunder at his then place of
residence and shall be required to come to Harris County not more than one
day in each calendar month. During the Consultation Period, the Company
shall pay the Executive (in addition to any other amounts to which he is
entitled pursuant to this Agreement) a consulting fee, in substantially
equal biweekly installments, at the rate of $134,260 per year increased by
an amount determined by multiplying $134,260 by the percentage increase, if
any, in the cost of living between January 1, 1995 and the January 1
immediately preceding the date of commencement of the Consultation Period,
as reflected by the Consumer Price Index. The amount of the consulting fee
shall be increased on each January 1 during the Consultation Period by an
amount determined by multiplying the amount of the consulting fee paid in
the preceding year by the percentage increase, if any, in the cost of
living from the preceding January 1, as reflected by the Consumer Price
Index. During the Consultation Period, the Executive shall not be required
to undertake any assignment inconsistent with the dignity, importance and
scope of his prior positions or with his physical and mental health at the
time. It is expressly understood between the parties that during the
Consultation Period, the Executive shall be an independent contractor and
shall not be subject to the direction, control, or supervision of the
Company. The provisions of Sections 5, 6 and 7 hereof shall continue to
apply to the Executive during the Consultation Period.
<PAGE> 78
5. Termination.
(a) Death and Disability.
(i) The Executive's employment hereunder shall
terminate upon his death or upon his becoming Totally Disabled. For
purposes of this Agreement, the Executive shall be "Totally Disabled" if
he is physically or mentally incapacitated so as to render him incapable of
performing his usual and customary duties as an executive (for the Company
or otherwise). The Executive's receipt of Social Security disability
benefits shall be deemed conclusive evidence of Total Disability for
purposes of this Agreement; provided, however, that in the absence of his
receipt of such Social Security benefits, the Board of Directors of the
Company may, in its sole discretion, but based upon appropriate medical
evidence, determine that the Executive is Totally Disabled.
(ii) In the event that the Executive is Totally
Disabled before his retirement benefit pursuant to Section 3(c) hereof has
commenced to be distributed (whether or not he is in the employ of the
Company at the time he is so Totally Disabled), such benefit shall commence
to be distributed to him on the first day of the month next following his
Total Disability, as if such payments had commenced at his Commencement
Date. In the event of the Executive's death (while Totally Disabled
or otherwise) after his retirement benefit has commenced to be distributed
pursuant to Section 3(c) hereof or subparagraph (ii) above, as applicable,
the Company shall continue to pay such retirement benefit to his Beneficiary
for her life. If the Executive's retirement benefit pursuant to Section 3(c)
hereof has not commenced to be distributed on the date of his death, such
benefit shall commence to be distributed to his Beneficiary for her life on
the first day of the month next following his date of death, as if such
payments had commenced at his Commencement Date. For purposes of this
Agreement, the Executive's "Beneficiary" shall be deemed to be his spouse;
if his spouse predeceases him (or if he is not married at the time of his
death), his Beneficiary shall be deemed to be his estate which shall
receive, in lieu of the payments otherwise payable to the Executive's spouse
hereunder, a lump sum cash payment equal to the actuarial present value
(determined on the basis of a 6 percent per annum interest rate assumption
and no decrement for mortality) of the payments that would have been
made to a spouse for her life, assuming that such spouse was three years
younger than the Executive on his date of death. If the Executive
predeceases his spouse, upon her death, a lump sum cash payment equal to
the amount of any cash and the present value of all property (including
any annuity contracts) owned by the 1986 Trust as of the date of her
death shall be paid by the Company to his spouse's estate or any
beneficiary or beneficiaries designated in her last will and testament
as soon as practicable after such calculation is completed. The actuarial
present value of any annuity contracts shall be calculated by the insurance
company that issued such contract or, if any such insurance company cannot
supply such present value, by an enrolled actuary.
<PAGE> 79
(b) For Cause. The Executive's employment hereunder may
be terminated for Cause. For purposes of this Agreement, the term
"Cause" shall mean (i) the Executive's continuing willful failure to
perform his duties hereunder (other than as a result of total or partial
incapacity due to physical or mental illness), (ii) gross negligence or
malfeasance by the Executive in the performance of his duties hereunder,
(iii) an act or acts on the Executive's part constituting a felony under
the laws of the United States or any state thereof which results or was
intended to result directly or indirectly in gain or personal enrichment
by the Executive at the expense of the Company, or (iv) breach of the
provisions of Section 6(b) hereof.
(c) Without Cause. If the Executive's employment or his
retention as a consultant hereunder is terminated without Cause, as soon
as practicable (but not later than 30 days) after such termination, he
shall receive a lump sum cash payment equal to the sum of: (i) an amount
equal to his highest monthly Base Salary during the Employment Term prior
to such termination multiplied by the number of months remaining in the
Employment Term (but by not less than thirty-six months if such
termination occurs during the Employment Term); (ii) if such termination
occurs during the Employment Term, an amount equal to the bonuses paid
pursuant to Section 3(a)(ii) hereof and Appendix A hereto or otherwise,
whether or not deferred, in respect of the most recently completed three
calendar years; (iii) an amount equal to the actuarial present value
(determined on the basis of a 6 percent per annum interest rate assumption
and no decrement for mortality) of the retirement benefit payments payable
to him under Section 3(c), commencing on the Commencement Date (or if such
payments have commenced, such actuarial present value of the remaining
payments); and (iv) an amount equal to the consulting fees due him under
Section 4 for the term or remainder of the Consultation Period. For
purposes of this Agreement, the Executive will be deemed to be terminated
without Cause upon the (i) failure to elect the Executive to the office of
chairman and chief executive officer of the Company in the event of a
vacancy in such office for any reason and (ii) resignation of the Executive
within 180 days of such vacancy.
(d) Change in Control.
(i) If a Change in Control Event (as defined in
Appendix B hereto) occurs, the Executive shall (A) if he so elects by
written notice to the Company within 360 days after such Change in
Control Event, be entitled to terminate his employment, if not already
terminated by the Company, and, in either event, receive the a mounts set
forth in paragraph (c) above (excluding the amount of the retirement
benefit described in Section 5(c)(iii)) within the time period specified
in subparagraph (iii) below, as if the Company had terminated his employment
without Cause, and (B) if he so elects by written notice to the Company
within 360 days after the occurrence of such Change in Control Event,
cause the Company to purchase the Executive's principal residence at its
fair market value. For purposes of this Agreement, such fair market value
shall be determined by two independent real estate firms, one of which
shall be selected by the Executive and one by the Company. If such real
estate firms fail to agree on such fair market value, the two firms so
selected shall select a third firm mutually acceptable to them and such
third firm's determination of fair market value shall be binding for all
purposes.
<PAGE> 80
(ii) Notwithstanding anything to the contrary herein,
if the aggregate amounts payable pursuant to subparagraph (i) of paragraph
(d) hereof would cause any payment under such subparagraph (i) to be subject
to an excise tax as an "excess parachute payment" under Section 4999
of the Code, such aggregate amounts payable hereunder shall be reduced by
the smallest amount necessary to ensure that no payment hereunder shall be
so treated under such Section 4999. Prior to effecting such reduction,
the Company shall give the Executive 30 days' written notice of the fact,
amount and basis of such reduction, as well as a determination of the
shortest period of time over which such aggregate amounts may be paid and
not be treated as "excess parachute payments." The Executive shall then
have 30 days within which to elect in writing to (A) receive a lump sum
payment, reduced pursuant to the first sentence hereof, or (B) receive
the aggregate amounts payable pursuant to subparagraph (i) hereof in annual
installments over the time period set forth in the Company's notice. In
making the determinations called for in this subparagraph (ii), the parties
hereto shall rely conclusively on (1) the opinion of Hay-Huggins, or such
other consulting firm as the Company shall designate (with the written
consent of the Executive) within one year of the date hereof, as to the
amount of the Executive's compensation which constitutes "reasonable
compensation" for purposes of Section 280G of the Code, and (2) the opinion
of Kwasha Lipton, or such other actuarial firm as the Company shall designate
(with the written consent of the Executive) within one year of the date
hereof, as to any present value calculations under Section 280G of the Code.
The Company shall bear all costs associated with obtaining such opinions.
(iii) The amounts payable pursuant to this paragraph
(d) shall be paid (or commence to be paid) to the Executive not later than
10 days after he notifies the Company under subparagraph (ii) above whether
he wishes to receive such amounts in a lump sum or in installments or if no
notice is given by the Company under subparagraph (ii) above, within 30 days
after the Executive gives notice to the Company under subparagraph (i) above.
(iv) In addition to all other rights granted the
Executive under this paragraph (d), if a Control Change (as defined in
paragraph (c) of Appendix B hereto) occurs, the Executive shall be entitled
to elect to terminate his employment upon written notice to the Company,
effective not more than 10 days after such an election. In such event, (A)
the Consultation Period shall commence immediately upon termination of
employment and shall cease five years thereafter, (B) the Executive shall
be entitled to elect at any time to have payment of his retirement benefit
commence on the Early Commencement Date in an amount determined in accordance
with the provisions of Section 3(c) hereof, and (C) the Company shall
promptly, but not later than 10 days after such election, transfer sufficient
assets to the 1986 Trust so that the assets of the 1986 Trust are then
sufficient to discharge the obligations for the consulting fees and
retirement benefits due him in full.
<PAGE> 81
6. Covenants.
(a) Confidentiality. The Executive acknowledges
that he has acquired and will acquire confidential information respecting
the business of the Company. Accordingly, the Executive agrees that,
without the written consent of the Company as authorized by its Board of
Directors, he will not, at any time, willfully disclose any such confidential
information to any unauthorized third party with an intent that such
disclosure will result in financial benefit to the Executive or to any
person other than the Company. For this purpose, information shall be
considered confidential only if such information is uniquely proprietary to
the Company and has not been made publicly available prior to its disclosure
by the Executive.
(b) Competitive Activity. Until the end of the
Consultation Period, the Executive shall not, without the consent of the
Board of Directors of the Company, directly or indirectly, knowingly
engage or be interested in (as owner, partner, shareholder, employee,
director, officer, agent, consultant or otherwise), with or without
compensation, any business which (i) is in competition with any line of
business being actively conducted by the Company or any of its
affiliates or subsidiaries during the Employment Term or Consultation Period,
or (ii) shall hire any person who was employed by the Company or any of its
affiliates or subsidiaries within the six-month period preceding such hiring,
except for any employee whose annual rate of compensation is not in excess
of $55,000. Nothing herein, however, shall prohibit the Executive from
acquiring or holding not more than one percent of any class of publicly
traded securities of any such business.
(c) Remedy for Breach. The Executive acknowledges
that the provisions of this Section 6 are reasonable and necessary for the
protection of the Company and that the Company will be irrevocably damaged
if such covenants are not specifically enforced. Accordingly, the Executive
agrees that, in addition to any other relief to which the Company may be
entitled, the Company shall be entitled to seek and obtain injunctive relief
(without the requirement of any bond) from a court of competent jurisdiction
for the purposes of restraining the Executive from any actual or threatened
breach of such covenants. Notwithstanding anything to the contrary herein,
the provisions of this Section 6 shall cease to apply to the Executive if
his employment hereunder terminates without Cause or following a Change in
Control Event. In addition, in the event that the Executive breaches the
provisions of this Section 6 during the Consultation Period, the Company's
sole remedy shall be to terminate the Executive for Cause.
7. Miscellaneous.
(a) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware
applicable to agreements made and to be performed in that State.
<PAGE> 82
(b) Notices. Any notice, consent or other
communication made or given in connection with this Agreement shall be in
writing and shall be deemed to have been duly given when delivered by
United States registered or certified mail, return receipt requested,
to the parties at the following addresses or at such other address as a
party may specify by notice to the other.
To the Executive:
2 Glendennig
Houston, Texas 77252
To the Company:
U.S. Home Corporation
1800 West Loop South
Houston, Texas 77252
Attention: Secretary
(c) Entire Agreement; Amendment. This Agreement
shall supersede any and all existing agreements between the Executive and
the Company or any of its affiliates or subsidiaries relating to the terms of
his employment. It may not be amended except by a written agreement signed
by both parties.
(d) Waiver. The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion shall not be
considered a waiver thereof or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement.
(e) Assignment. Except as otherwise provided in
this paragraph, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, representatives,
successors and assigns. This Agreement shall not be assignable by the
Executive, and shall be assignable by the Company only to any corporation
or other entity resulting from the reorganization, merger or
consolidation of the Company with any other corporation or entity or any
corporation or entity to which the Company may sell all or substantially all
of its assets, and it must be so assigned by the Company to, and accepted
as binding upon it by, such other corporation or entity in connection with
any such reorganization, merger, consolidation or sale.
(f) Litigation Costs. In the event that the
Executive shall successfully prosecute a judicial proceeding to enforce any
provision of this Agreement, in addition to any other relief awarded the
Executive by the court in such action, the parties agree that the judgment
rendered shall award the Executive all of his attorneys fees, disbursements
and other costs incurred by the Executive in prosecuting such suit.
(g) Separability. If any provision of this
Agreement is invalid or unenforceable, the balance of the Agreement shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons
and circumstances.
<PAGE> 83
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement and Appendices A and B thereto as evidence of their adoption
this 17th day of October, 1995.
U.S. HOME CORPORATION
By \s\ Robert J. Strudler
----------------------------
Name: Robert J. Strudler
Title: Chairman and
Co-Chief Executive
Officer
EXECUTIVE:
By \s\ Isaac Heimbinder
-------------------------------
Name: Isaac Heimbinder
<PAGE> 84
Appendix A
This Appendix A is attached to and shall form a part of
the Amended and Restated Employment and Consulting Agreement, dated October
17, 1995, by and between U.S. Home Corporation (the "Company"), and Isaac
Heimbinder (the "Executive").
(a) The Executive's bonus, if any, for each calendar
year during the Employment Term commencing with the 1995 calendar year shall
be an amount equal to: one-half (1/2) of one percent (1%) of the first
$10,000,000 of the Company's Pre-Tax Income for such year, plus
(i) three-fourths (3/4) of one percent (1%) of
the next $10,000,000 of the Company's Pre-Tax Income for such year, plus
(ii) one percent (1%) of the Company's Pre-Tax
Income for such year in excess of $20,000,000.
(b) In the event that the Executive's employment
hereunder is terminated for any reason prior to the end of a calendar year,
including the expiration of the Employment Term, his bonus for such year
shall be an amount, estimated in good faith by the Board of Directors of
the Company based on reasonable assumptions and projections, but without
the benefit of the report referred to in paragraph (c) below, equal to
the bonus otherwise determined pursuant to this Appendix A, multiplied
by a fraction, the numerator of which is the number of calendar months
during such year in which the Executive was employed by the Company for
at least one business day, and the denominator of which is 12.
(c) For purposes of this Agreement, the Company's
"Pre-Tax Income" for any year shall mean the income of the Company and its
consolidated and unconsolidated subsidiaries for such year, as reported by
the Company and certified by its independent certified public accountants,
except that no deduction shall be made for the bonus payable pursuant to
this Appendix A and Section 3(a)(ii) hereof for such year or for Federal
income and State and local franchise, gross receipts, or income taxes.
U.S. HOME CORPORATION
By \s\ Robert J. Strudler
-----------------------------------
Name: Robert J. Strudler
Title: Chairman and Co-Chief
Executive Officer
EXECUTIVE:
By \s\ Isaac Heimbinder
-----------------------------------
Name: Isaac Heimbinder
<PAGE> 85
Appendix B
This Appendix B is attached to and shall form a part of
the Amended and Restated Employment and Consulting Agreement, dated October
17, 1995, by and between U.S. Home Corporation (the "Company"), and Isaac
Heimbinder (the "Executive").
(a) For purposes of this Agreement, a "Change in Control
Event" shall occur when a "Control Change" (as defined in paragraph (c)
below) is followed within two years by a "Material Change" (as defined in
paragraph (b) below).
(b) A "Material Change" shall occur if:
(i) the Executive's employment hereunder is
terminated without Cause;
(ii) the Company makes any change in the Executive's
functions, duties or responsibilities from the position that the Executive
occupied on the date hereof or, if this Agreement has been renewed or
extended, the date of the last renewal or extension, but only if such
change would cause:
(A) the Executive to report to anyone other
than the Chairman of the Board of Directors who is also the Co-Chief
Executive Officer,
(B) the Executive to no longer be the President,
Co-Chief Executive Officer and Chief Operating Officer of the Company,
(C) even if the Executive maintains the
positions of President, Co-Chief Executive Officer and Chief Operating
Officer, his responsibilities to be reduced from those in effect on the
date hereof or the date of the last renewal or extension of this Agreement,
as applicable, or to be no longer commensurate with those of the Co-Chief
Executive Officer and Chief Operating Officer of a company with gross annual
sales of at least $800 million, or
(D) the Executive's position with the Company
to become one of lesser importance or scope;
(iii) the Company assigns or reassigns the Executive
(without his written permission) to another place of employment which is more
than 10 miles from his place of employment on the date hereof or the date of
the last renewal or extension of this Agreement, as applicable, and which
is not the corporate headquarters of the Company; or
(iv) the Company reduces the Executive's Base Salary
or otherwise breaches the terms of this Agreement.
<PAGE> 86
(c) A "Control Change" shall occur if:
(i) a report on Schedule 13D is filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing that any
person (within the meaning of Section 13(d) of the Exchange Act), other
than the Company (or one of its subsidiaries) or any employee benefit plan
sponsored by the Company (or one of its subsidiaries), is the beneficial
owner, directly or indirectly, of 15 percent or more of the combined voting
power of the then-outstanding securities of the Company;
(ii) any person (within the meaning of Section 13(d)
of the Exchange Act), other than the Company (or one of its subsidiaries) or
any employee benefit plan sponsored by the Company (or one of its
subsidiaries), shall purchase securities pursuant to a tender offer or
exchange offer to acquire any common stock of the Company (or securities
convertible into common stock) for cash, securities or any other
consideration, provided that after consummation of the offer, the person
in question is the beneficial owner (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of 15 percent or more of
the combined voting power of the then-outstanding securities of the
Company (as determined under paragraph (d) of Rule 13d-3 under the Exchange
Act, in the case of rights to acquire common stock);
(iii) the stockholders of the Company shall approve
(A) any consolidation or merger of the Company (1) in which the Company is
not the continuing or surviving corporation, (2) pursuant to which shares
of common stock of the Company would be converted into cash, securities or
other property, or (3) with a corporation which prior to such consolidation
or merger owned 15 percent or more of the cumulative voting power of the
then-outstanding securities of the Company, or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Company; or
(iv) there shall have been a change in a majority of
the members of the Board of Directors of the Company within a 12-month
period, unless the election or nomination for election by the Company's
stockholders of each new director during such 12-month period was approved
by the vote of two-thirds of the directors then still in office who were
directors at the beginning of such 12-month period.
(d) Notwithstanding the foregoing, the issuance by the
Company of shares of common stock of the Company, $.01 par value per share,
convertible preferred stock of the Company, $.10 par value per share, and
Class B Warrants aggregating 15% or more of the combined voting power of
the Company to any one beneficial owner (as such term is used in Rule
13d-3 under the Securities Exchange Act of 1934, as amended) who is a
holder of claims or interests pursuant to the First Amended Consolidated
Plan of Reorganization of the Company and certain of its affiliates, as
modified, filed with the United States Bankruptcy Court for the Southern
District of New York (the "USH Plan") in exchange for such claims or
interests shall not be deemed to constitute a Control Change unless such
<PAGE> 87
person subsequently increases its percentage beneficial ownership above
the percentage amount received pursuant to the USH Plan. Shares of
common stock, preferred stock and Class B Warrants acquired pursuant to
the USH Plan by creditors or stockholders for their claims or interests,
though less than 15% of the combined voting power of the Company, shall
be included in determining whether a person through acquisition of
additional shares, whether through purchase, exchange or otherwise,
on or after the Effective Date has subsequently become the beneficial
owner of 15% or more of the combined voting power of the Company, which
shall, in such event, constitute a Control Change.
U.S. HOME CORPORATION
By \s\ Robert J. Strudler
----------------------------------
Name: Robert J. Strudler
Title: Chairman and_____
Co-Chief Executive
Officer
EXECUTIVE:
By \s\ Isaac Heimbinder
----------------------------------
Name: Isaac Heimbinder
<PAGE> 88
EXHIBIT 11
(Unaudited)
U.S. HOME CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME PER COMMON SHARE
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Income Per Common And Common
Equivalent Share -
<S> <C> <C> <C> <C>
Net income .................... $ 12,145 $ 9,839 $ 31,514 $ 25,793
=========== =========== =========== ===========
Weighted average common
shares outstanding .......... 11,589,600 11,565,499 11,584,574 11,580,411
Effect of assumed exercise of
dilutive stock options and
warrants .................... 198,511 342,886 392,996 27,573
----------- ----------- ----------- -----------
Total common and common
equivalent shares ........... 11,788,111 11,908,385 11,977,570 11,607,984
=========== =========== =========== ===========
Income per common and common
equivalent share ........... $ 1.03 $ .83 $ 2.63 $ 2.22
=========== =========== =========== ===========
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Income Per Common Share,
Assuming Full Dilution -
<S> <C> <C> <C> <C>
Net income ................... $ 12,145 $ 9,839 $ 31,514 $ 25,793
Add interest applicable to
4.875% convertible
subordinated debentures,
net of income tax effect .. 613 480 1,840 1,441
----------- ----------- ----------- -----------
Income per common share,
assuming full dilution ..... $ 12,758 $ 10,319 $ 33,354 $ 27,234
=========== =========== =========== ===========
Total common and common
equivalent shares .......... 11,788,111 11,908,385 11,977,570 11,607,984
Assumed additional common
shares from exercise of
dilutive stock options
and warrants resulting
from use of market price
of common stock at end of
period ..................... - 88,470 - 405,867
Assumed conversion of 4.875%
convertible subordinated
debentures at $35.50 per
share at date of issuance .. 2,253,521 2,253,521 2,253,521 2,253,521
----------- ----------- ----------- -----------
Total common shares, assuming
full dilution .............. 14,041,632 14,250,376 14,231,091 14,267,372
=========== =========== =========== ===========
Income per common share,
assuming full dilution .... $ .91 $ .72 $ 2.34 $ 1.91
=========== =========== =========== ===========
Note: See Note 5 of Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE> 90
Exhibit 15
To U.S. HOME CORPORATION:
We are aware that U.S. Home Corporation has incorporated by reference in
its Registration Statements No. 33-64712, 33-52993, 33-00583 and 33-02775
its Form 10-Q for the quarter ended September 30, 1996, which includes our
report dated October 16, 1996 covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the Securities
Act of 1933, that report is not considered a part of the registration
statement prepared or certified by our firm within the meaning of Sections
7 and 11 of the Act.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
Houston, Texas
October 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From The
Consolidated Condensed Financial Statements As Of September 30, 1996
And For The Nine Months Then Ended And Is Qualified In Its Entirety By
Reference To Such Financial Statments.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 17806
<SECURITIES> 0
<RECEIVABLES> 89737
<ALLOWANCES> 0
<INVENTORY> 714843
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 958683
<CURRENT-LIABILITIES> 0
<BONDS> 108836
0
3072
<COMMON> 114
<OTHER-SE> 357756
<TOTAL-LIABILITY-AND-EQUITY> 958683
<SALES> 0
<TOTAL-REVENUES> 883670
<CGS> 729644
<TOTAL-COSTS> 832872
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1170
<INCOME-PRETAX> 49628
<INCOME-TAX> 18114
<INCOME-CONTINUING> 31514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $31514
<EPS-PRIMARY> $2.63
<EPS-DILUTED> $2.64
</TABLE>
