<PAGE> 1
Pursuant to Rule 424(b)(5)
Registration No. 333-46849
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 25, 1998) February 16, 1999
- --------------------------------------------------------------------------------
$125,000,000
U.S. HOME CORPORATION
8.875% Senior Subordinated Notes due 2009
- --------------------------------------------------------------------------------
COMPANY
+ We are one of the largest single-family homebuilders in the United States
based on homes delivered. We currently build and sell homes in more than 230
new home communities, covering 33 market areas in 12 states. We also provide
mortgage banking services to our customers.
NOTES
+ Interest on the notes will be paid at a fixed rate of 8.875% on February 15
and August 15 of each year, starting on August 15, 1999.
+ The notes mature on February 15, 2009.
+ We will use the net proceeds of this offering to repay part of our
outstanding indebtedness under our principal bank credit facility. We
currently intend to reborrow under that credit facility for general
corporate purposes.
REDEMPTION AND REPURCHASE
+ We may redeem any or all of the notes at any time after February 15, 2004 at
the redemption prices described in this prospectus supplement plus accrued
interest.
+ If we experience certain changes of control, we must offer to repurchase the
notes.
RANKING
+ Our obligations on the notes will not be secured, will rank junior to our
senior debt and will rank equally with all of our other current and future
senior subordinated debt.
+ The notes will be effectively subordinated to all existing and future
obligations of our subsidiaries.
LISTING
+ We do not plan to list the notes on NASDAQ or any national securities
exchange.
+ There is not currently any public market for the notes.
INVESTING IN THE NOTES INVOLVES RISKS. SEE RISK FACTORS BEGINNING ON PAGE S-6.
<TABLE>
<CAPTION>
Price to Discounts and Proceeds to
Public Commissions U.S. Home
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 99.190% 1.500% 97.690%
- --------------------------------------------------------------------------------------------------
Total $123,987,500 $1,875,000 $122,112,500
- --------------------------------------------------------------------------------------------------
</TABLE>
The "price to public" in the above table includes accrued interest, if any, from
the date of issuance. We have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933. We
will pay expenses estimated at $250,000. The underwriters have agreed to
purchase the notes on a firm commitment basis.
These securities have not been approved by the Securities and Exchange
Commission or any state securities commission, nor have these organizations
determined if this prospectus supplement or the accompanying prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the notes to purchasers on February 19, 1999.
WARBURG DILLON READ LLC
CREDIT LYONNAIS SECURITIES
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Important Notice About this Prospectus Summary and the
Related Prospectus........................................ S-4
Prospectus Supplement Summary............................... S-5
Risk Factors................................................ S-6
Special Note on Forward-Looking Statements.................. S-10
Use of Proceeds............................................. S-11
Consolidated Ratio of Earnings to Fixed Charges............. S-12
Summary Consolidated Financial and Operating Data........... S-13
Description of Notes........................................ S-15
Underwriting................................................ S-32
Legal Matters............................................... S-34
PROSPECTUS
Summary of Offering......................................... 1
Available Information....................................... 2
Incorporation of Certain Information by Reference........... 2
The Company................................................. 3
Use of Proceeds............................................. 3
Consolidated Ratio of Earnings to Fixed Charges............. 3
Description of Debt Securities.............................. 4
Plan of Distribution........................................ 16
Legal Matters............................................... 18
Experts..................................................... 18
</TABLE>
S-3
<PAGE> 3
IMPORTANT NOTICE
ABOUT THIS PROSPECTUS SUPPLEMENT AND THE RELATED PROSPECTUS
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of the notes. The second part is
the related prospectus, which includes additional and more detailed information,
some of which may not apply to the notes. We generally mean this prospectus
supplement and the related prospectus, taken together, when we use the term
"prospectus." If any differences exist between this prospectus supplement and
the prospectus, you should rely on the information in this prospectus
supplement.
You should rely only on the information incorporated by reference or
contained in this prospectus supplement and the related prospectus. We have not,
and the underwriters have not, authorized anyone to provide you with other
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not, and the underwriters are not, making an
offer to sell the notes in any jurisdiction where the offer or sale is not
permitted. You should not assume that the information incorporated by reference
or contained in this prospectus supplement or the prospectus is accurate as of
any date other than the date on the front cover of this prospectus supplement.
Our business, financial condition, results of operations and prospects may have
changed since that date.
S-4
<PAGE> 4
PROSPECTUS SUPPLEMENT SUMMARY
In this prospectus supplement, the words "Company," "we," "our," "ours" and
"us" refer to U.S. Home Corporation and its subsidiaries, unless the context
requires or we state otherwise. The following summary contains basic information
about this offering and summarizes additional and more detailed information
appearing elsewhere or incorporated by reference in the prospectus. This
prospectus supplement may not contain all of the information that may be
important to you. You should read this entire document, the related prospectus
and the documents to which we have referred you before making an investment
decision.
We were organized in 1954, and we incorporated in the State of Delaware in
1959. We have built more than 283,000 homes. We are one of the largest
single-family homebuilders in the United States based on homes delivered. We
currently build and sell homes in more than 230 new home communities, covering
33 market areas in 12 states. We also provide mortgage banking services to our
customers. We conduct substantially all of our homebuilding business as U.S.
Home Corporation. Our main executive offices are located at 10707 Clay Road,
Houston, Texas 77041. Our telephone number is (713) 877-2311.
S-5
<PAGE> 5
RISK FACTORS
You take certain risks by investing in the notes. Before you decide to
invest in the notes, you should carefully consider the risks discussed below and
all of the other information contained or incorporated by reference in this
prospectus supplement and the prospectus.
YOUR RIGHT TO RECEIVE PAYMENTS IS JUNIOR TO SOME OF OUR EXISTING AND FUTURE
INDEBTEDNESS.
The notes will be subordinate and junior in right of payment to all of our
existing and future senior debt. At December 31, 1998, on an as adjusted basis
after giving effect to the sale of the notes and the anticipated use of the net
proceeds from the sale of the notes, our senior debt, which does not include any
of our subsidiaries' debt, would have been $320.0 million, including $11.9
million of guarantees and letters of credit. At that date we also had $125.0
million of debt that ranks equally with the notes. The notes will be effectively
subordinated to all of our subsidiaries' existing and future obligations, even
though our subsidiaries' obligations do not constitute our senior debt.
If we dissolve, become insolvent or bankrupt or are forced to liquidate our
assets, then in the event of any payment or distribution of our assets, the
subordination provisions of the notes require that the holders of our senior
debt must be paid in full before you are paid. Money you would otherwise receive
will be paid to the holders of our senior debt until that senior debt is paid in
full. By reason of this subordination, if we dissolve, become insolvent or
bankrupt or are forced to liquidate our assets, you may recover nothing or may
recover less, ratably, than holders of our senior debt and our other creditors.
In addition, we are required to stop making all payments of principal and
interest on the notes if there is a payment default on some of our senior debt
and the trustee for the notes receives a notice of default from the specified
holders of that debt. We are also required to stop making payments of principal
and interest on the notes during a payment blockage period (which would not be
longer than 179 days during any 365-day period) if a default continues with
respect to certain of our senior debt that would permit the holders of that
senior debt to accelerate its repayment and the trustee for the notes receives a
notice of default from the specified holders of that debt.
The notes and our other debt agreements limit us, but do not prohibit us,
from incurring more debt, including debt that would be senior to the notes.
FLUCTUATIONS DUE TO THE CYCLICAL NATURE OF THE REAL ESTATE MARKET, ECONOMIC
CONDITIONS AND THE HOMEBUILDING BUSINESS COULD NEGATIVELY AFFECT US.
The homebuilding industry is cyclical and is significantly affected by
changes in general and local economic conditions, including:
- employment levels;
- availability of financing for home buyers;
- interest rates;
- consumer confidence; and
- housing demand.
The cost and availability of alternatives to new homes, including rental
properties and used homes, directly affects the demand for new homes. An
oversupply of rental properties and used homes could depress the prices we
charge for new homes and reduce our margins on the sale of new homes. Prevailing
interest rates, and whether rates are expected to rise, fall or stay the same,
heavily influence people's decision to buy new homes and therefore our
profitability. Rising interest rates mean higher monthly mortgage payments and
weaken the demand for our homes. These factors also affect the performance of
our mortgage banking subsidiary. We have no control over these economic
conditions, which could materially affect our business.
S-6
<PAGE> 6
Homebuilders face substantial inventory risk. The risk inherent in
purchasing and developing land increases as consumer demand for housing
decreases. Thus, we may have bought and developed land on which we cannot
economically build and sell homes. The market value of our housing inventory,
building lots and raw land can fluctuate significantly as a result of changing
market conditions. In addition, inventory carrying costs are significant and can
result in losses in a community or market that does not develop as we expected.
In the event of significant changes in economic or market conditions, we may
have to sell inventory at a loss. We have developed strategies for managing our
inventory risks. First, we build in many community locations and markets so that
our risks are diversified. Second, we try to acquire lots and land under option
agreements, so that we can control more land with a smaller capital investment.
Third, we generally do not begin construction until we receive from a customer a
signed sales contract supported by a preliminary mortgage approval. We cannot
assure you that these strategies will be successful.
Proper management of our cash resources is crucial to our success. Our
business requires us to purchase land and finished lots before we begin to build
homes, so we must commit our working capital for long periods of time. We
attempt to limit our investment in land and finished lots through the use of
option contracts, and we try to keep our fixed overhead costs low. We cannot
assure you that our efforts will be successful.
The development of many of our communities, and particularly our
retirement, active-adult and intergenerational communities, results from a
lengthy and complex series of events involving land purchase, regulatory
compliance, capital availability, marketing and sales. Any of these events can
materially affect the financial results for a community.
We also may encounter other difficulties, including:
- natural risks (such as floods, hurricanes and other disasters);
- shortages of qualified trades people;
- reliance on local contractors, who may be inadequately capitalized;
- shortages of materials; and
- volatile increases in the cost of certain materials, particularly
increases in the price of lumber or cement, which are significant
components of home construction costs.
These difficulties could cause us to take longer and to pay more to build
our homes. We may not be able to recapture increased costs by raising prices in
many cases. In addition, some home buyers may cancel or not honor their home
sales contracts altogether.
WE FACE SIGNIFICANT COMPETITION IN OUR INDUSTRY.
The residential housing industry is highly competitive and fragmented. We
face constant competitive pressure on our pricing structure (including our
ability to respond to price increases from our suppliers), quality and marketing
resources. In each of our markets, we compete with a large number of national,
regional and local homebuilders. Some of our competitors are larger than we are,
have greater financial resources and may have significant competitive
advantages, particularly when we enter new geographic markets. We cannot assure
you that we will be able to compete effectively.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL CONSIDERATIONS COULD NEGATIVELY
AFFECT US.
Our business is subject to extensive local, state and federal statutes,
ordinances, rules and regulations concerning zoning, environmental protection,
building design, construction, density, rate of development and similar matters.
In some areas, zoning and density requirements limit the numbers of homes that
we can build within a community. Building moratoria may also delay our projects.
We cannot assure you that compliance with these legal requirements will not have
a material adverse effect upon us.
S-7
<PAGE> 7
Local, state and federal statutes, ordinances, rules and regulations
concerning the protection of health and the environment also affect us, as do
environmental conditions relating to specific projects. The environmental laws
which might apply vary greatly based on a site's location, its environmental
condition and the present and prior uses of the site and adjoining property. Our
compliance with environmental laws and conditions may result in delays and cause
us to incur other costs. In some environmentally sensitive areas, environmental
laws may prohibit or severely restrict our homebuilding activities. We cannot
assure you that environmental regulations and conditions will not have a
material adverse affect upon us.
OUR SUBSTANTIAL INDEBTEDNESS AND HIGH LEVERAGE COULD ADVERSELY AFFECT US.
We have borrowed significant amounts of money. As of December 31, 1998, on
an as adjusted basis after giving effect to the sale of the notes and the
anticipated use of the net proceeds from the sale of the notes, our total
corporate and housing debt would have been approximately $557.1 million and the
ratio of our total corporate and housing debt to our stockholders' equity would
have been approximately 1.1 to 1. In addition, we expect to borrow additional
amounts under our principal bank credit facility or from other sources in the
future.
Our high level of debt affects our operations in several important ways:
- a large portion of the cash we generate is used to pay principal and
interest;
- the agreements governing our debt may limit our flexibility in planning
for and reacting to changes in our business conditions;
- we may be more vulnerable in the event of a downturn in our business,
industry or general economic conditions;
- the agreements governing our debt limit our ability to borrow additional
money, to own land, to pay dividends and to consolidate or merge with
other companies;
- a high level of debt may impair our ability to obtain additional
financing for working capital, capital expenditures, acquisitions,
general corporate or other purposes;
- we may experience a competitive disadvantage because we have more debt
than some of our competitors; and
- the agreements governing our debt permit our creditors to accelerate
payments if we default or experience a change in the control of our
ownership.
Our ability to pay the principal and interest on our debt as they become
due depends upon our current and future performance. Our performance is affected
by general economic conditions and by financial, competitive, political,
business and other factors. Many of these factors are beyond our control. We
believe that cash generated by our business will be sufficient to enable us to
make our debt payments as they become due. If, however, we do not generate
enough cash to make our debt payments as they become due, we may be required to
refinance some or all of our debt or to borrow more money. We cannot assure you
that a refinancing will be possible or that we will be able to negotiate
favorable or acceptable terms if we refinance our debt or borrow additional
money. In addition, our access to capital is affected by prevailing conditions
in the financial and capital markets.
Our principal bank credit facility imposes restrictions on our operations
and requires us to achieve and maintain certain financial performance measures.
These restrictions include, among other things, limitations on our ability to
own land, to pay dividends or make other distributions and to enter into mergers
and other transactions.
WE FACE RISKS RELATING TO THE "YEAR 2000" ISSUE.
Our business could be adversely impacted by information technology issues
related to the year 2000. We use software and related computer technologies
essential to our operations that employ two digits rather than four to specify
the year. With the transition to the year 2000, a date recognition problem could
S-8
<PAGE> 8
result. We expect to incur year 2000-related costs during 1999, but we do not at
present anticipate that these costs will be material to our business. We believe
that the most likely worst-case scenario for the year 2000 issue would occur if
we, or our suppliers and service providers, were to cease or not complete
successful year 2000 remediation efforts. If this were to occur, we would
encounter disruptions to our business that could have a material adverse effect
on our results of operations. We also could be materially impacted by widespread
economic or financial market disruption or by year 2000 computer system failures
at government agencies on which we are dependent for zoning, building permits
and related matters.
THE PRICE OF THE NOTES MAY FLUCTUATE SIGNIFICANTLY FOLLOWING THIS OFFERING.
The notes are a new issue of securities. They have no established trading
market and may not be widely distributed. While the underwriters intend to make
a market in the notes, the underwriters are not obligated to do so and may
discontinue making a market at any time without notice. We are not applying to
list the notes on NASDAQ or any national securities exchange. We cannot assure
you that a trading market for the notes will develop, and even if a market
develops, the price of the notes in secondary trading may be subject to
significant volatility.
WE MAY NOT HAVE SUFFICIENT FUNDS TO FINANCE ANY CHANGE OF CONTROL OFFER REQUIRED
BY THE NOTES.
If our ownership changes control, you may require us to repurchase your
notes for 101 percent of their principal amount, together with any earned but
unpaid interest. Before we can purchase any notes, we may be required to:
- repay all or a portion of our principal bank credit facility and other
debt that ranks senior to the notes to satisfy similar change of control
provisions; and
- obtain the consent of our senior lenders to repurchase the notes.
We will be unable to purchase the notes if we cannot repay the senior debt
or obtain the senior lenders' consent. A change of control may require us to
repay other debt and may be an event of default under the agreements governing
our principal bank credit facility and other debt. Events of default may permit
our lenders to accelerate our obligation to repay senior and other debt. Our
failure to purchase the notes would be an event of default under the notes. We
cannot assure you that we will be able to meet the necessary conditions to
repurchase the notes or that we will have enough money to repurchase the notes
if our ownership changes control.
S-9
<PAGE> 9
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
We include this disclosure to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
This prospectus supplement, the prospectus and the documents incorporated
by reference in this prospectus supplement and the prospectus include
"forward-looking statements" within the meaning of section 27A of the Securities
Act of 1933 and section 21E of the Securities Exchange Act of 1934.
Forward-looking statements may be identified by the use of words like
"believes," "intends," "expects," "may," "will," "should" or "anticipates," or
the negative equivalents of those words or comparable terminology, and by
discussions of strategies that involve risks and uncertainties.
Given the risks and uncertainties of our business, actual results may
differ materially from those expressed or implied by forward-looking statements.
In addition, we base forward-looking statements on assumptions about future
events, which may not prove to be accurate. In light of these risks,
uncertainties and assumptions, you should be aware that the forward-looking
events described in this prospectus supplement, the prospectus and the documents
incorporated by reference in this prospectus supplement and the prospectus may
not occur.
Our forward-looking statements regarding the results of our operations and
our financial condition are subject to risks, uncertainties and assumptions,
including the risk factors discussed above and the following:
- General economic and business conditions, the level and direction of
interest rates and the level of consumer confidence have a significant
impact on the willingness and ability of purchasers to enter into
contracts for homes and to consummate purchases of homes under contract,
as well as on the performance of U.S. Home Mortgage Corporation, our
principal subsidiary.
- The development of many of our communities, particularly in our
retirement, active adult and intergenerational communities, results from
a lengthy, complex series of events involving land purchase, regulatory
compliance, capital availability, and marketing and sales, any of which
can materially affect the financial results for a community.
- We are in a highly competitive and fragmented industry. This places
constant pressure on our pricing (including our ability to respond to
increases in prices from our suppliers), quality and marketing and
particularly challenges us upon our entry into new geographic markets.
- We face numerous regulatory hurdles in our development efforts, such as
laws and regulations regarding zoning, environmental protection, building
design and construction, density and rate of development.
- Our access to capital sufficient to fund our activities is affected by
our high level of debt and by the willingness of the capital markets and
banks to absorb our equity and debt offerings.
- We may encounter other contingencies, including labor shortages, work
stoppages, product liability, litigation, natural risks (including floods
or hurricanes) and other factors over which we have little or no control.
We cannot assure you that our future results, levels of activity and
achievements will occur as we expect, and neither we nor any other person
assumes responsibility for the accuracy and completeness of our forward-looking
statements. We have no obligation to update or revise any forward-looking
statements, whether as a result of new information or future events or
otherwise.
S-10
<PAGE> 10
USE OF PROCEEDS
We estimate that we will receive net proceeds from the sale of the notes
(after deducting underwriting discounts and commissions and estimated expenses)
of approximately $121.9 million. We intend to use these net proceeds to repay
approximately $121.9 million of short-term debt outstanding under our principal
bank credit facility.
Indebtedness under our principal bank credit facility may be reborrowed by
us after repayment, bears interest at fluctuating rates (6.7% at December 31,
1998) and matures on May 31, 2001, subject to extension with the consent of the
lenders. At December 31, 1998, $130.0 million of debt was outstanding under our
principal bank credit facility. These borrowings were incurred to fund the
development of existing and new projects and for other general corporate
purposes or to refinance debt incurred for those purposes. Affiliates of certain
of the underwriters (specifically Credit Lyonnais Securities (USA), Inc. and
First Chicago Capital Markets, Inc.) are lenders under our principal bank credit
facility, and a portion of the proceeds from this offering will be used to repay
indebtedness outstanding to such affiliates. See "Underwriting."
If we do not use the net proceeds of this offering immediately, we may
temporarily invest them in short-term interest bearing obligations.
S-11
<PAGE> 11
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
This table sets forth our consolidated ratio of earnings to fixed charges
for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
(unaudited)(1)...................................... 2.51 2.57 2.44 2.66 2.55
</TABLE>
- ------------------
(1) The ratio of earnings to fixed charges is calculated by dividing earnings by
fixed charges. For this purpose, "fixed charges" means the sum of (a)
interest expensed and capitalized, (b) amortized premium, discount and
capitalized expenses related to the indebtedness, (c) an estimate of the
interest included in rental expense and (d) the proportionate share of the
items described in clauses (a), (b) and (c) of this sentence that relates to
our unconsolidated affiliates. For this purpose, "earnings" means (a) the
sum of (i) pretax income from continuing operations, (ii) fixed charges and
(iii) previously capitalized interest charged to cost of sales minus (b)
interest capitalized.
S-12
<PAGE> 12
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Housing operating revenues.......................... $1,191,206 $1,294,100 $1,464,072
Housing operating income............................ 62,207 77,440 89,590
Financial services operating income................. 5,394 9,167 12,753
Corporate general and administrative................ 11,700 11,707 13,050
Income before income taxes and extraordinary loss... 55,901 74,900 89,293
Extraordinary loss from early retirement of debt,
net of income tax benefit........................ -- 8,650 3,026
Net income.......................................... 44,188 38,537 60,703
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
------------------------------
HISTORICAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Housing Assets:
Cash................................................... $ 8,172 $ 8,172
Other assets........................................... 1,210,475 1,210,475
---------- ----------
Total Housing Assets.............................. 1,218,647 1,218,647
Financial Services Assets................................... 97,126 97,126
Corporate Assets............................................ 37,203 39,328
---------- ----------
Total Assets...................................... $1,352,976 $1,355,101
========== ==========
Corporate and Housing Debt:
Principal bank credit facility......................... $ 130,000 $ 8,138
Notes and mortgages payable............................ 25,207 25,207
7.95% Senior Notes due 2001............................ 75,000 75,000
8.25% Senior Notes due 2004............................ 100,000 100,000
7.75% Senior Notes due 2005............................ 99,773 99,773
8.88% Senior Subordinated Notes due 2007............... 125,000 125,000
Notes offered hereby................................... -- 123,987
---------- ----------
Total Corporate and Housing Debt.................. 554,980 557,105
Financial Services Debt..................................... 33,112 33,112
---------- ----------
Total Debt........................................ $ 588,092 $ 590,217
========== ==========
Stockholders' Equity........................................ $ 514,241 $ 514,241
========== ==========
Total corporate and housing debt as a percent of total
corporate and housing debt and stockholders' equity....... 51.9% 52.0%
Net corporate and housing debt as a percent of net corporate
and housing debt and stockholders' equity(2).............. 51.5% 51.6%
</TABLE>
S-13
<PAGE> 13
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
OPERATING DATA:
New orders taken - units(3)....................... 7,406 7,893 9,195
Homes delivered - units........................... 7,099 7,496 8,258
Homes under contract at period end (backlog) -
units(4)........................................ 3,038 3,435 4,372
Homes under contract at period end (backlog) -
dollars(4)...................................... $ 530,857 $ 608,974 $ 844,714
Average sales price............................... $ 166 $ 171 $ 175
Single-family homes gross margin percentage....... 18.4% 18.0% 18.4%
Selling, general and administrative expenses as a
percentage of housing revenues.................. 9.5% 9.5% 9.6%
</TABLE>
- ---------------
(1) As adjusted for the sale of the notes and the use of the net proceeds as
described herein. See "Use of Proceeds."
(2) Net corporate and housing debt is total corporate and housing debt less
corporate and housing cash.
(3) New orders taken are net of cancellations. We recognize revenue at closing
when title is transferred to the buyer.
(4) Substantially all of our backlog units at December 31, 1998, net of
cancellations, are expected to result in revenues in the subsequent 12-month
period.
S-14
<PAGE> 14
DESCRIPTION OF NOTES
The 8.875% Senior Subordinated Notes due 2009 (the "Notes") constitute
Senior Subordinated Debt Securities (as defined in the prospectus). The
following discussion describes the particular terms of the Notes. It supplements
and, to the extent inconsistent, replaces the description in the prospectus of
the general terms and provisions of Senior Subordinated Debt Securities. The
Notes will be issued under a Senior Subordinated Indenture to be dated February
19, 1999 (the "Indenture") between U.S. Home Corporation (the "Company") and IBJ
Whitehall Bank & Trust Company, as trustee (the "Trustee"), formerly known as
IBJ Schroder Bank & Trust Company, the trustee referred to in the prospectus.
See "Description of the Notes -- Concerning the Trustee" in the prospectus. All
statements concerning the Trustee in the prospectus remain accurate in all
material respects as to its successor-in-interest. Unless the context requires
otherwise, initially capitalized terms used but not defined in this prospectus
supplement have the meanings set forth in the prospectus or the Indenture, as
applicable.
GENERAL
The Notes will:
- constitute direct unsecured senior subordinated general obligations of
the Company;
- be limited to $125,000,000 in aggregate principal amount;
- be issued only in book-entry form; and
- mature on February 15, 2009.
The Notes will bear interest from February 19, 1999 or from the most recent
date to which interest has been paid or provided for, at the rate of 8.875% per
annum, payable semi-annually on February 15 and August 15 commencing on August
15, 1999, to the persons in whose names the Notes are registered at the close of
business on the preceding February 1 and August 1, respectively.
The Company will not be obligated to make any mandatory sinking fund
payment or redemption of the Notes.
On or after February 15, 2004, the Notes will be redeemable at any time at
the option of the Company, in whole or from time to time in part, at the
redemption prices set forth below (expressed as a percentage of the principal
amount), plus accrued interest to the redemption date:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE 12-MONTH PERIOD BEGINNING FEBRUARY 15, REDEMPTION PRICE
- ------------------------------------------------------------- ----------------
<S> <C>
2004........................................................ 104.438%
2005........................................................ 102.958%
2006........................................................ 101.479%
2007 and thereafter......................................... 100.000%
</TABLE>
Notice of redemption will be mailed to each holder at least 15 days but not
more than 60 days prior to the redemption date. On and after the redemption
date, interest ceases to accrue on the Notes or portions thereof called for
redemption.
Upon issuance, the Notes will be represented by one or more global
securities which will be deposited with, or on behalf of, The Depository Trust
Company and will be registered in the name of The Depository Trust Company (the
"Depository") or a nominee thereof. See "Description of Debt Securities
- -- Global Securities" in the prospectus. If (i) the Company notifies the Trustee
in writing that the Depository is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days, (ii) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Notes in certificated form under the Indenture
or (iii) an Event of Default has occurred and is continuing, then, upon
surrender by the Depository of the applicable Global Certificates, certificated
Notes will be issued to each person whom the Depository identifies as a
beneficial owner of the Notes represented by such Global Certificates.
S-15
<PAGE> 15
SUBORDINATION OF NOTES
The Notes will be unsecured obligations of the Company. The Notes will be
subordinate and junior in right of payment, to the extent and in the manner set
forth in the Indenture, to the prior payment in full in cash (or cash
equivalents) of amounts then due on "Senior Indebtedness" of the Company. The
Indenture will define "Senior Indebtedness" of the Company as the principal of
(and premium, if any), and interest on (including without limitation interest
accruing subsequent to the filing of a petition under applicable Bankruptcy Law
(as defined in the Indenture) or the appointment of a Custodian (as defined in
the Indenture)), (i) any and all indebtedness and obligations of the Company
(including indebtedness of others guaranteed by the Company), whether or not
contingent and whether or not outstanding on the Issue Date (as defined in the
Indenture) or thereafter created, incurred or assumed (including without
limitation all charges, fees, expenses and other amounts incurred by or owing to
holders of such indebtedness), which (a) is for money borrowed, (b) is evidenced
by any bond, note, debenture or similar instrument, (c) represents the unpaid
balance on the purchase price of any property, business or asset of any kind,
(d) is an obligation of the Company as lessee under any and all leases of
property, equipment or other assets required to be capitalized on the balance
sheet of the lessee under generally accepted accounting principles, (e) is a
reimbursement obligation of the Company with respect to letters of credit, (f)
is an obligation of the Company with respect to an interest swap obligation or
foreign exchange agreement or (g) is an obligation of another, secured by a
lien, to which any of the properties or assets (including without limitation
leasehold interests and any other tangible or intangible property rights) of the
Company is subject, whether or not the obligations secured thereby have been
assumed by the Company or will otherwise be the Company's legal liability, and
(ii) any deferrals, amendments, renewals, extensions, modifications and
refundings of any indebtedness or obligations of the types referred to in clause
(i) of this paragraph; provided that "Senior Indebtedness" will not include (A)
the Notes, (B) the Company's 8.88% Senior Subordinated Notes due 2007, (C) any
other Senior Subordinated Debt Securities, (D) any Subordinated Debt Securities,
(E) any indebtedness or obligation of the Company (or the instrument creating or
evidencing it) which expressly provides that such indebtedness is not superior
in right of payment to the Notes, or which expressly provides that such
indebtedness is subordinate in right of payment to all other indebtedness of the
Company (including the Notes), (F) any indebtedness or obligation of the Company
to any of its Subsidiaries or (G) any indebtedness or obligation incurred by the
Company in connection with the purchase of assets, materials or services in the
ordinary course of business and which constitutes a trade payable.
The Company's indebtedness under its principal bank credit facility, the
Company's 7.95% Senior Notes due 2001 (issued in the original principal amount
of $75 million), the Company's 8.25% Senior Notes due 2004 (issued in the
original principal amount of $100 million), the Company's 7.75% Senior Notes due
2005 (issued in the original principal amount of $100 million) and other
obligations of the Company identified as senior debt will constitute "Senior
Indebtedness" with respect to the Notes. At December 31, 1998, on an as adjusted
basis after giving effect to the sale of the Notes and the use of the net
proceeds as described herein, the company would have had $320.0 million of
Senior Indebtedness outstanding, including $11.9 million of guarantees and
letters of credit. See "Use of Proceeds."
The Indenture will provide that the Company will not issue any indebtedness
that is subordinated in right of payment to any Senior Indebtedness of the
Company and is senior in right of payment to the Notes.
By reason of such subordination, in the event of dissolution, winding-up,
liquidation, insolvency, bankruptcy or other similar proceedings, upon any
distribution of assets of the Company: (i) holders of Senior Indebtedness will
be entitled to be paid in full before payments may be made on the Notes and
holders of Notes will be required to pay over their share of such distributions
to the holders of Senior Indebtedness until such Senior Indebtedness is paid in
full (except that holders of Notes may receive securities that are subordinated
at least to the same extent as the Notes) and (ii) creditors of the Company who
are not holders of Notes may recover less, ratably, than the holders of Senior
Indebtedness and may recover more, ratably, than the holders of the Notes.
Accordingly, such subordination may result in a reduction or elimination of
payments on the Notes.
S-16
<PAGE> 16
No payment of principal or interest on any of the Notes may be made by the
Company, nor may the Company acquire any Notes for cash or property (other than
securities that are subordinated at least to the same extent as the Notes), if
(i) a default in the payment of principal, premium, if any, or interest on any
Designated Senior Indebtedness occurs and continues beyond the applicable period
of grace, if any, specified in the applicable instrument, lease, contract,
agreement or other document evidencing such Designated Senior Indebtedness or
(ii) a default, other than a payment default, with respect to any Designated
Senior Indebtedness occurs and is continuing that permits the holders of the
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a notice of the default from a person permitted to give such notice
under the Indenture requesting that payment of principal or interest with
respect to the Notes be prohibited; provided that the foregoing will not
prohibit payments made in accordance with the defeasance or satisfaction and
discharge provisions of the Indenture from monies deposited with the Trustee in
accordance with such provisions prior to any such default, judicial proceeding
or notice. However, the Company may resume payments in respect of the Notes and
may acquire Notes upon the earlier of (a) the date upon which the default or
event of default with respect to such Designated Senior Indebtedness is cured or
waived or ceases to exist or (b) in the case of an event of default referred to
in clause (ii), the expiration of 179 days after notice is received (a "Payment
Blockage Period"); provided that the terms of the Indenture otherwise permit the
payment or acquisition of Notes at the time in question. Only one Payment
Blockage Period may be commenced within any consecutive 365-day period in
respect of the Notes, and in no event will a Payment Blockage Period extend
beyond 179 days from the date payment on the Notes is due. For purposes of the
provisions of the Indenture described in this paragraph, no default which, to
the knowledge of certain specified authorized persons, existed or was continuing
on the date of the commencement of any Payment Blockage Period by such person,
will be made the basis for the commencement of a subsequent Payment Blockage
Period by such person, whether or not within any consecutive 365-day period,
unless such default is cured or waived or ceases to exist, or the benefits of
the provisions of the Indenture described in this paragraph are waived in
writing by such person for a period of not less than 90 consecutive days. The
Indenture will define "Designated Senior Indebtedness" of the Company as (i)
Senior Indebtedness of the Company permitted to be incurred under the Indenture
pursuant to any institutional credit agreement (including the Company's existing
principal bank credit facility) and (ii) any other Senior Indebtedness permitted
to be incurred under the Indenture, the principal amount of which is $25 million
or more.
These subordination provisions will not prevent the occurrence of any Event
of Default under the Indenture.
The indentures for the Company's 7.95% Senior Notes due 2001, 8.25% Senior
Notes due 2004 and the 7.75% Senior Notes due 2005 and the documents governing
the Company's principal bank credit facility restrict the acquisition by the
Company of its subordinated indebtedness, including the Notes. For example, such
indentures contain similar covenants limiting the amount of "restricted
payments" made by the Company, including the acquisition of subordinated debt.
The amount of restricted payments permitted to be made by the Company will vary
depending upon, among other things, the Company's cumulative earnings and
restricted payments made other than acquisitions of subordinated debt (e.g.,
repurchases of stock by the Company). The Company's principal bank credit
facility generally prohibits the Company from acquiring subordinated debt, other
than by using the proceeds of new subordinated debt or equity securities.
In addition, the claims of third parties to the assets of the Company's
subsidiaries incurring obligations to such third parties will be superior to
those of the Company as a stockholder, and therefore the Notes may be deemed to
be effectively subordinated to the claims of such third parties.
INDENTURE COVENANTS
In addition to the other covenants described in the prospectus, the
Indenture will include the following covenants:
S-17
<PAGE> 17
Reports to Holders of Notes. The Indenture will provide that as long as
more than 10 percent of the original amount of the Notes is outstanding, the
Company will (i) remain subject to the requirements of section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or
not it is required to do so by the provisions thereof and will file with the
Securities and Exchange Commission (the "Commission") all periodic reports as
may be required thereunder and (ii) file with the Commission, and with the
Trustee within 15 days after the Company is required to file the same with the
Commission, copies of the periodic reports which the Company may be required to
file with the Commission pursuant to section 13(a), 13(c) or 15(d) of the
Exchange Act. The Company will also make such reports available to the Holders,
prospective purchasers of the Notes, securities analysts and broker-dealers upon
their written request.
The Indenture will also provide that in the event that (i) 10 percent or
less of the original principal amount of the Notes are Outstanding and (ii) the
Company is not required to file with the Commission such reports and other
information referred to in the preceding paragraph, the Company will furnish to
the Trustee (A) within 120 days after the end of each fiscal year, annual
reports containing the information required to be contained in items 1, 2, 3, 5,
6, 7, 8 and 9 of the Annual Report on Form 10-K promulgated under the Exchange
Act, or substantially the same information required to be contained in
comparable items of any successor form, (B) within 60 days after the end of each
of the first three fiscal quarters of each fiscal year, quarterly reports
containing the information required to be contained in the Quarterly Report on
Form 10-Q promulgated under the Exchange Act, or substantially the same
information required to be contained in any successor form, and (C) promptly
from the time after the occurrence of an event which would be required to be
reported in the Current Report on Form 8-K if the Company was required to file
such report, such other reports containing the information required to be
contained in the Current Report on Form 8-K promulgated under the Exchange Act,
or substantially the same information required to be contained in any successor
form.
The Indenture will also provide that the Company will also comply with the
other provisions of section 314(a) of the Trust Indenture Act of 1939, as
amended.
Limitations on Restricted Payments. The Indenture will provide that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
make any Restricted Payment, directly or indirectly, after the Issue Date if at
the time of such Restricted Payment:
(i) the amount of such Restricted Payment (the amount of such
Restricted Payment, if other than in cash, will be determined by the Board
of Directors of the Company), when added to the aggregate amount of all
Restricted Payments made after the Issue Date, exceeds the sum of: (1) $100
million plus (2) 50 percent of the Company's Consolidated Net Income
accrued during the period (taken as a single period) since January 1, 1997
(or, if such aggregate Consolidated Net Income is a deficit, minus 100
percent of such aggregate deficit), plus (3) the net cash proceeds derived
from the issuance and sale of Capital Stock of the Company and its
Restricted Subsidiaries that is not Disqualified Stock (other than a sale
to a Subsidiary of the Company) after the Issue Date but only to the extent
not applied under clause (d) of the definition of "Restricted Payment" set
forth herein, plus (4) 100 percent of the principal amount of any
Indebtedness of the Company or a Restricted Subsidiary that is converted
into or exchanged for Capital Stock of the Company that is not Disqualified
Stock, plus (5) 100 percent of the aggregate amounts received by the
Company or any Restricted Subsidiary upon the sale, disposition or
liquidation (including by way of dividends) of any Investment but only to
the extent (x) not included in Consolidated Net Income in clause (i)(2)
above and (y) that the making of such Investment constituted a Restricted
Investment made pursuant to the provisions of the Indenture described in
this paragraph, plus (6) 100 percent of the principal amount of, or if
issued at a discount the accreted value of, any Indebtedness or other
obligation that is the subject of a guaranty by the Company which is
released after the Issue Date, but only to the extent that the granting of
such guaranty constituted a "Restricted Payment" under the definition
thereof set forth in the Indenture and described herein; or
S-18
<PAGE> 18
(ii) the Company would be unable to incur an additional $1.00 of
Indebtedness under the ratio of the Company's Indebtedness (excluding
Non-Recourse Indebtedness) to Consolidated Tangible Net Worth set forth
under the caption "-- Limitations on Additional Indebtedness"; or
(iii) a Default or Event of Default has occurred and is continuing or
occurs as a consequence thereof.
Notwithstanding the foregoing, the provisions of the Indenture described
above will not prevent: (i) the payment of any dividend within 60 days after the
date of declaration thereof if the payment thereof would have complied with the
limitations of the Indenture on the date of declaration or (ii) the retirement
of shares of the Company's Capital Stock or the Company's or a Subsidiary of the
Company's Indebtedness for, in exchange for or out of the proceeds of a
substantially concurrent sale (other than a sale to a Subsidiary of the Company)
of, other shares of its Capital Stock (other than Disqualified Stock).
Limitations on Additional Indebtedness. The Indenture will provide that
the Company will not, and will not permit any of its Restricted Subsidiaries to,
Incur any additional Indebtedness (other than Indebtedness between the Company
and its Restricted Subsidiaries which are Wholly Owned Subsidiaries or among
such Restricted Subsidiaries which are Wholly Owned Subsidiaries), including
Acquisition Debt, unless, after giving effect thereto or the application of the
proceeds therefrom, the ratio of the Company's Indebtedness (excluding, for
purposes of this calculation, Non-Recourse Indebtedness) to Consolidated
Tangible Net Worth on the date thereof is not greater than 3.0 to 1.0.
Notwithstanding the foregoing, the provisions of the Indenture will not
prevent: (i) in addition to the Indebtedness permitted to be Incurred under
clauses (ii), (iii) and (iv) of this sentence and Indebtedness permitted to be
Incurred under the provisions of the Indenture described in the preceding
paragraph, the Company and/or any Restricted Subsidiary from Incurring (A)
Refinancing Indebtedness, (B) Non-Recourse Indebtedness, and (C) Indebtedness
Incurred for working capital purposes or to finance the acquisition, holding or
development of property by the Company and its Restricted Subsidiaries
(including, without limitation, the financing of any related interest reserve)
in the ordinary course of business in an aggregate amount at any one time
outstanding not to exceed $50 million (excluding any Indebtedness referred to in
clauses (i)(A), (i)(B), (ii), (iii) and (iv) of this paragraph), (ii)
Unrestricted Subsidiaries from Incurring Indebtedness, (iii) the Company and its
Restricted Subsidiaries from Incurring Indebtedness under any deposits made to
secure performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, progress statements, government contracts and other obligations of
like nature (exclusive of the obligation for the payment of borrowed money), in
each case Incurred in the ordinary course of business of the Company or any
Restricted Subsidiary consistent with past practice and (iv) Restricted
Subsidiaries from guaranteeing Indebtedness of the Company or another Restricted
Subsidiary.
Other than as described above, the Indenture will not limit the Company
from incurring additional indebtedness, including Senior Indebtedness.
Change of Control. The Indenture will provide that, following the
occurrence of any Change of Control, the Company will so notify the Trustee in
writing by delivery of an Officers' Certificate and will offer to purchase (a
"Change of Control Offer") from all Holders, and will purchase from Holders
accepting such Change of Control Offer on the date fixed for the closing of such
Change of Control Offer (the "Change of Control Payment Date"), the Outstanding
Notes at an offer price (the "Change of Control Price") in cash in an amount
equal to 101 percent of the aggregate principal amount thereof plus accrued and
unpaid interest, if any, to the Change of Control Payment Date in accordance
with the procedures set forth in the "Change of Control" covenant of the
Indenture.
In addition, the Indenture will provide that, within 30 days after the date
of any Change of Control, the Company (with written notice to the Trustee) or
the Trustee at the Company's request (and at the expense of the Company), will
send or cause to be sent by first-class mail, postage prepaid, to all Holders on
the date of the Change of Control at their respective addresses appearing in the
Security Register, a notice, prepared by the Company advising such Holders of
such occurrence and of such Holder's rights
S-19
<PAGE> 19
arising as a result thereof. Such notice will contain all instructions and
materials necessary to enable such Holders to tender their Notes to the Company.
The Indenture will also provide that:
(a) In the event of a Change of Control Offer, the Company will only
be required to accept Notes in denominations of $1,000 or integral
multiples thereof.
(b) The Company will not, and will not permit any Restricted
Subsidiary to, create or permit to exist or become effective any
restriction (other than any restriction set forth in any agreement,
indenture, document or instrument relating to any Existing Indebtedness or
Refinancing Indebtedness with respect thereto) that would materially impair
the ability of the Company to make a Change of Control Offer.
Notwithstanding the foregoing, if a Change of Control Offer is made, the
Company will pay for Notes tendered for purchase in accordance with the
provisions of the Indenture described under this caption.
(c) Not later than one Business Day prior to the Change of Control
Payment Date in connection with which the Change of Control Offer is being
made, the Company will (i) accept for payment Notes or portions thereof
tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent money sufficient, in immediately available funds, to pay the
purchase price of all Notes or portions thereof so accepted and (iii)
deliver to the Paying Agent an Officers' Certificate identifying the Notes
or portions thereof accepted for payment by the Company. The Paying Agent
will promptly authenticate and mail or deliver to Holders of Notes so
accepted payment in an amount equal to the Change of Control Price of the
Notes purchased from each such Holder, and the Company will execute and,
upon receipt of an Officers' Certificate of the Company, the Trustee will
promptly authenticate and mail or deliver to such Holder a new Note equal
in principal amount to any unpurchased portion of the Note surrendered. Any
Notes not so accepted will be promptly mailed or delivered by the Paying
Agent at the Company's expense to the Holder thereof. The Company will
publicly announce the results of the Change of Control Offer on the Change
of Control Payment Date. For purposes of the provisions of the Indenture
described above, the Company will choose a Paying Agent which will not be
the Company or a Subsidiary thereof. Any excess cash held by the Trustee
after the expiration of the Change of Control Offer will be returned to the
Company.
(d) Any Change of Control Offer will be conducted by the Company in
compliance with applicable law, including without limitation section 14(e)
of the Exchange Act and rule 14e-1 thereunder, if applicable.
There can be no assurance that sufficient funds will be available at the
time of a Change of Control to make any required repurchases. The Company's
failure to make any required repurchases in the event of a Change of Control
Offer will create an Event of Default under the Indenture.
The indentures for the Company's 7.95% Senior Notes due 2001, 8.25% Senior
Notes due 2004 and the 7.75% Senior Notes due 2005 and the documents governing
the Company's principal bank credit facility restrict the acquisition by the
Company of its subordinated indebtedness, including the Notes. For example, the
indentures for these Senior Notes contain similar covenants limiting the amount
of "restricted payments" made by the Company, including the acquisition of
subordinated debt. The amount of restricted payments permitted to be made by the
Company will vary depending upon, among other things, the Company's cumulative
earnings and restricted payments made other than acquisitions of subordinated
debt (e.g., repurchases of stock by the Company). The Company's principal bank
credit facility generally prohibits the Company from acquiring subordinated
debt, other than by using the proceeds of new subordinated debt or equity
securities.
No quantitative or other established meaning has been given to the phrase
"all or substantially all" (which appears in the definition of Change of
Control) by courts which have interpreted this phrase in various contexts. In
interpreting this phrase, courts make a subjective determination as to the
portion of assets conveyed, considering such factors as the value of the assets
conveyed and the proportion of an entity's income derived from the assets
conveyed. Accordingly, there may be uncertainty as to whether a
S-20
<PAGE> 20
Holder of Notes can determine whether a Change of Control has occurred and
exercise any remedies such Holder may have upon a Change of Control.
Limitations on Transactions with Affiliates. The Indenture will provide
that the Company will not, and will not permit any of its Restricted
Subsidiaries to, make any loan, advance, guaranty or capital contribution to or
for the benefit of, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or for the benefit of, or purchase or lease any
property or assets from, or enter into or amend any contract, agreement or
understanding with, or for the benefit of, (i) any Affiliate of the Company or
any Affiliate of the Company's Restricted Subsidiaries or (ii) any Person (or
any Affiliate of such Person) holding 10 percent or more of the Common Equity of
the Company or any of its Restricted Subsidiaries (each an "Affiliate
Transaction"), except on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary, as the case may be, than those that could have
been obtained in a comparable transaction on an arms' length basis from a Person
that is not an Affiliate.
The Indenture will also provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, enter into an Affiliate
Transaction involving or having a value of more than $10 million, unless in each
case such Affiliate Transaction has been approved by a majority of the
disinterested members of the Company's Board of Directors.
The Indenture will also provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, enter into any Affiliate
Transaction involving or having a value of more than $20 million unless the
Company has delivered to the Trustee an opinion of an Independent Financial
Advisor to the effect that the transaction is fair to the Company or the
relevant Restricted Subsidiary, as the case may be, from a financial point of
view.
The Indenture will also provide that, notwithstanding the foregoing, an
Affiliate Transaction will not include (i) any contract, agreement or
understanding with, or for the benefit of, or plan for the benefit of, employees
or directors of the Company or its Subsidiaries (in their capacity as such) that
has been approved by the Company's Board of Directors, (ii) Capital Stock
issuances to members of the Board of Directors, officers or employees of the
Company or its Subsidiaries pursuant to plans approved by the stockholders of
the Company, (iii) any Restricted Payment otherwise permitted under the
provisions of the Indenture described under the caption "-- Limitations on
Restricted Payments," (iv) any transaction between the Company or a Restricted
Subsidiary and another Restricted Subsidiary, (v) any contract, agreement or
understanding as in effect on the Issue Date or any amendment thereto or any
transaction contemplated thereby (including any amendment thereto) or (vi) loans
or advances by the Company or any Restricted Subsidiary to Unrestricted
Subsidiaries which in an aggregate amount at any one time outstanding do not
exceed $50 million.
Limitations on Restrictions on Distributions from Restricted
Subsidiaries. The Indenture will provide that the Company will not, and will
not permit any of its Restricted Subsidiaries to, create, assume or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction (other than encumbrances or restrictions imposed by law or by
judicial or regulatory action or by provisions in leases or other agreements
that restrict the assignability thereof) on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or any other interest or participation in, or measured by, its profits,
owned by the Company or any of its other Restricted Subsidiaries, or pay
interest on or principal of any Indebtedness owed to the Company or any of its
other Restricted Subsidiaries, (ii) make loans or advances to the Company or any
of its other Restricted Subsidiaries, or (iii) transfer any of its properties or
assets to the Company or any of its other Restricted Subsidiaries, except for
encumbrances or restrictions existing under or by reason of (a) applicable law,
(b) covenants or restrictions contained in Existing Indebtedness as in effect on
the Issue Date, (c) any restrictions or encumbrances arising in connection with
the Existing Credit Facility; provided that any such restrictions and
encumbrances relating to any extension or renewal of the Existing Credit
Facility are not more restrictive than those in the Existing Credit Facility
being extended or renewed, (d) any restrictions or encumbrances arising in
connection with Refinancing Indebtedness; provided that any restrictions and
encumbrances of the type described in this clause (d) that arise under such
Refinancing Indebtedness are
S-21
<PAGE> 21
not more restrictive than those under the agreement creating or evidencing the
Indebtedness being refunded or refinanced, (e) any agreement restricting the
sale or other disposition of property securing Indebtedness permitted by the
Indenture if such agreement does not expressly restrict the ability of a
Subsidiary of the Company to pay dividends or make loans or advances, (f)
reasonable and customary borrowing base covenants set forth in credit agreements
evidencing Indebtedness otherwise permitted by the Indenture which covenants
restrict or limit the distribution of revenues or sale proceeds from real estate
or a real estate project based upon the amount of Indebtedness outstanding on
such real estate or real estate project and the value of some or all of the
remaining real estate or the project's remaining assets and (g) any restrictions
under any instrument creating or evidencing any Acquisition Debt that was
permitted to be Incurred pursuant to the Indenture and the Notes and which (1)
only apply to assets that were subject to such restrictions and encumbrances
prior to the acquisition of such assets by the Company or any of its Restricted
Subsidiaries and (2) were not created in connection with, or in contemplation
of, such acquisition, and any restrictions replacing those permitted by this
clause (g) which are not more restrictive than, and do not extend to any Persons
or assets other than the Persons or assets subject to, the restrictions and
encumbrances so replaced.
Maintenance of Consolidated Tangible Net Worth. The Indenture will provide
that in the event that the Consolidated Tangible Net Worth of the Company for
any two consecutive fiscal quarters is less than $115 million, within 30 days
after the end of each such period the Company will so notify the Trustee in
writing by delivery of an Officers' Certificate and will offer to purchase from
all Holders (a "Net Worth Offer"), and will purchase from Holders accepting such
Net Worth Offer on the date fixed for the closing of such Net Worth Offer (the
"Net Worth Offer Date"), ten percent of the original Outstanding principal
amount of the Notes (the "Net Worth Amount") at an offer price (the "Net Worth
Offer Price") in cash in an amount equal to 100 percent of the principal amount
thereof plus accrued and unpaid interest, if any, to the Net Worth Offer Date,
in accordance with the procedures set forth in the "Maintenance of Consolidated
Tangible Net Worth" covenant of the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to a Net Worth Offer is less than the Net
Worth Amount relating thereto, then the Company may use the excess of the Net
Worth Amount over the amount of Notes tendered, or a portion thereof, for
general corporate purposes.
The Indenture will also provide that in the event that the Consolidated
Tangible Net Worth of the Company for any two consecutive fiscal quarters is
less than $115 million, within 30 days after the end of such period, the Company
(with written notice to the Trustee) or the Trustee at the Company's request
(and at the expense of the Company) will send or cause to be sent by first-class
mail, postage prepaid, to all Holders on the date of the end of the second such
consecutive fiscal quarter, at their respective addresses appearing in the
Security Register, a notice, prepared by the Company advising such Holders of
such occurrence and of each Holder's rights arising as a result thereof. Such
notice will contain all instructions and materials necessary to enable Holders
to tender their Notes to the Company.
The Indenture will also provide that:
(a) In the event that the aggregate principal amount of Notes
surrendered by Holders exceeds the Net Worth Amount, the Company will
select the Notes to be purchased on a pro rata basis from all Notes so
surrendered, with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral
multiples thereof, will be purchased. To the extent that the Net Worth
Amount remaining is less than $1,000, the Company may use such Net Worth
Amount for general corporate purposes. Holders whose Notes are purchased
only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
(b) The Company will not, and will not permit any Restricted
Subsidiary to, create or permit to exist or become effective any
restriction (other than any restriction set forth in any agreement,
indenture, document or instrument relating to any Existing Indebtedness or
Refinancing Indebtedness with respect thereto) that would materially impair
the ability of the Company to make a Net Worth Offer. Notwithstanding the
foregoing, if a Net Worth Offer is made, the Company will pay for Notes
tendered for purchase in accordance with the provisions of the Indenture
described under this caption.
S-22
<PAGE> 22
(c) Not later than one Business Day prior to the Net Worth Offer Date
in connection with which the Net Worth Offer is being made, the Company
will (i) accept for payment Notes or portions thereof tendered pursuant to
the Net Worth Offer (on a pro rata basis if required pursuant to the
provisions of the Indenture described in paragraph (a) above), (ii) deposit
with the Paying Agent money sufficient, in immediately available funds, to
pay the purchase price of all Notes or portions thereof so accepted and
(iii) deliver to the Paying Agent an Officers' Certificate identifying the
Notes or portions thereof accepted for payment by the Company. The Paying
Agent will promptly after acceptance mail or deliver to Holders of Notes so
accepted payment in an amount equal to the Net Worth Offer Price of the
Notes purchased from each such Holder, and the Company will execute and the
Trustee will promptly authenticate and mail or deliver to such Holder a new
Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted will be promptly mailed or delivered
by the Paying Agent at the Company's expense to the Holder thereof. The
Company will publicly announce the results of the Net Worth Offer on the
Net Worth Offer Date. For purposes of the provisions of the Indenture
described above, the Company will choose a Paying Agent which will not be
the Company or a Subsidiary thereof. Any excess cash held by the Trustee
after the expiration of the Net Worth Offer will be returned to the
Company.
(d) Any Net Worth Offer will be conducted by the Company in compliance
with applicable law, including without limitation section 14(e) of the
Exchange Act and rule 14e-1 thereunder, if applicable.
There can be no assurance that sufficient funds will be available at the
time of a Net Worth Offer to make any required repurchases. The Company's
failure to make any required repurchases in the event of a Net Worth Offer will
create an Event of Default under the Indenture.
The indentures for the Company's 7.95% Senior Notes due 2001, 8.25% Senior
Notes due 2004 and the 7.75% Senior Notes due 2005 and the documents governing
the Company's principal bank credit facility restrict the acquisition by the
Company of its subordinated indebtedness, including the Notes. For example, the
indentures for these Senior Notes contain similar covenants limiting the amount
of "restricted payments" made by the Company, including the acquisition of
subordinated debt. The amount of restricted payments permitted to be made by the
Company will vary depending upon, among other things, the Company's cumulative
earnings and restricted payments made other than acquisitions of subordinated
debt (e.g., repurchases of stock by the Company). The Company's principal bank
credit facility generally prohibits the Company from acquiring subordinated
debt, other than by using the proceeds of new subordinated debt or equity
securities.
Limitations on Mergers and Consolidations. The Indenture will provide that
the Company will not consolidate or merge with or into, or sell, lease, convey
or otherwise dispose of all or substantially all of its assets (including
without limitation by way of liquidation or dissolution), or assign any of its
obligations thereunder or under the Notes (as an entirety or substantially an
entirety in one transaction or series of related transactions), to any Person
unless: (i) the Person formed by or surviving such consolidation or merger (if
other than the Company), or to which sale, lease, conveyance or other
disposition or assignment will be made (collectively, the "Successor"), is a
solvent corporation or other legal entity organized and existing under the laws
of the United States or any state thereof or the District of Columbia, and the
Successor assumes by supplemental indenture in a form reasonably satisfactory to
the Trustee all of the obligations of the Company under the Notes and the
Indenture, (ii) immediately after giving effect to such transaction, no Default
or Event of Default has occurred and is continuing, (iii) immediately after
giving effect to such transaction and the use of any net proceeds therefrom on a
pro forma basis, the Consolidated Tangible Net Worth of the Company or the
Successor, as the case may be, would be at least equal to the Consolidated
Tangible Net Worth of the Company immediately prior to such transaction and (iv)
the ratio of the Company's or the Successor's Indebtedness (excluding Non-
Recourse Indebtedness) to Consolidated Tangible Net Worth set forth in the
Indenture and described under the caption "-- Limitations on Additional
Indebtedness" of the Company or the Successor, as the case may be, immediately
after giving effect to such transaction, would be such that the Company or the
Successor, as the case may be, would be entitled to Incur at least $1.00 of
additional Indebtedness under
S-23
<PAGE> 23
such ratio. However, any such consolidation, merger, sale, lease, conveyance or
disposition may result in a Change of Control, thereby requiring the Company to
make a Change of Control Offer. See "-- Change of Control."
No quantitative or other established meaning has been given to the phrase
"all or substantially all" by courts which have interpreted this phrase in
various contexts. In interpreting this phrase, courts make a subjective
determination as to the portion of assets conveyed, considering such factors as
the value of the assets conveyed and the proportion of an entity's income
derived from the assets conveyed. Accordingly, there may be uncertainty as to
whether a Holder of Notes can determine whether the Company has sold, leased,
conveyed or otherwise disposed of all or substantially all of its assets and
exercise any remedies such Holder may have upon the occurrence of any such
transaction.
For purposes of this "Indenture Covenants" section of this prospectus
supplement, the terms set forth below have the following meanings:
"Acquisition Debt" means Indebtedness of any Person existing at the time
such Person became a Subsidiary of the Company (or such Person is merged into
the Company or one of the Company's Subsidiaries) or assumed in connection with
the acquisition of assets from any such Person (other than assets acquired in
the ordinary course of business of the Company and its Subsidiaries), including
without limitation Indebtedness Incurred in connection with, or in contemplation
of, such Person becoming a Subsidiary of the Company (but excluding Indebtedness
of such Person which is extinguished, retired or repaid in connection with such
Person becoming a Subsidiary of the Company).
"Affiliate" of any Person means any Person directly or indirectly
controlling or controlled by, or under direct or indirect common control with,
such Person. For purposes of the Indenture, each executive officer and director
of the Company and each Restricted Subsidiary will be an Affiliate of the
Company. In addition, for purposes of the Indenture, control of a Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding the foregoing, the term "Affiliate" will not include,
with respect to the Company or any Restricted Subsidiary which is a Wholly Owned
Subsidiary of the Company, any Restricted Subsidiary which is a Wholly Owned
Subsidiary of the Company.
"Board of Directors" means the board of directors of a Person or any
authorized committee of the board of directors of such Person.
"Board Resolution" means a copy of a resolution, certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" of any Person means any and all shares, rights to purchase,
warrants or options (whether or not currently exercisable), participations, or
other equivalents of or interests in (however designated) the equity (which
includes, but is not limited to, common stock, preferred stock and partnership
and joint venture interests) of such Person (excluding any debt securities that
are convertible into, or exchangeable for, such equity).
"Capitalized Lease Obligations" of any Person means any obligation of such
Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligation will be the capitalized amount thereof determined in
accordance with GAAP.
"Change of Control" means any of the following: (i) the sale, lease,
conveyance or other disposition of all or substantially all of the Company's
assets as an entirety or substantially as an entirety to any Person or group of
Persons (within the meaning of section 13(d)(3) of the Exchange Act) in one or a
series of transactions; provided that a transaction where the holders of all
classes of Common Equity of the Company immediately prior to such transaction
own, directly or indirectly, 50 percent or more of the aggregate voting power of
all classes of Common Equity of such Person or group immediately after such
S-24
<PAGE> 24
transaction will not be a Change of Control, (ii) the acquisition by the Company
and/or any of its Subsidiaries of 50 percent or more of the aggregate voting
power of all classes of Common Equity of the Company in one transaction or a
series of related transactions, (iii) the liquidation or dissolution of the
Company; provided that a liquidation or dissolution of the Company which is part
of a transaction or series of related transactions that does not constitute a
Change of Control under the "provided" clause of clause (i) above will not
constitute a Change of Control under this clause (iii) or (iv) any transaction
or a series of related transactions (as a result of a tender offer, merger,
consolidation or otherwise) that results in, or that is in connection with, (a)
any Person, including a "group" (within the meaning of section 13(d)(3) of the
Exchange Act) acquiring beneficial ownership (as determined in accordance with
rule 13d-3 under the Exchange Act), directly or indirectly, of 50 percent or
more of the aggregate voting power of all classes of Common Equity of the
Company or of any Person that possesses beneficial ownership (as determined in
accordance with rule 13d-3 under the Exchange Act), directly or indirectly, of
50 percent or more of the aggregate voting power of all classes of Common Equity
of the Company or (b) less than 50 percent (measured by the aggregate voting
power of all classes) of the Common Equity of the Company being registered under
section 12(b) or 12(g) of the Exchange Act.
"Common Equity" of any Person means all Capital Stock of such Person that
is generally entitled (i) to vote in the election of directors of such Person,
or (ii) if such Person is not a corporation, to vote or otherwise participate in
the selection of the governing body, partners, managers or others that will
control the management and policies of such Person.
"Consolidated Net Income" of the Company for any period means the aggregate
net income (or loss) of the Company and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; provided
that there will be excluded from such net income (to the extent otherwise
included therein), without duplication (i) the net income (or loss) of any
Person (other than a Restricted Subsidiary) in which any Person (including,
without limitation, an Unrestricted Subsidiary) other than the Company has an
ownership interest, except to the extent that any such income has actually been
received by the Company or any Restricted Subsidiary in the form of dividends or
similar distributions during such period, (ii) except to the extent includible
in the Consolidated Net Income pursuant to the foregoing clause (i), the net
income (or loss) of any Person that accrued prior to the date that (a) such
Person becomes a Restricted Subsidiary or is merged into or consolidated with
the Company or any of its Restricted Subsidiaries or (b) the assets of such
Person are acquired by the Company or any of its Restricted Subsidiaries, (iii)
the net income of any Restricted Subsidiary to the extent that (but only so long
as) the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of that income is not permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary during
such period, (iv) in the case of a successor to the Company by consolidation,
merger or transfer of its assets, any earnings of the successor prior to such
merger, consolidation or transfer of assets and (v) the gains (but not losses)
resulting from (a) the acquisition of securities issued by the Company or
extinguishment of Indebtedness of the Company, (b) the sale or other disposition
(including without limitation dispositions pursuant to sale and leaseback
transactions) of any asset of the Company which is not sold or disposed of in
the ordinary course of business and (c) other extraordinary items.
Notwithstanding the foregoing, in calculating Consolidated Net Income, the
Company will be entitled to take into consideration the tax benefits associated
with any extraordinary loss, but only to the extent such tax benefits are
recognized by the Company. Consolidated Net Income will exclude any noncash
losses, whether or not extraordinary, incurred in connection with the issuance
of Capital Stock (other than Disqualified Stock) in exchange for Indebtedness of
the Company or its Wholly Owned Restricted Subsidiaries.
"Consolidated Tangible Net Worth" of the Company as of any date means the
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of the Company and its Restricted
Subsidiaries on a consolidated basis at the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less the
amount of Intangible
S-25
<PAGE> 25
Assets reflected on the consolidated balance sheet of the Company and its
Restricted Subsidiaries as of the end of the fiscal quarter immediately
preceding such date.
"Default" means any event, act or condition that is, or after notice or the
passage of time or both would be, an Event of Default.
"Defeasance" has the meaning set forth in section 11.02 of the Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final Maturity date of the Notes; provided that any Capital Stock which would
not constitute Disqualified Stock but for provisions thereof giving holders
thereof the right to require the Company to repurchase or redeem such Capital
Stock upon the occurrence of a change of control occurring prior to the final
Maturity of the Notes will not constitute Disqualified Stock if the change of
control provisions applicable to such Capital Stock are no more favorable to the
holders of such Capital Stock than the provisions of the Indenture described
under the caption "Change of Control" and such Capital Stock specifically
provides that the Company will not repurchase or redeem (or be required to
repurchase or redeem) any such Capital Stock pursuant to such provisions prior
to the Company's repurchase of Notes pursuant to the "Change of Control"
covenant set forth in the Indenture.
"Event of Default" has the meaning set forth under the caption "Description
of Debt Securities -- Events of Default" in the prospectus.
"Existing Credit Facility" means the Second Amended and Restated Credit
Agreement, dated as of September 11, 1998, between the Company and the lenders
named therein and The First National Bank of Chicago, as Agent (together with
the documents related thereto (including without limitation any guaranty
agreements)), as such facility may be amended, restated, supplemented or
otherwise modified from time to time, and includes any facility extending the
maturity of, increasing the total commitment of, or restructuring (including
without limitation the inclusion of additional borrowers thereunder that are
Subsidiaries of the Company and whose obligations thereunder are guaranteed by
the Company) all or any portion of, the Indebtedness under such facility or any
successor or replacement facilities and includes any facility with one or more
agents or lenders refinancing or replacing all or any portion of the
Indebtedness under such facility or any successor facilities.
"Existing Indebtedness" means all of the Indebtedness of the Company and
its Subsidiaries that is outstanding on the Issue Date.
"Fair Market Value" with respect to any asset or property means the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the Issue Date.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement relating to interest rates or foreign exchange
rates.
"Holder" means a Person in whose name a Note is registered.
"Incur" means to, directly or indirectly, create, incur, assume, guaranty,
extend the maturity of or otherwise become liable with respect to any
Indebtedness.
S-26
<PAGE> 26
"Indebtedness" of any Person at any date means, without duplication, (i)
all indebtedness of such Person for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (or reimbursement
obligations with respect thereto), other than standby letters of credit issued
for the benefit of, or surety and performance bonds issued by, such Person in
the ordinary course of business, (iv) all obligations of such Person with
respect to Hedging Obligations (other than those that fix or cap the interest
rate on variable rate indebtedness otherwise permitted by the Indenture or that
fix the exchange rate in connection with indebtedness denominated in a foreign
currency and otherwise permitted by the Indenture and other than the purchase of
mortgage commitments in the ordinary course of business), (v) all obligations of
such Person to pay the deferred and unpaid purchase price of property or
services, including without limitation all conditional sale obligations of such
Person and all obligations under any title retention agreement (except trade
payables and accrued expenses incurred in the ordinary course of business), (vi)
all Capitalized Lease Obligations of such Person, (vii) all indebtedness of
others secured by a Lien on any asset of such Person, whether or not such
indebtedness is assumed by such Person, (viii) all indebtedness of others
guaranteed by, or otherwise the liability of, such Person to the extent of such
guaranty or liability, and (ix) all Disqualified Stock issued by such Person
(the amount of indebtedness represented by any Disqualified Stock will equal the
greater of the voluntary or involuntary liquidation preference plus accrued and
unpaid dividends). The amount of indebtedness of any Person at any date will be
(a) the outstanding balance at such date of all unconditional obligations as
described above, (b) the maximum liability of such Person for any contingent
obligations under clause (v) above and (c) in the case of clause (vii) (if the
indebtedness referred to therein is not assumed by such Person), the lesser of
the (A) Fair Market Value of all assets subject to a Lien securing the
indebtedness of others on the date that the Lien attaches and (B) amount of the
indebtedness secured.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
reasonable judgment of the Company's Board of Directors, (i) qualified to
perform the task for which it has been engaged, and (ii) disinterested and
independent with respect to the Company, all of its Subsidiaries, and each
Affiliate of the Company and/or its Subsidiaries that is involved in the
Affiliate Transaction with respect to which such firm has been engaged.
"Intangible Assets" of the Company means all unamortized debt discount and
expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, write-ups of assets over their carrying value at
the end of the last fiscal quarter ended prior to the Issue Date or the date of
acquisition, if acquired subsequent thereto, and all other items which would be
treated as intangibles on the consolidated balance sheet of the Company and its
Restricted Subsidiaries prepared in accordance with GAAP.
"Investments" of any Person means all (i) investments by such Person in any
other Person in the form of loans, advances or capital contributions, (ii)
guarantees of Indebtedness or other obligations of any other Person by such
Person, (iii) purchases (or other acquisitions for consideration) by such Person
of Indebtedness, Capital Stock or other securities of any other Person and (iv)
other items that would be classified as investments (including without
limitation purchases of assets outside the ordinary course of business) on a
balance sheet of such Person determined in accordance with GAAP.
"Issue Date" means the date of original issuance of the Notes.
"Legal Holiday" means Saturday, Sunday or a day on which banking
institutions in New York, New York or at a Place of Payment are authorized or
obligated by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a Place of Payment, payment shall be made at that
place on the next succeeding day that is not a Legal Holiday and no interest
shall accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or other similar encumbrance of any kind upon or in
respect of such asset, whether or not filed, recorded or
S-27
<PAGE> 27
otherwise perfected under applicable law (including, without limitation, any
conditional sale or other title retention agreement, and any lease in the nature
thereof, any option or other agreement to sell, and any filing of, or agreement
to give, any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Maturity," when used with respect to a Note, means the date on which the
principal of such Note or an installment of principal becomes due and payable as
therein provided or provided in the Indenture, whether at the Stated Maturity or
by declaration of acceleration, call for redemption or otherwise.
"Non-Recourse Indebtedness" means Indebtedness of the Company or a
Restricted Subsidiary for which (i) the sole legal recourse for collection of
principal and interest on such Indebtedness is against the specific property
identified in the instruments evidencing or securing such Indebtedness and such
property was acquired with the proceeds of such Indebtedness or such
Indebtedness was Incurred within 90 days after the acquisition of such property
and (ii) no other assets of the Company or such Restricted Subsidiary may be
realized upon in collection of principal or interest on such Indebtedness.
"Officer" means the Chairman of the Board, the President, any Senior Vice
President, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary, any Assistant Secretary or any Vice President of a Person.
"Officers' Certificate" means a certificate signed by two Officers, one of
whom must be the Person's Chief Executive Officer (or Co-Chief Executive
Officer), Chief Operating Officer, Chief Financial Officer or Chief Accounting
Officer.
"Outstanding," when used with respect to Notes, means, as of the date of
determination, all Notes theretofore authenticated and delivered under the
Indenture, except:
(i) Notes theretofore canceled by the Trustee or delivered to the Trustee
for cancellation;
(ii) Notes for whose payment or redemption money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in
trust by the Company (if the Company acts as its own Paying Agent)
for the Holders of such Notes; provided that, if such Notes are to be
redeemed, notice of such redemption has been duly given pursuant to
the Indenture or provision therefor satisfactory to the Trustee has
been made;
(iii) Notes as to which the Defeasance has been effected pursuant to the
defeasance provisions, if any, of the Indenture; and
(iv) Notes which have been paid pursuant to the "Mutilated, Destroyed,
Lost and Stolen Securities" section of the Indenture or in exchange
for or in lieu of which other Notes have been authenticated and
delivered pursuant to the Indenture, other than any such Notes in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide purchaser
in whose hands such Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver under the Indenture, (a) the
principal amount of a Note denominated in one or more foreign currencies or
currency units will be the U.S. dollar equivalent, determined in the manner
provided as contemplated by section 3.01 of the Indenture on the Issue Date, of
the principal amount of such Note, and (b) Notes owned by the Company or any
other obligor of the Notes or any Subsidiary of the Company or of such other
obligor will be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee is protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Notes which
the Trustee knows to be so owned will be so disregarded. Notes so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Company or any other
obligor upon the Notes or any Subsidiary of the Company or of such other
obligor.
S-28
<PAGE> 28
"Paying Agent" means any Person, including the Company, authorized by the
Company to pay the principal of or any interest on any Note.
"Permitted Investment" of any Person means any Investment of such Person in
(i) direct obligations of the United States or any agency thereof or obligations
guaranteed by the United States or any agency thereof, in each case maturing
within 180 days of the date of acquisition thereof, (ii) certificates of deposit
maturing within 180 days of the date of acquisition thereof issued by a bank,
trust company or savings and loan association which is organized under the laws
of the United States or any state thereof having capital, surplus and undivided
profits aggregating in excess of $250 million and a Keefe Bank Watch Rating of C
or better (or a similar rating by any successor thereof), (iii) certificates of
deposit maturing within 180 days of the date of acquisition thereof issued by a
bank, trust company or savings and loan association organized under the laws of
the United States or any state thereof other than banks, trust companies or
savings and loan associations satisfying the criteria in (ii) above; provided
that the aggregate amount of all certificates of deposit issued to the Company
at any one time by such bank, trust company or savings and loan association will
not exceed $100,000, (iv) commercial paper given the highest rating by two
established national credit rating agencies and maturing not more than 180 days
from the date of the acquisition thereof, (v) repurchase agreements or
money-market accounts which are fully secured by direct obligations of the
United States or any agency thereof and (vi) in the case of the Company and its
Subsidiaries, any receivables or loans taken by the Company or a Subsidiary in
connection with the sale of any asset otherwise permitted by the Indenture.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, incorporated or unincorporated association, joint
stock company, trust, unincorporated organization or government or other agency
or political subdivision thereof or other entity of any kind.
"Place of Payment," when used with respect to the Notes, means the place or
places where the principal of and interest on the Notes are payable.
"Preferred Stock" of any Person means all Capital Stock of such Person
which has a preference in liquidation or with respect to the payment of
dividends.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Existing Indebtedness or other Indebtedness permitted to be Incurred
by the Company or its Restricted Subsidiaries pursuant to the terms of the
Indenture, but only to the extent that (i) the Refinancing Indebtedness is
subordinated to the Notes to the same extent as the Indebtedness being refunded,
refinanced or extended, if at all, (ii) the Refinancing Indebtedness is
scheduled to mature either (a) no earlier than the Indebtedness being refunded,
refinanced or extended, or (b) after the Maturity date of the Notes, (iii) the
portion, if any, of the Refinancing Indebtedness that is scheduled to mature on
or prior to the Maturity date of the Notes has a Weighted Average Life to
Maturity at the time such Refinancing Indebtedness is Incurred that is equal to
or greater than the Weighted Average Life to Maturity of the portion of the
Indebtedness being refunded, refinanced or extended that is scheduled to mature
on or prior to the Maturity date of the Notes, (iv) such Refinancing
Indebtedness is in an aggregate amount that is equal to or less than the
aggregate amount then outstanding under the Indebtedness being refunded,
refinanced or extended, (v) such Refinancing Indebtedness is Incurred by the
same Person that initially Incurred the Indebtedness being refunded, refinanced
or extended, except that the Company may Incur Refinancing Indebtedness to
refund, refinance or extend Indebtedness of any Restricted Subsidiary, and (vi)
such Refinancing Indebtedness is Incurred within 180 days before or after the
Indebtedness being refunded, refinanced or extended is so refunded, refinanced
or extended; provided that Refinancing Indebtedness shall include the amount of
any Indebtedness under the Existing Credit Facility which is Incurred within 180
days before or after the repayment of an equal amount of Indebtedness under the
Existing Credit Facility which was Incurred pursuant to the provisions of the
Indenture described in the first paragraph under the caption "-- Limitations on
Additional Indebtedness."
"Registrar" has the meaning set forth in the "Registration, Registration of
Transfer and Exchange" section of the Indenture.
S-29
<PAGE> 29
"Restricted Investment" with respect to any Person means any Investment
(other than any Permitted Investment) by such Person in any (i) of its
Affiliates, (ii) executive officer or director of any Affiliate of such Person,
or (iii) other Person other than a Restricted Subsidiary which is a Wholly Owned
Subsidiary of the referent Person; provided, however, that with respect to the
Company and its Restricted Subsidiaries, any loan or advance to an executive
officer or director of the Company or a Subsidiary will not constitute a
Restricted Investment provided such loan or advance is made in the ordinary
course of business consistent with past practices, and, if such loan or advance
exceeds $100,000 (other than a readily marketable mortgage loan not exceeding
$500,000), such loan or advance has been approved by the Board of Directors of
the Company or a disinterested committee thereof.
"Restricted Payment" with respect to any Person means (i) the declaration
of any dividend or the making of any other payment or distribution of cash,
securities or other property or assets in respect of such Person's Capital Stock
(except that a dividend payable solely in Capital Stock (other than Disqualified
Stock) of such Person will not constitute a Restricted Payment), (ii) any
payment on account of the purchase, redemption, retirement or other acquisition
for value of such Person's Capital Stock or any other payment or distribution
made in respect thereof (other than payments or distributions excluded from the
definitions of Restricted Payment in clause (i) above), either directly or
indirectly, (iii) any Restricted Investment, and (iv) any principal payment,
redemption, repurchase, defeasance or other acquisition or retirement of any
Indebtedness of any Unrestricted Subsidiary or of Indebtedness of the Company or
its Restricted Subsidiaries which is subordinated in right of payment to the
Notes (provided, however, that the payment, redemption, repurchase, defeasance
or other acquisition or retirement of any such subordinated Indebtedness by the
Company or any Restricted Subsidiary on its scheduled final Maturity date or on
any other scheduled date for the payment of any installment of principal thereof
(whether pursuant to a sinking fund, mandatory redemption or otherwise) will not
be a Restricted Payment); provided, further, that with respect to the Company
and its Subsidiaries, Restricted Payments will not include (a) any payment or
other obligation described in clause (i), (ii) or (iii) above made to, or on
behalf of or for the benefit of, the Company or any of its Restricted
Subsidiaries which are Wholly Owned Subsidiaries by any of the Company's
Subsidiaries or (b) any proportionate payment in respect of minority interests
in Restricted Subsidiaries of the Company to the extent that the payment
constitutes a return of capital that was not included in the Company's
shareholders' equity or a dividend or similar distribution not included in
determining the Company's Consolidated Net Income, or (c) any principal payment,
redemption, repurchase, defeasance or other acquisition or retirement of
Indebtedness of the Company or its Restricted Subsidiaries which is subordinated
to the Notes if the consideration therefor consists solely of, or is the
proceeds from, Indebtedness subordinated to the Notes to the same extent as the
Indebtedness being paid, redeemed, repurchased, defeased or otherwise acquired
or retired, or (d) any principal payment, redemption, repurchase, defeasance or
other acquisition or retirement of Indebtedness or Capital Stock of such Person
or its Subsidiaries if the consideration therefor consists solely of Capital
Stock (other than Disqualified Stock) of such Person, or the proceeds from such
sale of such Capital Stock, or (e) any loans or advances by the Company or any
Restricted Subsidiary to Unrestricted Subsidiaries which in an aggregate amount
at any one time outstanding do not exceed $50,000,000.
"Restricted Subsidiary" means each of the Subsidiaries of the Company which
is not an Unrestricted Subsidiary.
"Security Register" has the meaning set forth in the "Registration,
Registration of Transfer and Exchange" section of the Indenture.
"Stated Maturity," when used with respect to any Note or any installment of
principal thereof or interest thereon, means the date specified in such Note as
the fixed date on which the principal of such Note or such installment of
principal or interest is due and payable.
"Subsidiary" of any Person means any (i) corporation of which at least a
majority of the aggregate voting power of all classes of the Common Equity is
directly or indirectly beneficially owned by such Person and (ii) entity other
than a corporation of which such Person directly or indirectly beneficially owns
at least a majority of the Common Equity.
S-30
<PAGE> 30
"Trustee" means the Person named as Trustee in the first paragraph of the
Indenture until a successor Trustee shall have become such pursuant to the
applicable provisions of the Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee thereunder.
"Unrestricted Subsidiary" means each of the Subsidiaries of the Company so
designated by a Board Resolution. The Board of Directors of the Company may
designate an Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that (i) any such redesignation will be deemed to be an Incurrence by the
Company and its Restricted Subsidiaries of the Indebtedness (if any) of such
redesignated Subsidiary for purposes of the provisions of the Indenture
described under the caption "-- Limitations on Additional Indebtedness" as of
the date of such redesignation and (ii) immediately after giving effect to such
redesignation and the Incurrence of any such additional Indebtedness, the
Company and its Restricted Subsidiaries could Incur $1.00 of additional
Indebtedness under the ratio of the Company's Indebtedness (excluding
Non-Recourse Indebtedness) to Consolidated Tangible Net Worth set forth in the
first paragraph under the caption "-- Limitations on Additional Indebtedness."
Subject to the foregoing, the Board of Directors of the Company also may
designate any Restricted Subsidiary to be an Unrestricted Subsidiary; provided
that (i) all previous Investments by the Company and its Restricted Subsidiaries
in such Restricted Subsidiary will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the provisions of the Indenture described under the caption
"-- Limitations on Restricted Payments" and (ii) immediately after giving effect
to such designation and reduction of amounts available for Restricted Payments
under such provisions, the Company and its Restricted Subsidiaries could Incur
$1.00 of additional Indebtedness under the ratio of the Company's Indebtedness
(excluding Non-Recourse Indebtedness) to Consolidated Tangible Net Worth set
forth in the first paragraph under the caption "-- Limitations on Additional
Indebtedness." Any such designation or redesignation by the Board of Directors
of the Company will be evidenced to the Trustee by the filing with the Trustee
of a Board Resolution giving effect to such designation or redesignation and an
Officers' Certificate certifying that such designation or redesignation complied
with the foregoing conditions and setting forth the underlying calculations of
such Officers' Certificate.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or portion thereof, at any date, the number of years obtained by dividing (i)
the sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including without limitation payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment by (ii) the then
outstanding principal amount of such Indebtedness or portion thereof.
"Wholly Owned Subsidiary" of any Person means (i) a Subsidiary, of which
100 percent of the Common Equity (except for directors' qualifying shares or
certain minority interests owned by other Persons solely due to local law
requirements that there be more than one stockholder, but which interest is not
in excess of what is required for such purpose) is owned directly by such Person
or through one or more other Wholly Owned Subsidiaries of such Person, or (ii)
any entity other than a corporation in which such Person, directly or
indirectly, owns all of the Common Equity of such entity.
S-31
<PAGE> 31
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated the date hereof (the "Underwriting Agreement") by and among the Company
and Warburg Dillon Read LLC, Credit Lyonnais Securities (USA), Inc. and First
Chicago Capital Markets, Inc. (the "Underwriters"), we have agreed to sell to
each of the Underwriters and each of the Underwriters has severally agreed to
purchase the principal amount of the Notes set forth opposite its name below at
the price set forth on the cover page of this prospectus supplement:
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
----------- ----------------
<S> <C>
Warburg Dillon Read LLC.................................... $ 93,750,000
Credit Lyonnais Securities (USA), Inc. .................... 15,625,000
First Chicago Capital Markets, Inc. ....................... 15,625,000
------------
Total................................................. $125,000,000
============
</TABLE>
The Underwriters have agreed, subject to the terms and conditions set forth
in the Underwriting Agreement, to purchase all of the Notes offered hereby if
any Notes are purchased.
We have been advised by the Underwriters that they propose to offer the
Notes directly to the public at the price set forth on the cover page hereof,
less a concession not in excess of 1.35% of the principal amount of the Notes on
sales to certain dealers. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of 0.25% of the principal amount of the
Notes on sales to certain other dealers. The Underwriters reserve the right to
reject any order for the purchase of Notes. After the public offering, the
offering price and concession may be changed by the Underwriters.
Rule 2720 of the National Association of Securities Dealers, Inc. (the
"NASD") governs offering proceeds directed to a member. The rule applies to this
offering because (a) an affiliate of Credit Lyonnais Securities (USA), Inc. is a
lender, and an affiliate of First Chicago Capital Markets, Inc. is a lender and
the agent for the lenders, under the Company's principal bank credit facility
and (b) the net proceeds from the sale of the Notes will be used to repay
approximately $121.9 million of the principal balance outstanding on that credit
facility. Accordingly, the public offering price can be no higher than that
recommended by a "qualified independent underwriter." The NASD requires that the
"qualified independent underwriter" (i) be an NASD member experienced in the
securities or investment banking business, (ii) not be an affiliate of the
issuer of the securities and (iii) agree to undertake the responsibilities and
liabilities of an underwriter under the Securities Act of 1933, as amended (the
"Securities Act"). In accordance with this requirement, Warburg Dillon Read LLC
is serving in such role in pricing the offering, and the price to the public of
the Notes will not be higher than the price recommended by Warburg Dillon Read
LLC. It is expected that affiliates of Credit Lyonnais Securities (USA), Inc.
and First Chicago Capital Markets, Inc. will receive approximately $20.3 million
and $21.8 million, respectively, from the net proceeds of the sale of the Notes.
Pursuant to the NASD rules with respect to offering proceeds directed to a
member, the Underwriters will not confirm sales of the Notes to any accounts
over which they exercise discretionary authority without prior written approval
of the transactions by the customer.
The Underwriting Agreement provides that we will indemnify the Underwriters
against certain civil liabilities, including liabilities under the Securities
Act, or contribute to payments which the Underwriters may be required to make in
respect thereof.
The Underwriters and their affiliates have from time to time provided, and
may in the future provide, investment banking and general financing and banking
services to the Company. The Underwriters have been retained to perform certain
investment banking and advisory services for us from time to time for which they
have received customary fees and expenses.
In connection with this offering and in compliance with applicable law, the
Underwriters may engage in transactions which stabilize or maintain the market
price of the Notes at levels above those which
S-32
<PAGE> 32
might otherwise prevail in the open market. Specifically, the Underwriters may
over-allot in connection with this offering, creating a short position in the
Notes for their own account. For the purposes of covering a short position or
stabilizing the price of the Notes, the Underwriters may place bids for the
Notes or effect purchases of the Notes in the open market. Finally, the
Underwriters may impose a penalty bid whereby selling concessions allowed to
broker-dealers for distributing the Notes in this offering may be reclaimed by
the Underwriters if the Underwriters repurchase previously distributed Notes in
transactions to cover short positions, in stabilization transactions or
otherwise. These activities may stabilize, maintain or otherwise affect the
market price of the Notes, which may be higher than the price that might
otherwise prevail in the open market, and, if commenced, may be discontinued at
any time.
S-33
<PAGE> 33
LEGAL MATTERS
The legality of the Notes will be passed upon for the Company by Kaye,
Scholer, Fierman, Hays & Handler, LLP, New York, New York and for the
Underwriters by Davis Polk & Wardwell, New York, New York.
S-34
<PAGE> 34
$150,000,000
U.S. HOME CORPORATION
DEBT SECURITIES
------------------------
U.S. Home Corporation ("U.S. Home" or the "Company") may offer from time to
time, in one or more series, its debt securities, consisting of bonds,
debentures, notes and/or other unsecured evidences of indebtedness. The debt
securities may consist of the Company's unsecured senior debt securities (the
"Senior Debt Securities"), unsecured senior subordinated debt securities (the
"Senior Subordinated Debt Securities") or unsecured subordinated debt securities
(the "Subordinated Debt Securities," and together with the Senior Debt
Securities and the Senior Subordinated Debt Securities, the "Debt Securities").
The Debt Securities will have a maximum aggregate principal amount of
$150,000,000 and will be offered on terms to be determined at the time of sale.
The specific terms of the Debt Securities in respect of which this
Prospectus is being delivered will be set forth in the supplement accompanying
this Prospectus (the "Prospectus Supplement") and will include, where
applicable, the specific title, the aggregate principal amount, the currency,
authorized denominations, the maturity, the rate (or method of calculation) and
time of payment of interest, if any, any redemption or sinking fund provisions,
any additional covenants or events of default, the initial public offering price
and the other material terms of the Debt Securities. The Prospectus Supplement
will also disclose whether the Debt Securities will be listed on a national
securities exchange and if they are not to be listed, the possible effects
thereof on their marketability.
Debt Securities may be offered by the Company directly to one or more
purchasers, through agents designated from time to time by the Company or to or
through underwriters and/or dealers. If any agent of the Company or any
underwriter or dealer is involved in the sale of the Debt Securities, the name
of such agent, underwriter or dealer and any applicable purchase price, fee,
commission or discount arrangement between or among them will be set forth, or
will be calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Debt Securities may be sold without
delivery of the applicable Prospectus Supplement describing the method and terms
of the offering of such series of Debt Securities.
EACH PROSPECTUS SUPPLEMENT WILL DESCRIBE ANY RISKS ASSOCIATED WITH DEBT
SECURITIES OFFERED THEREBY OR APPLICABLE TO THE COMPANY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is February 25, 1998
<PAGE> 35
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (together with all amendments and
exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Debt Securities
offered hereby. This Prospectus, which constitutes part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Debt Securities, reference is made to the Registration
Statement.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Commission. The Registration Statement, as well as such reports, proxy
and information statements and other information filed by the Company with the
Commission, may be inspected and copied (at prescribed rates) at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 124, Washington, D.C. 20549 and at the Commission's regional offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. The Commission also maintains an Internet Web Site at http://www.sec.gov
that contains reports, proxy and information statements, and other information
regarding registrants that file electronically with the Commission. In addition,
such reports, proxy and information statements and other information concerning
the Company may also be inspected at the offices of the New York Stock Exchange,
at 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-5899) pursuant to the Exchange Act are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997; and
(ii) the Company's Current Report on Form 8-K dated January 15, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Debt Securities offered hereby shall be
deemed incorporated by reference into this Prospectus and to be a part hereof
from the date such documents are filed.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein will be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in the applicable Prospectus Supplement or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded will not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of each document incorporated herein by reference. Requests for such copies
should be directed to Kelly F. Somoza, Vice President, U.S. Home Corporation,
1800 West Loop South, Houston, Texas 77027, (713) 877-2311.
2
<PAGE> 36
THE COMPANY
U.S. Home, organized in 1954 and incorporated in the State of Delaware in
1959, is one of the largest single-family home builders in the United States
based on homes delivered. The Company currently builds and sells homes in more
than 220 new home communities in 31 market areas in 11 states. Since its
formation, the Company has delivered approximately 275,000 homes. In 1996, the
Company was the fifth largest single-family on-site home builder in the United
States based on homes completed and delivered and has been among the ten largest
single-family on-site home builders in the United States for more than 20 years.
The Company conducts substantially all of its homebuilding business through U.S.
Home, the parent company.
The Company offers a wide variety of moderately-priced homes that are
designed to appeal to the affordable, move-up and retirement and active-adult
buyers. In each of its markets, the Company's primary strategy is to build
quality homes, utilizing its Zero Defect Program, which the Company believes
offers prospective home buyers a high level of new home value. The Company
believes that many home purchasers compare homes on the basis of location,
perceived quality and dollars of purchase price per square foot of living area.
As a result, the Company attempts to purchase land and lots in popular growth
corridors, maintain high quality standards and design homes to maximize living
space.
In addition to building and selling single-family homes, the Company
provides mortgage banking services to its customers. The Company originates,
processes and sells mortgages to third-party investors. The Company does not
retain or service the mortgages that it originates but, rather, sells the
mortgages and related servicing rights to investors.
The principal executive offices of the Company are located at 1800 West
Loop South, Houston, Texas 77027 (telephone: (713) 877-2311).
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities for
general corporate purposes.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratio of earnings to fixed
charges for the Company for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
(unaudited)(1)................................ 2.66 2.44 2.57 2.51 2.78
</TABLE>
- ---------------
(1) The ratio of earnings to fixed charges is calculated by dividing earnings by
fixed charges. For this purpose, "earnings" means income (loss) before
reorganization items plus (a) provision (benefit) for income taxes, and (b)
fixed charges (including the proportionate share thereof of unconsolidated
affiliates). "Fixed charges" means total interest, whether capitalized or
expensed, and the portion of rent expense representative of interest costs
(including the proportionate share thereof of unconsolidated affiliates),
plus (i) debt-related fees and (ii) amortization of deferred financing
costs.
3
<PAGE> 37
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute direct, unsecured obligations of the
Company, unless otherwise provided in the applicable Prospectus Supplement.
Senior Debt Securities may be issued from time to time in series under an
indenture (the "Senior Indenture") between the Company and IBJ Schroder Bank &
Trust Company, as trustee (the "Trustee"). See "-- Concerning the Trustee." The
Senior Indenture has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. Senior Subordinated Debt Securities may be
issued from time to time in series under an indenture (the "Senior Subordinated
Indenture") between the Company and the Trustee. The Senior Subordinated
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. Subordinated Debt Securities may be issued from time
to time in series under an indenture (the "Subordinated Indenture") between the
Company and the Trustee. The Subordinated Indenture has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part. The Senior
Indenture, the Senior Subordinated Indenture and the Subordinated Indenture are
sometimes referred to individually as the "Indenture" and collectively as the
"Indentures." The Indentures will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). As used under this caption,
unless the context otherwise requires, "Offered Debt Securities" shall mean the
Debt Securities offered by this Prospectus and the accompanying Prospectus
Supplement; "Offered Senior Debt Securities" shall mean the Senior Debt
Securities so offered; "Offered Senior Subordinated Debt Securities" shall mean
the Senior Subordinated Debt Securities so offered and "Offered Subordinated
Debt Securities" shall mean Subordinated Debt Securities so offered.
The following summaries of certain provisions of the Indentures do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indentures, including the
definitions therein of certain capitalized terms used in this Prospectus. The
following sets forth certain general terms and provisions of the Debt Securities
to which any Prospectus Supplement may relate. Further terms of the Offered Debt
Securities will be described in the Prospectus Supplement. Except (i) with
respect to the covenants for Senior Debt Securities and Senior Subordinated Debt
Securities, (ii) with respect to the provisions relating to subordination and
(iii) to the extent set forth in a Prospectus Supplement with respect to a
particular series of Debt Securities, the Indentures are substantially
identical. See "-- Status of Debt Securities" and "Discharge, Defeasance and
Covenant Defeasance."
GENERAL
Each Indenture will provide for the issuance of Debt Securities in one or
more series. The Debt Securities will be unsecured senior, senior subordinated
or subordinated obligations of the Company, as set forth in the accompanying
Prospectus Supplement. Except as may be set forth in the accompanying Prospectus
Supplement and as described herein, the Indentures will not restrict the
business or operations of the Company or its subsidiaries, limit their
indebtedness or prohibit any liens, charges or other encumbrances on any
properties or other assets they may have from time to time.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Offered Debt Securities in respect
of which this Prospectus is being delivered, if applicable: (i) the title of the
Offered Debt Securities; (ii) whether the Offered Debt Securities are Senior
Debt Securities, Senior Subordinated Debt Securities or Subordinated Debt
Securities; (iii) the aggregate principal amount of the Offered Debt Securities
and any limit on such aggregate principal amount; (iv) the person to whom
interest on an Offered Debt Security will be payable, if other than the person
in whose name the Offered Debt Security is registered on the record date for the
payment of such interest; (v) the date or dates, or method by which such date or
dates will be determined, on which the principal of the Offered Debt Securities
will be payable; (vi) the rate or rates at which the Offered Debt Securities
will bear interest, if any, or the method by which such rate or rates will be
determined; (vii) the date or dates from which interest, if any, will accrue, or
the method by which such date or dates will be determined, the interest payment
dates on which any such interest will be payable and the record date, if any,
for the interest payable on any Offered Debt Security on any interest payment
date, or the method by which such date or dates will be determined, and the
basis upon which interest will be calculated if other than on the basis of
actual days elapsed over a 365 or 366-day year; (viii) the place or places, if
any, other than or in addition to New York, New York, where the
4
<PAGE> 38
principal of and interest on Offered Debt Securities will be payable, any
Offered Debt Securities may be surrendered for registration of transfer, any
Offered Debt Securities may be surrendered for exchange and the place or places
where notices or demands to or upon the Company in respect of the Offered Debt
Securities and the applicable Indenture may be served; (ix) the period or
periods within, the price or prices at and the terms and conditions upon, which
the Offered Debt Securities may be redeemed or purchased, in whole or in part,
at the option of the Company; (x) the obligation, if any, of the Company to
redeem or repurchase the Offered Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of a holder thereof and the period or
periods within which, the prices at which and the terms and conditions upon
which Offered Debt Securities will be redeemed or purchased, in whole or in
part, pursuant to such obligation; (xi) if other than denominations of $1,000
and any integral multiple thereof, the denomination in which the Offered Debt
Securities will be issuable; (xii) the currency, currencies or currency units in
which payment of the principal of and interest on any Offered Debt Securities
will be payable if other than the currency of the United States and the manner
of determining the equivalent thereof in the currency of the United States for
purposes of the definition of "Outstanding" in the applicable Indenture; (xiii)
if the principal of or interest on any Offered Debt Securities is to be payable,
at the election of the Company or a holder thereof, in one or more currencies or
currency units other than that or those in which the Offered Debt Securities are
stated to be payable, the currency, currencies or currency units in which
payment of the principal of and interest on Offered Debt Securities as to which
such election is made will be payable, and the periods within which and the
terms and conditions upon which such election is to be made; (xiv) if the amount
of principal of or interest on any Offered Debt Securities may be determined
with reference to an index, the manner in which such amounts will be determined;
(xv) if other than the principal amount of the Offered Debt Securities, the
portion of the principal amount thereof which will be payable upon declaration
of acceleration of the maturity thereof; (xvi) if the Offered Debt Securities
will be issuable in whole or in part in the form of one or more Global
Securities (as defined) and, in such case, the Depository or Depositories for
such Global Security or Global Securities and any circumstances other than those
set forth herein in which any such Global Security may be transferred to, and
registered and exchanged for Offered Debt Securities registered in the name of,
a person other than the Depository for such Global Security or a nominee thereof
and in which any such transfer may be registered; (xvii) if other than the
Trustee, the identity of each paying agent and registrar for the Offered Debt
Securities; (xviii) any Events of Default (as defined) with respect to the
Offered Debt Securities, if not otherwise set forth under the caption "-- Events
of Default" or if different from these set forth herein; (xix) any material
covenants with respect to the Offered Debt Securities, if not otherwise set
forth herein or if different from those set forth herein; (xx) the applicability
of the provisions related to discharge, defeasance or covenant defeasance, if
other than as described under the caption "-- Discharge, Defeasance and Covenant
Defeasance;" and (xxi) any other material terms of the Offered Debt Securities.
Debt Securities may be issued at a discount from their principal amount.
Federal income tax considerations and other special considerations applicable to
any such Offered Debt Securities will be described in the applicable Prospectus
Supplement.
If the purchase price of any of the Offered Debt Securities is denominated
in a foreign currency or currencies or a foreign currency unit or units or if
the principal of, or interest, if any, on, any series of Debt Securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
the restrictions, elections, general tax considerations, specific terms and
other information with respect to such Offered Debt Securities and such foreign
currency or currencies or foreign currency unit or units will be set forth in
the applicable Prospectus Supplement.
GLOBAL SECURITIES
Unless otherwise provided in the applicable Prospectus Supplement, the
Offered Debt Securities will be issued as fully-registered securities in the
form of one or more global securities (each a "Global Security") registered in
the name of a nominee of The Depository Trust Company (the "Depository"). One
fully registered Global Security certificate will be issued for each issue of
the global securities, each in the aggregate principal amount of such issue, and
will be deposited with the Depository. If, however, the aggregate principal
amount of any issue of the global securities exceeds $200 million, one
certificate will be issued with respect to
5
<PAGE> 39
each $200 million of principal amount and an additional certificate will be
issued with respect to any remaining principal amount of such issue. The
identity of the nominee appointed by the Depository, if other than "Cede & Co.,"
will be set forth in the applicable Prospectus Supplement. The Global Security
will be issued in a denomination or aggregate denominations equal to the portion
of the aggregate principal amount of the outstanding Debt Securities of the
series represented by such Global Security. Except as described herein or in the
applicable Prospectus Supplement, Debt Securities will not be issued in
definitive form.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement, if other than as
described herein. The Company expects that the following provisions will apply
to depositary arrangements.
Upon the issuance of a Global Security, the Depository or its nominee will
credit the accounts of persons holding through it with the respective principal
amounts of the Debt Securities represented by such Global Security. Such
accounts will be designated by the underwriter, if any, with respect to Debt
Securities placed by the underwriter for the Company. Ownership of beneficial
interests in a Global Security will be limited to persons that have accounts
with the Depository ("participants") or persons that may hold interests through
participants. Ownership of beneficial interests by participants in a Global
Security will be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by the Depository for such Global
Security. Ownership of beneficial interests in such Global Security by persons
that hold through participants will be shown on, and the transfer of that
ownership interest through such participant will be effected only through,
records maintained by such participant. Beneficial owners of the Global Security
will not receive written confirmation from the Depository of their purchase of
the Global Security, but beneficial owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the participant through which the beneficial
owner entered into the transaction. Transfer of ownership interest in the Global
Security are to be accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners will not receive
certificates representing their ownership interests in the Global Security,
except in the event that use of the book-entry system for the Global Security is
discontinued. The foregoing may impair the ability to transfer beneficial
interests in a Global Security.
To facilitate subsequent transfers, all Global Securities deposited by
participants with the Depository are registered in the name of the Depository's
nominee. The deposit of the Global Security with the Depository and their
registration in the name of the Depository's nominee effect no change in
beneficial ownership. The Depository has no knowledge of the actual beneficial
owners of the Global Security; the Depository's records reflect only the
identity of the direct participants (which include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations) to whose accounts the Global Security is credited, which may or
may not be the beneficial owners. The participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Except as provided in the applicable Prospectus Supplement, payment of
principal and interest, if any, on Debt Securities represented by any such
Global Security will be made to the Depository or its nominee, as the case may
be, as the sole registered holder of the Debt Securities represented thereby for
all purposes under the applicable Indenture. None of the Company, the Trustee,
any agent of the Company or the Trustee or the underwriter, if any, will have
any responsibility or liability for any aspect of the Depository's records
relating to or payments made on account of beneficial ownership interests in a
Global Security representing any Debt Securities or for maintaining, supervising
or reviewing any of the Depository's records relating to such beneficial
ownership interests.
The Company has been advised by the Depository that, upon receipt of any
payment of principal or interest on any Global Security, the Depository will
immediately credit, on its book-entry registration and transfer system, the
accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of the Depository. Payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by standing instructions and customary practices as is now the case
with securities held for
6
<PAGE> 40
customer accounts in bearer form or registered in "street name," and will be the
sole responsibility of such participants.
Except as described in the applicable Prospectus Supplement, a Global
Security may not be transferred except as a whole by the Depository for such
Global Security to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository or by such
Depository or any such nominee to a successor of such Depository or a nominee of
such successor. If the Depository is at any time unwilling or unable to continue
as depository and a successor depository is not appointed by the Company or the
Depository within 90 days, the Company will issue Debt Securities in definitive
form in exchange for the Global Security. In addition, the Company or the
Depository may at any time and in its sole discretion determine not to have the
Debt Securities represented by the Global Security and, in such event, the
Company will issue Debt Securities in definitive form in exchange for the Global
Security. In either instance, an owner of a beneficial interest in the Global
Security will be entitled to have Debt Securities equal in principal amount to
such beneficial interest registered in its name and will be entitled to physical
delivery of such Debt Securities in definitive form. Except as described in the
applicable Prospectus Supplement, Debt Securities so issued in definitive form
will be issued in denominations of $1,000 and integral multiples thereof and
will be issued in registered form only, without coupons. Except as described in
the applicable Prospectus Supplement, principal and interest, if any, on the
Debt Securities will be payable, and the Debt Securities may be presented for
registration of transfer or exchange, at the offices of the Trustee.
So long as the Depository for a Global Security, or its nominees, is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole registered holder of the Debt
Securities represented by such Global Security for all purposes of receiving
payment on the Debt Securities, receiving notices and for all other purposes
under the Indenture and the Debt Securities. Beneficial interests in Debt
Securities will be evidenced only by, and transfers thereof will be effected
only through, records maintained by the Depository and its participants. Except
as provided above, owners of beneficial interests in a Global Security will not
be entitled to and will not be considered the registered holders thereof for any
purposes under the Indentures. Accordingly, any such person owning a beneficial
interest in such a Global Security must rely on the procedures of the
Depository, and, if any such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a registered holder under the Indentures. The Indentures provide that
the Depository may grant proxies and otherwise authorize participants to give or
take any request, demand, authorization, direction, notice, consent, waiver or
other action which a registered holder is entitled to give or take under the
Indentures. The Company understands that under existing industry practices, in
the event that the Company requests any action of registered holders or that an
owner of a beneficial interest in such a Global Security desires to give or take
any action which a registered holder is entitled to give or take under the
Indenture, the Depository would authorize the participants holding the relevant
beneficial interest to give or take such action and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
The Depository has advised the Company that the Depository is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered under
the Exchange Act. The Depository was created to hold the securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depository's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own the Depository. Access to the Depository's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies, that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. The rules applicable to the
Depository and its participants are on file with the Commission.
7
<PAGE> 41
The above-mentioned information concerning the Depository and its
book-entry system has been obtained from sources that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
STATUS OF DEBT SECURITIES
The Senior Debt Securities will be unsecured and unsubordinated obligations
of the Company and will rank on a parity with all other unsecured and
unsubordinated indebtedness of the Company. All series of Senior Debt Securities
of the Company issued under the Senior Indenture will rank on parity in right of
payment with each other, with indebtedness under the Company's principal credit
facility, with the Company's 9 3/4% senior notes due 2003, previously issued in
the original principal amount of $200,000,000 under an Indenture, dated as of
June 21, 1993, between the Company and IBJ Schroder Bank & Trust Company, as
trustee (the "1993 Senior Notes"), with the Company's 7.95% senior notes due
2001, previously issued in the original principal amount of $75,000,000 under an
Indenture, dated as of February 16, 1996, between the Company and IBJ Schroder
Bank & Trust Company, as trustee (the "1996 Senior Notes"), the Company's 8.25%
senior notes due 2004, previously issued in the original principal amount of
$100,000,000 under an Indenture, dated as of August 28, 1997, between the
Company and IBJ Schroder Bank & Trust Company, as trustee (the "1997 Senior
Notes") and with the Company's 7 3/4% senior notes due 2005, previously issued
in the original principal amount of $100,000,000 under an Indenture, dated as of
August 28, 1997, between the Company and IBJ Schroder Bank and Trust Company, as
trustee (the "1998 Senior Notes"). The Senior Debt Securities offered hereby
will be senior in right of payment to the Company's 8.88% senior subordinated
notes due 2007, previously issued in the original principal amount of
$125,000,000 under an Indenture, dated as of August 28, 1997, between the
Company and IBJ Schroder Bank & Trust Company, as trustee (the "1997 Senior
Subordinated Notes").
The Senior Subordinated Debt Securities will be unsecured obligations of
the Company and will be subordinate and junior in right of payment, to the
extent and in the manner to be set forth in the Senior Subordinated Indenture to
the prior payment in full in cash (or cash equivalents) of amounts then due on
"Senior Indebtedness" of the Company. All series of Senior Subordinated Debt
Securities of the Company issued under the Senior Subordinated Indenture will
rank on parity in right of payment with each other, and with the 1997 Senior
Subordinated Notes. Except to the extent set forth in the applicable Prospectus
Supplement, the Senior Subordinated Indenture will define "Senior Indebtedness"
of the Company as the principal of (and premium, if any), and interest on
(including, without limitation, interest accruing subsequent to the filing of a
petition under applicable Bankruptcy Law (as defined in the Senior Subordinated
Indenture) or the appointment of a Custodian (as defined in the Senior
Subordinated Indenture)), (i) any and all indebtedness and obligations of the
Company (including indebtedness of others guaranteed by the Company), whether or
not contingent and whether or not outstanding on the Issue Date (as defined in
the Senior Subordinated Indenture) or thereafter created, incurred or assumed
(including, without limitation, all charges, fees, expenses and other amounts
incurred by or owing to holders of such indebtedness), which (a) is for money
borrowed, (b) is evidenced by any bond, note, debenture or similar instrument,
(c) represents the unpaid balance on the purchase price of any property,
business or asset of any kind, (d) is an obligation of the Company as lessee
under any and all leases of property, equipment or other assets required to be
capitalized on the balance sheet of the lessee under generally accepted
accounting principles, (e) is a reimbursement obligation of the Company with
respect to letters of credit, (f) is an obligation of the Company with respect
to an interest swap obligation or foreign exchange agreement or (g) is an
obligation of another secured by a lien to which any of the properties or assets
(including, without limitation, leasehold interests and any other tangible or
intangible property rights) of the Company is subject, whether or not the
obligations secured thereby shall have been assumed by the Company or will
otherwise be the Company's legal liability and (ii) any deferrals, amendments,
renewals, extensions, modifications and refundings of any indebtedness or
obligations of the types referred to in clause (i) of this paragraph; provided
that Senior Indebtedness will not include (A) the Senior Subordinated Debt
Securities or the Subordinated Debt Securities, (B) the 1997 Senior Subordinated
Notes, (C) any indebtedness or obligation of the Company (or the instrument
creating or evidencing it) which expressly provides that such indebtedness is
not superior in right of payment to the Senior Subordinated Debt Securities, or
which expressly provides that such indebtedness is subordinate in
8
<PAGE> 42
right of payment to all other indebtedness of the Company (including the Senior
Subordinated Debt Securities), (D) any indebtedness or obligation of the Company
to any of its subsidiaries and (E) any indebtedness or obligation incurred by
the Company in connection with the purchase of assets, materials or services in
the ordinary course of business and which constitutes a trade payable.
The Subordinated Debt Securities will be unsecured obligations of the
Company and will be subordinate and junior in right of payment, to the extent
and in the manner to be set forth in the Subordinated Indenture to the prior
payment in full in cash (or cash equivalents) of amounts then due on "Senior
Indebtedness" of the Company. Except to the extent set forth in the applicable
Prospectus Supplement, the Subordinated Indenture will define "Senior
Indebtedness" of the Company as the principal of (premium, if any), and interest
on (including, without limitation, interest accruing subsequent to the filing of
a petition under applicable Bankruptcy Law (as defined in the Subordinated
Indenture) or the appointment of a Custodian (as defined in the Subordinated
Indenture)), (i) any and all indebtedness and obligations of the Company
(including indebtedness of others guaranteed by the Company), whether or not
contingent and whether or not outstanding on the Issue Date (as defined in the
Subordinated Indenture) or thereafter created, incurred or assumed (including,
without limitation, all charges, fees, expenses and other amounts incurred by or
owing to holders of such indebtedness), which (a) is for money borrowed, (b) is
evidenced by any bond, note, debenture or similar instrument, (c) represents the
unpaid balance on the purchase price of any property, business or asset of any
kind, (d) is an obligation of the Company as lessee under any and all leases of
property, equipment or other assets required to be capitalized on the balance
sheet of the lessee under generally accepted accounting principles, (e) is a
reimbursement obligation of the Company with respect to letters of credit, (f)
is an obligation of the Company with respect to an interest swap obligation or
foreign exchange agreement or (g) is an obligation of another secured by a lien
to which any of the properties or assets (including, without limitation,
leasehold interests and any other tangible or intangible property rights) of the
Company is subject, whether or not the obligations secured thereby shall have
been assumed by the Company or will otherwise be the Company's legal liability
and (ii) any deferrals, amendments, renewals, extensions, modifications and
refundings of any indebtedness or obligations of the types referred to in clause
(i) of this paragraph; provided that Senior Indebtedness will not include (A)
the Subordinated Debt Securities, (B) any indebtedness or obligation of the
Company (or the instrument creating or evidencing it) which expressly provides
that such indebtedness is not superior in right of payment to the Subordinated
Debt Securities, or which expressly provides that such indebtedness is
subordinate in right of payment to all other indebtedness of the Company
(including the Subordinated Debt Securities), (C) any indebtedness or obligation
of the Company to any of its subsidiaries and (D) any indebtedness or obligation
incurred by the Company in connection with the purchase of assets, materials or
services in the ordinary course of business and which constitutes a trade
payable.
The Senior Subordinated Debt Securities, the 1993 Senior Notes, the 1996
Senior Notes, the 1997 Senior Notes, the 1997 Senior Subordinated Notes and the
1998 Senior Notes will constitute "Senior Indebtedness" with respect to the
Subordinated Debt Securities.
The Senior Subordinated Indenture will provide that the Company will not
issue any indebtedness that is subordinated in right of payment to any Senior
Indebtedness of the Company and is senior in right of payment to the Senior
Subordinated Debt Securities. The Subordinated Indenture will not contain a
similar provision.
By reason of such subordination, in the event of dissolution, winding-up,
liquidation, insolvency, bankruptcy or other similar proceedings, upon any
distribution of assets of the Company: (i) holders of Senior Indebtedness will
be entitled to be paid in full before payments may be made on Senior
Subordinated Debt Securities and the Subordinated Debt Securities and the
holders of Senior Subordinated Debt Securities and Subordinated Debt Securities
will be required to pay over their share of such distributions to the holders of
Senior Indebtedness until such Senior Indebtedness is paid in full, except that
holders of Senior Subordinated Debt Securities and Subordinated Debt Securities
may receive securities that are subordinated at least to the same extent as such
Senior Subordinated Debt Securities or Subordinated Debt Securities, as the case
may be; (ii) in addition, holders of Senior Subordinated Debt Securities will be
entitled to be paid in full before payments may be made on Subordinated Debt
Securities and holders of Subordinated Debt Securities will be required to pay
over their share of such distributions to the holders of Senior Subordinated
Debt Securities until such Senior Subordinated Debt Securities are paid in full,
except that holders of Subordinated Debt
9
<PAGE> 43
Securities may receive securities that are subordinated at least to the same
extent as such Subordinated Debt Securities; and (iii) creditors of the Company
who are not holders of Senior Subordinated Debt Securities or Subordinated Debt
Securities may recover less, ratably, than holders of Senior Indebtedness and
may recover more, ratably, than the holders of the Senior Subordinated Debt
Securities or Subordinated Debt Securities. Accordingly, such subordination may
result in a reduction or elimination of payments to the holders of all Senior
Subordinated Debt Securities and Subordinated Debt Securities.
Except as may otherwise be described in the applicable Prospectus
Supplement, no payment of principal or interest on any of the Offered Debt
Securities that are Senior Subordinated Debt Securities or Subordinated Debt
Securities may be made by the Company, nor may the Company acquire any Offered
Debt Securities that are Senior Subordinated Debt Securities or Subordinated
Debt Securities for cash or property (other than securities that are
subordinated at least to the same extent as such Senior Subordinated Debt
Securities or Subordinated Debt Securities, as the case may be), in each case
except as set forth in the Indenture for such Offered Debt Securities, if (i) a
default in the payment of principal, premium, if any, or interest on any
Designated Senior Indebtedness occurs and continues beyond the applicable period
of grace, if any, specified in the applicable instrument, lease, contract,
agreement or other document evidencing such Designated Senior Indebtedness, or
(ii) a default, other than a payment default, with respect to any Designated
Senior Indebtedness occurs and is continuing that permits the holders of the
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a notice of the default from a person permitted to give such notice
under the Indenture requesting that payment of principal or interest with
respect to the Offered Debt Securities that are Senior Subordinated Debt
Securities or Subordinated Debt Securities be prohibited; provided that the
foregoing will not prohibit payments made in accordance with the defeasance or
satisfaction and discharge provisions of the applicable Indenture from monies
deposited with the Trustee in accordance with such provisions prior to any such
default, judicial proceeding or notice. However, except as may otherwise be
described in the applicable Prospectus Supplement, the Company may resume
payments in respect of the Offered Debt Securities that are Senior Subordinated
Debt Securities or Subordinated Debt Securities and may acquire such Senior
Subordinated Debt Securities or Subordinated Debt Securities upon the earlier of
(a) the date upon which the default or event of default with respect to such
Designated Senior Indebtedness is cured or waived or ceases to exist or (b) in
the case of an event of default referred to in (ii) above, the expiration of 179
days pass after notice is received (a "Payment Blockage Period"); provided that
the terms of the Indenture otherwise permit the payment or acquisition of such
Offered Debt Securities at the time in question. Only one Payment Blockage
Period may be commenced within any consecutive 365-day period in respect of the
Offered Debt Securities that are Senior Subordinated Debt Securities or
Subordinated Debt Securities, and in no event will a Payment Blockage Period
extend beyond 179 days from the date payment on such Offered Debt Securities is
due. For the purpose of the provisions described in this paragraph, no default
which, to the knowledge of certain specified authorized persons, existed or was
continuing on the date of the commencement of any Payment Blockage Period by
such person, shall be made the basis for the commencement of a subsequent
Payment Blockage Period by such person, whether or not within any consecutive
365-day period, unless such default is cured or waived or ceases to exist, or
the benefits of the provisions of the applicable Indenture described in this
paragraph are waived in writing by such authorized persons for a period of not
less than 90 consecutive days. Except to the extent set forth in the applicable
Prospectus Supplement, the Senior Subordinated Indenture and the Subordinated
Indenture will define "Designated Senior Indebtedness" of the Company as (i)
Senior Indebtedness of the Company permitted to be incurred under the applicable
Indenture under any institutional credit agreement (including, the Company's
existing principal credit facility) and (ii) any other Senior Indebtedness
permitted to be incurred under the applicable Indenture the principal amount of
which is $25,000,000 or more.
Except as may otherwise be described in the applicable Prospectus
Supplement, the subordination provision described herein will not prevent the
occurrence of any Event of Default under the Senior Subordinated Indenture or
the Subordinated Indenture.
The indentures for the 1996 Senior Notes, the 1997 Senior Notes, the 1998
Senior Notes, the 1997 Senior Subordinated Notes and the Company's principal
credit facility restrict the acquisition by the Company of its subordinated
indebtedness, including any Senior Subordinated Debt Securities or Subordi-
10
<PAGE> 44
nated Debt Securities. For example, the indentures for the 1996 Senior Notes,
the 1997 Senior Notes, the 1998 Senior Notes and the 1997 Senior Subordinated
Notes contain similar covenants limiting the amount of "restricted payments"
made by the Company, including the acquisition of subordinated debt. The amount
of restricted payments permitted to be made by the Company will vary depending
upon, among other things, the Company's cumulative earnings and restricted
payments made, other than acquisitions of subordinated debt (e.g., repurchases
of stock by the Company). The Company's principal credit facility generally
prohibits the Company from acquiring subordinated debt, other than by using the
proceeds of new subordinated debt or equity securities.
In addition, the claims of third parties to the assets of the Company's
subsidiaries incurring obligations to such third parties will be superior to
those of the Company as a stockholder, and therefore the Offered Debt Securities
may be deemed to be effectively subordinated to the claims of such third
parties.
CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO OFFERED DEBT SECURITIES
Affirmative Covenants. In addition to such other covenants, if any, as may
be described in the applicable Prospectus Supplement, the Indentures for the
Offered Debt Securities will require the Company, subject to certain limitations
described therein, to, among other things, do the following: (i) pay the
principal of, and interest on, the Offered Debt Securities when the same shall
be due and payable; (ii) maintain an office or agency where Offered Debt
Securities may be surrendered for payment or registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Offered Debt Securities and the Indenture may be served; (iii) deliver to the
Trustee copies of all reports filed with the Commission; (iv) deliver to the
Trustee annual officers' certificates with respect to the Company's compliance
with its obligations under each Indenture; (v) maintain its corporate existence
subject to the provisions described below under the caption "Limitations on
Mergers and Consolidations;" (vi) pay its taxes when due except where such taxes
are being contested in good faith; and (vii) maintain insurance in at least such
amounts and against such risks as are usually and prudently insured against in
the same general area by companies engaged in the same or a similar business.
Except as may be set forth in the accompanying Prospectus Supplement, the
Indentures will not restrict the business or operations of the Company or its
subsidiaries, limit their indebtedness or prohibit any liens, charges or other
encumbrances on any properties or other assets they may have from time to time.
Limitations on Mergers and Consolidations. Except as may otherwise be
provided in the applicable Prospectus Supplement, the Indenture for the Offered
Debt Securities will provide that the Company will not consolidate or merge with
or into or sell, lease, convey or otherwise dispose of all or substantially all
of its assets (including, without limitation, by way of liquidation or
dissolution) or assign any of its obligations under the Indenture or the Offered
Debt Securities (as an entirety or substantially an entirety in one transaction
or series of related transactions), to any person unless (i) the person formed
by or surviving such consolidation or merger (if other than the Company), or to
which sale, lease, conveyance or other disposition or assignment will be made
(collectively, the "Successor"), is a solvent corporation or other legal entity
organized and existing under the laws of the United States, one of the states
thereof or the District of Columbia, and the Successor expressly assumes by
supplemental indenture all of the obligations of the Company under the Offered
Debt Securities and the Indenture related thereto, (ii) immediately after giving
effect to such transaction, no default or Event of Default has occurred and is
continuing, and (iii) certain other conditions are met. Upon compliance with
these provisions by the Successor, the Company would be relieved of its
obligations under the Indenture and the Offered Debt Securities. No quantitative
or other established meaning has been given to the phrase "all or substantially
all" by courts which have interpreted this phrase in various contexts. In
interpreting this phrase, courts make a subjective determination as to the
portion of assets conveyed, considering such factors as the value of the assets
conveyed and the proportion of an entity's income derived from the assets
conveyed. Accordingly, there may be uncertainty as to whether a holder of
Offered Debt Securities can determine whether the Company has sold, leased,
conveyed or otherwise disposed of all or substantially all of its assets and
exercise any remedies such holder may have upon the occurrence of any such
transaction.
11
<PAGE> 45
REDEMPTION
If and to the extent set forth in the applicable Prospectus Supplement, the
Company will have the right to redeem the Offered Debt Securities, in whole or
from time to time in part, after the date and at the redemption prices set forth
in the applicable Prospectus Supplement.
EVENTS OF DEFAULT
Except as may be described in the accompanying Prospectus Supplement, an
"Event of Default" will be defined in each Indenture for the Offered Debt
Securities as any of the following events (whatever the reason for such Event of
Default and whether it will be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or any order of any court
or any order, rule or regulation of any administrative or governmental body):
(i) the failure by the Company to pay interest on any Offered Debt
Security when the same becomes due and payable and the continuance of any
such failure for a period of 30 days;
(ii) the failure by the Company to pay the principal of any such
Offered Debt Security when the same becomes due and payable at maturity,
upon acceleration or otherwise;
(iii) the failure by the Company to make any sinking fund payment
when the same becomes due and payable;
(iv) the failure by the Company to comply with any of its agreements
or covenants in, or provisions of, such Offered Debt Security or the
applicable Indenture relating to such Offered Debt Security (other than an
agreement or covenant a default in whose performance or whose breach is
elsewhere in such Indenture specifically dealt with) and such failure
continues for the period and after the notice specified below;
(v) the acceleration of any indebtedness for borrowed money or
guarantees thereof (other than Non-Recourse Indebtedness (as defined in the
applicable Indenture)) of the Company or any of its subsidiaries that has
an outstanding principal amount of $10,000,000 or more in the aggregate;
provided that, in the event any such acceleration is withdrawn or otherwise
rescinded within a period of five days after such acceleration by the
holders of such indebtedness, any Event of Default under the provisions of
the applicable Indenture described in this clause (v) relating to such
Offered Debt Securities will be deemed to be cured and any acceleration
under such Indenture will be deemed withdrawn or rescinded;
(vi) the failure by the Company or any of its subsidiaries to make
any principal or interest payment in respect of indebtedness for borrowed
money or guarantees thereof (other than Non-Recourse Indebtedness) of the
Company or any of its subsidiaries with an outstanding aggregate principal
amount of $10,000,000 or more within five days of such principal or
interest payment becoming due and payable (after giving effect to any
applicable grace period set forth in the documents governing such
indebtedness);
(vii) a final judgment or judgments that exceed $10,000,000 or more
in the aggregate, for the payment of money, having been entered by a court
or courts of competent jurisdiction against the Company or any of its
subsidiaries and such judgment or judgments are not satisfied, stayed,
annulled or rescinded within 60 days of being entered;
(viii) the Company or any Material Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
12
<PAGE> 46
(ix) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Material Subsidiary as
debtor in an involuntary case,
(B) appoints a Custodian of the Company or any Material Subsidiary
or a Custodian for all or substantially all of the property of the
Company or any Material Subsidiary, or
(C) orders the liquidation of the Company or any Material
Subsidiary,
and the order or decree remains unstayed and in effect for 60 days; or
(x) any other Event of Default provided in the supplemental indenture
under which the applicable class of Offered Debt Securities are issued or
in the form of such Offered Debt Security.
For purposes hereof, "Material Subsidiary" means any subsidiary of the
Company which accounted for three percent or more of the consolidated tangible
net assets or consolidated cash flow available for fixed charges of the Company
on a consolidated basis for the fiscal year ending immediately prior to any
default or Event of Default, all computed in accordance with generally accepted
accounting principles.
The Indentures relating to the Offered Debt Securities will provide that
the Trustee will not be deemed to know of a default unless a trust officer has
actual knowledge of such default or receives written notice of such default with
specific reference to such default.
The Indentures relating to the Offered Debt Securities will provide that a
default as described in sub-clause (iv) above is not an Event of Default until
the Trustee notifies the Company, or the holders of at least 25 percent in
aggregate principal amount of the then outstanding applicable class of Offered
Debt Securities under the Indenture, or such other percentage as may be
specified in the applicable Prospectus Supplement, notify the Company and the
Trustee, of the default and the Company does not cure the default within 60 days
after receipt of the notice, or for such other period as may be specified in the
applicable Prospectus Supplement. The notice must specify the default, demand
that it be remedied and state that the notice is a "Notice of Default." If such
a default is cured within the applicable time period, it ceases.
Except to the extent otherwise stated in the applicable Prospectus
Supplement, the Indentures for the Offered Debt Securities will provide that if
an Event of Default (other than an Event of Default described in sub-clause
(viii) or (ix) above) shall have occurred and be continuing under the Indenture,
the Trustee (after receiving indemnities from the holders of such Offered Debt
Securities to its satisfaction) by notice to the Company, or the holders of at
least 25 percent in principal amount of the Offered Debt Securities then
outstanding, or such other percentage as may be specified in the Prospectus
Supplement, by notice to the Company and the Trustee, may declare all of such
Offered Debt Securities to be due and payable immediately. Upon such
declaration, the amounts due and payable on such Offered Debt Securities, as
determined pursuant to the provisions of the "Acceleration" section of the
Indenture, will be due and payable immediately. Except to the extent otherwise
stated in the Prospectus Supplement, the Indentures for the Offered Debt
Securities will provide that if an Event of Default described in sub-clause
(viii) or (ix) above occurs, the Offered Debt Securities will ipso facto become
and be immediately due and payable without any declaration, notice or other act
on the part of the Trustee and the Company or any holder. The holders of a
majority in principal amount of the Offered Debt Securities then outstanding, or
such other percentage as may be specified in the applicable Prospectus
Supplement, by written notice to the Trustee and the Company, may waive such
Event of Default, rescind an acceleration and its consequences (except an
acceleration due to nonpayment of principal of or interest on such Offered Debt
Securities) if the rescission would not conflict with any judgment or decree and
if all existing Events of Default have been cured or waived.
Except to the extent otherwise stated in the applicable Prospectus
Supplement, the Indentures for the Offered Debt Securities will contain a
provision entitling the Trustee, subject to the duty of the Trustee during a
default to act with the required standard of care, to be indemnified by the
holders of the applicable class of Offered Debt Securities before proceeding to
exercise any right or power under the Indenture at the request of such holders.
Subject to such provisions in the Indenture for the Offered Debt Securities for
the indemnification of the Trustee and certain other limitations, the holders of
a majority in principal amount of the applicable
13
<PAGE> 47
class of Offered Debt Securities then outstanding, or such other percentage as
may be specified in the applicable Prospectus Supplement, may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee. The Trustee
may withhold from the holders of such Offered Debt Securities notice of any
continuing default or Event of Default (except any default or Event of Default
in payment of principal or interest on the Offered Debt Securities) if the
Trustee determines that withholding such notice is in the holders' interest.
Except to the extent otherwise stated in the applicable Prospectus
Supplement, the Indentures for the Offered Debt Securities will provide that no
holder of Offered Debt Securities may institute any action against the Company
under the Indenture unless (i) such holder previously has given the Trustee
written notice of the default and continuance thereof, (ii) the holders of not
less than 25 percent in principal amount of the applicable class of Offered Debt
Securities then outstanding, or such other percentage as may be specified in the
applicable Prospectus Supplement, have requested the Trustee to institute such
action and offered the Trustee reasonable indemnity, (iii) such Holder or
Holders offer to the Trustee indemnity satisfactory to the Trustee against any
loss, liability, or expense, (iv) the Trustee has not instituted such action
within 60 days of the request and (v) the Trustee has not received direction
inconsistent with such written request from the holders of a majority in
principal amount of the Offered Debt Securities then outstanding, or such other
amount as may be specified in the applicable Prospectus Supplement.
Notwithstanding any other provision of the applicable Indenture, the right of
any holder of the applicable class of Offered Debt Securities to receive payment
of principal and interest on such Offered Debt Security on or after the
respective due dates thereof, or, subject to the provisions of the applicable
Indenture described in the preceding sentence, to bring suit for the enforcement
of any such payment on or after such respective dates, will not be impaired or
affected without the consent of such holder.
The Indentures and the Offered Debt Securities will provide that no
director, officer or employee of the Company, as such, will have any liability
for any obligations of the Company under the Offered Debt Securities or the
Indentures. The Indentures and the Offered Debt Securities will also each
provide that each holder of the Offered Debt Securities, by accepting the
Offered Debt Securities, waives and releases all such liability.
Except to the extent otherwise stated in the Prospectus Supplement, the
Indentures for the Offered Debt Securities will provide that the Company will be
required to deliver to the Trustee an annual statement regarding compliance with
the Indenture, and include in such statement, if any officer of the Company is
aware of any default or Event of Default, a statement specifying such default or
Event of Default and what action the Company is taking or proposes to take with
respect thereto. In addition, the Company will be required to deliver to the
Trustee prompt written notice of the occurrence of any default or Event of
Default.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company can discharge or defease its obligations under the Indentures
for the Offered Debt Securities as set forth below.
The Company may discharge certain obligations to holders of the Offered
Debt Securities that have not already been delivered to the Trustee for
cancellation and that have either become due and payable or are by their terms
due and payable within one year by irrevocably depositing with the Trustee cash
or U.S. Government Obligations, or a combination thereof, as trust funds in an
amount sufficient to pay at maturity the principal of and interest on the
Offered Debt Securities.
The Company may also discharge any and all of its obligations to holders of
the Offered Debt Securities at any time ("defeasance"), but may not thereby
avoid its duty to register the transfer or exchange of the Offered Debt
Securities, to replace any temporary, mutilated, destroyed, lost or stolen notes
or to maintain an office or agency in respect of the Offered Debt Securities and
certain other obligations. Alternatively, the Company may be released with
respect to the Offered Debt Securities from the obligations imposed by certain
covenants of the applicable Indenture and omit to comply with such covenants
without creating an Event of Default ("covenant defeasance"). Defeasance or
covenant defeasance may be effected only if, among other things: (a) the Company
irrevocably deposits with the Trustee cash or U.S. Government Obligations, or a
14
<PAGE> 48
combination thereof, as trust funds in an amount certified to be sufficient to
pay at maturity the principal of and interest on all outstanding notes; (b) no
Event of Default under the Offered Debt Securities has occurred and is then
continuing; (c) the defeasance or covenant defeasance will not result in an
event of default under any agreement to which the Company is a party or by which
it is bound; and (d) the Company delivers to the Trustee an opinion of counsel
to the effect that the holders of the Offered Debt Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance or covenant defeasance and such defeasance or covenant defeasance
will not otherwise alter such holders' federal income tax treatment of principal
and interest payments on the Offered Debt Securities.
For purposes hereof, "U.S. Government Obligations" means (i) any security
that is (a) a direct obligation of the United States for the payment of which
the full faith and credit of the United States is pledged or (b) an obligation
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States, which, in
either case (a) or (b), is not callable or redeemable at the option of the
issuer thereof, and (ii) any depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the securities Act) as custodian with respect to any U.S.
Government Obligation specified in clause (i) and held by such custodian for the
account of the holder of such depositary receipt, or with respect to any
specific payment of principal of or interest on any such U.S. Government
Obligation; provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depositary receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of principal or interest
evidenced by such depositary receipt.
TRANSFER AND EXCHANGE
A holder of an Offered Debt Security will be able to transfer or exchange
the Offered Debt Securities only in accordance with the provisions of the
applicable Indentures. The registrar may require a holder, among other things,
to furnish appropriate endorsements and transfer documents, and to pay any taxes
and fees required by law or permitted by such Indenture.
MODIFICATIONS TO THE INDENTURES
Except as may otherwise be set forth in the applicable Prospectus
Supplement, the Indenture for the Offered Debt Securities will provide that the
Company and the Trustee may enter into supplemental indentures without the
consent of the holders of Offered Debt Securities to, among other things: (i)
cure any ambiguity, defect or inconsistency in the applicable Indenture for such
Offered Debt Securities; (ii) comply with the "Limitations on Mergers and
Consolidations" section set forth in the Indenture; (iii) provide for
uncertificated Offered Debt Securities in addition to certificated Offered Debt
Securities; (iv) make any change that does not adversely affect the legal rights
under the Indenture of holders of Offered Debt Securities; (v) add to the
covenants of the Company for the benefit of the holders of Offered Debt
Securities or to surrender any right or power in the Indenture conferred upon
the Company; (vi) add any additional Events of Default for the benefit of the
holders of Offered Debt Securities; (vii) change or eliminate any of the
provisions of each Indenture before Offered Debt Securities are issued
thereunder; (viii) establish the form or terms of the Offered Debt Securities;
(ix) evidence and provide for the acceptance of appointment under the Indenture
of a successor Trustee with respect to the Offered Debt Securities and to add to
or change any of the provisions of the Indenture as shall be necessary to
provide for or facilitate the administration of the trusts under the Indenture
by more than one Trustee; (x) supplement any of the provisions of the Indentures
to such extent as shall be necessary to permit or facilitate the defeasance or
discharge of Offered Debt Securities pursuant to the applicable Indenture;
provided that any such action shall not adversely affect the interests of the
holders of Offered Debt Securities; or (xi) comply with the qualification of the
Indenture under the TIA.
Except as may otherwise be set forth in the applicable Prospectus
Supplement, the Indenture for the Offered Debt Securities also will contain
provisions permitting the Company and the Trustee, with the consent of the
holders of not less than a majority in principal amount of each class of Offered
Debt Securities outstanding, or such other percentage as may be specified in the
applicable Prospectus Supplement, to add any provision to, change in any manner
or eliminate any of the provisions of the Indentures for the Offered Debt
15
<PAGE> 49
Securities or modify in any manner the rights of the holders of the Offered Debt
Securities so affected; provided that the Company and the Trustee may not,
without the consent of the holder of each outstanding Offered Debt Security
affected thereby, do, among other things, any of the following: (i) change the
stated maturity of the principal of, or any installment of principal of, or
interest on, any Offered Debt Security, or reduce the principal amount thereof
or the rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where any Offered Debt Security or
interest thereon is payable, or change the coin or currency in which any Offered
Debt Security or interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the stated maturity
thereof (or, in the case of redemption or repayment at the option of the holder,
on or after the redemption date or repayment date); (ii) reduce the percentage
in principal amount of the outstanding Offered Debt Securities, the consent of
whose holders is required for any such amendment, or the consent of whose
holders is required for any waiver of compliance with certain provisions of the
Indenture or certain defaults thereunder and their consequences provided for in
the Indenture; (iii) modify Section 13.02(d)(iii) or 8.07 of the Indenture; or
(iv) modify the ranking or priority of the Offered Debt Securities in a manner
adverse to the holders of Offered Debt Securities. The Senior Subordinated
Indenture and the Subordinated Indenture may not be amended to alter the
subordination of any outstanding Senior Subordinated Debt Securities or
Subordinated Debt Securities without the consent of each holder of Senior
Indebtedness then outstanding that would be adversely affected thereby.
Except as provided in the applicable Prospectus Supplement, the holders of
at least a majority in principal amount of each class of the then outstanding
Offered Debt Securities may on behalf of the holders of all Offered Debt
Securities, or such other amount as may be specified in the applicable
Prospectus Supplement, waive (i) insofar as the Offered Debt Securities are
concerned, compliance by the Company with certain covenants of the applicable
Indenture and (ii) any past default under the Indenture with respect to the
Offered Debt Securities, except a default in the payment of the principal of or
interest on any Offered Debt Security or in respect of a provision which under
the Indenture cannot be modified or amended without the consent of the holder of
each outstanding Offered Debt Security affected.
CONCERNING THE TRUSTEE
IBJ Schroder Bank & Trust Company is to be Trustee under each of the
Indentures and has been appointed by the Company as paying agent and registrar.
The Indenture will provide that upon execution and delivery of the Offered Debt
Securities by the Company the Trustee shall authenticate and deliver the Offered
Debt Securities in accordance with the order of the Company. IBJ Schroder Bank &
Trust Company is the trustee under the Indenture, dated as of June 21, 1993,
relating to the 1993 Senior Notes, the Indenture, dated as of February 16, 1996,
relating to the 1996 Senior Notes, the Indenture, dated as of August 28, 1997,
relating to the 1997 Senior Notes, the Indenture, dated as of August 28, 1997,
relating to the 1997 Senior Subordinated Notes, and the Indenture, dated as of
August 28, 1997, relating to the 1998 Senior Notes and it or any other Trustee,
or their respective affiliates, may from time to time have lender or other
business arrangements with the Company. The Indentures will contain certain
limitations on the rights of the Trustee, should it or its affiliates become a
creditor of the Company, to obtain payment of claims in certain cases or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustee and its affiliates will be permitted to engage in other
transactions; however, if they acquire any conflicting interest, the conflict
must be eliminated or the Trustee must resign.
GOVERNING LAW
Unless otherwise specified in the accompanying Prospectus Supplement, the
Indentures for the Offered Debt Securities and the Offered Debt Securities will
be governed by the laws of the State of New York.
PLAN OF DISTRIBUTION
The Company may sell the Offered Debt Securities offered hereby (i) through
agents, (ii) through underwriters, (iii) through dealers, (iv) directly to
purchasers (through a specific bidding or auction process
16
<PAGE> 50
or otherwise) or (v) through a combination of any such methods of sale. The
distribution of Debt Securities may be effected from time to time in one or more
transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices relating to such prevailing
market prices or at negotiated prices.
Each Prospectus Supplement will set forth the terms of the offering of the
particular issuance of Debt Securities to which such Prospectus Supplement
relates, including (i) the name or names of any underwriters or agents with whom
the Company has entered into arrangements with respect to the sale of such Debt
Securities, (ii) the initial public offering or purchase price of such Debt
Securities, (iii) any underwriting discounts, commissions and other items
constituting underwriters' compensation from the Company and any other
discounts, concessions or commissions allowed or reallowed or paid by any
underwriters to other dealers, (iv) any commissions paid to any agents, (v) the
net proceeds to the Company and (vi) the securities exchange, if any, on which
such Debt Securities will be listed.
If an underwriter or underwriters are utilized in the sale of Debt
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached,
and the names of the specific managing underwriter or underwriters, as well as
any other underwriters, and the terms of the transactions, including
compensation of the underwriters and dealers, if any, will be set forth in the
applicable Prospectus Supplement, which will be used by the underwriters to make
resales of the Debt Securities.
If a dealer is utilized in the sale of Debt Securities, the Company will
sell such Debt Securities to the dealer, as principal. The dealer may then
resell such Debt Securities to the public at varying prices to be determined by
such dealer at the time of resale. The name of the dealer and the terms of the
transactions will be set forth in the applicable Prospectus Supplement relating
thereto.
Offers to purchase the Debt Securities may be solicited directly by the
Company and sales thereof may be made by the Company directly to institutional
investors or others. The terms of any such sales, including the terms of any
bidding or auction process, if utilized, will be described in the applicable
Prospectus Supplement.
Agents, underwriters and dealers may be entitled under agreements which may
be entered into with the Company to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act, and any
such agents, underwriters or dealers, or their affiliates may be customers of,
engage in transactions with or perform services for, the Company in the ordinary
course of business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters and other persons to solicit offers by certain
institutions to purchase Debt Securities from the Company pursuant to contracts
providing for payment and delivery on a future date. Institutions with which
such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company. The obligations of any purchaser under any such contract will be
subject to the condition that the purchase of the Debt Securities shall not at
the time of delivery be prohibited under the laws of the jurisdiction to which
such purchaser is subject. The underwriters and such other agents will not have
any responsibility in respect of the validity or performance of such contracts.
The Company may grant underwriters who participate in the distribution of
Debt Securities an option to purchase additional Debt Securities to cover
over-allotments, if any.
The place and date of delivery for Debt Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities in respect of which this Prospectus is being delivered will be a
new issue of securities, will not have an established trading market when issued
and will not be listed on any securities exchange. Any underwriters or agents to
or through whom such Debt Securities are sold by the Company for public offering
and sale may make a market in such Debt Securities, but such underwriters or
agents will not be obligated to do so and may discontinue any market
17
<PAGE> 51
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for any such Debt Securities.
LEGAL MATTERS
The legality of the Offered Debt Securities will be passed upon for the
Company by Kaye, Scholer, Fierman, Hays & Handler, LLP, New York, New York.
Certain legal matters in connection with offerings made by this Prospectus may
be passed on for the underwriters, if any, by counsel named in the Prospectus
Supplement.
EXPERTS
The audited financial statements of the Company and subsidiaries
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are so
included herein in reliance upon the authority of said firm as experts in giving
said reports.
18
<PAGE> 52
PROSPECTUS SUPPLEMENT February 16, 1999
$125,000,000
U.S. HOME CORPORATION
8.875% Senior Subordinated Notes due 2009
WARBURG DILLON READ LLC
CREDIT LYONNAIS SECURITIES
FIRST CHICAGO CAPITAL MARKETS, INC.
You should rely only on the information incorporated by reference or contained
in this prospectus supplement and the related prospectus. We have not, and the
underwriters have not, authorized anyone to provide you with other information.
If anyone provides you with different or inconsistent information, you should
not rely on it. We are not, and the underwriters are not, making an offer to
sell the notes in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information incorporated by reference or contained in
this prospectus supplement or the prospectus is accurate as of any date other
than the date on the front cover of this prospectus supplement. Our business,
financial condition, results of operations and prospects may have changed since
that date.
