-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QFwAvpYL4gH2bRxkOw1Om7w+wpwyXB7IZWT1fzWJ3dXgOcwkdki/Hj8LnJxJOP1R LlF6c69V6AQXm2DA1rDFTQ== 0000101640-96-000028.txt : 19961101 0000101640-96-000028.hdr.sgml : 19961101 ACCESSION NUMBER: 0000101640-96-000028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961031 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S HOME CORP /DE/ CENTRAL INDEX KEY: 0000101640 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 210718930 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05899 FILM NUMBER: 96650714 BUSINESS ADDRESS: STREET 1: 1800 WEST LOOP SOUTH CITY: HOUSTON STATE: TX ZIP: 77027 BUSINESS PHONE: 7138772311 MAIL ADDRESS: STREET 1: PO BOX 2863 CITY: HOUSTON STATE: TX ZIP: 77252 FORMER COMPANY: FORMER CONFORMED NAME: UNITED STATES HOME & DEVELOPMENT CORP DATE OF NAME CHANGE: 19710713 10-Q 1 FORM 10-Q PERIOD ENDING 09/30/96 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ________________. Commission File Number 1-5899 U.S. HOME CORPORATION (Exact name of registrant as specified in its charter) Delaware 21-0718930 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1800 West Loop South, Houston, Texas 77027 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 877-2311 Not Applicable (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ________ Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution o f securities under a plan confirmed by a court. YES X NO ________ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at September 30, 1996 Common stock, $.01 par value 11,448,088 shares 2 U.S. HOME CORPORATION --------------------- INDEX ----- Page Number -------- Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets-- September 30, 1996 and December 31, 1995 3 Consolidated Condensed Statements of Operations--Three and Nine Months Ended September 30, 1996 and 1995 5 Consolidated Condensed Statements of Cash Flows--Nine Months Ended September 30, 1996 and 1995 6 Notes to Consolidated Condensed Financial Statements 7 Review by Independent Public Accountants 10 Report of Independent Public Accountants 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Part II. Other Information Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 17 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands, Except Per Share Data) ASSETS ------ September 30, December 31, 1996 1995 ------------- ------------ (Unaudited) HOUSING: Cash (including restricted funds) ......... $ 12,702 $ 5,110 Receivables, net .......................... 45,054 33,454 Single-Family Housing Inventories ......... 714,843 632,035 Option Deposits on Real Estate ............ 70,191 63,375 Other Assets .............................. 49,991 43,437 -------- -------- 892,781 777,411 -------- -------- FINANCIAL SERVICES: Cash (including restricted funds) ......... 5,104 5,456 Residential Mortgage Loans ................ 44,683 43,292 Other Assets .............................. 16,115 15,925 -------- -------- 65,902 64,673 -------- -------- $958,683 $842,084 ======== ======== The accompanying notes are an integral part of these balance sheets. 4 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands, Except Per Share Data) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ September 30, December 31, 1996 1995 ------------ ------------- HOUSING: (Unaudited) Accounts Payable ......................... $ 102,066 $ 88,234 Accrued Expenses and Other Current Liabilities ............................ 68,096 46,070 Revolving Credit Facility ................ 16,000 24,000 Senior and Convertible Subordinated Debt and Notes Payable ................. 364,450 300,599 --------- --------- 550,612 458,903 --------- --------- FINANCIAL SERVICES: Accrued Expenses and Other Current Liabilities .................... 18,743 18,818 Revolving Credit Facility ................ 28,386 35,371 --------- --------- 47,129 54,189 --------- --------- Total Liabilities ...................... 597,741 513,092 --------- --------- STOCKHOLDERS' EQUITY: Convertible Preferred Stock, $25 per share redemption value, authorized 207,206 and 403,597 shares at September 30, 1996 and December 31, 1995, outstanding 122,863 and 319,254shares at September 30, 1996 and December 31, 1995 3,072 7,981 Common Stock, $.01 par value, authorized 50,000,000 shares, outstanding 11,448,088 and 11,243,147 shares at September 30, 1996 and December 31, 1995 114 112 Capital In Excess of Par Value ........... 353,704 348,577 Retained Earnings ........................ 6,147 (25,367) Unearned Compensation on Restricted Stock .................................. (2,095) (2,311) --------- --------- Total Stockholders' Equity ............. 360,942 328,992 --------- --------- $ 958,683 $ 842,084 ========= ========= The accompanying notes are an integral part of these balance sheets. 5 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Per Share Data) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------- --------------- 1996 1995 1996 1995 -------- --------- -------- -------- HOUSING: Operating Revenues .................. $312,275 $282,422 $868,610 $798,113 -------- -------- -------- -------- Operating Costs and Expenses - Cost of products sold ............. 261,709 237,900 729,644 671,910 Selling, general and administrative 32,867 29,920 93,390 87,312 -------- -------- -------- -------- 294,576 267,820 823,034 759,222 -------- -------- -------- -------- Housing Operating Income ............ 17,699 14,602 45,576 38,891 -------- -------- -------- -------- FINANCIAL SERVICES: Operating Revenues .................. 5,397 4,286 15,060 11,075 -------- -------- -------- -------- Operating Costs and Expenses - General and administrative ........ 3,625 2,862 9,838 8,247 Interest .......................... 345 283 1,170 449 -------- -------- -------- -------- 3,970 3,145 11,008 8,696 -------- -------- -------- -------- Financial Services Operating Income ............................ 1,427 1,141 4,052 2,379 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES ............ 19,126 15,743 49,628 41,270 PROVISION FOR INCOME TAXES ............ 6,981 5,904 18,114 15,477 -------- -------- -------- -------- NET INCOME ............................ $ 12,145 $ 9,839 $ 31,514 $ 25,793 ======== ======== ======== ======== INCOME PER COMMON AND COMMON EQUIVALENT SHARE: Primary ........................... $ 1.03 $ .83 $ 2.63 $ 2.22 ======== ======== ======== ======== Fully diluted ..................... $ .91 $ .72 $ 2.34 $ 1.91 ======== ======== ======== ======== The accompanying notes are an integral part of these statements.
6 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) Nine Months Ended September 30, 1996 1995 --------- --------- Net Cash Used by Operating Activities ............. $(39,051) $(42,963) -------- -------- Net Cash Flows From Investing Activities: Purchase of property, plant and equipment, net of disposals .............................. (2,120) (1,920) Proceeds from investments in mortgages .......... 1,543 1,386 Decrease (increase) in restricted cash .......... 179 (264) Other ........................................... (405) (666) -------- -------- Net cash used by investing activities ........... (803) (1,464) -------- -------- Net Cash Flows From Financing Activities: Repayment of revolving credit facilities, net of proceeds ............................... (14,985) 49,616 Net proceeds from sale of 7.95% senior notes .... 73,406 -- Repayment of notes and mortgage notes payable ... (11,149) (5,790) -------- -------- Net cash provided by financing activities ....... 47,272 43,826 -------- -------- Net Increase (Decrease) in Cash ................... 7,418 (601) Cash At Beginning of Period ....................... 6,228 2,050 -------- -------- Cash At End of Period ............................. $ 13,646 $ 1,449 ======== ======== Supplemental Disclosure: Interest paid, before amount capitalized - Housing ....................................... $ 18,656 $ 18,026 Financial Services ............................ 1,152 403 -------- -------- $ 19,808 $ 18,429 ======== ======== Income taxes paid ............................... $ 9,589 $ 1,454 ======== ======== The accompanying notes are an integral part of these statements. 7 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS September 30, 1996 (Dollars in Thousands) (Unaudited) (1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The accompanying consolidated condensed balance sheet as of December 31, 1995, which has been derived from audited financial statements, and the accompanying unaudited consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. Although the Company believes that the disclosures made are adequate to ensure that the information presented is not misleading, it is suggested that these consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's latest Annual Report on Form 10-K. The preparation of consolidated condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of any contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Management's estimates and assumptions are reflective of, among other things, prevailing market conditions, expected market conditions based on published economic forecasts, current operating strategies and the availability of capital which are all subject to change. Changes to the aforementioned or other conditions could in turn cause changes to such estimates and assumptions and, as a result, actual results could differ from the original estimates. In the opinion of the Company, the accompanying consolidated condensed financial statements contain all adjustments (all of which were normal and recurring adjustments) necessary to present fairly the Company's financial position as of September 30, 1996 and December 31, 1995 and its results of operations for the three and nine month periods ended September 30, 1996 and 1995 and cash flows for the nine month periods ended September 30, 1996 and 1995. Because of the seasonal nature of the Company's business, the results of operations for the three and nine month periods ended September 30, 1996 and 1995 are not necessarily indicative of the results for the full year. 8 (2) INVENTORIES The components of single-family housing inventories are as follows: September 30, December 31, 1996 1995 ------------ ------------ Housing completed and under construction $294,315 $238,508 Models ................................. 67,951 63,475 Finished lots .......................... 129,432 129,260 Land under development ................. 69,509 50,714 Land held for development or sale ...... 153,636 150,078 -------- -------- $714,843 $632,035 ======== ======== (3) REVOLVING CREDIT FACILITIES, SENIOR AND CONVERTIBLE SUBORDINATED DEBT AND NOTES PAYABLE Housing - Revolving credit facility, senior and convertible subordinated debt and notes payable consist of the following: September 30, December 31, 1996 1995 ------------- ------------ Revolving credit facility ...... $ 16,000 $ 24,000 -------- -------- 7.95% Senior notes due 2001 .... 75,000 -- 9.75% Senior notes due 2003 .... 200,000 200,000 4.875% Convertible subordinated debentures due 2005 .......... 80,000 80,000 Notes and mortgage notes payable 9,450 20,599 -------- -------- 364,450 300,599 -------- -------- $380,450 $324,599 ======== ======== The Company has a three-year unsecured revolving credit facility (the "Credit Facility") with a group of banks. The Credit Facility provides up to a maximum of $130,000 of which up to $20,000 may be used for letter of credit obligations, subject to a borrowing base limitation. The amount available for borrowing under the Credit Facility is based on housing inventories, land, finished lots and closing proceeds receivable less outstanding senior debt borrowings (as defined), including amounts outstanding under the Credit Facility; as the amount invested in these categories changes, the 9 amount of available borrowings will increase or decrease. At September 30, 1996, $107,760 of the Credit Facility was available for borrowing. Borrowings bear interest at a premium over the Eurodollar rate or a bank corporate base rate announced by the agent bank. The Credit Facility, as amended on September 25, 1996, expires on September 29, 1999, but may be extended annually for successive one-year periods with the consent of the banks and contains numerous real estate and financial covenants, including restrictions on incurring additional debt, creation of liens and the levels of land and housing inventories maintained by the Company and a prohibition on the payment of dividends, other than stock dividends. In September 1996, the Company amended the Credit Facility to, among other things, extend the expiration date one year to September 29, 1999, and modify the borrowing base provisions to increase the availability for borrowing. On February 16, 1996, the Company completed the sale of $75,000 principal amount of its 7.95% senior notes ("Senior Notes") due March 1, 2001. Interest on the Senior Notes is payable on March 1 and September 1 of each year. The indenture relating to the Senior Notes contains certain covenants, including a minimum tangible net worth requirement and a limitation on the incurrence of additional debt. Financial Services - Financial Services revolving credit facility consists of an agreement with a financial institution whereby the Company's mortgage banking subsidiary, U.S. Home Mortgage Corporation ("Mortgage"), may borrow up to $45,000 under a revolving line of credit (the "Mortgage Credit Facility") secured by residential mortgage loans and mortgage notes receivable. The Mortgage Credit Facility is not guaranteed by the Company, was amended and renewed in August 1996, matures on August 31, 1997 and bears interest at a premium over the London Interbank Offered Rate. 10 (4) HOUSING INTEREST A summary of housing interest for the three and nine month periods ended September 30, 1996 and 1995 follows: Three Month Period ------------------------ 1996 1995 --------- ---------- Capitalized at beginning of period $ 62,165 $ 57,638 Capitalized ...................... 8,526 8,375 Included in cost of sales ........ (8,008) (6,604) Included in other ................ (22) (1) -------- -------- Capitalized at end of period ..... $ 62,661 $ 59,408 ======== ======== Nine Month Period ----------------------- 1996 1995 --------- --------- Capitalized at beginning of period $ 59,898 $ 56,082 Capitalized ...................... 24,853 24,172 Included in cost of sales ........ (22,064) (20,335) Included in other ................ (26) (511) -------- -------- Capitalized at end of period ..... $ 62,661 $ 59,408 ======== ======== (5) INCOME PER SHARE The following weighted average number of common and common equivalent shares were used to compute income per share for the three and nine month periods ended September 30, 1996 and 1995: Three Month Period Nine Month Period ---------------------- ----------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Primary 11,788,111 11,908,385 11,977,570 11,607,984 Fully diluted 14,041,632 14,250,376 14,231,091 14,267,372 The weighted average number of common and common equivalent shares outstanding for primary income per share includes the dilutive effect of the convertible redeemable preferred stock and Class B warrants and the assumed exercise of stock options. Fully diluted income per share includes the assumed conversion of the convertible subordinated debentures. 11 REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP, independent public accountants, have performed a review of the consolidated condensed balance sheet as of September 30, 1996 and the related consolidated condensed statements of operations for the three and nine month periods ended September 30, 1996 and 1995 and cash flows for the nine month periods ended September 30, 1996 and 1995 included in this report. Such review was made in accordance with standards established by the American Institute of Certified Public Accountants. 12 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO U.S. HOME CORPORATION: We have reviewed the accompanying consolidated condensed balance sheet of U.S. Home Corporation (a Delaware corporation) and subsidiaries as of September 30, 1996, and the related consolidated condensed statements of operations for the three and nine month periods ended September 30, 1996 and 1995 and cash flows for the nine month periods ended September 30, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of U.S. Home Corporation and subsidiaries as of December 31, 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended (not presented herein), and in our report dated February 1, 1996, we expressed an unqualified opinion on those statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Arthur Andersen LLP ------------------------ ARTHUR ANDERSEN LLP Houston, Texas October 25, 1996 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Housing ------- The following table sets forth certain financial information for the periods indicated (dollars in thousands, except average sales price): Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Revenues - Single-family homes ....... $308,727 $280,223 $859,285 $788,002 Land and other ............ 3,548 2,199 9,325 10,111 -------- -------- -------- -------- Total ................... $312,275 $282,422 $868,610 $798,113 ======== ======== ======== ======== Single-family homes - Gross margin amount ....... $ 50,518 $ 45,396 $138,289 $126,340 Gross margin percentage ... 16.4% 16.2% 16.1% 16.0% Units delivered ........... 1,848 1,743 5,213 4,991 Average sales price ....... $167,100 $160,800 $164,800 $157,900 New orders taken .......... 1,669 1,612 6,147 5,757 Backlog at end of period .. 3,665 3,317 Selling, general and administrative expenses as a percentage of housing revenues .................. 10.5% 10.6% 10.8% 10.9% Interest expense - Paid and accrued .......... $ 8,526 $ 8,375 $ 24,853 $ 24,172 Capitalized ............... $ 8,526 $ 8,375 $ 24,853 $ 24,172 Percent capitalized ....... 100.0% 100.0% 100.0% 100.0% Capitalized interest included in cost of products sold .. $ 8,008 $ 6,604 $ 22,064 $ 20,335 Revenues - Revenues from sales of single-family homes for the three and nine month periods ended September 30, 1996 increased 10% and 9% compared to the three and nine month periods ended September 30, 1995. The increase resulted from 6% and 4% increases in the number of housing units delivered and 4% increases for both periods in the average sales price. The increase in the average sales prices in 1996 was primarily due to price increases. New orders taken for the three and nine month periods ended September 30, 1996 increased 4% and 7% compared to the same period in 1995. See Part II, "Item 5 - Other Information" on page 16 for a table of unit activity by state for the three and nine month periods ended September 30, 1996 and 1995. 14 Financial Services ------------------ Revenues - Revenues for the financial services segment for the periods indicated were as follows (dollars in thousands): Three Months Nine Months Ended Ended September 30, September 30, ------------------ ------------------ 1996 1995 1996 1995 ------- ------- ------- ------- U.S. Home Mortgage Corporation and Subsidiary ...................... $ 4,265 $ 3,629 $12,092 $ 8,783 Other financial services operations 1,132 657 2,968 2,292 ------- ------- ------- ------- $ 5,397 $ 4,286 $15,060 $11,075 ======= ======= ======= ======= The increases in U.S. Home Mortgage Corporation and subsidiary's ("Mortgage") revenues for the three and nine month periods ended September 30, 1996 when compared to the three and nine month periods ended September 30, 1995 were primarily due to an increase in mortgage loan originations and income from the sale of mortgage loans and servicing rights. Financial Condition and Liquidity Housing ------- The Company's most significant needs for capital resources are land and finished lot purchases, land development and housing construction. The Company's ability to generate cash adequate to meet these needs is principally achieved from the sale of homes and the margins thereon, the utilization of Company-owned lots and borrowings under its financing facilities. Access to quality land and lot locations is an integral part of the Company's success. Typically, in order to secure the rights to quality locations and provide sufficient lead time for development, the Company must acquire land rights well in advance of when orders for housing units are expected to occur. The Company attempts to minimize its exposure to the cyclical nature of the housing market and its use of working capital by employing rolling lot options, which enable the Company to initially pay a small portion of the total lot cost and then purchase the lots on a scheduled basis. The increase in land inventories in 1996 from 1995 was primarily the result of increased activities, including the increase in the Company's retirement and active-adult communities. In February 1996, the Company sold $75 million principal amount of its 7.95% senior notes due 2001. The net proceeds thereof were used to repay the outstanding balance under the Credit Facility and for working capital and general corporate purposes. See Note 3 of Notes to Consolidated Condensed Financial Statements. 15 The Company has financed, and expects to continue to finance, its working capital needs from operations and borrowings, including those made under the Company's unsecured revolving credit facility ("Credit Facility"). The Credit Facility (and previous credit facilities) has enabled the Company to meet peak operating needs. In September 1996, the Company amended the Credit Facility to extend its maturity date one year to September 29, 1999 and to amend certain other covenants. See Note 3 of Notes to Consolidated Condensed Financial Statements. The net cash provided or used by the operating, investing and financing activities of the housing operations for the nine month periods ended September 30, 1996 and 1995 is summarized below (dollars in thousands): 1996 1995 -------- --------- Net cash provided (used) by: Operating activities ........ $(40,327) $(32,927) Investing activities ........ (2,608) (2,090) Financing activities ........ 54,257 33,246 -------- -------- Net increase (decrease) in cash $ 11,322 $ (1,771) ======== ======== Housing operations are, at any time, affected by a number of factors, including the number of housing units under construction and housing units delivered. Housing operating activities for 1996 used more cash than in 1995 primarily due to an increase in housing construction and land asset activities offset in part by increased profitability, a decrease in housing proceeds receivable and the timing of payments related to these activities. Cash flow from housing financing activities for 1996 provided cash reflecting the sale of the Company's 7.95% senior notes, partially offset by the repayment of the outstanding amount under the Credit Facility, while 1995 provided cash reflecting primarily net borrowings under the Company's previous revolving credit facility. The Company's fedeal income tax returns for the years ending December 31, 1992 and 1993 are currently being examined by the Internal Revenue Service. The Company believes that cash flow from operations and amounts available under the Credit Facility will be sufficient to meet its working capital obligations and other needs. However, should the Company require capital in excess of that which is currently available there can be no assurance that it will be available. Financial Services ------------------ Mortgage's activities represent a substantial portion of the financial services segment's activities. As loan originations by Mortgage are primarily from housing units delivered by the Company's home building operations, Mortgage's financial condition and liquidity are to a significant extent dependent upon the financial condition of the Company. 16 Financial services operating activities are affected primarily by Mortgage's loan originations which result in the sale of mortgage loans and related servicing rights to third party investors. Cash flows from financial services operating activities are also affected by the timing of the sales of loans and servicing rights which generally are sold to investors within 30 days after homes are delivered. In this regard, cash flows from financial services operating activities for 1996 used less cash compared to 1995 primarily because the increase in residential mortgage loan receivables in 1996 was less than the increase in residential mortgage loan receivables in 1995. The Company finances its financial services operations primarily from internally generated funds, such as from the origination and sale of residential mortgage loans and related servicing rights, and short-term debt. As more fully discussed in Note 3 of Notes to Consolidated Condensed Financial Statements, the short-term debt consists of a $45 million secured revolving line of credit (the "Mortgage Credit Facility") which matures on August 31, 1997. While the Mortgage Credit Facility contains numerous covenants, including a debt to tangible net worth ratio and a minimum tangible net worth requirement, these covenants are not anticipated to significantly limit Mortgage's operations. The Company has no obligation to provide funding to its financial services operations, nor does it guarantee any of its financial services subsidiaries' debt. The Company believes that the internally generated funds and the Mortgage Credit Facility will be sufficient to provide for Mortgage's working capital needs. 17 Part II. OTHER INFORMATION Item 5. Other Information Additional Operating Data - The following table provides information (expressed in number of housing units) with respect to new orders taken, deliveries to purchasers of single-family homes and backlog by state for the three and nine month periods ended September 30, 1996 and 1995: States New Orders Deliveries -------------------- ------- ------- ------- ------- 1996 1995 1996 1995 Three Month Period - Arizona ......... 192 296 221 230 California ...... 113 123 139 160 Colorado ........ 329 277 320 310 Florida ......... 448 429 520 466 Indiana/Ohio .... 36 31 43 22 Maryland/Virginia 76 105 102 109 Minnesota ....... 60 73 77 78 Nevada .......... 64 78 91 93 New Jersey ...... 128 101 151 88 Texas ........... 223 99 184 187 ----- ----- ----- ----- 1,669 1,612 1,848 1,743 ===== ===== ===== ===== States New Orders Deliveries Backlog ------------------- -------------- ------- ------- ------ ------ 1996 1995 1996 1995 1996 1995 Nine Month Period - Arizona ......... 686 839 737 624 334 478 California ...... 430 449 370 392 171 143 Colorado ........ 1,146 975 876 851 732 514 Florida ......... 1,776 1,755 1,582 1,671 1,180 1,230 Indiana/Ohio .... 161 95 103 38 120 67 Maryland/Virginia 313 330 255 263 171 149 Minnesota ....... 251 276 222 205 148 158 Nevada .......... 302 266 278 221 143 135 New Jersey ...... 399 240 322 210 260 199 Texas ........... 683 532 468 516 406 244 ----- ----- ----- ----- ----- ----- 6,147 5,757 5,213 4,991 3,665 3,317 ===== ===== ===== ===== ===== ===== 18 Cautionary Disclosure Regarding Forward-Looking Statements - Certain statements in the Company's press releases, oral communications and filings with the Securities and Exchange Commission that are not historical facts are, or may be considered to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such matters involve risks and uncertainties, including general economic conditions, fluctuations in interest rates, the impact of competitive products and prices, the supply of raw materials and prices, levels of consumer confidence and other risks referred to under the caption "Other Information -- Cautionary Disclosure Regarding Forward-Looking Statements" in the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 3.1 - Certificate of Retirement, dated as of September 11, 1995 Exhibit 3.2 - Certificate of Retirement, dated as of July 31, 1996 Exhibit 10.1 - Second Amendment to Credit Agreement, dated as of September 25, 1996, between U.S. Home Corporation and First National Bank of Chicago, as Agent Exhibit 10.2 - Second Amendment to First Amended and Restated Warehousing Credit and Security Agreement (single- family mortgage loans), dated as of August 30, 1996, between U.S. Home Mortgage Corporation and Residential Funding Corporation Exhibit 10.3 - Corrected Copy of Amended and Restated Employment and Consulting Agreement, dated October 17, 1995, between U.S. Home Corporation and Robert J. Strudler Exhibit 10.4 - Corrected Copy of Amended and Restated Employment and Consulting Agreement, dated October 17, 1995, between U.S. Home Corporation and Isaac Heimbinder Exhibit 11 - Computation of Income Per Common Share Exhibit 15 - Letter with respect to unaudited interim financial information Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K No Current Report on Form 8-K was filed by the Company during July, August or September 1996. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. U.S. HOME CORPORATION Date: October 28, 1996 /s/ Isaac Heimbinder ------------------------------------ Isaac Heimbinder President, Co-Chief Executive Officer and Chief Operating Officer Date: October 28, 1996 /s/ Chester P. Sadowski ------------------------------------ Chester P. Sadowski Vice President, Controller and Chief Accounting Officer 20 INDEX OF EXHIBITS ----------------- Sequential Exhibit Numbered Number Page - ------- ---------- 3.1 Certificate of Retirement, dated as of September 11, 1995 3.2 Certificate of Retirement, dated as of July 31, 1996 10.1 Second Amendment to Credit Agreement, dated as of September 25, 1996, between U.S. Home Corporation and First National Bank of Chicago, as Agent 10.2 Second Amendment to First Amended and Restated Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of August 30, 1996, between U.S. Home Mortgage Corporation and Residential Funding Corporation 10.3 Corrected Copy of Amended and Restated Employment and Consulting Agreement, dated October 17, 1995, between U.S. Home Corporation and Robert J. Strudler 10.4 Corrected Copy of Amended and Restated Employment and Consulting Agreement, dated October 17, 1995, between U.S. Home Corporation and Isaac Heimbinder 11 Computation of Income Per Common Share 15 Letter with respect to unaudited interim financial information 27 Financial Data Schedule EX-3 2 EXHIBIT 3.1 CERT. OF RETIREMENT 9-11-95 21 EXHIBIT 3.1 U.S. HOME CORPORATION CERTIFICATE OF RETIREMENT (pursuant to Section 243 of the General Corporation Law of the State of Delaware) U.S. Home Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of the Corporation a resolution was duly adopted which identified shares of the capital stock of the Corporation, which, to the extent hereinafter set forth, have the status of retired shares (the "Retired Shares"). SECOND: The Retired Shares which were converted into an equal number of shares of common stock, .01 par value per share, as of June 30, 1995, are identified as being an aggregate of Two Million Four Hundred Seventy-Four Thousand Three Hundred Fifty-Eight (2,474,358) shares of Convertible Redeemable Preferred Stock with a par value of $0.10 per share. THIRD: That the Restated Certificate of Incorporation of the Corporation, as filed on June 18, 1993, as amended (the "Restated Certificate"), prohibits the reissue of the shares of Convertible Redeemable Preferred Stock when so retired and provides that such shares will be restored to the status of authorized but unissued shares of Preferred Stock of the Corporation without designation as to series; and pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, upon the effective date of the filing of this Certificate as therein provided, it shall have the effect of amending the Restated Certificate so as to reduce the authorized number of shares of the Convertible Redeemable Preferred Stock to the extent of Two Million Four Hundred Seventy-Four Thousand Three Hundred Fifty-Eight (2,474,358) shares, being the total number of shares retired. As a result of such amendment, the aggregate number of authorized shares of Preferred Stock shall not be reduced and the authorized number of shares of Convertible Redeemable Preferred Stock shall be Four Hundred Twenty-Five Thousand Seven Hundred Sixty-Five (425,765). FOURTH: The capital of the Corporation shall not be reduced by or in connection with the retirement of the shares of Convertible Redeemable Preferred Stock. 22 IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by Isaac Heimbinder, President, this 11th day of September, 1995. By: \s\ Isaac Heimbinder -------------------------- ISAAC HEIMBINDER President EX-3 3 EXHIBIT 3.2 CERT. OF RETIREMENT 7-31-96 23 EXHIBIT 3.2 U.S. HOME CORPORATION CERTIFICATE OF RETIREMENT (Pursuant to Section 243 of the General Corporation Law of the State of Delaware) U.S. Home Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of the Corporation a resolution was duly adopted which identified shares of the capital stock of the Corporation, which, to the extent hereinafter set forth, have the status of retired shares (the "Retired Shares"). SECOND: As of June 30, 1996, the Retired Shares which were converted into an equal number of shares of the Corporation's common stock, $.01 par value per share, since the Corporation's previous filing of a Certificate of Retirement with the Secretary of State of the State of Delaware on September 14, 1995, are identified as being an aggregate of Two Hundred Nineteen Thousand Five Hundred Forty-One (219,541) shares of Convertible Redeemable Preferred Stock, $0.10 par value per share. THIRD: That the Restated Certificate of Incorporation of the Corporation, as filed on June 18, 1993 with the Secretary of State of the State of Delaware, as amended (the "Restated Certificate"), prohibits the reissue of the shares of Convertible Redeemable Preferred Stock when so retired and provides that such shares will be restored to the status of authorized but unissued shares of preferred stock of the Corporation without designation as to series; and pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, upon the effective date of the filing of this Certificate, it shall have the effect of amending the Restated Certificate so as to reduce the authorized number of shares of the Convertible Redeemable Preferred Stock to the extent of Two Hundred Nineteen Thousand Five Hundred Forty-One (219,541) shares, being the total number of shares retired pursuant to this Certificate of Retirement. As a result of such amendment, the aggregate number of authorized but unissued shares of Preferred Stock shall not be reduced and the authorized number of shares of Convertible Redeemable Preferred Stock shall be reduced to Two Hundred Seven Thousand Two Hundred Six (207,206) shares. FOURTH: The capital of the Corporation shall not be reduced by or in connection with the retirement of the shares of Convertible Redeemable Preferred Stock. 24 IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Isaac Heimbinder, its President, this 31st day of July, 1996. By: \s\ Isaac Heimbinder ------------------------ ISAAC HEIMBINDER President EX-10 4 EXHIBIT 10.1 SEC. AMEND TO CREDIT AGREE. 25 EXHIBIT 10.1 SECOND AMENDMENT TO CREDIT AGREEMENT SECOND AMENDMENT TO CREDIT AGREEMENT ("Amendment"), dated as of September 25, 1996, among U.S. HOME CORPORATION, a Delaware corporation (the "Borrower"), the Lenders that are parties to the Credit Agreement (as hereinafter defined) and THE FIRST NATIONAL BANK OF CHICAGO, as Agent (the "Agent"). RECITALS: A. The Borrower, the Lenders and the Agent have previously entered into that certain Credit Agreement dated as of September 29, 1995, and that certain Consent and First Amendment to Credit Agreement dated as of February 9, 1996 (such Credit Agreement, as so amended, being herein referred to as the "Credit Agreement"). B. The parties hereto desire to amend the Credit Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto, intending to be legally bound, agree as follows: 1. DEFINITIONS 1.1 In addition to the terms defined herein, capitalized terms used in this Amendment shall have the respective meanings ascribed thereto in the Credit Agreement. 1.2 Article I of the Credit Agreement is amended by amending and restating or adding, as the case may be, the definitions set forth below: "Borrowing Base" means, with respect to an Inventory Valuation Date for which it is to be determined, an amount equal to the sum of the following assets of the Borrower and the Guarantors: (i) the Receivables, multiplied by ninety percent (90%), (ii) the book value of Housing Units Under Contract, multiplied by eighty percent (80%), (iii) the book value of Inventory Housing Units, multiplied by seventy percent (70%), but not exceeding thirty percent (30%) of Total Senior Loan Commitments, and (iv) the sum (but not exceeding thirty-three and one-third (33 1/3%) percent of Total Senior Loan Commitments) of (A) the book value of Finished Lots, multiplied by fifty percent (50%) and (B) the book value of Owned Land, multiplied by twenty-five percent (25%). 26 "Consolidated Senior Debt Borrowings" means, at any date, with respect to the Borrower and the Guarantors, on a consolidated basis, the outstanding balance of all obligations described in clauses (i), (iv) or (viii) of the definition of "Indebtedness" (including the Obligations) calculated in accordance with Agreement Accounting Principles but excluding (i) Indebtedness of the Borrower to a Guarantor, a Guarantor to the Borrower or a Guarantor to another Guarantor, and (ii) the Convertible Subordinated Notes and any other Subordinated Indebtedness. "Facility Termination Date" means September 29, 1999, as the same may be extended as provided in Section 2.20. "Owned Land" means land (other than Finished Lots) owned or held by the Borrower or any Guarantor for development or sale or land under development. "Total Senior Loan Commitments" means, at any date, on a consolidated basis for the Borrower and the Guarantors, (i) the sum of (a) all outstanding obligations described in clauses (i), (iv) and (viii) of the definition of "Indebtedness" to Persons that are not the Borrower, Subsidiaries of the Borrower or Affiliates of the Borrower or of any of its Subsidiaries, plus (b) all bona fide, binding but unfunded commitments (including the Commitments) of banks or other financial institutions with respect to the borrowing by the Borrower or any Guarantor of obligations of the type referred to in clause (a) above, except to the extent that such commitments are subject to conditions that have not been satisfied (other than customary conditions that the Borrower and the Guarantors can reasonably be expected to satisfy in the ordinary course of business), less (ii) the sum of the outstanding amounts of the Convertible Subordinated Notes and all other Subordinated Indebtedness, all as determined in accordance with Agreement Accounting Principles. 2. EXTENSION The parties hereto acknowledge and agree that, pursuant to Section 2.20 of the Credit Agreement, the Facility Termination Date has been extended to September 29, 1999. 27 3. AMENDMENT OF SECTION 8.6 3.1 Clause (ix) of Section 8.6 of the Credit Agreement is hereby amended and restated in its entirety as follows: (ix) Investments in Non-Borrowing Subsidiaries to the extent permitted under the provisions of Section 7.2 and other loans or advances to Non-Borrowing Subsidiaries that are neither made nor outstanding at any time at which any Loans (excluding Facility Letters of Credit) are outstanding hereunder. 3.2 Section 8.6 of the Credit Agreement is further amended by inserting the following clauses (xv) and (xvi) at the end thereof: (xv) The repurchase, repayment, prepayment, redemption or other acquisition of any of the Convertible Subordinated Notes involving expenditures not to exceed $15,000,000 in the aggregate and as otherwise permitted under Section 8.11 hereof. (xvi) Investments permitted under Section 8.9 hereof. 4. AMENDMENT OF SECTION 8.9 4.1 Section 8.9 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 8.9 Redemption. The Borrower will not purchase or redeem any of its capital stock heretofore or hereafter issued, except that the Borrower may purchase or redeem its capital stock (i) to the extent that the consideration for such redemption or purchase is limited to capital stock of the Borrower or (ii) if the consideration for such purchase or redemption is other than capital stock of the Borrower and does not exceed, in the aggregate for all such purchases and redemptions from and after the date hereof, $5,000,000; provided that this Section 8.9 shall not prohibit the Borrower from repurchasing, repaying, prepaying, redeeming or otherwise acquiring Convertible Subordinated Notes to the extent permitted under Section 8.6(xv) hereof. 28 5. AMENDMENT OF SECTION 8.11 5.1 Section 8.11 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 8.11. Subordinated Indebtedness. The Borrower will not, nor will it permit any Significant Guarantor to, make any amendment or modification to the subordination provisions of any indenture, note or other agreement evidencing or governing any Subordinated Indebtedness, or directly or indirectly voluntarily prepay, defease or in substance defease, purchase, redeem, retire or otherwise acquire, any Subordinated Indebtedness; provided, however, that the foregoing shall not prohibit (i) the conversion of the Convertible Subordinated Notes in accordance with the Indenture dated as of November 3, 1993 or an amendment permitting such conversion at a lower conversion price than is therein provided, (ii) the repayment or prepayment of Subordinated Indebtedness solely from the net proceeds of other Subordinated Indebtedness or from capital stock or (iii) the Borrower from repurchasing, repaying, prepaying, redeeming, or otherwise acquiring Convertible Subordinated Notes to the extent permitted by Section 8.6(xv) hereof. 6. CHANGE IN SCHEDULES The Borrower (i) furnished, on the date hereof, to the Agent a revised Schedule "6.8", and (ii) hereby certifies that such revised Schedule is true, correct and complete in all material respects on the date hereof. Such revised Schedule "6.8" shall be substituted for Schedule "6.8" to the Credit Agreement. 7. ADDITIONAL REQUIREMENTS On or before the execution and delivery of this Amendment, the Borrower shall: 7.1 deliver to the Agent the Consent of the Guarantors in the form attached to this Amendment; 7.2 deliver to the Agent the favorable opinion of the Borrower's counsel, Kaye, Scholer, Fierman, Hays & Handler, substantially in the form of Exhibit "A" to this Amendment; and 7.3 pay to the Agent the fees provided for in Section 2.20 of the Credit Agreement. 29 8. MISCELLANEOUS 8.1 This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart. 8.2 In all respects, including all matters of construction, validity and performance, this Amendment shall be construed in accordance with the internal laws (and not the laws of conflicts) of the State of Illinois, but giving effect to federal laws applicable to national banks. IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first above written. U.S. HOME CORPORATION By: \s\ Thomas A. Napoli ---------------------------------- Thomas A. Napoli Vice President - Finance and Chief Financial Officer LENDERS: THE FIRST NATIONAL BANK OF CHICAGO, Individually and as Agent By: \s\ James D. Benko -------------------------------- Name: James D. Benko Title: Assistant Vice President GUARANTY FEDERAL BANK, F.S.B. By: \s\ Randy Reid -------------------------------- Name: Randy Reid Title: Vice President 30 CREDIT LYONNAIS NEW YORK BRANCH By: \s\ Robert Ivosevich --------------------------------- Name: Robert Ivosevich Title: Senior Vice President BANK ONE, ARIZONA, NA By: \s\ Rhonda R. Williams --------------------------------- Name: Rhonda R. Williams Title: Vice President COMERICA BANK, a Michigan corporation By: \s\ David J. Campbell --------------------------------- Name: David J. Campbell Title: Vice President 31 CONSENT OF GUARANTORS The undersigned, being the Guarantors under the above-referenced Credit Agreement, do hereby consent to the foregoing Second Amendment to Credit Agreement. CANTERBURY CORPORATION By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President COUNTRYPLACE GOLF COURSE, INC. By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President HOMECRAFT CORPORATION By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President IMPERIAL HOMES CORPORATION By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President LODGE HOLDINGS CORP. By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President 32 OCEANPOINTE DEVELOPMENT CORPORATION By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President ORRIN THOMPSON CONSTRUCTION COMPANY By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President ORRIN THOMPSON HOMES CORP. By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President PAPARONE CONSTRUCTION CO. By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President RUTENBERG HOMES, INC. (FLORIDA) By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President 33 RUTENBERG HOMES, INC. (TEXAS) By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President STONEY CORPORATION By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President USH CAPITAL CORPORATION By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President USH CROSSCREEK, INC. By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President USH EQUITY CORPORATION By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President 34 U.S. HOME CORPORATION OF NEW YORK By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President U.S. HOME OF ARIZONA CONSTRUCTION CO. By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President U.S. HOME OF COLORADO REAL ESTATE, INC. By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President U.S. HOME REALTY CORPORATION By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President U.S. HOME REALTY, INC. (MARYLAND) By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President U.S. HOME REALTY, INC. (TEXAS) By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President 35 U.S. HOME AND DEVELOPMENT CORPORATION By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President U.S.H. CORPORATION OF NEW YORK By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President U.S.H. LOS PRADOS, INC. By: /s/ Thomas A. Napoli ____________________________________ Thomas A. Napoli Vice President 36 Exhibit A [Kaye, Scholer, Fierman, Hays & Handler, LLP] September 25, 1996 The First National Bank of Chicago, as Agent One First National Plaza Chicago, Illinois 60670 Ladies and Gentlemen: We have acted as counsel to U.S. Home Corporation, a Delaware corporation (the "Borrower"), in connection with the preparation, execution and delivery of the Second Amendment to Credit Agreement, dated September 25, 1996 (the "Second Amendment"), among the Borrower, the lenders named therein and you, as agent (the "Agent"). Capitalized terms used but not defined herein have the meanings set forth in the Credit Agreement, dated as of September 29, 1995, among the Borrower, certain lenders and the Agent, as amended from time to time. We have examined such documents, instruments, records and certificates of public officials and officers of the Borrower, and have reviewed such questions of law, as we have deemed necessary or appropriate as a basis for the opinion set forth below. As to any facts material to our opinion, we have relied upon such documents, instruments, certificates and records. Based on the foregoing, and subject to the limitations, qualifications and exceptions set forth herein, in our opinion, the Second Amendment has been duly authorized, executed and delivered by the Borrower. The opinion set forth above is subject to the following assumptions and qualifications: We have assumed the Borrower is a corporation validly existing and in good standing under the laws of Delaware. We have also assumed the genuineness of all signatures, other than those of officers of the Borrower, the authenticity of all documents submitted to us as originals, and the conformity with the original documents of all documents submitted to us as reproduced copies, and the authenticity of all such latter documents. Our opinion is limited to the Delaware General Corporation Law. Our opinion is rendered solely for your information in connection with the foregoing, and may not be relied upon by any other person or for any other purpose without our prior written consent. Very truly yours, /s/ Kaye, Scholer, Fierman, Hays and Handler EX-10 5 EXHIBIT 10.2 SEC. AMEND TO WARE. AGREEMENT 37 EXHIBIT 10.2 SECOND AMENDMENT TO FIRST AMENDED AND RESTATED WAREHOUSING CREDIT AND SECURITY AGREEMENT THIS SECOND AMENDMENT TO FIRST AMENDED AND RESTATED WAREHOUSING CREDIT AND SECURITY AGREEMENT (this "Amendment") is entered into as of this 29th day of August 1996, by and between U.S. HOME MORTGAGE CORPORATION, a Florida corporation (the "Company") and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (the "Lender"). WHEREAS, the Company and the Lender have entered into a single family revolving warehouse facility with a present Commitment Amount of Forty-Five Million Dollars ($45,000,000), to finance the origination and acquisition of Mortgage Loans as evidenced by a Warehousing Promissory Note in the principal sum of Forty-Five Million Dollars ($45,000,000), dated as of December 27, 1995, a Sublimit Promissory Note in the principal sum of Fifteen Million Dollars ($15,000,000), dated as of December 27, 1995, (the "Notes"), and by a First Amended and Restated Warehousing Credit and Security Agreement dated as of August 31, 1995, as the same may have been amended or supplemented (the "Agreement"); WHEREAS, the Company has requested the Lender extend the period for which the Commitment under the Agreement has been made and to amend the Agreement to allow for the warehousing of FmHA Mortgage Loans and the Lender has agreed to such extension and amendment subject to the terms and conditions of this Amendment; NOW, THEREFORE, for and in consideration of the foregoing and of the mutual covenants, agreements and conditions hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. All capitalized terms used herein and not otherwise defined shall have their respective meanings set forth in the Agreement. 2. The effective date ("Effective Date") of this Amendment shall be, the date on which the Company has complied with all the terms and conditions of this Amendment. 3. Section 1.1 of the Agreement shall be amended by adding the following definitions in the appropriate alphabetical order: "FmHA" means the Farmers Home Administration and any successor thereto. "FmHA Mortgage Loan" means a Mortgage Loan secured by a First Mortgage and with respect to which ninety percent (90%) of the principal amount of each Mortgage Loan is guaranteed by FmHA. 38 "HUD 203(K) Mortgage Loan" means an FHA insured Mortgage Loan secured by a First Mortgage, a portion of which will be used for the purpose of rehabilitating and/or repairing the related single family property, and which satisfies the definition of "rehabilitation loan" under 24 C.F.R. Section 203.50(a). "RFC Mortgage Loan" means a Mortgage Loan covered by a Purchase Commitment issued by RFC. "Second Mortgage Loan" means a closed-end Mortgage Loan secured by a Second Mortgage. "Title I Mortgage Loan" means an FHA co-insured Mortgage Loan secured by a Mortgage which is underwritten in accordance with HUD underwriting standards for the Title I Property Improvement Program as set forth in and which is reported for insurance under the Mortgage Insurance Program authorized and administered under Title I of the National Housing Act of 1934, as amended and the regulations promulgated thereunder. 4. Section 1.1 of the Agreement shall be amended to delete the definitions of "Adjusted Tangible Net Worth," "Approved Custodian," "Collateral Value," "Conforming Mortgage Loan," "Conventional Mortgage Loan," "Debt," "Fair Market Value," "Nonconforming Mortgage Loan" and "Operating Account" in their entirety, replacing them with the following definitions: "Adjusted Tangible Net Worth" means with respect to any Person at any date, the Tangible Net Worth of such Person at such date, excluding capitalized excess servicing fees and capitalized servicing rights, plus one percent (1%) of the Adjusted Servicing Portfolio, and plus deferred taxes arising from capitalized excess servicing fees and capitalized servicing rights. "Approved Custodian" means a pool custodian or other Person which is deemed acceptable to the Lender from time to time in its sole discretion to hold a Mortgage Loan for inclusion in a Mortgage Pool or to hold a Mortgage Loan as agent for an Investor who has issued a Purchase Commitment for such Mortgage Loan. "Collateral Value" means (a) with respect to any Mortgage Loan as of the date of determination, the lesser of (i) the amount of any Advance made against such Mortgage Loan under Section 2.1(c) hereof; or (ii) the Fair Market Value of such Mortgage Loan; or (b) in the event Pledged Mortgages have been exchanged for Pledged Securities, the Fair Market Value of such Pledged Securities; or (c) with respect to cash, the amount of such cash. 39 "Conforming Mortgage Loan" means a First Mortgage Loan which is either (a) an FHA insured (other than a Title I Mortgage Loan or HUD 203(K) Mortgage Loan) or VA guaranteed Mortgage Loan or (b) a Conventional Mortgage Loan which is underwritten substantially in accordance with FNMA or FHLMC underwriting standards, and the principal amount of which is less than or equal to the maximum amount eligible for purchase by FNMA or FHLMC. "Conventional Mortgage Loan" means a First Mortgage Loan, other than an FHA insured, VA guaranteed Mortgage Loan or FmHA guaranteed Mortgage Loan. "Debt" means, with respect to any Person, at any date (a) all indebtedness or other obligations of such Person which, in accordance with GAAP, would be included in determining total liabilities as shown on the liabilities side of a balance sheet of such Person at such date; and (b) all indebtedness or other obligations of such Person for borrowed money or for the deferred purchase price of property or services; provided that for purposes of this Agreement, there shall be excluded from Debt at any date loan loss reserves, Subordinated Debt not due within one year of such date, and deferred taxes arising from capitalized excess servicing fees and capitalized servicing rights. "Fair Market Value" means at any time for a Mortgage Loan or the related Mortgage-backed Security (if such Mortgage Loan is to be used to back a Mortgage-backed Security), (a) if such Mortgage Loan or the related Mortgage-backed Security is covered by a Purchase Commitment, the Committed Purchase Price, or (b) otherwise, the market price for such Mortgage Loan or Mortgage-backed Security, determined by the Lender based on market data for similar Mortgage Loans or Mortgage-backed Securities and such other criteria as the Lender deems appropriate. "Nonconforming Mortgage Loan" means a Conventional Mortgage Loan which is not a Conforming Mortgage Loan or a Jumbo Mortgage Loan, which has a credit risk rating C- or better (determined using the underwriting standards of the Investor to which such Mortgage Loan is to be sold under a Purchase Commitment, provided such underwriting standards comply with industry standards in the sole judgment of the Lender), and which is underwritten and approved for purchase by an Investor prior to funding if its original principal amount exceeds Six Hundred Thousand Dollars ($600,000). "Operating Account" means a demand deposit account maintained at the Funding Bank in the name of the Company and designated for funding that portion of each Mortgage Loan not funded by an Advance made against such Mortgage Loan and for returning any excess payment from an Investor for a Pledged Mortgage or Pledged Security. 5. The definition of "Maturity Date" in Section 1.1 of the Agreement shall be amended by inserting the date "August 31, 1997" in place of "August 31, 1996" wherever it appears in such definition. 40 6. Section 2.1(b) (3) of the Agreement shall be deleted in its entirety and the following is substituted in lieu thereof: (3) No Advance shall be made against a Home Equity Loan, a Title I Mortgage Loan or a HUD 203(K) Mortgage Loan. 7. Section 2.1(c) (1) of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: (1) For a Conforming Mortgage Loan, a Jumbo Mortgage Loan or an FmHA Mortgage Loan pledged hereunder, other than an RFC Mortgage Loan, ninety-eight percent (98%) of the lesser of (A) the Mortgage Note Amount or (B) the product of the weekly Weighted Average Purchase Commitment Price at the time of the Advance multiplied by the Mortgage Note Amount. 8. Section 2.1(c) of the Agreement shall be further amended by adding the following Section 2.1(c)(5) at the end thereof: (5) For an RFC Mortgage Loan pledged hereunder, one hundred percent (100%) of the lesser of (i) the Mortgage Note Amount or (ii) the Committed Purchase Price. 9. Sections 2.2(d) and 2.2(e) of the Agreement shall be deleted in their entirety and the following shall be substituted in lieu thereof: 2.2(d) The Company shall hold in trust for the Lender, and the Company shall deliver to the Lender promptly upon request, or within one hundred twenty (120) days from the date an Advance was made against such Pledged Mortgage and the Pledged Mortgage is not being held by an Investor for purchase or has not been redeemed from pledge, the following: (1) the originals of the Collateral Documents for which copies are required to be delivered to the Lender pursuant to Exhibit D-SF, Exhibit D-SF/CONSTRUCTION or Exhibit D-UNI, (2) the original lender's ALTA Policy of Title Insurance or an equivalent thereto, and (3) any other documents relating to a Pledged Mortgage which the Lender may request, including, without limitation, documentation evidencing the FHA Commitment to Insure or the FmHA Guaranty or VA Guaranty of any Pledged Mortgage which is either FHA insured, FmHA guaranteed or VA guaranteed, the appraisal, Private Mortgage Insurance Certificate, if applicable, the Regulation Z Statement, certificates of casualty or hazard insurance, credit information on the maker of each such Mortgage Note, a copy of a HUD-1 or corresponding purchase advice and other documents of all kinds which are customarily desired for inspection or transfer incidental to the purchase of any Mortgage Note by an Investor and any additional documents which are customarily executed by the seller of a Mortgage Note to an Investor. 2.2(e) To make an Advance, the Lender shall cause the Funding Bank to credit an account of the Company with the Funding Bank, which account shall be under the exclusive control of the Lender, upon compliance by the Company with the terms of this Agreement. The Lender shall determine in its sole discretion the method by which an Advance is made. 41 10. Section 2.3 of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: 2.3 Notes. The Company's Obligations in respect of Ordinary Warehousing Advances and Nonconforming Advances shall be evidenced by a Warehousing Promissory Note of the Company substantially in the form of Exhibit A-1 attached hereto, and the Company's Obligations in respect of Construction Advances, Unimproved Advances and Advances made against FmHA Mortgage Loans shall be evidenced by a Sublimit Promissory Note of the Company substantially in the form of Exhibit A-2 attached hereto, each note dated as of the date hereof (Warehousing Promissory Note and Sublimit Promissory Note are collectively referred to as the "Notes"). The terms "Warehousing Promissory Note", "Sublimit Promissory Note," "Note" or "Notes" shall include all extensions, renewals and modifications of the Notes and all substitutions therefor. All terms and provisions of the Notes are hereby incorporated herein. 11. Section 2.4 of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: 2.4 Interest. 2.4(a) Except as otherwise provided in Section 2.4(g) hereof, the unpaid amount of each Ordinary Warehousing Advance and each Advance against an FmHA Mortgage Loan (net of applicable Buydown) shall bear interest, from the date of such Ordinary Warehousing Advance, until paid in full, at the Ordinary Warehousing Rate. 2.4(b) Except as otherwise provided in Section 2.4(g) hereof, the unpaid amount of each Nonconforming Advance (net of applicable Buydown) shall bear interest, from the date of such Nonconforming Advance, until paid in full, at the Nonconforming Rate. 2.4(c) Prior to the occurrence of an Event of Default, the unpaid amount of (i) each Construction Advance (net of applicable Buydown) shall bear interest, from the date of such Construction Advance until paid in full, at the Construction Rate, and (ii) each Unimproved Advance (net of applicable Buydown) shall bear interest, from the date of such Unimproved Advance until paid in full, at the Unimproved Rate. 2.4(d) The Company is entitled to receive a benefit in the form of an "Earnings Credit" on the portion of the Eligible Balances maintained in time deposit accounts with a Designated Bank, and the Company is entitled to receive a benefit in the form of an "Earnings Allowance" on the portion of the Eligible Balances maintained in demand deposit accounts with a Designated Bank. Any Earnings Allowance shall be used first and any Earnings Credit shall be used second as a credit against accrued Miscellaneous Charges and fees, including, but not limited to Commitment Fees, Usage Fees and Warehousing Fees, and may be used, at the Lender's option, to reduce accrued interest. Any Earnings Allowance not used during the month in which the benefit was received shall be accumulated for use and must be used during the calendar year in which the benefit was received. Any Earnings Credit 42 not used during the month in which the benefit was received shall be used to provide a cash benefit to the Company. The Lender's determination of the Earnings Credit and the Earnings Allowance for any month shall be determined by the Lender in its sole discretion and shall be conclusive and binding absent manifest error. In no event shall the benefit received by the Company exceed the Depository Benefit. Either party hereto may terminate the benefits provided for in this Section effective immediately upon Notice to the other party, if the terminating party shall have determined (which determination shall be conclusive and binding absent manifest error) at any time that any applicable law, rule, regulation, order or decree or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by such party with any request or directive (whether or not having the force of law) of any such authority, shall make it unlawful or impossible for such party to continue to offer or receive the benefits provided for in this Section. 2.4(e) Interest shall be computed on the basis of a 360-day year and applied to the actual number of days elapsed in each interest calculation period and shall be payable monthly in arrears, on the first day of each month, commencing with the first month following the Closing Date and on the Maturity Date. 2.4(f) If, for any reason, no interest is due on an Advance, the Company agrees to pay to the Lender an administrative fee equal to one day of interest on such Advance at the rate applicable to such Advances under the applicable section hereof, as in effect on the date of such Advance. Administrative and other fees shall be due and payable in the same manner as interest is due and payable hereunder. 2.4(g) Upon demand of the Lender and upon Notice to the Company, after the occurrence and during the continuation of an Event of Default the unpaid amount of each Advance shall bear interest until paid in full at a per annum rate of interest (the "Default Rate") equal to four percent (4%) in excess of the rate of interest otherwise applicable to such Advance pursuant to any other subsection of this Section 2.4 or, if no rate is applicable, the highest rate then applicable to any outstanding Advance. 43 12. Section 2.5(d)(6) of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: (6) On the date on which a Pledged Mortgage is determined to have been originated based on untrue, incomplete or inaccurate information, whether or not the Company had knowledge of such misrepresentation or incorrect information, or the Pledged Mortgage is (i) in the case of an Unimproved Mortgage Loan, delinquent (without giving effect to any grace period) and remains delinquent for a period of thirty (30) days or more, and (ii) in all other cases, defaulted and remains in default for a period of sixty (60) days or more. 13. Section 2.8(a) of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: 2.8(a) The Company agrees to pay to the Lender a Commitment Fee in the amount of one-tenth of one percent (1/10%) per annum of the lesser of Fifteen Million Dollars ($15,000,000) or the Commitment Amount, which Commitment Fee may be paid quarterly in advance and shall be computed on the basis of a 365-day year and applied to the actual number of days elapsed in such calendar quarter. The Company shall make quarterly payments of the Commitment Fee on the first (1st) day of each calendar quarter. If the Maturity Date is other than the last day of a calendar quarter, the Company shall pay the prorated portion of the quarterly Commitment Fee due from the beginning of the then current calendar quarter to and including the Maturity Date. For the purposes hereof, calendar quarters shall be defined as the three (3) month periods beginning on each April 1, July 1, October 1 and January 1. The Company shall not be entitled to a reduction in the amount of the Commitment Fee, in the event the Commitment Amount is reduced or in the event that the Commitment is terminated at the request of the Company or as a result of an Event of Default. If the Commitment terminates at the request of the Company or as a result of an Event of Default, the unpaid balance of the Commitment Fee shall be due and payable in full on the date of such termination. 14. Section 2.10 of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: 2.10 Miscellaneous Charges. The Company agrees to reimburse the Lender for miscellaneous charges and expenses (collectively, "Miscellaneous Charges") incurred by or on behalf of the Lender in connection with the handling and administration of Advances, and to reimburse the Lender for Miscellaneous Charges incurred by or on behalf of the Lender in connection with the handling and administration of the Collateral. For the purposes hereof, Miscellaneous Charges shall include, but not be limited to, charges for wire transfers, check processing charges, charges for security delivery fees, charges for overnight delivery of Collateral to Investors, Funding Bank's service charges and Designated Bank's service charges. Miscellaneous Charges are due when incurred, but shall not be delinquent if paid within fifteen (15) days after receipt of an invoice or an account analysis statement from the Lender. 44 15. Section 3.1(c) of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: 3.1(c) All private mortgage insurance and all commitments issued by the FHA, FmHA or VA to insure or guarantee any Mortgage Loans included in the Pledged Mortgages; all Purchase Commitments held by the Company covering the Pledged Mortgages or the Pledged Securities and all proceeds resulting from the sale thereof to Investors pursuant thereto; and all personal property, contract rights, servicing and servicing fees and income or other proceeds, amounts and payments payable to the Company as compensation or reimbursement, accounts and general intangibles of whatsoever kind relating to the Pledged Mortgages, the Pledged Securities, said FHA commitments, FmHA commitments or VA commitments and the Purchase Commitments, and all other documents or instruments relating to the Pledged Mortgages and the Pledged Securities, including, without limitation, any interest of the Company in any fire, casualty or hazard insurance policies and any awards made by any public body or decreed by any court of competent jurisdiction for a taking or for degradation of value in any eminent domain proceeding as the same relate to the Pledged Mortgages. 16. Section 5.13 of the Agreement shall be amended to add the following Section 5.13(f) at the end thereof: 5.13(f) Lender in good standing under the FmHA loan guarantee program eligible to originate, purchase, hold, sell and service FmHA-guaranteed Mortgage Loans. 17. Section 5.15(e) of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: 5.15(e) The Company has complied and will continue to comply with all laws, rules and regulations in respect of the FHA insurance, FmHA guaranty or VA guaranty of each Mortgage Loan included in the Pledged Mortgages designated by the Company as an FHA insured, FmHA guaranteed Mortgage Loan or VA guaranteed Mortgage Loan, and such insurance or guarantee is and will continue to be in full force and effect. All such FHA insured, FmHA guaranteed Mortgage Loans and VA guaranteed Mortgage Loans comply and will continue to comply in all respects with all applicable requirements for purchase under the FNMA standard form of selling contract for FHA insured, FmHA guaranteed loans and VA guaranteed loans and any supplement thereto then in effect. 18. Section 6.13(b) of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: 6.13(b) Service or cause to be serviced all Mortgage Loans in accordance with the standard requirements of the issuers of Purchase Commitments covering the same and all applicable FHA, FmHA and VA requirements, including without limitation taking all actions necessary to enforce the obligations of the obligors under such Mortgage Loans. The Company shall service or cause to be serviced all Mortgage Loans backing Pledged Securities in accordance with applicable governmental requirements and requirements of issuers of Purchase Commitments covering the same. The Company shall hold all escrow funds collected in respect of Pledged Mortgages and Mortgage Loans backing Pledged Securities in trust, without commingling the same with non-custodial funds, and apply the same for the purposes for which such funds were collected. 45 19. Upon execution of this Amendment, the Company agrees to pay to the Lender the pro rata Commitment Fee on the Commitment Amount for the month of September 1996. 20. The Sublimit Promissory Note is amended and restated in its entirety as set forth in the First Amended and Restated Sublimit Promissory Note, in the form of Exhibit A-2 attached to this Amendment. All references in this Amendment and in the Agreement to the Sublimit Promissory Note shall be deemed to refer to the First Amended and Restated Sublimit Promissory Note delivered in connection with this Amendment. 21. Exhibits C-SF and D-SF to the Agreement are hereby deleted in their entirety and replaced with the new Exhibits C-SF and D-SF attached to this Amendment. All references in the Agreement to Exhibits C-SF and D-SF shall be deemed to refer to the new Exhibits C-SF and D-SF. 22. Exhibit I-SF to the Agreement is deleted in its entirety and replaced with the new Exhibit I-SF attached to this Amendment. All references in this Amendment and the Agreement to Exhibit I-SF shall be deemed to refer to the new Exhibit I-SF. 23. The Company shall deliver to the Lender (a) an executed original of this Amendment; (b) an executed First Amended and Restated Sublimit Promissory Note; (c) an executed Certificate of Secretary with corporate resolutions; (d) executed UCC-3 financing statements; (e) a current certified tax, lien and judgment search of the appropriate public records for the Company, including a search of Uniform Commercial Code financing statements, which search shall not have disclosed the existence of any prior Lien on the Collateral other than in favor of the Lender or as permitted hereunder; (f) current Certificates of Good Standing of the Company; (g) current insurance information; and (h) a Two Hundred Fifty Dollar ($250) document production fee. 24. The Company represents, warrants and agrees that (a) there exists no Default or Event of Default under the Loan Documents, except for Defaults with respect to the JRH Eastridge Partners Mortgage Loan and the Paradise Valley Partners, LLC Mortgage Loan which have been disclosed to the Lender, (b) the Loan Documents continue to be the legal, valid and binding agreements and obligations of the Company enforceable in accordance with their terms, as modified herein, (c) the Lender is not in default under any of the Loan Documents and the Company has no offset or defense to its performance or obligations under any of the Loan Documents, (d) the representations contained in the Loan Documents remain true and accurate in all respects, and (e) there has been no material adverse change in the financial condition of the Company from the date of the Agreement to the date of this Amendment. 25. Except as hereby expressly modified, the Agreement shall otherwise be unchanged and shall remain in full force and effect, and the Company ratifies and reaffirms all of its obligations thereunder. 46 26. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Lender have caused this Amendment to be duly executed on their behalf by their duly authorized officers as of the day and year above written. U.S. HOME MORTGAGE CORPORATION By: /s/ Thomas A. Napoli ---------------------------------- Thomas A. Napoli Its: Vice President RESIDENTIAL FUNDING CORPORATION, a Delaware corporation By: /s/ Donna A. West ---------------------------------- Its: Director 47 STATE OF Texas ) ) ss COUNTY OF Harris) On August 30, 1996, before me, a Notary Public, personally appeared Thomas A. Napoli, the Vice President of U.S. HOME MORTGAGE CORPORATION, a Florida corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. /s/ Brenda Grable ----------------------------------- Brenda Grable Notary Public (SEAL) My Commission Expires: 7-1-97 STATE OF Florida ) ) ss COUNTY OF Breward ) On, September 4, 1996, before me, a Notary Public, personally appeared Donna A. West, the Director of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. /s/ Marsha S. Grabin ------------------------------ Marsha S. Grabin (SEAL) Notary Public My Commission Expires: 9-15-98 48 EXHIBIT A-2 FIRST AMENDED AND RESTATED SUBLIMIT PROMISSORY NOTE $45,000,000 Date: August 29, 1996 FOR VALUE RECEIVED, the undersigned, U.S. HOME MORTGAGE CORPORATION, a Florida corporation (herein called the "Company"), hereby promises to pay to the order of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (the "Lender" or, together with its successors and assigns, the "Holder") whose principal place of business is 8400 Normandale Lake Blvd., Suite 600, Minneapolis, Minnesota 55437, or at such other place as the Holder may designate from time to time, the principal sum of Forty-Five Million Dollars ($45,000,000) or so much thereof as may be outstanding from time to time pursuant to the Agreement described below, and to pay interest on said principal sum or such part thereof as shall remain unpaid from time to time, from the date of each Advance until repaid in full, and all other fees and charges due under the Agreement, at the rate and at the times set forth in the Agreement. All payments hereunder shall be made in lawful money of the United States and in immediately available funds. This Note is given to evidence an actual warehouse facility in the above amount and is the Sublimit Promissory Note referred to in that certain First Amended and Restated Warehousing Credit and Security Agreement (the "Agreement") dated August 31, 1995, between the Company and the Lender, as the same may be amended or supplemented from time to time, and is entitled to the benefits thereof. Reference is hereby made to the Agreement (which is incorporated herein by reference as fully and with the same effect as if set forth herein at length) for a description of the Collateral, a statement of the covenants and agreements, a statement of the rights and remedies and securities afforded thereby and other matters contained therein. Capitalized terms used herein, unless otherwise defined herein, shall have the meanings given them in the Agreement. Without limiting the generality of the foregoing, this Note, together with the Sublimit Promissory Note, evidences a single line of credit, and the Lender has not committed to make Advances with an aggregate principal amount exceeding the Commitment Amount, notwithstanding the fact that the sum of the principal amount of the Notes may exceed the Commitment Amount. This Note is given in replacement for, and not in satisfaction of, that certain Sublimit Promissory Note dated December 27, 1995, and issued by the Company to evidence its Obligations under the Agreement (the "Existing Note"). All amounts owed by the Company under the Existing Note (including, without limitation, the unpaid principal thereunder, interest accrued thereon and fees accrued under the Agreement, whether or not yet due and owing) as of the date hereof, shall be owed hereunder. 49 This Note may be prepaid in whole or in part at any time without premium or penalty. Should this Note be placed in the hands of attorneys for collection, the Company agrees to pay, in addition to principal and interest, fees and charges due under the Agreement, any and all costs of collecting this Note, including reasonable attorneys' fees and expenses. The Company hereby waives demand, notice, protest and presentment. This Note shall be construed and enforced in accordance with the laws of the State of Minnesota, without reference to its principles of conflicts of law. IN WITNESS WHEREOF, the Company has executed this Note as of the day and year first above written. U.S. HOME MORTGAGE CORPORATION, a Florida corporation By: Its: STATE OF _______________ ) ) ss COUNTY OF ______________ ) On , 1996, before me, a Notary Public, personally appeared , the of U.S. HOME MORTGAGE CORPORATION, a Florida corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. Notary Public (SEAL) My Commission Expires: 50 EXHIBIT I-SF OFFICER'S CERTIFICATE Reference is made to that certain First Amended and Restated Warehousing Credit and Security Agreement (Single Family Mortgage Loans) between U.S. HOME MORTGAGE CORPORATION, a Florida corporation (the "Company"), and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (the "Lender"), dated as of August 31, 1995 (as the same may be amended, modified, supplemented, renewed or restated from time to time, the "Agreement"). All capitalized terms used herein and all Section numbers given herein refer to those terms and Sections set forth in the Agreement. This Officer's Certificate is submitted to the Lender pursuant to Section 6.2(c) of the Agreement. The undersigned hereby certifies to the Lender that as of the close of business on , 19 ("Statement Date",) and with respect to the Company and its Subsidiaries on a consolidated basis: 1. As illustrated in the attached calculations supporting this Officer's Certificate, the Company met the covenants set forth in Sections 7.6 and 7.7, or if the Company did not meet any of such covenants, a detailed explanation is attached setting forth the nature and period of the existence of the Default and the action the Company has taken, is taking, and proposes to take with respect thereto. 2. No Servicing Contracts have been sold or pledged by the Company except as permitted under the terms of the Agreement. 3. No recourse Servicing Contracts have been acquired by the Company. 4. No payments in advance of the scheduled maturity date have been made with respect to any Subordinated Debt. The Company has incurred no Debt required to be subordinated pursuant to Section 6.10. 5. The Company was in compliance with the applicable HUD, GNMA or Investor net worth requirements, and in good standing with FmHA, VA, HUD, GNMA and each Investor. 6. I have reviewed the terms of the Agreement and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and conditions of the Company (and, if applicable, its Subsidiaries) and such review has not disclosed the existence, and I have no knowledge of the existence, of any Default or Event of Default, or if any Default or Event of Default existed or exists, a detailed explanation is attached specifying the nature and period of the existence of the Default and the action the Company has taken, is taking and proposes to take with respect thereto. 51 7. Pursuant to Section 6.2 of the Agreement, enclosed are the financial statements of the Company as of the Statement Date. The financial statements for the period ending on the Statement Date fairly present the financial condition and results of operations of the Company (and, if applicable, its Subsidiaries) as at the Statement Date. Dated: U.S. HOME MORTGAGE CORPORATION By: Its: 52 CALCULATIONS SUPPORTING OFFICER'S CERTIFICATE Company Name: U.S. HOME MORTGAGE CORPORATION and its Subsidiaries Statement Date: All financial calculations set forth herein are as of the Statement Date. I. TANGIBLE NET WORTH A. Tangible Net Worth of the Company is: Excess of total assets over total liabilities:$ ________________ Plus: Loan loss reserves: $ ________________ Plus: Subordinated Debt not due within one year of the Statement Date (or any portion thereof): $ ________________ Minus: Advances to owners, officers or Affiliates: $ ________________ Minus: Investments in Affiliates: $ ________________ Minus: Assets pledged to secure liabilities not included in Debt: $ ________________ Minus: Intangible assets: $ ________________ Minus: Any other HUD nonacceptable assets: $ ________________ Minus: Other assets unacceptable to the Lender: $ ________________ TANGIBLE NET WORTH $ ______________ B. Requirements of Section 7.7 of the Agreement: MINIMUM TANGIBLE NET WORTH OF $6,000,000. C. Covenant Satisfied:____ Covenant Not Satisfied:____ II. DEBT OF THE COMPANY Total liabilities $ ________________ Minus: Loan loss reserves: $ ________________ Minus: Subordinated Debt not due within one year of the Statement Date (or any portion thereof): $ ________________ Minus: Deferred taxes arising from capitalized excess servicing fees and capitalized servicing rights: $ ________________ DEBT $ _________________ 53 III. RATIO OF DEBT TO TANGIBLE NET WORTH A. The ratio of Debt to Tangible Net Worth (IV to I.A) is: ____________ to 1 B. Requirements of Section 7.6 of the Agreement: The ratio of Debt to Tangible Net Worth shall not exceed 10 to 1. C. Covenant Satisfied:____ Covenant Not Satisfied:____ 54 EXHIBIT D-SF PROCEDURES AND DOCUMENTATION FOR WAREHOUSING SINGLE FAMILY MORTGAGE LOANS The following procedures and documentation requirements must be observed in all respects by the Company. All documents must be satisfactory to the Lender in its sole discretion. Terms used below, which are not otherwise defined, shall have the meanings given them in the Agreement. The HUD, FNMA and FHLMC form numbers referred to herein are for convenience only and the Company shall use the equivalent forms required at the time of delivery of the Mortgage Loans or Mortgage-backed Securities. All Requests for Advance and Collateral Documents, should be submitted to the Lender in a top tabbed, legal size manila file folder, hole-punched and acco-fastened in the order specified in the Request for Advance. Each folder should be labelled with the mortgagor name(s), Company loan number and Company name. If a Wet Settlement Advance is being requested, the Request for Advance and required Collateral Documents should be submitted in accordance with the above instructions. The remaining Collateral Documents should be submitted with a cover letter identifying the mortgagor name(s) and Company loan number. I. Prior to making a Wet Settlement Advance, the Lender must receive the following: (1) Estimate of the amount of the requested Advance one (1) Business Day prior to such Advance. (2) Copy of settlement or funding check issued to the escrow/title company, if applicable. (3) Original Request for Advance against Single Family Mortgage Loans (Exhibit C-SF) and one (1) copy of same. (4) Copy of the Purchase Commitment or satisfactory evidence thereof. (5) Bailee Pledge Agreement (only required for Wet Settlement Advance) (Exhibit M). (6) A copy of the HUD-1 Settlement Statement or equivalent (Home Equity Loans and Title I Mortgage Loans only). (7) A copy of HUD 203(K) Maximum Mortgage Worksheet (HUD 203(K) Mortgage Loans only). The following must be received by the Lender within five (5) Business Days of the date of the Wet Settlement Advance: (8) Original signed Mortgage Note, endorsed by the Company in blank with corresponding interim endorsements, if applicable, and one copy of same. 55 (9) Copy of the Mortgage certified true by the escrow/title company. (10) Copies of all interim assignments of the Mortgage certified true by the escrow/title company (recorded or sent for recordation). Mortgage Note must bear corresponding endorsements. (11) An assignment of the Mortgage to the Lender in recordable form but unrecorded. (12) Completed Company Worksheet Concerning Applicability of Section 32 of Regulation Z (12 CFR Section 226.32) and, if Section 32 applies, copies of the disclosure and other related documentation delivered to the mortgagor, or executed by the mortgagor, evidencing compliance with Section 32 (if applicable). II. Prior to the making of an Advance (other than a Wet Settlement Advance), the Lender must receive all of the Collateral Documents listed in Section I above. III. The Lender exclusively shall deliver the Mortgage Notes and other original Collateral Documents evidencing Pledged Mortgages or Pledged Securities and related pool documents to the Investor or pool custodian, unless otherwise agreed in writing. A. The following procedures are to be followed for deliveries of Pledged Mortgages: No later than one (1) Business Day prior to the requested shipment date and no later than one (1) Business Day prior to the expiration date of the Purchase Commitment, the Lender must receive the following: (1) Signed shipping instructions for the delivery of the Pledged Mortgages including the following: (a) Name and address of the office of the Investor to which the loan documents are to be shipped, the desired shipping date and the preferred method of delivery; (b) Instructions for endorsement of the Mortgage Note; (c) Names of mortgagor(s), Mortgage Note Amounts of Pledged Mortgages to be shipped and the Company's loan number; and (d) Commitment number and expiration date of the Purchase Commitment. (2) For deliveries of Pledged Mortgages to FNMA for cash purchase, the following additional documents are required: (a) Copy of Loan Schedule (FNMA Form 1068 or 1069) showing the Lender's designated FNMA payee code as recipient of the loan purchase proceeds. 56 (3) For deliveries of Pledged Mortgages to FHLMC for cash purchase, the following additional documents are required: (a) Original completed Warehouse Lender Release of Security Interest (FHLMC Form 996) to be executed by the Lender, designating the Lender as the Warehouse Lender and showing the Cash Collateral Account designated by the Lender as the receiving account for loan purchase proceeds. (b) Copy of Wire Transfer Authorization for a Cash Warehouse Delivery (FHLMC Form 987), designating the Lender as the Warehouse Lender and showing the Cash Collateral Account designated by the Lender as the receiving account for loan purchase proceeds. B. In the event Pledged Mortgages are delivered to a pool custodian, other than an Approved Custodian, payment of the related Advance is required within two (2) Business Days of shipment. The following procedures are to be followed for deliveries of Pledged Mortgages to Approved Custodians: No later than one (1) Business Day prior to the requested shipment date and no later than one (1) Business Day prior to required delivery date to the Approved Custodian, the Lender must receive the following: (1) Signed shipping instructions for the delivery of the Pledged Mortgages to the Approved Custodian including the following: (a) Name and address of the office of the Approved Custodian to which the loan documents are to be shipped, the desired shipping date and the preferred method of delivery; (b) Instructions for endorsement of the Mortgage Note; (c) Names of mortgagor(s) and Mortgage Note Amounts of Pledged Mortgages to be shipped and the Company's loan number; and (d) Commitment number and expiration date of the Purchase Commitment for the Pledged Securities. (2) For FNMA Mortgage-backed Securities issuance, the following additional documents are required: (a) Copy of Schedule of Mortgages (FNMA Form 2005 or 2025). (b) Copy of Delivery Schedule (FNMA Form 2014), instructing FNMA to issue the Mortgage-backed Securities in the name of the Company with the Lender as pledgee and to deliver the Mortgage-backed Securities to the Lender's custody account at The Chase Manhattan Bank (CHASE NYC/GEOCUST/MR9229490) and bearing the following instructions: "These instructions may not be changed without the prior written consent of Residential Funding Corporation, Preston A. Lyvers, Director or Patti Erfan, Director." 57 (3) For FHLMC Mortgage-backed Securities issuance, the following additional documents are required: (a) Copy of Settlement Information and Delivery Authorization (FHLMC Form 939), designating the Lender as the Warehouse Lender and instructing FHLMC to deliver the Mortgage-backed Securities to the Lender's custody account at The Chase Manhattan Bank (CHASE NYC/GEOCUST/MR9229490). (b) Original Warehouse Lender Release of Security Interest (FHLMC Form 996) to be executed by the Lender, designating the Lender as the Warehouse Lender and instructing FHLMC to deliver the Mortgage-backed Securities to the Lender's custody account at The Chase Manhattan Bank (CHASE NYC/GEOCUST/MR9229490). (4) For GNMA Mortgage-backed Securities issuance, the following additional documents are required: (a) Signed original Schedule of Mortgages (HUD Form 11706). (b) Signed original Schedule of Subscribers (HUD Form 11705) instructing GNMA to issue the Mortgage-backed Securities in the name of the Company and designating The Chase Manhattan Bank as Agent for the Lender as the subscriber, using the following language: THE CHASE MANHATTAN BANK AS AGENT FOR RESIDENTIAL FUNDING CORPORATION SEG ACCT MANUF/CUST/MR9229490). The following instructions must also be included on the form: "These instructions may not be changed without the prior written consent of Residential Funding Corporation, Preston A. Lyvers, Director or Patti Erfan, Director." (c) Completed original Release of Security Interest (HUD Form 11711A) to be executed by the Lender. (5) No later than two (2) Business Days prior to the Settlement Date for the Mortgage-backed Securities, the Lender must receive signed Securities Delivery Instructions form attached hereto as Schedule I. Upon instruction by the Company, the Lender will complete the endorsement of the Mortgage Note and make arrangements for the delivery of the original Collateral Documents evidencing Pledged Mortgages or Pledged Securities and related original pool documents with the appropriate bailee letter to the Investor, Approved Custodian, or other pool custodian. Upon receipt of Mortgage-backed Securities, the Lender will cause such Mortgage-backed Securities to be delivered to the Investor which issued the Purchase Commitment. Mortgage-backed Securities will be released to the Investor only upon payment of the purchase proceeds to the Lender. Cash proceeds of sales of Pledged Mortgages and Pledged Securities shall be applied to related Advances outstanding under the Commitment. Provided no Default exists, the Lender shall return any excess proceeds of the sale of Mortgage Loans or Mortgage-backed Securities to the Company, unless otherwise instructed in writing. 58 SCHEDULE I RESIDENTIAL FUNDING CORPORATION WAREHOUSING LENDING DIVISION Security Delivery Instructions INSTRUCTIONS MUST BE RECEIVED TWO (2) BUSINESS DAYS IN ADVANCE OF PICK-UP/DELIVERY BOOK-ENTRY DATE: ______________________ SETTLEMENT DATE: ISSUER:________________________________ SECURITY: $ NO. OF CERTIFICATES: __________________ 1) 2) 3) CUSIP #______________ Pool #_______________ MI#______________ Coupon Rate: Issue Date:(M/D/Y) _________________________ Maturity Date:(M/D/Y) POOL TYPE (circle one): GNMA: GNMA I GNMA II FHLMC: FIXED ARM DISCOUNT NOTE FNMA: FIXED ARM DISCOUNT NOTE DEBENTURES REMIC - ---------------------------------------------------------------------------- DELIVER TO:_______________________________ ( ) Versus Payment _______________________________ DVP AMT. $ _______________________________ ( ) Free Delivery DELIVER TO:_______________________________ ( ) Versus Payment _______________________________ DVP AMT. $ _______________________________ ( ) Free Delivery DELIVER TO:_______________________________ ( ) Versus Payment _______________________________ DVP AMT. $ _______________________________ ( ) Free Delivery - ---------------------------------------------------------------------------- AUTHORIZED SIGNATURE: TITLE: EX-10 6 EXHIBIT 10.3 AMENDED AGREEMENT TO R. STRUDLER 59 EXHIBIT 10.3 AMENDED AND RESTATED EMPLOYMENT AND CONSULTING AGREEMENT AMENDED AND RESTATED EMPLOYMENT AND CONSULTING AGREEMENT, dated as of October 17, 1995, by and between U.S. Home Corporation (the "Company"), and Robert J. Strudler (the "Executive"). WHEREAS, the Company and the Executive are parties to an Employment and Consulting Agreement, dated May 12, 1986, as amended by (i) the First Amendment to Employment and Consulting Agreement, dated February 8, 1990, (ii) the Second Amendment to Employment and Consulting Agreement, dated December 6, 1990, and (iii) the Third Amendment to Employment and Consulting Agreement, dated May 25, 1993 (collectively, the "Agreement"). WHEREAS, the Company and the Executive desire to amend and restate the Agreement as hereinafter provided. WHEREAS, Section 7(c) of the Agreement permits such amendment by written agreement of both parties. NOW, THEREFORE, the Company and the Executive agree to amend and restate the Agreement as follows: 1. Employment and Duties. The Company shall employ the Executive, and the Executive shall be employed by the Company, as Chairman and Co-Chief Executive Officer, at the Company's headquarters in Houston, Texas (or such other location as shall be mutually satisfactory to the Executive and the Company) for the term of this Agreement. In these capacities, the Executive shall devote substantially all of his business time and energies to the business of the Company and shall perform such services as shall from time to time be assigned to him by the Board of Directors of the Company. 2. Term. The term of the Executive's employment hereunder shall continue until June 20, 1999; provided, however, that, unless either party otherwise elects by notice in writing delivered to the other at least 90 days prior to June 20, 1999, or any subsequent anniversary of June 20, 1999, such term shall be automatically renewed for successive one-year terms unless sooner terminated by the Executive's voluntary resignation or otherwise terminated pursuant to the terms of this Agreement (the "Employment Term"). 3. Compensation and Benefits. (a) Compensation. During each calendar year of the Employment Term, the Company shall pay the Executive: (i) a base salary at a rate of $425,000 per year (the "Base Salary"), payable in substantially equal biweekly installments, and (ii) any cash bonus to which he is entitled 60 pursuant to the provisions of Appendix A hereto, payable as promptly as practicable after the end of each such calendar year, but in any event by April 15 of the following year. Notwithstanding the foregoing, if the Executive's applicable employee remuneration (as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")) for any taxable year would exceed the higher of $1 million or the maximum amount deductible by the Company under Section 162(m) for such taxable year, the amount otherwise payable shall be reduced to the higher of $1 million or the maximum amount deductible under Section 162(m) and the excess shall be deferred until the expiration of the Employment Term and shall be payable in a cash lump sum on April 16 of the first year of the Consultation Period. The deferred compensation shall accrue interest at the same rate charged the Company from time to time under the Credit Agreement, dated as of September 29, 1995, among the Company, the First National Bank of Chicago, as agent, and certain lenders named therein, as amended, restated, supplemented or otherwise modified from time to time, or any successor facility. The Executive's Base Salary and bonus shall be reviewed at least annually by the Board of Directors of the Company, or pursuant to its delegation, and (i) at a minimum, the Board shall increase the Base Salary annually commencing with the 1996 calendar year by an amount determined by multiplying the current Base Salary by the percentage increase in the Consumer Price Index -- U.S. City Average published by the Bureau of Labor Statistics of the United States Department of Labor (or if that Index is no longer published by any substantially equivalent successor thereto) (the "Consumer Price Index") in the preceding calendar year, and (ii) the Board may increase the bonus from time to time. (b) Stock Options. On October 17, 1995, the Executive was granted an option (the "Option") to purchase 50,000 shares of the Company's common stock, $.01 par value per share (the "Common Stock"), pursuant to the Company's 1993 Employee's Stock Option Plan. Such Option shall be an "incentive stock option" within the meaning of Section 422 of the Code to the extent permitted by Section 422(d) of the Code; to the extent not permitted by Section 422(d), the remaining portion of the Option shall be a nonqualified stock option. The Option shall be for a term of ten years from, and shall be exercisable immediately at the fair market value of the Common Stock on, the date of grant. (c) Retirement Benefit. (i) In consideration of the Executive's past services to the Company, the Executive shall be entitled to a retirement benefit, payable monthly for his life, in an amount equal to 50 percent of his highest monthly Base Salary during the Employment Term. Such payments shall commence on the first day of the month coincident with or 61 next following the later of the Executive's attainment of age 58 or the end of the Employment Term (the "Commencement Date"); provided, however, that if the Employment Term terminates prior to his attainment of age 58, the Executive may elect by written notice to the Company to have such payments commence on the first day of any month after such termination of employment (the "Early Commencement Date") in a monthly amount equal to the monthly amount that the Executive would have received at the Commencement Date, reduced by one-third of one percent (.33%) per month for each month by which the Early Commencement Date precedes the Commencement Date. The amount of each payment hereunder shall be increased on each January 1 following the Early Commencement Date or Commencement Date, as applicable, by an amount determined by multiplying the amount of each monthly payment made in the preceding year by the percentage increase, if any, in the cost of living from the preceding January 1, as reflected by the Consumer Price Index. The Executive's election to have his retirement benefit payments commence on the Early Commencement Date shall not affect the Company's obligation to pay consulting fees to the Executive in accordance with Section 4 hereof. The retirement benefit shall be an unconditional, but unsecured, general credit obligation of the Company to the Executive, and nothing contained in this Agreement, and no action taken pursuant to it, shall create or be construed to create a trust of any kind between the Company and the Executive. The Executive shall have no right, title or interest whatever in or to any investments which the Company may make (including, but not limited to, an insurance policy on the life of the Executive) to aid it in meeting its obligations hereunder. (ii) From time to time, the Company shall make such contributions to the trust established under the Trust Agreement dated as of December 18, 1986 (the "1986 Trust") between the Company, as grantor, and William E. Reichard, as successor trustee, to provide a sufficient reserve for the discharge of its obligation to pay the retirement benefit to the Executive as provided in clause (i) of this Section 3(c) and clauses (ii) and (iii) of Section 5(a) hereof. (d) Expense Reimbursement. The Company shall promptly pay, or reimburse the Executive for, all ordinary and necessary business expenses incurred by him in the performance of his duties hereunder, provided that the Executive properly accounts for them in accordance with Company policy. 62 (e) Other Benefit Plans, Fringe Benefits, and Vacations (i) The Executive shall be eligible to participate in each of the Company's present employee benefit plans, policies or arrangements and any such plans, policies or arrangements that the Company may maintain or establish during the Employment Term and receive all fringe benefits and vacations for which his position makes him eligible in accordance with the Company's usual policies and the terms and provisions of such plans, policies or arrangements. (ii) The Company shall not terminate or change, in such a way as to adversely affect the Executive's rights or reduce his benefits, any employee benefit plan, policy or arrangement now in effect or which may hereafter be established and in which the Executive is eligible to participate, including, without limitation, the Company's profit sharing, life insurance, disability and stock option plans, unless a plan, policy or arrangement providing the Executive with at least equivalent rights and benefits has been established. (iii) From and after the last day of the Employment Term, the Executive shall be entitled to participate in each of the Company's employee benefit plans, policies or arrangements which provide medical coverage and similar benefits to the Company's executive officers (the "Company Medical Plan") on the same basis as the Company's other executive officers. The Company shall bear the cost of medical coverage and benefits during the Consultation Period (as defined below); thereafter, the Executive shall bear such cost. After the Executive is eligible for Medicare and the Company becomes a secondary payor (or its equivalent) pursuant to Medicare or other applicable law, the Company shall provide secondary medical coverage and benefits. If continued coverage under the Company Medical Plan is not possible under the terms of any insurance policy or applicable law following the Employment Term, the Company shall provide the Executive with coverage equivalent to that provided to the Company's other executive officers under a policy or arrangement acceptable to the Executive. In the event of the Executive's death before the end of the Consultation Period, the Company shall continue to provide such primary and secondary medical coverage, as applicable, and benefits to the Executive's spouse and dependents for the remainder of the Consultation Period on the same basis as provided to the Company's other executive officers. 4. Consultation Period. From and after the last day of the Employment Term and for a period of five years thereafter (the "Consultation Period"), the Executive shall serve as a consultant to the Company with respect to such business matters and at such times (not more than four days per month and not more than two consecutive days per week) as the Company may reasonably request within Harris County, Texas; provided, however, that if the Consultant does not reside in Harris County, he may perform his consulting duties hereunder at his then place of residence and shall be required to come to Harris County not more than one day in each calendar month. During the Consultation Period, the Company shall pay the Executive (in addition to any other amounts to which he is 63 entitled pursuant to this Agreement) a consulting fee, in substantially equal biweekly installments, at the rate of $139,854 per year increased by an amount determined by multiplying $139,854 by the percentage increase, if any, in the cost of living between January 1, 1995 and the January 1 immediately preceding the date of commencement of the Consultation Period, as reflected by the Consumer Price Index. The amount of the consulting fee shall be increased on each January 1 during the Consultation Period by an amount determined by multiplying the amount of the consulting fee paid in the preceding year by the percentage increase, if any, in the cost of living from the preceding January 1, as reflected by the Consumer Price Index. During the Consultation Period, the Executive shall be reimbursed up to an amount not to exceed $50,000 during each year of the Consultation Period for any expenses incurred by the Executive for (i) the maintenance of an office that shall be located other than at the Company's offices and (ii) secretarial assistance, such expenses to be billed and paid monthly. During the Consultation Period, the Executive shall not be required to undertake any assignment inconsistent with the dignity, importance and scope of his prior positions or with his physical and mental health at the time. It is expressly understood between the parties that during the Consultation Period, the Executive shall be an independent contractor and shall not be subject to the direction, control, or supervision of the Company. The provisions of Sections 5, 6 and 7 hereof shall continue to apply to the Executive during the Consultation Period. . 5. Termination. (a) Death and Disability (i) The Executive's employment hereunder shall terminate upon his death or upon his becoming Totally Disabled. For purposes of this Agreement, the Executive shall be "Totally Disabled" if he is physically or mentally incapacitated so as to render him incapable of performing his usual and customary duties as an executive (for the Company or otherwise). The Executive's receipt of Social Security disability benefits shall be deemed conclusive evidence of Total Disability for purposes of this Agreement; provided, however, that in the absence of his receipt of such Social Security benefits, the Board of Directors of the Company may, in its sole discretion, but based upon appropriate medical evidence, determine that the Executive is Totally Disabled. (ii) In the event that the Executive is Totally Disabled before his retirement benefit pursuant to Section 3(c) hereof has commenced to be distributed (whether or not he is in the employ of the Company at the time he is so Totally Disabled), such benefit shall commence to be distributed to him on the first day of the month next following his Total Disability, as if such payments had commenced at his Commencement Date. 64 (iii) In the event of the Executive's death (while Totally Disabled or otherwise) after his retirement benefit has commenced to be distributed pursuant to Section 3(c) hereof or subparagraph (ii) above, as applicable, the Company shall continue to pay such retirement benefit to his Beneficiary for her life. If the Executive's retirement benefit pursuant to Section 3(c) hereof has not commenced to be distributed on the date of his death, such benefit shall commence to be distributed to his Beneficiary for her life on the first day of the month next following his date of death, as if such payments had commenced at his Commencement Date. For purposes of this Agreement, the Executive's "Beneficiary" shall be deemed to be his spouse; if his spouse predeceases him (or if he is not married at the time of his death), his Beneficiary shall be deemed to be his estate which shall receive, in lieu of the payments otherwise payable to the Executive's spouse hereunder, a lump sum cash payment equal to the actuarial present value (determined on the basis of a 6 percent per annum interest rate assumption and no decrement for mortality) of the payments that would have been made to a spouse for her life, assuming that such spouse was three years younger than the Executive on his date of death. If the Executive predeceases his spouse, upon her death, a lump sum cash payment equal to the amount of any cash and present value of all property (including any annuity contracts) owned by the 1986 Trust as of the date of her death shall be paid by the Company to his spouse's estate or any beneficiary or beneficiaries designated in her last will and testament as soon as practicable after such calculation is completed. The acturial present value of any annuity contracts shall be calculated by the insurance company that issued such contract or, if any such insurance company cannot supply such present value, by an enrolled actuary. (b) The Executive's employment hereunder may be terminated for Cause. For purposes of this Agreement, the term "Cause" shall mean (i) the Executive's continuing willful failure to perform his duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by the Executive in the performance of his duties hereunder, (iii) an act or acts on the Executive's part constituting a felony under the laws of the United States or any state thereof which results or was intended to result directly or indirectly in gain or personal enrichment by the Executive at the expense of the Company, or (iv) breach of the provisions of Section 6(b) hereof. (c) Without Cause. If the Executive's employment or his retention as a consultant hereunder is terminated without Cause, as soon as practicable (but not later than 30 days) after such termination, he shall receive a lump sum cash payment equal to the sum of: (i) an amount equal to his highest monthly Base Salary during the Employment Term prior to such termination multiplied by the number of months remaining in the Employment Term (but by not less than thirty-six months if such termination occurs during the Employment Term); (ii) if such termination occurs during 65 the Employment Term, an amount equal to the bonuses paid pursuant to Section 3(a)(ii) hereof and Appendix A hereto or otherwise, whether or not deferred, in respect of the most recently completed three calendar years; (iii) an amount equal to the actuarial present value (determined on the basis of a 6 percent per annum interest rate assumption and no decrement for mortality) of the retirement benefit payments payable to him under Section 3(c), commencing on the Commencement Date (or, if such payments have commenced, such actuarial present value of the remaining payments); and (iv) an amount equal to the consulting fees due him under Section 4 for the term or remainder of the Consultation Period. (d) Change in Control. (i) If a Change in Control Event (as defined in Appendix B hereto) occurs, the Executive shall (A) if he so elects by written notice to the Company within 360 days after such Change in Control Event, be entitled to terminate his employment, if not already terminated by the Company, and, in either event, receive the amounts set forth in paragraph (c) above (excluding the amount of the retirement benefit described in Section 5(c)(iii)) within the time period specified in subparagraph (iii) below, as if the Company had terminated his employment without Cause, and (B) if he so elects by written notice to the Company within 360 days after the occurrence of such Change in Control Event, cause the Company to purchase the Executive's principal residence at its fair market value. For purposes of this Agreement, such fair market value shall be determined by two independent real estate firms, one of which shall be selected by the Executive and one by the Company. If such real estate firms fail to agree on such fair market value, the two firms so selected shall select a third firm mutually acceptable to them and such third firm's determination of fair market value shall be binding for all purposes. (ii) Notwithstanding anything to the contrary herein, if the aggregate amounts payable pursuant to subparagraph (i) of paragraph (d) hereof would cause any payment under such subparagraph (i) to be subject to an excise tax as an "excess parachute payment" under Section 4999 of the Code, such aggregate amounts payable hereunder shall be reduced by the smallest amount necessary to ensure that no payment hereunder shall be so treated under such Section 4999. Prior to effecting such reduction, the Company shall give the Executive 30 days' written notice of the fact, amount and basis of such reduction, as well as a determination of the shortest period of time over which such aggregate amounts may be paid and not be treated as "excess parachute payments." The Executive shall then have 30 days within which to elect in writing to (A) receive a lump sum payment, reduced pursuant to the first sentence hereof, or (B) receive the aggregate amounts payable pursuant to subparagraph (i) hereof in annual installments over the time period set forth in the Company's notice. In making the determinations called for in this subparagraph (ii), the parties hereto shall rely conclusively 66 on (1) the opinion of Hay-Huggins, or such other consulting firm as the Company shall designate (with the written consent of the Executive) within one year of the date hereof as to the amount of the Executive's compensation which constitutes "reasonable compensation" for purposes of Section 280G of the Code, and (2) the opinion of Kwasha Lipton, or such other actuarial firm as the Company shall designate (with the written consent of the Executive) within one year of the date hereof as to any present value calculations under Section 280G of the Code. The Company shall bear all costs associated with obtaining such opinions. (iii) The amounts payable pursuant to this paragraph (d) shall be paid (or commence to be paid) to the Executive not later than 10 days after he notifies the Company under subparagraph (ii) above whether he wishes to receive such amounts in a lump sum or in installments or, if no notice is given by the Company under subparagraph (ii) above, within 30 days after the Executive gives notice to the Company under subparagraph (i) above. (iv) In addition to all other rights granted him under this paragraph (d), if a Control Change (as defined in paragraph (c) of Appendix B hereto) occurs, the Executive shall be entitled to elect to terminate his employment with the Company upon written notice to the Company, effective not more than 10 days after such election. In such event, (A) the Consultation Period shall commence immediately upon termination of employment and shall cease five years thereafter, (B) the Executive shall be entitled to elect at any time to have payment of his retirement benefit commence on the Early Commencement Date in an amount determined in accordance with the provisions of Section 3(c) hereof, and (C) the Company shall promptly, but not later than 10 days after such election, transfer sufficient assets to the 1986 Trust so that the assets of the 1986 Trust are then sufficient to discharge the obligations for the consulting fees and retirement benefits due him in full. 6. Covenants. (a) Confidentiality. The Executive acknowledges that he has acquired and will acquire confidential information respecting the business of the Company. Accordingly, the Executive agrees that, without the written consent of the Company as authorized by its Board of Directors, he will not, at any time, willfully disclose any such confidential information to any unauthorized third party with an intent that such disclosure will result in financial benefit to the Executive or to any person other than the Company. For this purpose, information shall be considered confidential only if such information is uniquely proprietary to the Company and has not been made publicly available prior to its disclosure by the Executive. 67 (b) Competitive Activity. Until the end of the Consultation Period, the Executive shall not, without the consent of the Board of Directors of the Company, directly or indirectly, knowingly engage or be interested in (as owner, partner, shareholder, employee, director, officer, agent, consultant or otherwise), with or without compensation, any business which (i) is in competition with any line of business being actively conducted by the Company or any of its affiliates or subsidiaries during the Employment Term or Consultation Period, or (ii) shall hire any person who was employed by the Company or any of its affiliates or subsidiaries within the six-month period preceding such hiring, except for any employee whose annual rate of compensation is not in excess of $55,000. Nothing herein, however, shall prohibit the Executive from acquiring or holding not more than one percent of any class of publicly traded securities of any such business. (c) Remedy for Breach. The Executive acknowledges that the provisions of this Section 6 are reasonable and necessary for the protection of the Company and that the Company will be irrevocably damaged if such covenants are not specifically enforced. Accordingly, the Executive agrees that, in addition to any other relief to which the Company may be entitled, the Company shall be entitled to seek and obtain injunctive relief (without the requirement of any bond) from a court of competent jurisdiction for the purposes of restraining the Executive from any actual or threatened breach of such covenants. Notwithstanding anything to the contrary herein, the provisions of this Section 6 shall cease to apply to the Executive if his employment hereunder terminates without Cause or following a Change in Control Event. In addition, in the event that the Executive breaches the provisions of this Section 6 during the Consultation Period, the Company's sole remedy shall be to terminate the Executive for Cause. 7. Miscellaneous. (a) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed in that State. (b) Notices. Any notice, consent or other communication made or given in connection with this Agreement shall be in writing and shall be deemed to have been duly given when delivered by United States registered or certified mail, return receipt requested, to the parties at the following addresses or at such other address as a party may specify by notice to the other. To the Executive: 11110 Greenbay Houston, Texas 77024 68 To the Company: U.S. Home Corporation 1800 West Loop South Houston, Texas 77252 Attention: Secretary (c) Entire Agreement; Amendment. This Agreement shall supersede any and all existing agreements between the Executive and the Company or any of its affiliates or subsidiaries relating to the terms of his employment. It may not be amended except by a written agreement signed by both parties. (d) Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. (e) Assignment. Except as otherwise provided in this paragraph, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, representatives, successors and assigns. This Agreement shall not be assignable by the Executive, and shall be assignable by the Company only to any corporation or other entity resulting from the reorganization, merger or consolidation of the Company with any other corporation or entity or any corporation or entity to which the Company may sell all or substantially all of its assets, and it must be so assigned by the Company to, and accepted as binding upon it by, such other corporation or entity in connection with any such reorganization, merger, consolidation or sale. (f) Litigation Costs. In the event that the Executive shall successfully prosecute a judicial proceeding to enforce any provision of this Agreement, in addition to any other relief awarded the Executive by the court in such action, the parties agree that the judgment rendered shall award the Executive all of his attorneys' fees, disbursements and other costs incurred by the Executive in prosecuting such suit. (g) Separability. If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. 69 IN WITNESS WHEREOF, the parties hereto have duly executed this Amended and Restated Employment and Consulting Agreement and Appendices A and B thereto as evidence of their adoption this 17th day of October, 1995. U.S. HOME CORPORATION By \s\ Isaac Heimbinder ---------------------------------------- Name: Isaac Heimbinder Title: President, Co-Chief Executive Officer and Chief Operating Officer EXECUTIVE: By \s\ Robert J. Strudler --------------------------------------- Name: Robert J. Strudler 70 Appendix A This Appendix A is attached to and shall form a part of the Amended and Restated Employment and Consulting Agreement, dated October 17, 1995, by and between U.S. Home Corporation (the "Company"), and Robert J. Strudler (the "Executive"). (a) The Executive's bonus, if any, for each calendar year during the Employment Term commencing with the 1995 calendar year shall be an amount equal to: (i) one-half (1/2) of one percent (1%) of the first $10,000,000 of the Company's Pre-Tax Income for such year, plus (ii) three-fourths (3/4) of one percent (1%) of the next $10,000,000 of the Company's Pre-Tax Income for such year, plus (iii) one percent (1%) of the Company's Pre-Tax Income for such year in excess of $20,000,000. (b) In the event that the Executive's employment hereunder is terminated for any reason prior to the end of a calendar year, including the expiration of the Employment Term, his bonus for such year shall be an amount, estimated in good faith by the Board of Directors of the Company based on reasonable assumptions and projections, but without the benefit of the report referred to in paragraph (c) below, equal to the bonus otherwise determined pursuant to this Appendix A, multiplied by a fraction, the numerator of which is the number of calendar months during such year in which the Executive was employed by the Company for at least one business day, and the denominator of which is 12. (c) For purposes of this Agreement, the Company's "Pre-Tax Income" for any year shall mean the income of the Company and its consolidated and unconsolidated subsidiaries for such year, as reported by the Company and certified by its independent certified public accountants, except that no deduction shall be made for the bonus payable pursuant to this Appendix A and Section 3(a)(ii) hereof for such year or for Federal income and State and local franchise, gross receipts, or income taxes. U.S. HOME CORPORATION By \s\ Isaac Heimbinder ------------------------------ Name: Isaac Heimbinder Title: President, Chief Executive Officer and Chief Operating Officer EXECUTIVE: By \s\ Robert J. Strudler ------------------------------ Name: Robert J. Strudler 71 Appendix B This Appendix B is attached to and shall form a part of the Amended and Restated Employment and Consulting Agreement, dated October 17, 1995, by and between U.S. Home Corporation (the "Company"), and Robert J. Strudler (the "Executive"). (a) For purposes of this Agreement, a "Change in Control Event" shall occur when a "Control Change" (as defined in paragraph (c) below) is followed within two years by a "Material Change" (as defined in paragraph (b) below). (b) A "Material Change" shall occur if: (i) the Executive's employment hereunder is terminated without Cause; (ii) the Company makes any change in the Executive's functions, duties or responsibilities from the position that the Executive occupied on the date hereof or, if this Agreement has been renewed or extended, the date of the last renewal or extension, but only if such change would cause: (A) the Executive to report to anyone other than the Board of Directors of the Company, (B) the Executive to no longer be the Chairman of the Board of Directors and Co-Chief Executive Officer of the Company, (C) even if the Executive maintains the positions of Chairman of the Board of Directors and Co-Chief Executive Officer, his responsibilities to be reduced from those in effect on the date hereof or the date of the last renewal or extension of this Agreement, as applicable, or to no longer be commensurate with those of the Co-Chief Executive Officer of a company with gross annual sales of at least $800 million, or (D) the Executive's position with the Company to become one of lesser importance or scope; (iii) the Company assigns or reassigns the Executive (without his written permission) to another place of employment which is more than 10 miles from his place of employment on the date hereof or the date of the last renewal or extension of this Agreement, as applicable, and which is not the corporate headquarters of the Company; or (iv) the Company reduces the Executive's Base Salary or otherwise breaches the terms of this Agreement. (c) A "Control Change" shall occur if: (i) a report on Schedule 13D is filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act") disclosing that any person (within the meaning of Section 13(d) of the Exchange Act), other than the Company (or one of its subsidiaries) or any employee benefit plan sponsored by the Company (or one of its subsidiaries), is the 72 beneficial owner, directly or indirectly, of 15 percent or more of the combined voting power of the then-outstanding securities of the Company; (ii) any person (within the meaning of Section 13(d) of the Exchange Act), other than the Company (or one of its subsidiaries) or any employee benefit plan sponsored by the Company (or one of its subsidiaries), shall purchase securities pursuant to a tender offer or exchange offer to acquire any common stock of the Company (or securities convertible into common stock) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 15 percent or more of the combined voting power of the then-outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 under the Exchange Act, in the case of rights to acquire common stock); (iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company (1) in which the Company is not the continuing or surviving corporation, (2) pursuant to which shares of common stock of the Company would be converted into cash, securities or other property, or (3) with a corporation which prior to such consolidation or merger owned 15 percent or more of the cumulative voting power of the then-outstanding securities of the Company, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (iv) there shall have been a change in a majority of the members of the Board of Directors of the Company within a 12-month period, unless the election or nomination for election by the Company's stockholders of each new director during such 12-month period was approved by the vote of two-thirds of the directors then still in office who were directors at the beginning of such 12-month period. (d) Notwithstanding the foregoing, the issuance by the Company of shares of Common Stock of the Company, $.01 par value per share, convertible preferred stock of the Company, $.10 par value per share, and Class B Warrants aggregating 15% or more of the combined voting power of the Company to any one beneficial owner (as such term is used in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) who is a holder of claims or interests pursuant to the First Amended Consolidated Plan of Reorganization of the Company and certain of its affiliates, as modified, filed with the United States Bankruptcy Court for the Southern District of New York (the "USH Plan") in exchange for such claims or interests shall not be deemed to constitute a Control Change unless such person subsequently increases its percentage beneficial ownership above the percentage amount received pursuant to the USH Plan. Shares of common stock, preferred stock and Class B Warrants acquired pursuant to the USH Plan by creditors or stockholders for their claims or interests, though 73 less than 15% of the combined voting power of the Company, shall be included in determining whether a person through acquisition of additional shares, whether through purchase, exchange or otherwise, on or after the Effective Date has subsequently become the beneficial owner of 15% or more of the combined voting power of the Company, which shall, in such event, constitute a Control Change. U.S. HOME CORPORATION By \s\ Isaac Heimbinder ------------------------------ Name: Isaac Heimbinder Title: President, Co-Chief Executive Officer and Chief Operating Officer EXECUTIVE: By \s\ Robert J. Strudler ------------------------------- Name: Robert J. Strudler EX-10 7 EXHIBIT 10.4 AMENDED AGREEMENT I. HEIMBINDER 74 EXHIBIT 10.4 AMENDED AND RESTATED EMPLOYMENT AND CONSULTING AGREEMENT AMENDED AND RESTATED EMPLOYMENT AND CONSULTING AGREEMENT, dated as of October 17, 1995, by and between U.S. Home Corporation (the "Company"), and Isaac Heimbinder (the "Executive"). WHEREAS, the Company and the Executive are parties to an Employment and Consulting Agreement, dated May 12, 1986, as amended by (i) the First Amendment to Employment and Consulting Agreement dated February 8, 1990, (ii) the Second Amendment to Employment and Consulting Agreement, dated December 6, 1990, and (iii) the Third Amendment to Employment and Consulting Agreement, dated May 25, 1993 (collectively, the "Agreement"). WHEREAS, the Company and the Executive desire to amend and restate the Agreement as hereinafter provided. WHEREAS, Section 7(c) of the Agreement permits such amendment by written agreement of both parties. NOW, THEREFORE, the Company and the Executive agree to amend and restate the Agreement as follows: 1. Employment and Duties. The Company shall employ the Executive, and the Executive shall be employed by the Company, as President, Co-Chief Executive Officer and Chief Operating Officer at the Company's headquarters in Houston, Texas (or such other location as shall be mutually satisfactory to the Executive and the Company) for the term of this Agreement. In these capacities, the Executive shall devote substantially all of his business time and energies to the business of the Company and shall perform such services as shall from time to time be assigned to him by the Board of Directors of the Company. 2. Term. The term of the Executive's employment hereunder shall continue until June 20, 1999; provided, however, that, unless either party otherwise elects by notice in writing delivered to the other at least 90 days prior to June 20, 1999, or any subsequent anniversary of June 20, 1999, such term shall be automatically renewed for successive one-year terms unless sooner terminated by the Executive's voluntary resignation or otherwise terminated pursuant to the terms of this Agreement (the "Employment Term"). 3. Compensation and Benefits. (a) Compensation. During each calendar year of the Employment Term, the Company shall pay the Executive: (i) a base salary at a rate of $415,000 per year (the "Base Salary"), payable in substantially equal biweekly installments, and (ii) any cash bonus to which he is entitled pursuant to the provisions of Appendix A hereto, payable as 75 promptly as practicable after the end of each such calendar year, but in any event by April 15 of the following year. Notwithstanding the foregoing, if the Executive's applicable employee remuneration (as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")) for any taxable year would exceed the higher of $1 million or the maximum amount deductible by the Company under Section 162(m) for such taxable year, the amount otherwise payable shall be reduced to the higher of $1 million or the maximum amount deductible under Section 162(m) and the excess shall be deferred until the expiration of the Employment Term and shall be payable in a cash lump sum on April 16 of the first year of the Consultation Period. The deferred compensation shall accrue interest at the same rate charged the Company from time to time under the Credit Agreement, dated as of September 29, 1995, among the Company, the First National Bank of Chicago, as agent, and certain lenders named therein, as amended, restated, supplemented or otherwise modified from time to time, or any successor facility. The Executive's Base Salary and bonus shall be reviewed at least annually by the Board of Directors of the Company, or pursuant to its delegation, and (i) at a minimum, the Board shall increase the Base Salary annually commencing with the 1996 calendar year by an amount determined by multiplying the current Base Salary by the percentage increase in the Consumer Price Index -- U.S. City Average published by the Bureau of Labor Statistics of the United States Department of Labor (or if that Index is no longer published, by any substantially equivalent successor thereto) (the "Consumer Price Index") in the preceding calendar year and (ii) the Board may increase the bonus from time to time. (b) Stock Options. On October 17, 1995, the Executive was granted an option (the "Option") to purchase 50,000 shares of the Company's common stock, $.01 par value per share (the "Common Stock"), pursuant to the Company's 1993 Employee's Stock Option Plan. Such Option shall be an "incentive stock option" within the meaning of Section 422 of the Code to the extent permitted by Section 422(d) of the Code; to the extent not permitted by Section 422(d), the remaining portion of the Option shall be a nonqualified stock option. The Option shall be for a term of ten years from, and shall be exercisable immediately at the fair market value of the Common Stock on, the date of grant. (c) Retirement Benefit. (i) In consideration of the Executive's past services to the Company, the Executive shall be entitled to a retirement benefit, payable monthly for his life, in an amount equal to 50 percent of his highest monthly Base Salary during the Employment Term. Such payments shall commence on the first day of the month coincident with or next following the later of the Executive's attainment of age 58 or the end of the Employment Term (the "Commencement Date"); provided, however, that if the Employment Term terminates prior to his attainment of age 58, the Executive may elect by written notice to the Company to have such payments commence on the first day of any month after such termination of employment (the "Early Commencement Date") in a monthly amount equal to the monthly amount that the Executive would have received 76 at the Commencement Date, reduced by one-third of one percent (.33%) per month for each month by which the Early Commencement Date precedes the Commencement Date. The amount of each payment hereunder shall be increased on each January 1 following the Early Commencement Date or Commencement Date, as applicable, by an amount determined by multiplying the amount of each monthly payment made in the preceding year by the percentage increase, if any, in the cost of living from the preceding January 1, as reflected by the Consumer Price Index. The Executive's election to have his retirement benefit payments commence on the Early Commencement Date shall not affect the Company's obligation to pay consulting fees to the Executive in accordance with Section 4 hereof. The retirement benefit shall be an unconditional, but unsecured, general credit obligation of the Company to the Executive, and nothing contained in this Agreement, and no action taken pursuant to it, shall create or be construed to create a trust of any kind between the Company and the Executive. The Executive shall have no right, title or interest whatever in or to any investments which the Company may make (including, but not limited to, an insurance policy on the life of the Executive) to aid it in meeting its obligations hereunder. (ii) From time to time, the Company shall make such contributions to the trust established under the Trust Agreement dated as of December 18, 1986 (the "1986 Trust") between the Company, as grantor, and William E. Reichard, as successor trustee, to provide a sufficient reserve for the discharge of its obligation to pay the retirement benefit to the Executive as provided in clause (i) of this Section 3(c) and clauses (ii) and (iii) of Section 5(a) hereof. (d) Expense Reimbursement. The Company shall promptly pay, or reimburse the Executive for, all ordinary and necessary business expenses incurred by him in the performance of his duties hereunder, provided that the Executive properly accounts for them in accordance with Company policy. (e) Other Benefit Plans, Fringe Benefits, and Vacations. (i) The Executive shall be eligible to participate in each of the Company's present employee benefit plans, policies or arrangements and any such plans, policies or arrangements that the Company may maintain or establish during the Employment Term and receive all fringe benefits and vacations for which his position makes him eligible in accordance with the Company's usual policies and the terms and provisions of such plans, policies or arrangements. (ii) The Company shall not terminate or change, in such a way as to adversely affect the Executive's rights or reduce his benefits, any employee benefit plan, policy or arrangement now in effect or which may hereafter be established and in which the Executive is eligible to participate, including, without limitation, the Company's profit sharing, life insurance, disability and stock option plans, unless a plan, policy or arrangement providing the Executive with at least equivalent rights and benefits has been established. 77 (iii) From and after the last day of the Employment Term, the Executive shall be entitled to participate in each of the Company's employee benefit plans, policies or arrangements which provide medical coverage and similar benefits to the Company's executive officers (the "Company Medical Plan") on the same basis as the Company's other executive officers. The Company shall bear the cost of medical coverage and benefits during the Consultation Period (as defined below); thereafter, the Executive shall bear such cost. After the Executive is eligible for Medicare and the Company becomes a secondary payor (or its equivalent) pursuant to Medicare or other applicable law, the Company shall provide secondary medical coverage and benefits. If coverage under the Company Medical Plan is not possible under the terms of any insurance policy or applicable law following the Employment Term, the Company shall provide the Executive with coverage equivalent to that provided to the Company's other executive officers under a policy or arrangement acceptable to the Executive. In the event of the Executive's death before the end of the Consultation Period, the Company shall continue to provide such primary and secondary medical coverage, as applicable, and benefits to the Executive's spouse and dependents for the remainder of the Consultation Period on the same basis as provided to the Company's other executive officers. 4. Consultation Period. From and after the last day of the Employment Term and for a period of five years thereafter (the "Consultation Period"), the Executive shall serve as a consultant to the Company with respect to such business matters and at such times (not more than four days per month and not more than two consecutive days per week) as the Company may reasonably request within Harris County, Texas, provided, however, that if the Consultant does not reside in Harris County, he may perform his consulting duties hereunder at his then place of residence and shall be required to come to Harris County not more than one day in each calendar month. During the Consultation Period, the Company shall pay the Executive (in addition to any other amounts to which he is entitled pursuant to this Agreement) a consulting fee, in substantially equal biweekly installments, at the rate of $134,260 per year increased by an amount determined by multiplying $134,260 by the percentage increase, if any, in the cost of living between January 1, 1995 and the January 1 immediately preceding the date of commencement of the Consultation Period, as reflected by the Consumer Price Index. The amount of the consulting fee shall be increased on each January 1 during the Consultation Period by an amount determined by multiplying the amount of the consulting fee paid in the preceding year by the percentage increase, if any, in the cost of living from the preceding January 1, as reflected by the Consumer Price Index. During the Consultation Period, the Executive shall not be required to undertake any assignment inconsistent with the dignity, importance and scope of his prior positions or with his physical and mental health at the time. It is expressly understood between the parties that during the Consultation Period, the Executive shall be an independent contractor and shall not be subject to the direction, control, or supervision of the Company. The provisions of Sections 5, 6 and 7 hereof shall continue to apply to the Executive during the Consultation Period. 78 5. Termination. (a) Death and Disability. (i) The Executive's employment hereunder shall terminate upon his death or upon his becoming Totally Disabled. For purposes of this Agreement, the Executive shall be "Totally Disabled" if he is physically or mentally incapacitated so as to render him incapable of performing his usual and customary duties as an executive (for the Company or otherwise). The Executive's receipt of Social Security disability benefits shall be deemed conclusive evidence of Total Disability for purposes of this Agreement; provided, however, that in the absence of his receipt of such Social Security benefits, the Board of Directors of the Company may, in its sole discretion, but based upon appropriate medical evidence, determine that the Executive is Totally Disabled. (ii) In the event that the Executive is Totally Disabled before his retirement benefit pursuant to Section 3(c) hereof has commenced to be distributed (whether or not he is in the employ of the Company at the time he is so Totally Disabled), such benefit shall commence to be distributed to him on the first day of the month next following his Total Disability, as if such payments had commenced at his Commencement Date. In the event of the Executive's death (while Totally Disabled or otherwise) after his retirement benefit has commenced to be distributed pursuant to Section 3(c) hereof or subparagraph (ii) above, as applicable, the Company shall continue to pay such retirement benefit to his Beneficiary for her life. If the Executive's retirement benefit pursuant to Section 3(c) hereof has not commenced to be distributed on the date of his death, such benefit shall commence to be distributed to his Beneficiary for her life on the first day of the month next following his date of death, as if such payments had commenced at his Commencement Date. For purposes of this Agreement, the Executive's "Beneficiary" shall be deemed to be his spouse; if his spouse predeceases him (or if he is not married at the time of his death), his Beneficiary shall be deemed to be his estate which shall receive, in lieu of the payments otherwise payable to the Executive's spouse hereunder, a lump sum cash payment equal to the actuarial present value (determined on the basis of a 6 percent per annum interest rate assumption and no decrement for mortality) of the payments that would have been made to a spouse for her life, assuming that such spouse was three years younger than the Executive on his date of death. If the Executive predeceases his spouse, upon her death, a lump sum cash payment equal to the amount of any cash and the present value of all property (including any annuity contracts) owned by the 1986 Trust as of the date of her death shall be paid by the Company to his spouse's estate or any beneficiary or beneficiaries designated in her last will and testament as soon as practicable after such calculation is completed. The actuarial present value of any annuity contracts shall be calculated by the insurance company that issued such contract or, if any such insurance company cannot supply such present value, by an enrolled actuary. 79 (b) For Cause. The Executive's employment hereunder may be terminated for Cause. For purposes of this Agreement, the term "Cause" shall mean (i) the Executive's continuing willful failure to perform his duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by the Executive in the performance of his duties hereunder, (iii) an act or acts on the Executive's part constituting a felony under the laws of the United States or any state thereof which results or was intended to result directly or indirectly in gain or personal enrichment by the Executive at the expense of the Company, or (iv) breach of the provisions of Section 6(b) hereof. (c) Without Cause. If the Executive's employment or his retention as a consultant hereunder is terminated without Cause, as soon as practicable (but not later than 30 days) after such termination, he shall receive a lump sum cash payment equal to the sum of: (i) an amount equal to his highest monthly Base Salary during the Employment Term prior to such termination multiplied by the number of months remaining in the Employment Term (but by not less than thirty-six months if such termination occurs during the Employment Term); (ii) if such termination occurs during the Employment Term, an amount equal to the bonuses paid pursuant to Section 3(a)(ii) hereof and Appendix A hereto or otherwise, whether or not deferred, in respect of the most recently completed three calendar years; (iii) an amount equal to the actuarial present value (determined on the basis of a 6 percent per annum interest rate assumption and no decrement for mortality) of the retirement benefit payments payable to him under Section 3(c), commencing on the Commencement Date (or if such payments have commenced, such actuarial present value of the remaining payments); and (iv) an amount equal to the consulting fees due him under Section 4 for the term or remainder of the Consultation Period. For purposes of this Agreement, the Executive will be deemed to be terminated without Cause upon the (i) failure to elect the Executive to the office of chairman and chief executive officer of the Company in the event of a vacancy in such office for any reason and (ii) resignation of the Executive within 180 days of such vacancy. (d) Change in Control. (i) If a Change in Control Event (as defined in Appendix B hereto) occurs, the Executive shall (A) if he so elects by written notice to the Company within 360 days after such Change in Control Event, be entitled to terminate his employment, if not already terminated by the Company, and, in either event, receive the a mounts set forth in paragraph (c) above (excluding the amount of the retirement benefit described in Section 5(c)(iii)) within the time period specified in subparagraph (iii) below, as if the Company had terminated his employment without Cause, and (B) if he so elects by written notice to the Company within 360 days after the occurrence of such Change in Control Event, cause the Company to purchase the Executive's principal residence at its fair market value. For purposes of this Agreement, such fair market value shall be determined by two independent real estate firms, one of which shall be selected by the Executive and one by the Company. If such real estate firms fail to agree on such fair market value, the two firms so selected shall select a third firm mutually acceptable to them and such third firm's determination of fair market value shall be binding for all purposes. 80 (ii) Notwithstanding anything to the contrary herein, if the aggregate amounts payable pursuant to subparagraph (i) of paragraph (d) hereof would cause any payment under such subparagraph (i) to be subject to an excise tax as an "excess parachute payment" under Section 4999 of the Code, such aggregate amounts payable hereunder shall be reduced by the smallest amount necessary to ensure that no payment hereunder shall be so treated under such Section 4999. Prior to effecting such reduction, the Company shall give the Executive 30 days' written notice of the fact, amount and basis of such reduction, as well as a determination of the shortest period of time over which such aggregate amounts may be paid and not be treated as "excess parachute payments." The Executive shall then have 30 days within which to elect in writing to (A) receive a lump sum payment, reduced pursuant to the first sentence hereof, or (B) receive the aggregate amounts payable pursuant to subparagraph (i) hereof in annual installments over the time period set forth in the Company's notice. In making the determinations called for in this subparagraph (ii), the parties hereto shall rely conclusively on (1) the opinion of Hay-Huggins, or such other consulting firm as the Company shall designate (with the written consent of the Executive) within one year of the date hereof, as to the amount of the Executive's compensation which constitutes "reasonable compensation" for purposes of Section 280G of the Code, and (2) the opinion of Kwasha Lipton, or such other actuarial firm as the Company shall designate (with the written consent of the Executive) within one year of the date hereof, as to any present value calculations under Section 280G of the Code. The Company shall bear all costs associated with obtaining such opinions. (iii) The amounts payable pursuant to this paragraph (d) shall be paid (or commence to be paid) to the Executive not later than 10 days after he notifies the Company under subparagraph (ii) above whether he wishes to receive such amounts in a lump sum or in installments or if no notice is given by the Company under subparagraph (ii) above, within 30 days after the Executive gives notice to the Company under subparagraph (i) above. (iv) In addition to all other rights granted the Executive under this paragraph (d), if a Control Change (as defined in paragraph (c) of Appendix B hereto) occurs, the Executive shall be entitled to elect to terminate his employment upon written notice to the Company, effective not more than 10 days after such an election. In such event, (A) the Consultation Period shall commence immediately upon termination of employment and shall cease five years thereafter, (B) the Executive shall be entitled to elect at any time to have payment of his retirement benefit commence on the Early Commencement Date in an amount determined in accordance with the provisions of Section 3(c) hereof, and (C) the Company shall promptly, but not later than 10 days after such election, transfer sufficient assets to the 1986 Trust so that the assets of the 1986 Trust are then sufficient to discharge the obligations for the consulting fees and retirement benefits due him in full. 81 6. Covenants. (a) Confidentiality. The Executive acknowledges that he has acquired and will acquire confidential information respecting the business of the Company. Accordingly, the Executive agrees that, without the written consent of the Company as authorized by its Board of Directors, he will not, at any time, willfully disclose any such confidential information to any unauthorized third party with an intent that such disclosure will result in financial benefit to the Executive or to any person other than the Company. For this purpose, information shall be considered confidential only if such information is uniquely proprietary to the Company and has not been made publicly available prior to its disclosure by the Executive. (b) Competitive Activity. Until the end of the Consultation Period, the Executive shall not, without the consent of the Board of Directors of the Company, directly or indirectly, knowingly engage or be interested in (as owner, partner, shareholder, employee, director, officer, agent, consultant or otherwise), with or without compensation, any business which (i) is in competition with any line of business being actively conducted by the Company or any of its affiliates or subsidiaries during the Employment Term or Consultation Period, or (ii) shall hire any person who was employed by the Company or any of its affiliates or subsidiaries within the six-month period preceding such hiring, except for any employee whose annual rate of compensation is not in excess of $55,000. Nothing herein, however, shall prohibit the Executive from acquiring or holding not more than one percent of any class of publicly traded securities of any such business. (c) Remedy for Breach. The Executive acknowledges that the provisions of this Section 6 are reasonable and necessary for the protection of the Company and that the Company will be irrevocably damaged if such covenants are not specifically enforced. Accordingly, the Executive agrees that, in addition to any other relief to which the Company may be entitled, the Company shall be entitled to seek and obtain injunctive relief (without the requirement of any bond) from a court of competent jurisdiction for the purposes of restraining the Executive from any actual or threatened breach of such covenants. Notwithstanding anything to the contrary herein, the provisions of this Section 6 shall cease to apply to the Executive if his employment hereunder terminates without Cause or following a Change in Control Event. In addition, in the event that the Executive breaches the provisions of this Section 6 during the Consultation Period, the Company's sole remedy shall be to terminate the Executive for Cause. 7. Miscellaneous. (a) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed in that State. 82 (b) Notices. Any notice, consent or other communication made or given in connection with this Agreement shall be in writing and shall be deemed to have been duly given when delivered by United States registered or certified mail, return receipt requested, to the parties at the following addresses or at such other address as a party may specify by notice to the other. To the Executive: 2 Glendennig Houston, Texas 77252 To the Company: U.S. Home Corporation 1800 West Loop South Houston, Texas 77252 Attention: Secretary (c) Entire Agreement; Amendment. This Agreement shall supersede any and all existing agreements between the Executive and the Company or any of its affiliates or subsidiaries relating to the terms of his employment. It may not be amended except by a written agreement signed by both parties. (d) Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. (e) Assignment. Except as otherwise provided in this paragraph, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, representatives, successors and assigns. This Agreement shall not be assignable by the Executive, and shall be assignable by the Company only to any corporation or other entity resulting from the reorganization, merger or consolidation of the Company with any other corporation or entity or any corporation or entity to which the Company may sell all or substantially all of its assets, and it must be so assigned by the Company to, and accepted as binding upon it by, such other corporation or entity in connection with any such reorganization, merger, consolidation or sale. (f) Litigation Costs. In the event that the Executive shall successfully prosecute a judicial proceeding to enforce any provision of this Agreement, in addition to any other relief awarded the Executive by the court in such action, the parties agree that the judgment rendered shall award the Executive all of his attorneys fees, disbursements and other costs incurred by the Executive in prosecuting such suit. (g) Separability. If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. 83 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement and Appendices A and B thereto as evidence of their adoption this 17th day of October, 1995. U.S. HOME CORPORATION By \s\ Robert J. Strudler ---------------------------- Name: Robert J. Strudler Title: Chairman and Co-Chief Executive Officer EXECUTIVE: By \s\ Isaac Heimbinder ------------------------------- Name: Isaac Heimbinder 84 Appendix A This Appendix A is attached to and shall form a part of the Amended and Restated Employment and Consulting Agreement, dated October 17, 1995, by and between U.S. Home Corporation (the "Company"), and Isaac Heimbinder (the "Executive"). (a) The Executive's bonus, if any, for each calendar year during the Employment Term commencing with the 1995 calendar year shall be an amount equal to: one-half (1/2) of one percent (1%) of the first $10,000,000 of the Company's Pre-Tax Income for such year, plus (i) three-fourths (3/4) of one percent (1%) of the next $10,000,000 of the Company's Pre-Tax Income for such year, plus (ii) one percent (1%) of the Company's Pre-Tax Income for such year in excess of $20,000,000. (b) In the event that the Executive's employment hereunder is terminated for any reason prior to the end of a calendar year, including the expiration of the Employment Term, his bonus for such year shall be an amount, estimated in good faith by the Board of Directors of the Company based on reasonable assumptions and projections, but without the benefit of the report referred to in paragraph (c) below, equal to the bonus otherwise determined pursuant to this Appendix A, multiplied by a fraction, the numerator of which is the number of calendar months during such year in which the Executive was employed by the Company for at least one business day, and the denominator of which is 12. (c) For purposes of this Agreement, the Company's "Pre-Tax Income" for any year shall mean the income of the Company and its consolidated and unconsolidated subsidiaries for such year, as reported by the Company and certified by its independent certified public accountants, except that no deduction shall be made for the bonus payable pursuant to this Appendix A and Section 3(a)(ii) hereof for such year or for Federal income and State and local franchise, gross receipts, or income taxes. U.S. HOME CORPORATION By \s\ Robert J. Strudler ----------------------------------- Name: Robert J. Strudler Title: Chairman and Co-Chief Executive Officer EXECUTIVE: By \s\ Isaac Heimbinder ----------------------------------- Name: Isaac Heimbinder 85 Appendix B This Appendix B is attached to and shall form a part of the Amended and Restated Employment and Consulting Agreement, dated October 17, 1995, by and between U.S. Home Corporation (the "Company"), and Isaac Heimbinder (the "Executive"). (a) For purposes of this Agreement, a "Change in Control Event" shall occur when a "Control Change" (as defined in paragraph (c) below) is followed within two years by a "Material Change" (as defined in paragraph (b) below). (b) A "Material Change" shall occur if: (i) the Executive's employment hereunder is terminated without Cause; (ii) the Company makes any change in the Executive's functions, duties or responsibilities from the position that the Executive occupied on the date hereof or, if this Agreement has been renewed or extended, the date of the last renewal or extension, but only if such change would cause: (A) the Executive to report to anyone other than the Chairman of the Board of Directors who is also the Co-Chief Executive Officer, (B) the Executive to no longer be the President, Co-Chief Executive Officer and Chief Operating Officer of the Company, (C) even if the Executive maintains the positions of President, Co-Chief Executive Officer and Chief Operating Officer, his responsibilities to be reduced from those in effect on the date hereof or the date of the last renewal or extension of this Agreement, as applicable, or to be no longer commensurate with those of the Co-Chief Executive Officer and Chief Operating Officer of a company with gross annual sales of at least $800 million, or (D) the Executive's position with the Company to become one of lesser importance or scope; (iii) the Company assigns or reassigns the Executive (without his written permission) to another place of employment which is more than 10 miles from his place of employment on the date hereof or the date of the last renewal or extension of this Agreement, as applicable, and which is not the corporate headquarters of the Company; or (iv) the Company reduces the Executive's Base Salary or otherwise breaches the terms of this Agreement. 86 (c) A "Control Change" shall occur if: (i) a report on Schedule 13D is filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act") disclosing that any person (within the meaning of Section 13(d) of the Exchange Act), other than the Company (or one of its subsidiaries) or any employee benefit plan sponsored by the Company (or one of its subsidiaries), is the beneficial owner, directly or indirectly, of 15 percent or more of the combined voting power of the then-outstanding securities of the Company; (ii) any person (within the meaning of Section 13(d) of the Exchange Act), other than the Company (or one of its subsidiaries) or any employee benefit plan sponsored by the Company (or one of its subsidiaries), shall purchase securities pursuant to a tender offer or exchange offer to acquire any common stock of the Company (or securities convertible into common stock) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 15 percent or more of the combined voting power of the then-outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 under the Exchange Act, in the case of rights to acquire common stock); (iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company (1) in which the Company is not the continuing or surviving corporation, (2) pursuant to which shares of common stock of the Company would be converted into cash, securities or other property, or (3) with a corporation which prior to such consolidation or merger owned 15 percent or more of the cumulative voting power of the then-outstanding securities of the Company, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (iv) there shall have been a change in a majority of the members of the Board of Directors of the Company within a 12-month period, unless the election or nomination for election by the Company's stockholders of each new director during such 12-month period was approved by the vote of two-thirds of the directors then still in office who were directors at the beginning of such 12-month period. (d) Notwithstanding the foregoing, the issuance by the Company of shares of common stock of the Company, $.01 par value per share, convertible preferred stock of the Company, $.10 par value per share, and Class B Warrants aggregating 15% or more of the combined voting power of the Company to any one beneficial owner (as such term is used in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) who is a holder of claims or interests pursuant to the First Amended Consolidated Plan of Reorganization of the Company and certain of its affiliates, as modified, filed with the United States Bankruptcy Court for the Southern District of New York (the "USH Plan") in exchange for such claims or interests shall not be deemed to constitute a Control Change unless such 87 person subsequently increases its percentage beneficial ownership above the percentage amount received pursuant to the USH Plan. Shares of common stock, preferred stock and Class B Warrants acquired pursuant to the USH Plan by creditors or stockholders for their claims or interests, though less than 15% of the combined voting power of the Company, shall be included in determining whether a person through acquisition of additional shares, whether through purchase, exchange or otherwise, on or after the Effective Date has subsequently become the beneficial owner of 15% or more of the combined voting power of the Company, which shall, in such event, constitute a Control Change. U.S. HOME CORPORATION By \s\ Robert J. Strudler ---------------------------------- Name: Robert J. Strudler Title: Chairman and_____ Co-Chief Executive Officer EXECUTIVE: By \s\ Isaac Heimbinder ---------------------------------- Name: Isaac Heimbinder EX-11 8 EXHIBIT 11 COMPUT. OF INCOME PER COMMON SHARE 88 EXHIBIT 11 (Unaudited) U.S. HOME CORPORATION AND SUBSIDIARIES COMPUTATION OF INCOME PER COMMON SHARE (Dollars in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ----------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Income Per Common And Common Equivalent Share - Net income .................... $ 12,145 $ 9,839 $ 31,514 $ 25,793 =========== =========== =========== =========== Weighted average common shares outstanding .......... 11,589,600 11,565,499 11,584,574 11,580,411 Effect of assumed exercise of dilutive stock options and warrants .................... 198,511 342,886 392,996 27,573 ----------- ----------- ----------- ----------- Total common and common equivalent shares ........... 11,788,111 11,908,385 11,977,570 11,607,984 =========== =========== =========== =========== Income per common and common equivalent share ........... $ 1.03 $ .83 $ 2.63 $ 2.22 =========== =========== =========== ===========
89
Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ----------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Income Per Common Share, Assuming Full Dilution - Net income ................... $ 12,145 $ 9,839 $ 31,514 $ 25,793 Add interest applicable to 4.875% convertible subordinated debentures, net of income tax effect .. 613 480 1,840 1,441 ----------- ----------- ----------- ----------- Income per common share, assuming full dilution ..... $ 12,758 $ 10,319 $ 33,354 $ 27,234 =========== =========== =========== =========== Total common and common equivalent shares .......... 11,788,111 11,908,385 11,977,570 11,607,984 Assumed additional common shares from exercise of dilutive stock options and warrants resulting from use of market price of common stock at end of period ..................... - 88,470 - 405,867 Assumed conversion of 4.875% convertible subordinated debentures at $35.50 per share at date of issuance .. 2,253,521 2,253,521 2,253,521 2,253,521 ----------- ----------- ----------- ----------- Total common shares, assuming full dilution .............. 14,041,632 14,250,376 14,231,091 14,267,372 =========== =========== =========== =========== Income per common share, assuming full dilution .... $ .91 $ .72 $ 2.34 $ 1.91 =========== =========== =========== =========== Note: See Note 5 of Notes to Consolidated Condensed Financial Statements.
EX-15 9 EXHIBIT 15 LETTER FROM AUDITORS 90 Exhibit 15 To U.S. HOME CORPORATION: We are aware that U.S. Home Corporation has incorporated by reference in its Registration Statements No. 33-64712, 33-52993, 33-00583 and 33-02775 its Form 10-Q for the quarter ended September 30, 1996, which includes our report dated October 16, 1996 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statement prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. /s/ Arthur Andersen LLP ------------------------ ARTHUR ANDERSEN LLP Houston, Texas October 25, 1996 EX-27 10 EXHIBIT 27 - FINANCIAL DATA END. 9-30-96
5 This Schedule Contains Summary Financial Information Extracted From The Consolidated Condensed Financial Statements As Of September 30, 1996 And For The Nine Months Then Ended And Is Qualified In Its Entirety By Reference To Such Financial Statments. 1000 9-MOS DEC-31-1996 SEP-30-1996 17806 0 89737 0 714843 0 0 0 958683 0 108836 0 3072 114 357756 958683 0 883670 729644 832872 0 0 1170 49628 18114 31514 0 0 0 $31514 $2.63 $2.64
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