-----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, UER4U0XTxZ7+k/T6MPqnosPrTeGPrkWWscjbcFxDIkmn22PRLKpuX8xAJLiRLENN twOYADXAFmgfPPXr2s2AcA== 0000950129-97-000751.txt : 19970223 0000950129-97-000751.hdr.sgml : 19970223 ACCESSION NUMBER: 0000950129-97-000751 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970221 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05899 FILM NUMBER: 97540981 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-K 1 U.S. HOME CORPORATION - 12/31/96 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED ------------------- ---------------------------- Common Stock, $.01 par value per share New York Stock Exchange Convertible Redeemable Preferred Stock, $.10 par value per share New York Stock Exchange Class B Warrants to acquire Common Stock New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: NONE 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 IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ] 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 OF SECURITIES UNDER A PLAN CONFIRMED BY A COURT. YES [X] NO [ ] As of January 31, 1997, the number of shares outstanding of Registrant's voting stock was 11,575,005 and the aggregate market value of the Registrant's voting stock held by non-affiliates was $279,736,019. DOCUMENTS INCORPORATED BY REFERENCE
PART OF 10-K WHERE INCORPORATED ------------------ Proxy Statement dated March 17, 1997 for the III Annual Meeting of Stockholders to be held on April 23, 1997.
================================================================================ 2 PART I ITEM 1. BUSINESS GENERAL U.S. Home Corporation ("U.S. Home" or the "Company"), organized in 1954 and incorporated in the State of Delaware in 1959, is one of the largest single-family home builders in the United States based on homes delivered. The Company currently builds and sells homes in more than 215 new home communities in 31 market areas in 12 states. Since its formation, the Company has delivered more than 267,000 homes. In 1995, the Company was the fifth largest single-family on-site home builder in the United States based on homes completed and delivered and has been among the ten largest single-family on-site home builders in the United States for more than 20 years. The Company conducts substantially all of its home building business through U.S. Home, the parent company. The Company offers a wide variety of moderately-priced homes that are designed to appeal to the affordable, move-up and retirement and active adult buyers. In each of its markets, the Company's primary strategy is to build quality homes, utilizing its Zero Defect Program, which the Company believes offers prospective home buyers a high level of new home value. The Company believes that many home purchasers compare homes on the basis of location, perceived quality and dollars of purchase price per square foot of living area. As a result, the Company attempts to purchase land and lots in popular growth corridors, maintain high quality standards and design homes to maximize living space. In addition to building and selling single-family homes, the Company provides mortgage banking services to its customers. The Company originates, processes and sells mortgages to third-party investors. The Company does not retain or service the mortgages that it originates but, rather, sells the mortgages and related servicing rights to investors. OPERATIONS The Company is engaged in two related industry segments: home building and financial services. The revenues, operating profits or losses and identifiable assets attributable to the Company's industry segments are separately disclosed in the Consolidated Financial Statements. HOME BUILDING OPERATIONS The Company's primary industry segment is the on-site development of single-family residential communities. During 1996, the Company's product mix consisted of deliveries of approximately 28% affordable homes, 49% move-up homes and 23% retirement and active adult homes. The Company has set a goal to increase its retirement and active adult home deliveries to approximately 30% of the Company's volume. However, there can be no assurance such efforts will be successful. The Company presently has 18 retirement and active adult communities in Arizona, California, Florida, Maryland, Nevada, New Jersey and Texas. 2 3 MARKETS U.S. Home's building operations are currently conducted in the following market areas:
STATES MARKET AREAS - ------ ------------ Arizona.............................. Phoenix and Tucson California........................... Bakersfield, Corona, Palm Springs and Sacramento Colorado............................. Colorado Springs, Denver and Fort Collins/Greeley/Loveland Florida.............................. Bonita Springs, Clearwater/Palm Harbor/Tarpon Springs, Fort Myers, Hernando County, Naples, Orlando, Pasco County, Sarasota/ Bradenton and Tampa Indiana/Ohio......................... Indianapolis, Cleveland and Columbus Maryland/Virginia.................... Annapolis/Baltimore and Washington, D.C. area Minnesota............................ Minneapolis/St. Paul Nevada............................... Las Vegas New Jersey........................... Dover/Jackson/Monroe/Princeton and Washington/Lumberton Texas................................ Dallas/Fort Worth, Houston, McAllen/Harlingen/Brownsville and San Antonio
The Company seeks to maintain geographic diversity and thus reduce the potential risk of economic volatility in any given market. The Company's home building and marketing activities are conducted under the name of U.S. Home in each of its markets except in Minneapolis/St. Paul where the Company markets its homes under the name of Orrin Thompson Homes and in Florida where homes are marketed under the name of Rutenberg Homes as well as U.S. Home. Set forth below are revenues for the Company from the sale of single-family homes by state for each of the last three fiscal years:
YEARS ENDED DECEMBER 31, ------------------------------------ STATES 1996 1995 1994 - ------ ---------- ---------- -------- (DOLLARS IN THOUSANDS) Arizona....................................... $ 137,606 $ 125,103 $128,343 California.................................... 92,193 89,662 107,625 Colorado...................................... 206,231 171,733 138,409 Florida....................................... 335,166 349,526 293,278 Indiana/Ohio.................................. 33,008 13,923 -- Maryland/Virginia............................. 72,914 69,944 67,689 Minnesota..................................... 64,129 55,746 67,496 Nevada........................................ 62,088 48,030 43,540 New Jersey.................................... 86,656 63,160 39,198 Texas......................................... 88,947 88,379 79,173 ---------- ---------- -------- $1,178,938 $1,075,206 $964,751 ========== ========== ========
3 4 Set forth below are tables providing information (expressed in number of housing units) with respect to new orders taken, deliveries to purchasers and backlog of single-family homes by state for each of the last three fiscal years: NEW ORDERS TAKEN
YEARS ENDED DECEMBER 31, -------------------------- STATES 1996 1995 1994 - ------ ------ ------ ------ Arizona..................................................... 832 1,015 845 California.................................................. 532 533 592 Colorado.................................................... 1,378 1,172 812 Florida..................................................... 2,173 2,081 2,127 Indiana/Ohio................................................ 178 118 10 Maryland/Virginia........................................... 353 400 333 Minnesota................................................... 294 322 339 Nevada...................................................... 371 335 308 New Jersey.................................................. 471 321 283 Texas....................................................... 824 662 585 ----- ----- ----- 7,406 6,959 6,234 ===== ===== =====
DELIVERIES
YEARS ENDED DECEMBER 31, -------------------------- STATES 1996 1995 1994 - ------ ------ ------ ------ Arizona..................................................... 948 893 970 California.................................................. 494 508 643 Colorado.................................................... 1,199 1,100 898 Florida..................................................... 2,126 2,241 1,948 Indiana/Ohio................................................ 156 66 -- Maryland/Virginia........................................... 366 369 382 Minnesota................................................... 306 290 396 Nevada...................................................... 356 306 299 New Jersey.................................................. 475 307 203 Texas....................................................... 673 699 648 ----- ----- ----- 7,099 6,779 6,387 ===== ===== =====
BACKLOG(1)
AS OF DECEMBER 31, ----------------------- STATES 1996 1995 1994 - ------ ----- ----- ----- Arizona..................................................... 269 385 263 California.................................................. 149 111 86 Colorado.................................................... 641 462 390 Florida..................................................... 1,033 986 1,146 Indiana/Ohio................................................ 84 62 10 Maryland/Virginia........................................... 100 113 82 Minnesota................................................... 107 119 87 Nevada...................................................... 134 119 90 New Jersey.................................................. 179 183 169 Texas....................................................... 342 191 228 ----- ----- ----- 3,038 2,731 2,551 ===== ===== =====
- --------------- (1) Homes under contract for sale but not delivered at end of year. 4 5 The Company anticipates that substantially all of its backlog units, net of cancellations, as of December 31, 1996 will be completed and delivered during 1997. While operations in certain market areas are affected by seasonal factors which limit on-site building and sales activities, the Company's ability to build and deliver its backlog is not considered to be seriously affected by such factors. SALES AND MARKETING The Company employs sales consultants for the sale of single-family homes, although sales by independent real estate brokers are also encouraged. Specific sales training programs are provided which inform sales consultants about sales techniques and methods as well as information about their local market, realtors and products. The sales programs focus on the Company's Zero Defect Program as a marketing tool because the sales force is the first contact with the customer. The Zero Defect Program is a quality assurance program with major emphasis on construction (see Construction below). The Company advertises primarily in magazines and local newspapers. Additionally, homes are marketed by means of model homes, pictorial brochures and on-site displays. The Company's general marketing strategy seeks to generate one-third of housing sales through advertisements, one-third through customer referrals and one-third through realtor contacts. The Company markets homes in "model home parks" featuring one or more model homes, attractively furnished and decorated and staffed by the Company's sales consultants who provide information regarding floor plans, the various elevations available, decorating options, as well as assisting with mortgage financing information. The model may include a variety of options and upgrades which the customer may request at an additional cost. Such upgrades may include items such as pools, fireplaces and decks. The Company constantly studies both aesthetic design and architectural trends, as well as quality construction and engineering trends, in order to provide customers with high quality, design and value. The Company has received numerous awards in various markets for outstanding housing design. Selling prices are set in each area based on local market conditions and competitive factors. The Company's gross margins vary from area to area based on competitive factors in each market. The Company's product lines include both single-family detached and attached homes. During 1996, approximately 83% of the homes delivered were single-family detached compared to 84% in 1995 and 85% in 1994. The number of units and average sales prices of single-family homes delivered in 1996, 1995 and 1994 were as follows:
SINGLE-FAMILY DETACHED SINGLE-FAMILY ATTACHED ------------------------- ------------------------- NUMBER AVERAGE NUMBER AVERAGE OF UNITS SALES PRICE OF UNITS SALES PRICE -------- ----------- -------- ----------- 1996................................ 5,891 $170,500 1,208 $144,200 1995................................ 5,708 162,800 1,071 136,400 1994................................ 5,411 155,200 976 127,900
The increases in the average sales prices of single-family detached and attached homes in 1996 and 1995 were primarily due to price increases. In 1996, the national average sales prices of new single-family homes (both detached and attached) as reported on a preliminary basis by the U.S. Census Bureau was $165,800 compared with an average sales price of $166,100 for the Company. 5 6 Variations in the general product and customer mix may exist from year to year based on shifts in local market demand or product availability. The table below sets forth the mix of the Company's deliveries for the affordable, move-up and retirement and active adult home products during the last three years:
1996 1995 1994 ---- ---- ---- Affordable.................................................. 28% 28% 34% Move-up..................................................... 49% 50% 47% Retirement and active adult................................. 23% 22% 19%
Many purchasers finance a large portion of the purchase price of a home through conventional or government insured/guaranteed mortgages from lending institutions. The Company generally assists purchasers in obtaining mortgages. Approximately 83% of the homes delivered in 1996, and 82% delivered in 1995 and 85% delivered in 1994, were purchased using mortgage financing. The Company takes steps to qualify certain of its homes under Veterans Administration ("VA") and Federal Housing Administration ("FHA") mortgage financing programs, which provide mortgage financing sources. During 1996 and 1995, approximately 17% and during 1994 approximately 19% of the Company's homes delivered were financed under VA and FHA mortgage programs. CONSTRUCTION The Company's investment in direct employee labor costs, equipment and facilities is kept to a minimum because all construction of single-family homes is performed by independent subcontractors. At all stages of construction, however, on-site Company managers supervise and coordinate the activities of these subcontractors and subject their work to quality and cost control standards. The Company's Director of National Purchasing and Quality Control provides centralized management of quality standards, both with respect to the construction of homes and the purchase of certain major components used in the construction of homes. Company employees are rated and compensation incentives are affected by a measure of quality standards. The Company's commitment to quality and its use in the Company's sales efforts are best illustrated by its Zero Defect Program. Under the Zero Defect Program, the home buyer meets with the construction supervisor prior to the commencement of, and during, construction in order to ensure that the home buyer (i) is aware of all quality features of the house, including those which are not readily apparent in the finished house, (ii) agrees that the design features, including appliances, match those ordered and (iii) is satisfied with the finished product. The Company considers a completed house to have "zero defects" if, upon final inspection by the home buyer, only a few minor cosmetic items remain to be corrected. Construction subcontractors are selected on the basis of competitive bids and written agreements govern their relationship with the Company. All bids are based on detailed specifications and complete blueprints to ensure commitment to the Company's expectation for high quality workmanship. The Company purchases the majority of its construction material on a decentralized basis with a "just in time" delivery schedule to each individual job site. Materials are regularly purchased on a competitive bid basis to ensure both competitive pricing and high quality. In addition to local purchasing, the Company has entered into a number of national purchasing agreements in order to maximize purchasing power. Agreements with each vendor are negotiated on an annual basis by the Company's Director of National Purchasing and Quality Control. In order to minimize the risk associated with completed but unsold inventory, the Company generally does not commence construction of a single-family detached home prior to receipt of an executed purchase contract, a deposit from the customer and preliminary mortgage approval based on the purchaser's mortgage application. For single-family attached homes, construction does not generally commence until 50% of the units in a building have been sold. 6 7 REGULATION The Company and its subcontractors must comply with various federal, state and local zoning, building, pollution, environmental, health, advertising and consumer credit statutes, ordinances, rules and regulations, as well as regulations relating to specific building materials to be used, building design and minimum elevations of properties. All of these regulations have increased the time and cost required to market the Company's products by extending the time between the initial acquisition of land and the commencement of construction. The Company's operations, like those of other home builders, have been periodically subject to moratoriums on development activities caused by insufficient water, sewage and energy-related facilities. Moratoriums in local areas have not had a material adverse effect on the Company's overall activities because of the geographic diversification of the Company's operations. COMPETITION The single-family residential housing industry is highly competitive. U.S. Home competes in each of its markets, with respect to the location, design and price of its products, with numerous firms engaged in the on-site development of single-family residential housing, ranging from regional and national firms to small local companies. The Company is one of the largest on-site builders of single-family homes in the United States, ranking among the ten largest single-family on-site home builders in the United States for more than 20 years. However, because there are so many firms engaged in the single-family home building industry, the Company accounts for less than 1% of all new on-site single-family housing sales in the United States. RAW MATERIALS AND SUBCONTRACTORS The Company uses numerous suppliers of raw materials and services in its business and such materials and services have been and continue to be available. Where appropriate, the Company has adopted national programs for products to maximize price discounts through volume purchases. The Company also utilizes numerous independent subcontractors representing all building trades in connection with the construction of its homes. COMMUNITY DEVELOPMENT A significant portion of the Company's finished lot needs are currently satisfied through rolling lot options, which enable the Company to initially pay a small fraction of total lot cost and then purchase the lots on a scheduled basis. For example, during 1996, 55% of the Company's unit deliveries were from lots owned by the Company and 45% were from lots acquired by the exercise of rolling lot options. The Company's policy is that land cannot be purchased or sold without prior approval of the Company's Asset Management Committee. Asset Management Committee approval requires submission of data relating to sales forecasts, a timing schedule (e.g., estimated dates for the commencement of land development, housing construction, model opening and sales) and a projection of income and internal rate of return. All development expenditures are reviewed by the Senior Vice President-Community Development and the respective President of Operations prior to the commencement of development. In addition, the Company's by-laws require approval by the Company's Board of Directors of any acquisition of unimproved real property or acreage by the Company which is material to the Company in any single transaction involving an expenditure in excess of $5 million and any other material capital expenditures, borrowings (subject to certain exceptions) and other commitments by the Company in excess of $5 million per transaction (excluding transactions involving housing inventory). The Presidents of Operations and the Division Presidents are responsible for maintaining continuity of housing sales through awareness of trends in housing demand in each market area. Feasibility studies and market research studies are generally required before approval of the purchase of land. These studies examine the demographics of an area, including population trends, income trends, employment trends, housing stock and housing demand. Products are matched to customer profile, determined in part by the market studies and the experience of the local manager in each market. 7 8 Housing communities are generally built in or near major metropolitan areas and are normally located in growing markets for such areas. At December 31, 1996, the Company's land and finished lot inventories totaled $354.8 million, excluding option deposits. See Note 1 of Notes to Consolidated Financial Statements. Substantially all housing communities are zoned for their intended use and serviced by utilities. As of December 31, 1996, the Company had refundable and nonrefundable deposits totaling $28.0 million for options and contracts to purchase undeveloped land and finished lots for home building operations for a total purchase price of approximately $267.0 million. The Company has incurred pre-development costs of approximately $42.7 million relating to these properties. The following table sets forth as of December 31, 1996, by state, the cost of certain of the Company's land inventories and the estimated number of lots controlled through direct ownership and under option which are being used or that are anticipated to be used in the Company's home building operations (dollars in thousands):
ESTIMATED NUMBER OF HOUSING UNITS THAT COULD BE CONSTRUCTED ON LAND CONTROLLED AS OF DECEMBER 31, 1996(1) BOOK COST --------------------------------------- OF LAND UNDER STATES OWNED OWNED OPTION TOTAL - ------ --------- --------- --------- --------- Arizona.................................. $ 24,442 1,154 1,728 2,882 California............................... 38,555 1,011 1,409 2,420 Colorado................................. 74,906 4,718 1,867 6,585 Florida.................................. 84,246 7,243 7,260 14,503 Indiana/Ohio............................. 7,167 179 861 1,040 Maryland/Virginia........................ 18,529 552 2,297 2,849 Minnesota................................ 16,456 760 484 1,244 Nevada................................... 25,344 632 130 762 New Jersey............................... 27,806 1,125 196 1,321 Texas.................................... 25,093 2,432 696 3,128 -------- ------ ------ ------ $342,544 19,806 16,928 36,734 ======== ====== ====== ======
- --------------- (1) The estimates set forth above have been prepared based on numerous assumptions made at the date hereof, many of which are beyond the control of the Company. Many of these assumptions, and hence the estimates, are subject to change and there can be no assurances that such lots will be used or as to when they will be used. This table does not include commercial property and other properties which the Company has no current plans to use, with an aggregate cost of $12.3 million (including $6.5 million relating to land under contract for sale). In view of the various stages of development of the land owned by the Company as of December 31, 1996 (i.e., finished, under development and development not started), any per lot cost derived by dividing the book cost by the estimated number of units would not be meaningful. Inventory risk is substantial for all home building companies. The market value of housing inventories, finished lots and raw land can change significantly over the life of a community, reflecting dynamic market conditions. In addition, inventory carrying costs are significant, which can result in losses when trying to exit a poorly performing community or market. The Company seeks to reduce its risks associated with housing inventories, finished lots and raw land through (i) maintaining its geographic diversity and (ii) acquiring lots and land under option where possible, thereby enabling the Company to control land and lots with a smaller capital investment. In 1996, the Company's revenues from the sale of developed and undeveloped land amounted to $10.9 million, as compared to revenues of $16.1 million in 1995 and $16.2 million in 1994. 8 9 REORGANIZATION The Company and certain of its affiliates commenced proceedings (the "Cases") under Chapter 11 of Title 11 of the United States Code on April 15, 1991, in order to restructure their indebtedness and other liabilities. The Company's plan of reorganization (the "Plan") was confirmed in May 1993 by the United States Bankruptcy Court for the Southern District of New York and became effective in June 1993 (the "Effective Date"). On the Effective Date, the Company also completed a public offering of $200 million principal amount of 9.75% senior notes due 2003, the net proceeds from which were utilized to pay a portion of the claims of certain unsecured creditors of the Company under the Plan and to repay outstanding amounts under the Company's debtor-in-possession financing facility. The Plan effected a recapitalization of the Company and did not result in a reduction in the scope or other major restructuring of the Company's operations. During the pendency of the Cases, the Company continued its home building operations in the ordinary course in its housing markets and improved its market share in a majority of such markets. FINANCIAL SERVICES OPERATIONS The Company's second industry segment consists primarily of its mortgage banking activities. U.S. Home Mortgage Corporation ("Mortgage"), a wholly-owned subsidiary of the Company, commenced operations in 1971 and serves an important role in the Company's sale of its homes by arranging financing for customers. Mortgage is a Federal National Mortgage Association/Government National Mortgage Association/Federal Home Loan Mortgage Corporation approved seller-servicer, headquartered in Clearwater, Florida with branch or satellite offices in the metropolitan areas of Phoenix and Tucson, Arizona; Bakersfield, Palmdale, Palm Springs and Sacramento, California; Colorado Springs, Denver, and Fort Collins, Colorado; Washington, D.C.; Clearwater, Fort Myers, Orlando, and Sarasota, Florida; Indianapolis, Indiana; Minneapolis, Minnesota; Las Vegas, Nevada; Cleveland, Ohio; and Dallas, and Houston, Texas. The Company offers a wide variety of conventional, FHA and VA financing programs through Mortgage, thereby providing prospective buyers the benefits of both conventional and government-assisted loan programs. As a mortgage banker, Mortgage originates and funds mortgage loans and sells the loans and the related servicing rights directly to investors. Loans and servicing rights are generally sold by Mortgage and funded by the investors within 30 days after home delivery. To limit its risk of interest rate fluctuations, Mortgage regularly enters into fixed price mandatory forward delivery contracts to sell mortgage-backed securities to securities dealers or fixed price forward delivery commitments to sell specific whole loans to investors on a mandatory or best efforts basis. Mortgage has a secured revolving line of credit to fund the mortgage loans on an interim basis until purchased by investors. See Note 2 of Notes to Consolidated Financial Statements. The following table summarizes certain mortgage banking operating information (dollars in thousands):
YEARS ENDED DECEMBER 31, -------------------------------- 1996 1995 1994 -------- -------- -------- Residential mortgage loans Number of loans originated....................... 3,786 3,367 2,987 Average amount of loan originated................ $ 134 $ 128 $ 122 Total amount of loans originated: Funded by Mortgage............................ $466,000 $376,000 $308,000 Brokered by Mortgage.......................... 43,000 57,000 58,000 -------- -------- -------- Total.................................... $509,000 $433,000 $366,000 ======== ======== ======== Company's homes delivered financed by Mortgage as a percentage of Company's homes delivered which were financed.................................... 61% 57% 50% Company's homes delivered financed by Mortgage as a percentage of Mortgage's total originations...... 95% 95% 92%
9 10 While the Company continues to focus its attention primarily upon the expansion of Mortgage's operations within the Company's own customer base, Mortgage also offers its services to realtors, unaffiliated builders and refinance customers. Among the factors affecting Mortgage's operations are general economic conditions, federal, state and local regulatory constraints, consumer confidence and interest rate volatility. These factors, together with the number of homes delivered by the Company, affect the volume of loan originations which in turn impact the resulting volume of mortgage loans and mortgage servicing rights available for sale. ADDITIONAL INFORMATION EMPLOYEES At December 31, 1996, the Company had 1,466 employees. None of the Company's employees are represented by a union. The Company considers its relations with its employees to be good. The Company's single-family housing and community development operations are conducted primarily through independent subcontractors, thereby limiting the number of direct employees required. ITEM 2. PROPERTIES The Company leases its executive offices, located at 1800 West Loop South, Houston, Texas 77027, pursuant to a lease scheduled to expire on February 28, 1999. The Company does not believe that its executive offices or its other facilities, consisting of sales and administrative offices located in or near each of the Company's areas of operations and generally held under leases with terms not exceeding five years, are material to its operations. ITEM 3. LEGAL PROCEEDINGS The Company is involved from time to time in litigation arising from the normal course of business, none of which, in the opinion of the Company, is expected to have a material adverse effect on the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE COMPANY The Company's executive officers during 1996 and their respective ages and positions are set forth below:
NAME AGE POSITION AND OFFICE ---- --- ------------------- Robert J. Strudler.................... 54 Chairman and Co-Chief Executive Officer Isaac Heimbinder...................... 53 President, Co-Chief Executive Officer and Chief Operating Officer Craig M. Johnson...................... 43 Senior Vice President -- Community Development Gary L. Frueh......................... 56 Vice President -- Tax and Audit Thomas A. Napoli...................... 55 Vice President -- Corporate Finance and Treasurer Chester P. Sadowski................... 50 Vice President -- Controller and Chief Accounting Officer Richard G. Slaughter.................. 52 Vice President -- Planning and Secretary Kelly F. Somoza....................... 43 Vice President -- Investor Relations
No family relationship exists among any of the executive officers of the Company. 10 11 Each of the foregoing officers has been elected to serve in the office indicated until the first meeting of the Board of Directors following the next annual meeting of stockholders of U.S. Home and until his or her successor is elected and qualified. Mr. Strudler has served as Chairman and Co-Chief Executive Officer since April 26, 1995: prior thereto, he had been Chairman and Chief Executive Officer of the Company since May 12, 1986. Mr. Heimbinder has served as President, Co-Chief Executive Officer and Chief Operating Officer since April 26, 1995; prior thereto, he had been President and Chief Operating Officer of the Company since May 12, 1986. Mr. Johnson has served as Senior Vice President -- Community Development since April 26, 1995; prior thereto, he had been Vice President -- Community Development since June 11, 1992, and Executive Vice President, Community Development since October 14, 1988. Mr. Frueh has served as Vice President -- Tax and Audit since February 5, 1992; prior thereto, he had been Vice President -- Tax since December 18, 1986. Mr. Napoli has served as Vice President -- Corporate Finance and Treasurer since February 13, 1997; prior thereto, he had been Vice President -- Finance and Chief Financial Officer since April 21, 1989. Mr. Sadowski has served as Vice President -- Controller and Chief Accounting Officer since December 17, 1987. Mr. Slaughter has served as Vice President -- Planning and Secretary since December 18, 1986. Ms. Somoza has served as Vice President -- Investor Relations since December 6, 1996; prior thereto, she had been Vice President since June 11, 1992, and Director, Investor Relations since December 31, 1981. Ms. Somoza is also the administrator of the Company's profit sharing and employees' savings programs. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS As of February 7, 1997, there were 3,430 holders of record of the Company's common stock, $.01 par value per share. The principal market on which the common stock is traded is the New York Stock Exchange. Information concerning the high and low sales prices for the Company's common stock for each calendar quarter during 1996 and 1995 is set forth below:
CALENDAR YEAR ENDED YEAR ENDED QUARTER DECEMBER 31, 1996 DECEMBER 31, 1995 -------- ------------------ ------------------ HIGH LOW HIGH LOW ------- ------- ------- ------- First......................................... $29.38 $23.25 $18.25 $14.75 Second........................................ 26.13 22.75 25.38 16.13 Third......................................... 24.75 19.25 25.88 20.25 Fourth........................................ 26.00 19.50 29.25 23.25
No dividends were paid by the Company during 1996 or 1995. The Company's credit agreement (the most restrictive of the Company's borrowing agreements) prohibits the Company from paying dividends on its capital stock, other than stock dividends. 11 12 ITEM 6. SELECTED FINANCIAL DATA U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED SELECTED FINANCIAL DATA FOR THE FIVE YEARS ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31, ---------------------------------------------------------- 1996 1995 1994 1993 1992 ---------- ---------- -------- -------- -------- STATEMENT OF OPERATIONS DATA: Operating Revenues...................... $1,211,450 $1,107,945 $995,311 $812,077 $689,900 Operating Income........................ 55,901 59,072 52,526 44,640 29,349 Reorganization Items.................... -- -- -- 6,915 50,703 Income Taxes............................ 11,713 22,152 19,697 (33,966) -- ---------- ---------- -------- -------- -------- Net Income (Loss)....................... $ 44,188 $ 36,920 $ 32,829 $ 71,691 $(21,354) ========== ========== ======== ======== ======== Net Income (Loss) Per Common And Common Equivalent Share: Primary............................... $ 3.70(1) $ 3.14 $ 2.89 $ 6.16(2) $ (1.89)(3) Fully Diluted......................... $ 3.25(1) $ 2.68 $ 2.50 $ 5.93(2) $ (1.89)(3) Dividends Per Common Share.............. $ -- $ -- $ -- $ -- $ -- BALANCE SHEET DATA (at year end): Total Assets............................ $ 947,411 $ 842,084 $753,203 $682,637 $545,110 ========== ========== ======== ======== ======== Revolving Credit Facilities -- Housing............................... $ -- $ 24,000 $ 7,553 $ -- $172,373(4) Financial Services.................... 42,414 35,371 10,014 20,566 14,079 ---------- ---------- -------- -------- -------- $ 42,414 $ 59,371 $ 17,567 $ 20,566 $186,452 ========== ========== ======== ======== ======== Senior And Convertible Subordinated Debt And Notes Payable -- Housing............................ $ 362,887 $ 300,599 $304,327 $311,937 $161,736(4) Financial Services................. -- -- 1,034 1,102 1,797 ---------- ---------- -------- -------- -------- $ 362,887 $ 300,599 $305,361 $313,039 $163,533 ========== ========== ======== ======== ========
- --------------- (1) Primary and fully diluted income per share in 1996 includes $.04 primary income per share and $.03 fully diluted income per share, respectively, due to the net effect of an $8,233, net of tax, provision for impairment of land inventories and an $8,691 tax benefit. (2) Primary and fully diluted income per share in 1993 were $2.29 and $2.21, respectively, excluding $3.87 primary income per share and $3.72 fully diluted income per share, respectively, due to a $45,000 decrease in the deferred tax asset valuation allowance. (3) Income (loss) per common and common equivalent share has been computed using the weighted average number of common and common equivalent shares outstanding, assuming the Company's current capital structure had been effective as of the beginning of all periods presented. This differs from historical primary and fully diluted loss per common and common equivalent share previously reported (based on the Company's former capital structure) for the year ended December 31, 1992, of $.47. The Company believes that earnings per common share information for 1992 is of limited use and relevance in view of the significant changes in ownership of the Company's capital stock and the Company's capital structure which occurred in 1993. 12 13 (4) Includes unsecured debt of $266,635 at December 31, 1992 which was exchanged for a combination of cash and equity securities, and secured debt of $5,213 at December 31, 1992 which was either reinstated or the property securing the debt was deeded to the lenders in full satisfaction of the debt. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS HOUSING The following table, which excludes the provision for impairment of land inventories recorded in the fourth quarter of 1996 (see Results of Operations Other -- Impairment of Land Inventories below and Consolidated Statements of Operations), sets forth certain financial information for the Company's housing segment for the periods indicated (dollars in thousands, except average sales price):
YEARS ENDED DECEMBER 31, ------------------------------------ 1996 1995 1994 ---------- ---------- -------- Revenues -- Single-family homes........................... $1,178,938 $1,075,206 $964,751 Land and other................................ 12,268 17,077 17,627 ---------- ---------- -------- Total................................. $1,191,206 $1,092,283 $982,378 ========== ========== ======== Single-family homes -- Gross margin amount........................... $ 217,461 $ 199,629 $184,265 Gross margin percentage....................... 18.4% 18.6% 19.1% Units delivered............................... 7,099 6,779 6,387 Average sales price........................... $ 166,100 $ 158,600 $151,000 New orders taken.............................. 7,406 6,959 6,234 Backlog at end of year........................ 3,038 2,731 2,551 Selling, general and administrative expenses as a percentage of housing revenues.............. 9.5% 9.7% 9.8% Interest -- Paid or accrued............................... $ 33,484 $ 31,995 $ 30,820 Percentage capitalized........................ 100.0% 100.0% 100.0% Previously capitalized interest included in interest expense........................... $ 30,786 $ 27,555 $ 28,871 Percentage of housing revenues................ 2.6% 2.5% 2.9%
Revenues and Gross Margin Revenues from sales of single-family homes for 1996 increased 10% from 1995. The increase resulted from a 5% increase in the number of housing units delivered and a 5% increase in the average sales price. Revenues from sales of single-family homes for 1995 increased 11% from 1994, resulting primarily from a 6% increase in the number of housing units delivered and a 5% increase in the average sales price. The increases in the average sales prices in 1996 and 1995 were primarily due to price increases. The gross margin percentage for 1996 decreased from 1995 and the gross margin percentage for 1995 decreased from 1994. These decreases resulted primarily from cost increases which were not offset by increases in sales prices. New orders taken in 1996 increased 6% from 1995. New orders taken in 1995 increased 12% from 1994. The increase in new orders in 1996 reflects the continued demand for new single-family homes which the Company believes was brought about by strong consumer confidence, opening of new home communities and stable mortgage interest rates. The increase in new orders in 1995 reflects the demand for new single-family 13 14 homes which the Company believes was brought about by the decrease in mortgage interest rates starting in the second quarter of 1995. Selling, General and Administrative Expenses As a percentage of housing revenues, selling, general and administrative expenses declined in 1996 as compared to both 1995 and 1994. Actual selling, general and administrative expense for 1996 increased $7.3 million compared to 1995. This increase was attributable to increases in volume-related expenses ($4.1 million) resulting from the increase in deliveries in 1996 when compared to 1995 and increases in other selling, general and administrative expenses resulting from increased activities and earnings. Similarly, selling, general and administrative expenses increased by $9.9 million in 1995 compared to 1994, due to increases in volume-related expenses ($4.7 million) resulting from increases in deliveries in 1995 when compared to 1994 and increases in other selling, general and administrative expenses resulting from increased activities and earnings. Interest Interest paid and accrued for 1996 increased approximately 5% compared to 1995 and increased approximately 4% in 1995 compared to 1994. The increase in 1996 was primarily due to the sale of the Company's 7.95% senior notes in February 1996, offset in part by a decrease in the average borrowings under the Company's Credit Facility (see Financial Condition and Liquidity -- Housing below), while the increase in 1995 was primarily due to an increase in the average borrowings under the Company's Credit Facility. The Company capitalizes interest cost into housing inventories and charges the previously capitalized interest to interest expense when the related inventories are delivered. The amount of interest capitalized and previously capitalized interest expensed in any one year is a function of the amount of housing assets, land sales and the number of housing units delivered, average outstanding debt levels and average interest rates. In addition, the amount of previously capitalized interest charged to interest expense in 1995 and 1994 was affected by the amount of interest capitalized prior to 1994 because interest on a majority of the Company's debt was stayed during the period of the Company's bankruptcy proceedings. Capitalized interest amounts charged to interest expense in 1996 were greater than 1995 and 1994 primarily due to the increase in the number of housing units delivered and higher average debt levels, offset in part by an increase in the amount of housing assets qualifying for interest capitalization. FINANCIAL SERVICES Revenues Revenues for the financial services segment for the periods indicated were as follows (dollars in thousands):
YEARS ENDED DECEMBER 31, ----------------------------- 1996 1995 1994 ------- ------- ------- U.S. Home Mortgage Corporation and Subsidiaries....... $16,363 $12,477 $ 9,885 Other financial services subsidiaries................. 3,881 3,185 3,048 ------- ------- ------- $20,244 $15,662 $12,933 ======= ======= =======
Mortgage provides financing primarily to purchasers of homes sold by the Company's housing operations through origination of residential mortgage loans and engages in the sale of such mortgages and related servicing rights to unaffiliated investors. Mortgage's operations are affected, among other things, by general economic conditions, consumer confidence and interest rate volatility. These factors, together with the number of homes delivered by the Company, affect the volume of loan originations which in turn impact the resulting volume of mortgages and servicing rights for sale. 14 15 The increase in Mortgage's revenues in 1996 from 1995 and in 1995 from 1994 was primarily due to an increase in mortgage loan originations and income from the sales of mortgage loans and servicing rights. OTHER Impairment of Land Inventories During the fourth quarter of 1996, in conjunction with the completion of the 1997 business plan, the Company completed its annual detailed evaluation of the intended use of its land inventories to insure that the primary and planned use reflected the appropriate economic value for the Company's intended use. Even though industry forecasts project a softening in housing demand in 1997, no change in use was required for most of the Company's land inventories. However, it was determined during the evaluation that based on economic forecasts for 1997 the current best use of certain land inventories located primarily in Florida, Maryland and Texas had changed from the Company's previous intended use. The change in intended use for these land inventories include land previously held for long term development which will now be sold to other builders in the near term to accelerate its disposition, land that has been replanned for new products and land affected by changes in product pricing. Based on the change in intended use, the Company revised its cash flow estimates and determined the cash flow expected to be generated from the new intended use would be less than the cost of the land. Accordingly, the Company recorded a non-cash provision for impairment of approximately $13.0 million ($8.2 million, net of income taxes) to reduce the carrying value of the land to its current fair value, which amount has been included in "provision for impairment of land inventories" in the Consolidated Statements of Operations. Fair value was determined based on sales contracts or offers received on land being sold and by evaluations of comparable market prices. The provision for impairment reduced primary and fully diluted income per share in 1996 by $.69 per share and $.57 per share, respectively. Corporate General and Administrative Corporate general and administrative includes the operations of the Company's corporate office. As a percentage of total revenues, such expenses were 1.0%, 1.1% and 1.2% for 1996, 1995 and 1994, respectively. Actual corporate overhead expenses for 1996 totaled $11.7 million compared with $11.8 million and $11.3 million, respectively, for 1995 and 1994. The increase for 1995 over 1994 was primarily due to increased payroll expense. Income Taxes During the fourth quarter of 1996, the Internal Revenue Service (the "IRS") completed an examination of the Company's federal income tax returns for the years ended December 31, 1993 and 1992. The results of this examination allowed certain previously reserved deductions taken by the Company in its 1993 tax return. However, certain other deductions claimed by the Company in that year were disallowed by the IRS. At the conclusion of this examination, the Company reduced its deferred tax liability and recognized an income tax benefit totaling $8.7 million related to the deductions allowed by the IRS. The Company plans to appeal the IRS decision to disallow certain other deductions and these deductions remain reserved as a deferred tax liability as of December 31, 1996. The decrease in the deferred tax liability increased primary and fully diluted income per share in 1996 by $.73 per share and $.60 per share, respectively. 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, including the Credit Facility (see below). 15 16 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, primarily in its affordable and move-up home communities, which enable the Company to initially pay a small portion of the total lot cost and then purchase the lots on a scheduled basis. Over the last three years, approximately 45% of the units delivered have been on lots acquired under rolling lot option agreements. The increase in land inventories in 1996 from 1995 and 1995 from 1994 was primarily the result of increased activities, including an increase in the Company's retirement and active adult communities activities. 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 $130 million unsecured revolving credit agreement ("Credit Facility") entered into in September 1995. The Credit Facility (and previous credit facilities) have enabled the Company to meet peak operating needs. See Note 2 of Notes to Consolidated Financial Statements. 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 then outstanding balance under the Credit Facility and for working capital and general corporate purposes. See Note 2 of Notes to Consolidated Financial Statements. Also, certain of the properties owned or under option by the Company may be located within community development districts ("Districts") formed by municipalities to construct and finance certain infrastructure/improvements on property in the Districts' area. The Districts utilize ad valorem and assessment revenue bonds to fund improvements and repay the bonds by annual tax assessments on District property based on the property's relative value to other District property. The Company provides no credit support for and is not liable for the debt of the Districts, except to the extent of actual assessments made by the Districts. The Company may utilize Districts to a greater extent in the future. However, there can be no assurance that it will do so. The net cash provided or used by the operating, investing and financing activities of the housing operations for the years ended December 31, 1996, 1995 and 1994 is summarized below (dollars in thousands):
YEARS ENDED DECEMBER 31, -------------------------------- 1996 1995 1994 -------- -------- -------- Net cash provided (used by): Operating activities.................. $(28,091) $(13,752) $(17,887) Investing activities.................. (3,684) (2,041) (1,676) Financing activities.................. 36,694 5,216 (3,445) -------- -------- -------- Net increase (decrease) in cash......... $ 4,919 $(10,577) $(23,008) ======== ======== ========
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 construction and land asset activities increased in 1996 over 1995 and in 1995 over 1994. Housing operating activities for 1996 used more cash than in 1995 primarily due to an increase in these activities offset in part by increased profitability and the timing of payments related to these activities. Housing operating activities for 1995 used less cash than in 1994 primarily due to increased profitability and the timing of payments related to these activities. Cash flow from housing financing activities in 1996 provided cash reflecting the sale of the Company's 7.95% senior notes, partially offset by the repayment of the amounts outstanding under the Credit Facility. Cash flow from housing financing activities increased in 1995 from 1994 primarily due to increased net borrowings under the Company's revolving credit facilities. The Company believes that cash flow from operations and amounts available under the Credit Facility will be sufficient to meet its current 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. 16 17 FINANCIAL SERVICES Mortgage's activities represent a substantial portion of the financial services segment's activities. As loan originations by Mortgage are primarily from homes sold 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. Financial services operating activities are affected primarily by the volume of Mortgage's loan originations and the timing of the sale of mortgage loans and related servicing rights to third party investors. Loans and servicing rights are generally sold to investors within 30 days after homes are delivered. In this regard, cash required by financial services operating activities for 1996 was higher compared to 1995 and 1995 was higher compared to 1994 primarily due to an increase in residential mortgage loan receivables. The Company finances its financial services operations primarily from short-term debt which is repaid with internally generated funds, such as from the origination and sale of residential mortgage loans and related servicing rights. As more fully discussed in Notes 2 of Notes to Consolidated Financial Statements, the short-term debt consists of a $55 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 internally generated funds and the Mortgage Credit Facility will be sufficient to provide for Mortgage's working capital needs. OTHER Impact of Inflation Inflation not only affects interest rates on funds borrowed by the Company, but also affects the affordability of permanent mortgage financing available to prospective customers. Increased construction costs associated with rising interest rates, as well as increased material costs, compress gross margins in the short-term, but may be recovered in the long-term through increases in sales prices, although such increases may reduce sales volume. In recent years, inflation has not had a significant adverse effect on the Company. Cautionary Disclosure Regarding Forward-Looking Statements The Company desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and is including this disclosure in order to do so. 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. Given the risks, uncertainties and contingencies of the Company's business, the actual results may differ materially from those expressed or implied by such forward-looking statements. Further, certain forward-looking statements are based on assumptions concerning future events which may not prove to be accurate. Forward-looking statements by the Company regarding results of operations and, ultimately, financial condition, are subject to numerous risk and assumptions, including the following: - General economic and business conditions, the level and direction of interest rates and the level of consumer confidence have significant impact on the willingness and ability of purchasers to enter into contracts for homes and to consummate purchases of such homes under contract (backlog), as well as on the performance of Mortgage, the Company's principal subsidiary. - The development of many of the Company's communities, particularly its retirement and active adult communities, result from a lengthy, complex series of events involving land purchase, regulatory 17 18 compliance, capital availability, marketing and sales, any of which can materially affect the financial results for a community. - The Company is in a highly competitive and fragmented industry, which places constant pressure on price (including the ability of the Company to respond to increases in prices from its suppliers), quality and marketing and particularly challenges the Company upon any entry into new geographic markets. - The Company faces numerous regulatory hurdles in its development efforts, such as laws and regulations regarding zoning, environmental protection, building design and construction, density and rate of development. - The Company's access to capital sufficient to fund its development activities is affected by the Company's financial leverage and by the willingness of the capital markets and banks to absorb equity or debt of the Company. - The Company may encounter other contingencies, including labor shortages, work stoppages, product liability, litigation, natural risks such as floods or hurricanes and other factors over which the Company has little or no control. 18 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA U.S. HOME CORPORATION AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Financial Statements: Report of Independent Public Accountants.................. Consolidated Balance Sheets -- December 31, 1996 and 1995................................................... Consolidated Statements of Operations -- For the Years Ended December 31, 1996, 1995 and 1994................. Consolidated Statements of Cash Flows -- For the Years Ended December 31, 1996, 1995 and 1994................. Consolidated Statements of Stockholders' Equity -- For the Years Ended December 31, 1996, 1995 and 1994........... Notes to Consolidated Financial Statements................
19 20 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To U.S. Home Corporation: We have audited the accompanying consolidated balance sheets of U.S. Home Corporation (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of U.S. Home Corporation and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas February 12, 1997 20 21 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ASSETS
1996 1995 -------- -------- HOUSING: Cash (including restricted funds of $1,578 and $334)...... $ 8,786 $ 5,110 Receivables, net.......................................... 28,028 33,454 Single-Family Housing Inventories......................... 709,344 632,035 Option Deposits on Real Estate............................ 70,688 63,375 Other Assets.............................................. 49,036 43,437 -------- -------- 865,882 777,411 -------- -------- FINANCIAL SERVICES: Cash (including restricted funds of $3,533 and $4,004).... 4,463 5,456 Residential Mortgage Loans................................ 63,656 43,292 Other Assets.............................................. 13,410 15,925 -------- -------- 81,529 64,673 -------- -------- $947,411 $842,084 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY HOUSING: Accounts Payable.......................................... $ 96,594 $ 88,234 Accrued Expenses and Other Current Liabilities............ 50,972 46,070 Revolving Credit Facility................................. -- 24,000 Senior and Convertible Subordinated Debt and Notes Payable................................................ 362,887 300,599 -------- -------- 510,453 458,903 -------- -------- FINANCIAL SERVICES: Accrued Expenses and Other Current Liabilities............ 20,854 18,818 Revolving Credit Facility................................. 42,414 35,371 -------- -------- 63,268 54,189 -------- -------- Total Liabilities...................................... 573,721 513,092 -------- -------- STOCKHOLDERS' EQUITY: Convertible Preferred Stock, $25 per share redemption value, 117,863 and 319,254 shares outstanding at December 31, 1996 and 1995............................. 2,947 7,981 Common Stock, 11,453,290 and 11,243,147 shares outstanding at December 31, 1996 and 1995.......................... 114 112 Capital in Excess of Par Value............................ 353,830 348,577 Retained Earnings......................................... 18,821 (25,367) Unearned Compensation on Restricted Stock................. (2,022) (2,311) -------- -------- Total Stockholders' Equity............................. 373,690 328,992 -------- -------- $947,411 $842,084 ======== ========
The accompanying notes are an integral part of these balance sheets. 21 22 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1996 1995 1994 ---------- ---------- ---------- HOUSING: Operating Revenues................................... $1,191,206 $1,092,283 $ 982,378 Operating Costs and Expenses -- Cost of products sold............................. 971,896 891,163 794,952 Selling, general and administrative............... 113,352 106,036 96,168 Interest.......................................... 30,786 27,555 28,871 ---------- ---------- ---------- 1,116,034 1,024,754 919,991 ---------- ---------- ---------- 75,172 67,529 62,387 Provision for Impairment of Land Inventories......... 12,965 -- -- ---------- ---------- ---------- Housing Operating Income............................. 62,207 67,529 62,387 ---------- ---------- ---------- FINANCIAL SERVICES: Operating Revenues................................... 20,244 15,662 12,933 General, Administrative and Other Expenses........... 14,850 12,329 11,452 ---------- ---------- ---------- Financial Services Operating Income.................. 5,394 3,333 1,481 ---------- ---------- ---------- CORPORATE GENERAL AND ADMINISTRATIVE................... 11,700 11,790 11,342 ---------- ---------- ---------- INCOME BEFORE INCOME TAXES............................. 55,901 59,072 52,526 ---------- ---------- ---------- PROVISION FOR INCOME TAXES -- Federal and State Income Taxes....................... 20,404 22,152 19,697 Tax Benefit.......................................... (8,691) -- -- ---------- ---------- ---------- 11,713 22,152 19,697 ---------- ---------- ---------- NET INCOME............................................. $ 44,188 $ 36,920 $ 32,829 ========== ========== ========== INCOME PER COMMON AND COMMON EQUIVALENT SHARE: Primary........................................... $ 3.70 $ 3.14 $ 2.89 ========== ========== ========== Fully Diluted..................................... $ 3.25 $ 2.68 $ 2.50 ========== ========== ==========
The accompanying notes are an integral part of these statements. 22 23 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
1996 1995 1994 --------- -------- -------- Cash Flows From Operating Activities: Net income................................................ $ 44,188 $ 36,920 $ 32,829 Adjustments to reconcile net income to net cash provided (used) by operating activities -- Provision for impairment of land inventories........... 12,965 -- -- Provision for deferred income taxes.................... 635 19,886 18,897 Tax benefit............................................ (8,691) -- -- Other, net (principally depreciation and amortization)........................................ 8,680 4,579 4,578 Changes in assets and liabilities -- Increase in receivables, inventories and other assets............................................... (121,010) (80,610) (85,075) Increase (decrease) in accounts payable and accrued liabilities.......................................... 23,524 (4,963) 29,765 --------- -------- -------- Net cash provided (used) by operating activities.......... (39,709) (24,188) 994 --------- -------- -------- Cash Flows From Investing Activities: Purchase of property, plant and equipment, net of disposals.............................................. (2,657) (2,526) (2,034) Decrease (increase) in restricted cash.................... (773) 327 436 Proceeds from investments in mortgages.................... 1,989 1,687 868 Other..................................................... (677) (661) 22 --------- -------- -------- Net cash used by investing activities..................... (2,118) (1,173) (708) --------- -------- -------- Cash Flows From Financing Activities: Repayment of revolving credit facilities, net of proceeds............................................... (16,957) 41,804 (2,999) Net proceeds from sale of 7.95% senior notes.............. 73,406 -- -- Long-term debt assumed.................................... -- -- 1,037 Repayment of notes and mortgages payable.................. (12,712) (12,265) (12,103) --------- -------- -------- Net cash provided (used) by financing activities.......... 43,737 29,539 (14,065) --------- -------- -------- Net Increase (Decrease) In Cash............................. 1,910 4,178 (13,779) Cash At Beginning Of Year................................... 6,228 2,050 15,829 --------- -------- -------- Cash At End Of Year......................................... $ 8,138 $ 6,228 $ 2,050 ========= ======== ======== Supplemental Disclosure: Interest paid, before amount capitalized -- Housing................................................ $ 31,508 $ 31,761 $ 30,559 Financial Services..................................... 1,472 645 572 --------- -------- -------- $ 32,980 $ 32,406 $ 31,131 ========= ======== ======== Income taxes paid......................................... $ 16,069 $ 2,159 $ -- ========= ======== ========
The accompanying notes are an integral part of these statements. 23 24 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
UNEARNED CONVERTIBLE CAPITAL IN COMPENSATION COMMON PREFERRED EXCESS OF ON RESTRICTED RETAINED STOCK STOCK PAR VALUE STOCK EARNINGS ------ ----------- ---------- ------------- -------- BALANCE AT DECEMBER 31, 1993.............. $ 94 $ 48,868 $303,193 $ -- $(95,116) Conversion of convertible redeemable preferred stock to common stock (1,435,835 shares)...................... 14 (35,896) 35,882 -- -- Contribution of common stock to profit sharing plan (55,000 shares)............ 1 -- 847 -- -- Other..................................... -- (3) 751 -- -- Net income for the year................... -- -- -- -- 32,829 ---- -------- -------- ------- -------- BALANCE AT DECEMBER 31, 1994.............. 109 12,969 340,673 -- (62,287) Conversion of convertible redeemable preferred stock to common stock (198,536 shares)................................. 2 (4,963) 4,961 -- -- Issuance of common stock under restricted stock plan (144,547 shares)............. 1 -- 2,599 (2,600) -- Other..................................... -- (25) 344 289 -- Net income for the year................... -- -- -- -- 36,920 ---- -------- -------- ------- -------- BALANCE AT DECEMBER 31, 1995.............. 112 7,981 348,577 (2,311) (25,367) Conversion of convertible redeemable preferred stock to common stock (201,391 shares)................................. 2 (5,034) 5,032 -- -- Other..................................... -- -- 221 289 -- Net income for the year................... -- -- -- -- 44,188 ---- -------- -------- ------- -------- BALANCE AT DECEMBER 31, 1996.............. $114 $ 2,947 $353,830 $(2,022) $ 18,821 ==== ======== ======== ======= ========
The accompanying notes are an integral part of these statements. 24 25 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (1) SIGNIFICANT ACCOUNTING POLICIES GENERAL Nature of Operations The Company is one of the largest single-family home builders in the United States based on homes delivered. The Company currently builds and sells homes in more than 215 new home communities in 31 market areas in 12 states. The Company offers a wide variety of moderately-priced homes that are designed to appeal to the affordable, move-up and retirement and active adult buyers. In addition to building and selling single-family homes, the Company provides mortgage banking services to its customers. The Company originates, processes and sells mortgages to third-party investors. The Company does not retain or service the mortgages that it originates but, rather, sells the mortgages and related servicing rights to investors. Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and all wholly-owned subsidiaries after elimination of all significant intercompany balances and transactions. The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 consolidated financial statements and revenues and expenses during the reporting period. Management's estimates and assumptions are reflective of, among other things, prevailing and expected market conditions, 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. The Company is engaged in two related industry segments, the on-site development of single-family residential communities and financial services. Identifiable assets and the results of operations of the Company's segments are reported in the consolidated balance sheets and consolidated statements of operations. Capital expenditures, depreciation and amortization expense for the years ended December 31, 1996, 1995 and 1994 were insignificant. New Pronouncement Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"). SFAS No. 123 establishes a "fair value based method" of accounting for all stock-based employee compensation plans, such as the Company's incentive stock options, but allows for the continued application of the intrinsic value concept under existing accounting rules prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"). The Company will continue to value its stock options using the guidance of APB 25 and, as required by SFAS No. 123, disclose in the notes to the consolidated financial statements (See Note 5) what net income and earnings per share would have been had the Company valued its stock options using the fair value based method. Income Per Share The following weighted average number of common and common equivalent shares were used to compute income per share:
1996 1995 1994 ---------- ---------- ---------- Primary........................................ 11,958,439 11,773,099 11,366,810 Fully diluted.................................. 14,346,440 14,525,989 13,620,331
25 26 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The weighted average number of common and common equivalent shares outstanding for primary income per share include the dilutive effect of the convertible redeemable preferred stock and Class B warrants and the assumed exercise of stock options. No effect was given to the shares that would be issuable on exercise of the warrants and stock options in 1994, since they would be antidilutive or immaterial. Fully diluted income per share includes the assumed conversion of the convertible subordinated debentures and the dilutive effect of the Class B warrants and stock options (based on the higher year-end stock price) in 1996 and 1995. Cash Equivalents The Company considers all short-term investments with an initial maturity of less than 90 days to be cash equivalents. Financial Instruments The Company believes that fair value approximates recorded values for such financial instruments as cash and cash equivalents, trade receivables and payables, short-term debt and option deposits because of the typically liquid, short-term nature, market rate terms and lack of specific concentration of these instruments. The fair value of the senior notes and convertible subordinated debentures can not be determined as none of these instruments are actively traded on the open market. The Company has been informed that the 9.75% senior notes are currently trading at a nominal premium, the 7.95% senior notes are currently trading at a nominal discount and the convertible subordinated debentures are currently trading at a discount under ten percent; however the actual amount of the premium or discount can not be determined because of the limited activity. The fair value of the Company's residential mortgage loans approximate their carrying value as such loans are packaged and sold to investors generally within 30 days after home delivery. Additionally, a significant portion of the Company's interest rate risk associated with and generated by these loans is mitigated by the use of forward delivery contracts and commitments. See Hedging Contracts below. HOUSING Sales and Profit Recognition Profit is recognized from the sale of real estate at time of closing, i.e., when sufficient down payment has been made; any financing has been arranged; title, possession and other attributes of ownership have been transferred to the buyer; and the Company is not obligated to perform additional significant activities after the sale. Inventories and Valuation The components of single-family housing inventories are as follows:
1996 1995 -------- -------- Housing completed and under construction.................... $280,390 $238,508 Models...................................................... 74,167 63,475 Finished lots............................................... 147,893 129,260 Land under development...................................... 59,840 50,714 Land held for development or sale........................... 147,054 150,078 -------- -------- $709,344 $632,035 ======== ========
26 27 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The cost of acquiring and developing land and constructing certain amenities are allocated to the related parcels. Housing inventories are recorded using the specific identification method. The Company measures any impairments on land under development and to be developed at the lower of cost or fair value and carries land substantially completed and ready for its intended use, land held for sale and housing inventories at the lower of cost or fair value less cost to sell. Fair value is the amount at which a property could be bought or sold in a current transaction between willing parties. Prior to 1995, the Company recorded its inventories at the lower of cost or net realizable value. Provisions to reduce land and housing inventories to the lower of cost or fair value/net realizable value in 1996 (other than the $12,965 provision for impairment of land inventories discussed below), 1995 and 1994 were not significant. Total land and housing reserves were $40,236, $36,370 and $35,417 at December 31, 1996, 1995 and 1994, respectively. During the fourth quarter of 1996, in conjunction with the completion of the 1997 business plan, the Company completed its annual detailed evaluation of the intended use of its land inventories to insure that the primary and planned use reflected the appropriate economic value for the Company's intended use. Even though industry forecasts project a softening in housing demand in 1997, no change in use was required for most of the Company's land inventories. However, it was determined during the evaluation that based on economic forecasts for 1997 the current best use of certain land inventories located primarily in Florida, Maryland and Texas had changed from the Company's previous intended use. The change in intended use for these land inventories include land previously held for long term development which will now be sold to other builders in the near term to accelerate its disposition, land that has been planned for new products and land affected by changes in product pricing. Based on the change in intended use, the Company determined the cash flow expected to be generated from the new intended use would be less than the cost of the land. Accordingly, the Company recorded a non-cash provision for impairment of $12,965 ($8,233, net of income taxes) to reduce the carrying value of the land to its current fair value, which amount has been included in "provision for impairment of land inventories" in the accompanying consolidated statements of operations. Fair value was determined based on sales contracts or offers received on land being sold and by evaluations of comparable market prices. The provision for impairment reduced primary and fully diluted income per share by $.69 per share and $.57 per share, respectively. During 1995, the Company acquired land assets in transactions with third parties totaling approximately $14,832, in which the Company received land suitable for single-family detached homes, and these acquisitions were treated as non-cash transactions for purposes of the consolidated statements of cash flows. Interest Capitalization Interest is capitalized on land, finished building lots and single-family residential housing construction costs during the development and construction period. Interest is capitalized to eligible assets using an allocation method based on the Company's actual interest costs. A summary of interest for 1996, 1995 and 1994 follows:
YEARS ENDED DECEMBER 31, -------------------------------- 1996 1995 1994 -------- -------- -------- Capitalized at beginning of year.................... $ 59,898 $ 56,082 $ 55,580 Capitalized......................................... 33,484 31,995 30,820 Previously capitalized interest included in interest expense........................................... (30,786) (27,555) (28,871) Included in provision for impaired land inventories and other......................................... (4,030) (624) (1,447) -------- -------- -------- Capitalized at end of year.......................... $ 58,566 $ 59,898 $ 56,082 ======== ======== ========
27 28 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FINANCIAL SERVICES Revenue Recognition The sale of loans and loan servicing rights is recognized when the closed loans are sold and delivered to an investor. During the years ended December 31, 1996, 1995 and 1994, revenues included net losses from the sale of loans of $976, $512 and $831, respectively, and net gains from the sale of servicing of $7,294, $5,467 and $4,212, respectively. Interest Expense Interest expense relating to financial services for the years ended December 31, 1996, 1995 and 1994 was $1,507, $692 and $537, respectively, and is included in "general, administrative and other expenses" in the accompanying consolidated statements of operations. Residential Mortgage Loans Residential mortgage loans held for sale ($38,491 at December 31, 1996) are included in the accompanying consolidated balance sheets at the lower of cost or market on an aggregate basis. The Company estimates the fair value of residential mortgage loans held at December 31, 1996 approximated recorded value based on quoted market prices for similar loans sold either on a whole loan basis or pooled and sold as collateral for mortgage-backed securities. Hedging Contracts The Company manages its interest rate market risk on the inventory loans held for sale and its estimated future commitments to originate and close mortgage loans at fixed prices ("Loan Quotes") through hedging techniques by regularly entering into either fixed price mandatory forward delivery contracts ("Forward Contracts") to sell mortgage-backed securities to security dealers or fixed price forward delivery commitments ("Forward Commitments") to sell specific whole loans to investors on a mandatory or best efforts basis ("Forward Contracts" and "Forward Commitments", collectively "Hedging Contracts"). The Company records the inventory of residential mortgage loans at the lower of cost or market on an aggregate basis after considering any market value changes in the inventory loans, Loan Quotes and Hedging Contracts. See Note 7. (2) REVOLVING CREDIT FACILITIES, SENIOR AND CONVERTIBLE SUBORDINATED DEBT AND NOTES PAYABLE Housing Revolving credit facilities, senior and convertible subordinated debt and notes payable consist of the following:
DECEMBER 31, -------------------- 1996 1995 -------- -------- Revolving credit facility................................... $ -- $ 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............................ 7,887 20,599 -------- -------- 362,887 300,599 -------- -------- $362,887 $324,599 ======== ========
28 29 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company has an unsecured revolving credit agreement (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 receivables less outstanding senior debt borrowings (as defined), including amounts outstanding under the Credit Facility; as the amount invested in these categories changes, the amount of available borrowings will increase or decrease. At December 31, 1996, $124,403 of the Credit Facility commitment was available for borrowing. Borrowings bear interest at a premium over the Eurodollar rate or the base rate announced by the agent bank. The Credit Facility, as amended, 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 and in November 1996, amended the Credit Facility to increase to $20,000 the amount of convertible subordinated debentures and/or capital stock which may be repurchased. On February 16, 1996, the Company completed the sale of $75,000 principal amount of its 7.95% senior notes due March 1, 2001. Interest is payable semi-annually. The indenture relating to the 7.95% senior notes contains certain covenants, including a minimum tangible net worth requirement, a limitation on the incurrence of additional debt and the making of certain restricted payments. The 9.75% senior notes are due June 15, 2003. Interest is payable semi-annually. On or after June 15, 1998, the 9.75% senior notes may be redeemed at the option of the Company, in whole or in part, at prices ranging from 103.656% (during the 12-month period ending June 14, 1999) to 100% (on and after June 15, 2001) of the principal amount thereof, together with accrued and unpaid interest. The indenture relating to the 9.75% senior notes contains certain covenants, including a minimum tangible net worth requirement, a limitation on the incurrence of additional debt and the making of certain restricted payments. The 4.875% convertible subordinated debentures are due November 1, 2005. Interest is payable semi-annually. The debentures are convertible at any time at the option of the holder into common stock at a conversion price of $35.50 per share, subject to adjustment under certain conditions. On or after November 1, 1996, the debentures may be redeemed at the option of the Company, in whole or in part, at prices ranging from 103.25% (during the 12 month period ending October 31, 1997) to 100% (on or after November 1, 2004) of the principal amount thereof, together with accrued and unpaid interest. Housing notes and mortgage notes payable are primarily for the acquisition and development of land, with interest rates ranging from 6.0% to 10.0%. Assets pledged as collateral under these agreements totaled approximately $42,590 at December 31, 1996. Upon a change of control of the Company, holders of both issues of senior notes and the debentures will have the right to require the Company to redeem the senior notes and debentures at a price of 101% of the principal amount of the senior notes and 100% of the principal amount of the debentures, together with accrued and unpaid interest. There can be no assurance that sufficient funds will be available to make the required repurchases if a change of control occurs. In addition, the Credit Facility prohibits the Company from repurchasing more than $20,000 of the debentures and/or capital stock prior to the termination of the Credit Facility. Moreover, the occurrence of a change of control will trigger an event of default under the Credit Facility. The maximum amounts of borrowings from banks and other financial institutions outstanding at any time during 1996, 1995 and 1994 were $64,000, $67,000 and $34,600, respectively. The average amounts of debt outstanding from banks and other financial institutions during 1996, 1995 and 1994 were $15,800, $42,400 and 29 30 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $10,700, respectively, and the weighted average interest rates, without giving effect to commitment fees, were 8.4%, 9.7% and 9.2%, respectively. Computations of the weighted average interest rates were based upon the weighted average of outstanding loan balances during the respective years. At December 31, 1996, housing notes and mortgages payable, senior debt and convertible subordinated debt mature as follows: $5,243 in 1997, $1,821 in 1998, $643 in 1999, $180 in 2000, $75,000 in 2001, $200,000 in 2003 and $80,000 in 2005. 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 $55,000 under a revolving line of credit (the "Mortgage Credit Facility") secured by residential mortgage loans and mortgage notes receivables. The Mortgage Credit Facility is not guaranteed by the Company, was amended and renewed in August 1996 under substantially the same terms and conditions as the previous agreement, matures on August 31, 1997 and bears interest at a premium over the London Interbank Offered Rate. The maximum amounts of financial services borrowings from banks and other financial institutions outstanding at any time during 1996, 1995 and 1994 were $42,400, $35,400 and $21,600, respectively. The average amounts of short-term debt outstanding from banks and other financial institutions during 1996, 1995 and 1994 were $22,300, $8,500 and $5,600, respectively, and the weighted average interest rates, without giving effect to balance deficiency fees, were 6.6%, 7.0% and 6.3%, respectively. Computations of such rates were made based upon the weighted average of outstanding loan balances during the respective years. (3) INCOME TAXES The Company and its subsidiaries file consolidated federal income tax returns. The components of the provision for income taxes consisted of the following:
YEARS ENDED DECEMBER 31, ----------------------------- 1996 1995 1994 ------- ------- ------- Current -- Federal............................................. $16,943 $ 1,136 $ 730 State............................................... 2,826 1,130 70 ------- ------- ------- 19,769 2,266 800 ------- ------- ------- Deferred -- Federal............................................. (8,147) 18,653 16,866 State............................................... 91 1,233 2,031 ------- ------- ------- (8,056) 19,886 18,897 ------- ------- ------- Total provision....................................... $11,713 $22,152 $19,697 ======= ======= =======
Deferred income taxes are determined based upon the difference between the financial reporting and tax basis of assets and liabilities. At December 31, 1996, the Company has recorded a net deferred tax asset of $2,800 which is comprised of deferred tax assets of $36,200 (including $17,400 relating to housing reserves which were expensed for financial reporting purposes but deferred for federal income tax purposes) and deferred tax liabilities of $33,400 (including $14,000 relating to interest expense capitalized for financial reporting purposes but expensed for federal income tax purposes and an amount related to certain deductions taken in the Company's 1993 federal income tax return). At December 31, 1995, deferred tax assets and 30 31 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) deferred tax liability were $33,900 and $39,700, respectively, and were primarily attributable to the same items noted above. During the fourth quarter of 1996, the Internal Revenue Service (the "IRS") completed an examination of the Company's federal income tax returns for the years ended December 31, 1993 and 1992. The results of this examination allowed certain previously reserved deductions taken by the Company in its 1993 tax return. However, certain other deductions claimed by the Company in that year were disallowed by the IRS. At the conclusion of this examination, the Company reduced its deferred tax liability and recognized an income tax benefit totaling $8,691 related to the deductions allowed by the IRS. The Company plans to appeal the IRS decision to disallow certain other deductions, and these deductions remain reserved as a deferred tax liability as of December 31, 1996. The decrease in the deferred tax liability increased primary and fully diluted income per share in 1996 by $.73 per share and $.60 per share, respectively. The following table reconciles the statutory federal income tax rate to the effective income tax rate for:
YEARS ENDED DECEMBER 31, ------------------------ 1996 1995 1994 ------ ----- ----- Tax provision at statutory rate............................. 35.0% 35.0% 35.0% Increases (decreases) in taxes resulting from -- State and local income taxes, net of federal income tax provision.............................................. 4.0 4.0 4.0 Tax benefit............................................... (15.5) -- -- Other, net................................................ (2.5) (1.5) (1.5) ----- ---- ---- Effective rate.............................................. 21.0% 37.5% 37.5% ===== ==== ====
(4) STOCKHOLDERS' EQUITY As of December 31, 1996, the Company's capital structure consisted of the following: Common Stock -- Authorized 50,000,000 shares, par value $.01 per share, outstanding 11,453,290 shares. Shares reserved for issuance -- Convertible subordinated debentures....................... 2,253,521 Stock plans............................................... 1,925,817 Class B warrants.......................................... 1,899,897 Convertible redeemable preferred stock.................... 202,206 --------- 6,281,441 =========
Preferred Stock -- Authorized 10,000,000 shares, par value $.10 per share, including 202,206 convertible redeemable preferred shares, 500,000 Series A junior non-cumulative preferred shares and 9,297,794 shares undesignated as to series. (a) Convertible redeemable preferred stock -- $25 per share liquidation preference and redemption value, outstanding 117,863 shares. The shares may be redeemed at the option of the Company at any time at an amount equal to the liquidation preference/redemption value ($25 per share) plus any declared and unpaid dividends. Each share of convertible redeemable preferred stock is convertible, subject to adjustment, into one share of common stock at the option of the holder and at any time prior to its redemption by the Company. On February 12, 1997, the Board of Directors authorized the redemption of the remaining outstanding shares of the Company's convertible preferred stock for $25 per share on March 18, 1997. As of December 31, 1996, 2,697,794 shares of convertible redeemable preferred stock had been converted into an equal number of shares of 31 32 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) common stock. If the closing price of the common stock is equal to or greater than $30 per share for 20 consecutive trading days, the convertible redeemable preferred stock will automatically convert into common stock. Any shares converted are restored to the status of authorized and unissued preferred stock without designation as to series. The holders of the convertible redeemable preferred stock are entitled to one vote for each share of convertible redeemable preferred stock held by them. The holders of the convertible redeemable preferred stock vote together as a single class with the holders of the common stock on substantially all matters requiring stockholder action. (b) Series A junior non-cumulative preferred stock -- Authorized 500,000 shares, par value $.10 per share. The shares are authorized for issuance pursuant to certain rights that trade with the Company's common stock and convertible redeemable preferred stock. There are no shares of the Series A junior non-cumulative preferred stock outstanding; however, all of the shares have been reserved for issuance upon the exercise of the stock purchase rights as discussed in "Stockholder Rights Plan" below. (c) Undesignated as to series -- None outstanding. Shares may be issued in one or more classes or series with preferences, limitations and relative rights as determined by the Company's Board of Directors at the time of issuance. Any shares issued will rank, as to dividends and liquidation preference, junior to the convertible redeemable preferred stock, if any shares are outstanding. Class B Warrants -- In connection with the Plan of Reorganization, pre-Effective Date stockholders received Class B warrants to acquire an aggregate of 1,904,757 shares of common stock for $20 per share, of which 4,860 warrants had been exercised at December 31, 1996. The warrants expire in June 1998. Stockholder Rights Plan -- On November 7, 1996, the Company adopted a rights plan and declared a dividend distribution of one preferred stock purchase right for each outstanding share of the Company's common stock and each outstanding share of the Company's convertible redeemable preferred stock held of record on December 4, 1996. Under certain circumstances, each right entitles the holder to purchase 1/100th of a share of the Company's Series A junior non-cumulative preferred stock ("Series A Preferred Stock") at a price of $80 ("Purchase Price"), subject to certain antidilution provisions. The rights are not exercisable until the earlier to occur of (i) 10 days following a public announcement that (a) a person or group has acquired, or has the right to acquire, 15% or more of the outstanding shares of the Company's common stock or (b) an institutional stockholder has acquired or has the right to acquire 20% or more of the outstanding shares of common stock, or (ii) 10 business days following the commencement of, or announcement of an intention to make, a tender offer for 15% or more of the then outstanding shares of common stock. In such event, each holder of a right (other than the acquiring person) shall have the right to receive, upon exercise, the number of shares of common stock or of 1/100th of a share of Series A Preferred Stock having a value of equal to two times the Purchase Price. In the event of any merger, consolidation or other transaction in which the Company's common stock is exchanged, each holder of a right, upon exercise, will be entitled to receive common stock of the acquiring company equal to two times the Purchase Price. Unless and until the rights become exercisable, they will be transferred with the Company's common stock and convertible redeemable preferred stock. At the option of the Company, the rights are redeemable prior to becoming exercisable at $.01 per right. Unless earlier redeemed or exchanged by the Company, the rights will expire on November 7, 2006. Until a right is exercised, the holder will have no rights as a stockholder of the Company, including the right to vote or receive dividends. The Credit Facility and the senior note indentures contain restrictions on the (i) payment of dividends on the Company's common and preferred stock and (ii) purchase, redemption, retirement or other acquisition of 32 33 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the Company's common and preferred stock, other than upon conversion of the convertible redeemable preferred stock into common stock and upon exercise into the Company's common stock of Class B warrants and options to acquire common stock issued pursuant to stock options and stock payment plans. (5) STOCK PLANS Stock Option Plans The Company has three stock option plans for key employees (the "1997 Employee Plan", which is subject to stockholder approval which will be sought at the 1997 annual meeting of stockholders, the "1996 Employee Plan" and the "1993 Employee Plan") to purchase a maximum of 1,500,000 shares (500,000 shares for each plan) of the Company's common stock. Under all three plans, the Company may grant incentive and non-qualified stock options. The Company also has a stock option plan whereby options may be granted to non-employee directors (the "Director Plan") to purchase a maximum of 100,000 shares of the Company's common stock. Options under the Director Plan are granted annually in a fixed amount. Options granted under the Employee Plans will be exercisable at not less than the closing price of the common stock on date of grant. Options granted under the Director Plan will be exercisable at not less than the average closing price of the common stock for the ten consecutive trading days prior to the date of grant. However under the Employee Plans and the Director Plan, the grant price will not be less than 95% of the average closing price of the common stock for the 20 consecutive trading days prior to the date of grant. The options are exercisable as specified in the stock option agreements relating to the options and may not be exercised later than ten years from the date of grant and, with respect to the 1997 Employee Plan, no options may be exercised prior to stockholder approval. As discussed in New Pronouncement in Note 1, the Company adopted SFAS No. 123 as of January 1, 1996. As permitted by SFAS No. 123, the Company has elected to continue to account for its stock option plans under the accounting rules prescribed by APB 25, under which no compensation costs are recognized as an expense. Had compensation costs for the stock options been determined using the fair value method of accounting as recommended by SFAS No. 123, net income and earnings per share for 1996 and 1995 would have been reduced to the following proforma amounts:
1996 1995 ------- ------- Net income -- As reported............................................... $44,188 $36,920 Proforma.................................................. $43,810 $36,434 Primary income per share -- As reported............................................... $ 3.70 $ 3.14 Proforma.................................................. $ 3.65 $ 3.07 Fully diluted income per share -- As reported............................................... $ 3.25 $ 2.68 Proforma.................................................. $ 3.22 $ 2.63
Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting proforma compensation cost may not be representative of that to be expected in future years. 33 34 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of the status of the stock option plans at December 31, 1996, 1995 and 1994 and changes during the years then ended is presented below:
1996 1995 1994 ------------------ ------------------ ------------------ WTD AVG WTD AVG WTD AVG EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------- -------- ------- -------- ------- -------- Options outstanding at beginning of year................................. 531,169 $22.65 403,500 $21.87 308,500 $23.98 Options granted: Employee Plans....................... 102,000 $24.13 122,000 $25.70 95,000 $15.13 Director Plan........................ 9,000 $23.74 9,000 $16.82 9,000 $22.71 Options exercised...................... -- $ -- -- $ -- -- $ -- Options forfeited...................... (2,669) $24.09 (3,331) $24.57 (9,000) $23.65 ------- ------- ------- Options outstanding at end of year..... 639,500 $22.89 531,169 $22.65 403,500 $21.87 ======= ======= ======= Options exercisable at end of year..... 551,179 $23.12 365,537 $23.32 143,834 $23.74 ======= ======= ======= Weighted average fair value per share of option granted -- Employee Plans....................... $ 8.39 $ 7.87 N/A Director Plan........................ $ 9.97 $ 7.96 N/A
Options outstanding at December 31, 1996 had exercise prices ranging from $15.13 to $27.75 per share and a weighted average remaining contractual life of 8.3 years. Options exercisable at December 31, 1996 had a weighted average remaining contractual life of 8.3 years. The fair value of each option granted in 1996 and 1995 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest of 6.6% for 1996 and 5.9% for 1995; expected lives of 7.1 years for 1996 and 6.1 years for 1995; and expected volatility of 25.0% for both years. Stock Payment Plan The Company's employee stock payment plan (the "Payment Plan") provides that up to 25% of a key employee's annual incentive pay (compensation other than base salary), which is charged to expense when earned, may be payable in shares of the Company's common stock as determined by the Company's Board of Directors, of which up to 50% of the shares payable will vest to the employee not later than two years after the end of the incentive compensation year and will expire in the event the employee is not employed by the Company on the vesting date. Shares to be issued under the Payment Plan will be valued at the average closing price of the common stock for a ten consecutive trading day period as defined in the Payment Plan, but in no event will the average closing price be less than 95% of the average closing price of the common stock for the 20 consecutive trading day period as defined in the Payment Plan. The Payment Plan has a five-year term and commenced on January 1, 1994. In 1996, 7,905 shares were issued to officers and key employees at prices ranging from $25.05 to $27.93 per share and in 1995, 21,731 shares were issued to officers and key employees at prices ranging from $16.74 to $17.99 per share. As of December 31, 1996, 220,364 shares were available for issuance under the Payment Plan. Restricted Stock Plan The Company has a restricted stock plan (the "Restricted Plan") for officers and other key employees. Under the Restricted Plan, a maximum of 250,000 shares of the Company's common stock may be granted as restricted stock. Shares granted under the Restricted Plan will be granted at the average closing price of the common stock for a ten consecutive trading day period as defined in the Restricted Plan. Participants in the 34 35 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Restricted Plan may not dispose of any of the stock granted for five years from date of grant. Restrictions lapse at the rate of 20% of the stock granted per year, commencing with the end of the fifth year. As defined in the Restricted Plan, the lapsing of the restrictions may be accelerated if certain stipulated improvements in the Company's return on assets over the base year are achieved or if a change in control occurs. As of January 1, 1995, a total of 144,547 restricted shares of the Company's common stock were issued to officers and other key employees. The market value of the shares issued of $2,600 has been charged to stockholders' equity as Unearned Compensation on Restricted Stock and is being amortized to expense over a nine-year period. (6) PROFIT SHARING The Company has a qualified profit sharing plan for the benefit of its employees which may be terminated at any time at the option of the Company. The annual contributions may be made in such amount as the Board of Directors of the Company determines, limited to 15% of the total compensation (as defined in the profit sharing plan) of all participating employees. The aggregate amounts accrued for contribution to the profit sharing plan for distribution to employees were $1,051 in 1996, $991 in 1995 and $891 in 1994. (7) COMMITMENTS AND CONTINGENCIES Housing The Company is significantly affected by the cyclical nature of the home building industry, which is sensitive to fluctuations in economic activity, interest rates and the level of consumer confidence. The sale of new homes and profitability from sales are heavily influenced by the level and expected direction of interest rates. Increases in interest rates tend to have a depressing effect on the market for new homes in view of increased monthly mortgage costs to potential home buyers. As of December 31, 1996, the Company had refundable and nonrefundable deposits totaling $28,035 for options and contracts to purchase undeveloped land and finished lots having a total purchase price of approximately $267,000. The Company had incurred pre-development costs of $42,653 relating to these properties. These options expire at various dates through 2002. The Company is involved from time to time in litigation arising from the normal course of business, none of which, in the opinion of the Company, are expected to have a material adverse effect on the financial position or results of operations of the Company. Financial Services At December 31, 1996, Mortgage, in connection with managing the interest rate market risk on its inventory loans held for sale of $38,833 and Loan Quotes of $18,755, had outstanding $41,370 (face amount of $42,000 and estimated fair value of $41,245) of Forward Contracts and $14,038 of Forward Commitments which expire over the next three months, when the inventory loans are expected to be sold and Loan Quotes are expected to close. At December 31, 1996, the estimated fair value of the inventory loans and Loan Quotes hedged by Forward Contracts and not covered by the Forward Commitments was $42,760. Mortgage reduces its risk of nonperformance under the Hedging Contracts by entering into those contracts with reputable security dealers and investors and evaluating their financial condition. However, there is a risk if certain of the Loan Quotes do not close or are renegotiated in a declining interest rate market and close at lower prices. Mortgage reduces this risk by collecting commitment fees on certain of the Loan Quotes along with entering into Forward Commitments to deliver loans to investors on a best efforts basis and adjusting, from time to time, the estimate of loan closings covered by Forward Contracts. 35 36 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (8) UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY INFORMATION Summarized quarterly financial information for the years ended December 31, 1996 and 1995 is as follows. See Notes 1 and 3 for discussions of 1996 fourth quarter adjustments.
THREE MONTHS ENDED --------------------------------------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, 1996 1996 1996 1996 --------- -------- ------------- ------------ Housing -- Operating revenues.................... $267,907 $288,428 $312,275 $322,596 Cost of products sold................. $218,350 $235,563 $253,756 $264,227 Operating income...................... $ 16,276 $ 17,348 $ 20,644 $ 7,939 Financial Services -- Operating revenues.................... $ 4,855 $ 4,808 $ 5,397 $ 5,184 Operating income...................... $ 1,154 $ 1,471 $ 1,427 $ 1,342 Corporate General and Administrative.... $ 2,754 $ 2,993 $ 2,945 $ 3,008 Net Income.............................. $ 9,319 $ 10,050 $ 12,145 $ 12,674 Income Per Common and Common Equivalent Share -- Primary............................... $ .77 $ .84 $ 1.03 $ 1.07 Fully diluted......................... $ .69 $ .75 $ .91 $ .93
THREE MONTHS ENDED --------------------------------------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, 1995 1995 1995 1995 --------- -------- ------------- ------------ Housing -- Operating revenues.................... $260,127 $255,564 $282,422 $294,170 Cost of products sold................. $211,332 $208,985 $231,302 $239,544 Operating income...................... $ 15,726 $ 14,165 $ 17,575 $ 20,063 Financial Services -- Operating revenues.................... $ 3,075 $ 3,714 $ 4,286 $ 4,587 Operating income...................... $ 385 $ 853 $ 1,141 $ 954 Corporate General and Administrative.... $ 3,087 $ 2,515 $ 2,973 $ 3,215 Net Income.............................. $ 8,140 $ 7,814 $ 9,839 $ 11,127 Income Per Common and Common Equivalent Share -- Primary............................... $ .70 $ .67 $ .83 $ .92 Fully diluted......................... $ .62 $ .59 $ .72 $ .81
(9) RECEIVABLES The Company had housing and financial services receivables of approximately $1,973 in 1996 and $6,574 in 1995 that were due after one year. The 1996 balance due after one year included notes and mortgage notes receivable of $151 with interest rates ranging from 8.0% to 10.5%. A majority of the balance matures within five years. 36 37 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (10) ACCRUED EXPENSES At December 31, 1996 and 1995, accrued expenses and other current liabilities consisted of the following:
1996 1995 ------- ------- Housing -- Customer deposits..................... $18,762 $16,887 Salaries and other compensation....... 13,633 12,013 Interest.............................. 4,023 2,206 Taxes, other than income taxes........ 3,739 2,852 Income taxes.......................... 1,910 6,266 Other................................. 8,905 5,846 ------- ------- $50,972 $46,070 ======= ======= Financial Services -- Accounts payable...................... $14,621 $12,935 Other................................. 6,233 5,883 ------- ------- $20,854 $18,818 ======= =======
37 38 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information relating to the directors of the Company is incorporated by reference from the Nominees for Directors Section, pages 2 through 5, of the Company's Proxy Statement, dated March 17, 1997, for the Annual Meeting of Stockholders to be held on April 23, 1997, to be filed with the Securities and Exchange Commission pursuant to Section 14 of the Securities Exchange Act of 1934 (the "1997 Proxy Statement"). ITEM 11. EXECUTIVE COMPENSATION The information is incorporated by reference from the Executive Compensation Section, pages 6 through 8 of the 1997 Proxy Statement (see Part I-Item 4, Executive Officers of the Company). ITEM 12. COMMON STOCK The information relating to the security ownership of certain beneficial owners and management is incorporated by reference from the Security Ownership of Management and Certain Beneficial Owners Section, pages 19 and 20 of the 1997 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. and 2. The following financial statements and financial statement schedules are filed as part of this Report: See Index to Financial Statements -- Item 8. (a) 3. Exhibits
EXHIBIT NO. DESCRIPTION ----------- ----------- 2.1 -- First Amended Consolidated Plan of Reorganization of U.S. Home Corporation and certain of its affiliates dated April 1, 1993. Incorporated by reference from exhibit 2.1 to U.S. Home Corporation's Current Report on Form 8-K filed June 9, 1993. 2.2 -- Modification to "USH Debtors' First Amended Consolidated Plan of Reorganization." Incorporated by reference from exhibit 2.2 to U.S. Home Corporation's Current Report on Form 8-K filed June 9, 1993. 2.3 -- First Amended Joint Plan of Reorganization of certain affiliates of U.S. Home Corporation dated April 1, 1993. Incorporated by reference from exhibit 2.3 to U.S. Home Corporation's Current Report on Form 8-K filed June 9, 1993. 2.4 -- Findings of Fact, Conclusions of Law and Order Confirming the First Amended Consolidated Plan of Reorganization of U.S. Home Corporation and certain of its affiliates. Incorporated by reference from exhibit 28.1 to U.S. Home Corporation's Current Report on Form 8-K filed June 9, 1993.
38 39
EXHIBIT NO. DESCRIPTION ----------- ----------- 2.5 -- Findings of Fact, Conclusions of Law and Order Confirming the First Amended Joint Plan of Reorganization of certain affiliates of U.S. Home Corporation. Incorporated by reference from exhibit 28.2 to U.S. Home Corporation's Current Report on Form 8-K filed June 9, 1993. 3.1 -- Restated Certificate of Incorporation of U.S. Home Corporation effective on June 21, 1993. Incorporated by reference from exhibit 3.1 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 3.1 (i) -- Certificate of Amendment of Restated Certificate of Incorporation as filed with the State of Delaware on May 13, 1994. Incorporated by reference from exhibit 3.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1994. 3.1 (ii) -- Certificate of Retirement, dated as of September 11, 1995. Incorporated by reference from exhibit 3.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1996. 3.1 (iii) -- Certificate of Retirement, dated as of July 31, 1996. Incorporated by reference from exhibit 3.2 to U.S. Home Corporation's Quarterly Report on 10-Q for the period ended September 30, 1996. 3.2 -- Certificate of Designation, Preferences and Rights of Series A Junior Non-Cumulative Preferred Stock as filed with the State of Delaware on December 2, 1996. 3.3 -- Amended and Restated By-Laws of U.S. Home Corporation, dated as of October 17, 1996. Incorporated by reference from exhibit 3.1 (ii) to U.S. Home Corporation's Current Report on Form 8-K filed November 8, 1996. 10.1 -- Credit Agreement, dated as of September 29, 1995, between U.S. Home Corporation and The First National Bank of Chicago, as Agent. Incorporated by reference from exhibit 10.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for period ended September 30, 1995. 10.1 (i) -- Consent and First Amendment to Credit Agreement, dated as of February 9, 1996, between U.S. Home Corporation and the First National Bank of Chicago, as Agent. Incorporated by reference from exhibit 10 to U.S. Home Corporation's Current Report on Form 8-K filed February 12, 1996. 10.1 (ii) -- Second Amendment to Credit Agreement, dated as of September 25, 1996, between U.S. Home Corporation and the First National Bank of Chicago, as Agent. Incorporated by reference from exhibit 10.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for period ended September 30, 1996. 10.1 (iii) -- Third Amendment to Credit Agreement, dated as of November 4, 1996, between U.S. Home Corporation and The First National Bank of Chicago, as Agent. Incorporated by reference from exhibit 10 to U.S. Home Corporation's Current Report on Form 8-K filed November 8, 1996. 10.2 -- Trust Indenture, dated as of June 21, 1993, by and between U.S. Home Corporation and IBJ Schroder Bank & Trust Company, as trustee, relating to U.S. Home Corporation's 9.75% Senior Notes due 2003. Incorporated by reference from exhibit 10.2 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966).
39 40
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.3 -- Trust Indenture, dated as of November 3, 1993, by and between U.S. Home Corporation and Marine Midland Bank, N.A., as trustee, relating to U.S. Home Corporation's 4.875% Convertible Subordinated Debentures. Incorporated by reference from exhibit 4.1 to U.S. Home Corporation's Current Report on Form 8-K filed November 3, 1993. 10.4 -- Senior Indenture, dated as of February 16, 1996, by and between U.S. Home Corporation and IBJ Schroder Bank & Trust Company, as Trustee, relating to U.S. Home Corporation's 7.95% Senior Notes due 2001. Incorporated by reference from exhibit 4.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended March 31, 1996. 10.4 (i) -- Officers' Certificate, dated February 16, 1996, establishing the form and terms of the $75 million aggregate principal amount of 7.95% Senior Notes due 2001. Incorporated by reference from exhibit 4.2 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended March 31, 1996. 10.5 -- Rights Agreement, dated as of November 7, 1996, between U.S. Home Corporation and First Chicago Trust Company of New York, and exhibits thereto. Incorporated by reference from exhibit 4 to U.S. Home Corporation's Current Report on Form 8-K/A Amendment No. 1 filed November 18, 1996. 10.6 -- Warrant Agreement, dated as of June 21, 1993, between U.S. Home Corporation and First Chicago Trust Company of New York (as successor to The First National Bank of Boston) relating to U.S. Home Corporation's Class B Warrants. Incorporated by reference from exhibit 10.3 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.7 -- U.S. Home Corporation 1997 Employees' Stock Option Plan. 10.8 -- U.S. Home Corporation Amended and Restated 1996 Employees' Stock Option Plan. 10.9 -- U.S. Home Corporation's Amended and Restated 1993 Employees' Stock Option Plan. 10.10 -- U.S. Home Corporation's Amended and Restated Non-Employee Directors' Stock Option Plan. 10.11 -- U.S. Home Corporation's Amended and Restated Employee Stock Payment Plan. 10.12 -- U.S. Home Corporation's Corporate Officers and President of Operations Restricted Stock Plan. Incorporated by reference from exhibit 10.8 to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1994. 10.13 -- U.S. Home Corporation's Corporate Officers Incentive Compensation Program for the Incentive Period January 1, 1997 to December 31, 1997. 10.14 -- U.S. Home Corporation's Key Employees' Severance Plan. 10.15 -- U.S. Home Corporation's Retirement Plan for Non-Employee Directors. Incorporated by reference from exhibit 10 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1994. 10.16 -- Corrected copy of Amended and Restated Employment and Consulting Agreement, dated as of October 17, 1995, between U.S. Home Corporation and Robert J. Strudler. Incorporated by reference from exhibit 10.3 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1996. 10.16(i) -- First Amendment to Amended and Restated Employment and Consulting Agreement, dated as of February 11, 1997, between U.S. Home Corporation and Robert J. Strudler.
40 41
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.17 -- Corrected copy of Amended and Restated Employment and Consulting Agreement, dated as of October 17, 1995, between U.S. Home Corporation and Isaac Heimbinder. Incorporated by reference from exhibit 10.4 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1996. 10.17(i) -- First Amendment to Amended and Restated Employment and Consulting Agreement, dated as of February 11, 1997, between U.S. Home Corporation and Isaac Heimbinder. 10.18 -- Registration Rights Agreement, dated as of June 21, 1993, between U.S. Home Corporation and Loomis, Sayles & Company Incorporated, on behalf of certain holders of the common stock of U.S. Home Corporation. Incorporated by reference from exhibit 10.10 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.19 -- Trust Agreement, dated December 18, 1986, between U.S. Home Corporation, as Grantor, and Kenneth J. Hanau, Jr., as Trustee, with respect to retirement benefits for Isaac Heimbinder. Incorporated by reference from exhibit 10.25 to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1986. 10.20 -- Trust Agreement, dated December 18, 1986, between U.S. Home Corporation, as Grantor, and Kenneth J. Hanau, Jr., as Trustee, with respect to retirement benefits for Robert J. Strudler. Incorporated by reference from exhibit 10.26 to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1986. 10.21 -- Letter, dated as of March 20, 1990, between U.S. Home Corporation and William E. Reichard, as Successor Trustee, with respect to Trust Agreements dated December 18, 1986 between U.S. Home Corporation, as Grantor, Kenneth J. Hanau, Jr., as Trustee, with respect to retirement benefits for Robert J. Strudler and Isaac Heimbinder. Incorporated by reference from exhibit 10.19 to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. 10.22 -- First Amended and Restated Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of August 31, 1995, between U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by reference from exhibit 10.2 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1995. 10.22(i) -- First Amendment to First Amended and Restated Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of December 27, 1995, between U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by reference from exhibit 10.19(I) to U.S. Home Corporation's annual report on Form 10-K for the year ended December 31, 1995. 10.22(ii) -- 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. Incorporated by reference from exhibit 10.2 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1996. 10.22(iii) -- Third Amendment to First Amended and Restated Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of January 2, 1997, between U.S. Home Mortgage Corporation and Residential Funding Corporation. 10.23 -- U.S. Home Corporation's Amortizing Incentive Plan. Incorporated by reference from exhibit 4.2 to Registration Statement on Form S-8 of U.S. Home Corporation (Registration No. 33-64712).
41 42
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.24 -- Form of Indemnification Agreement for directors and executive officers. Incorporated by reference from exhibit 10.15 to Amendment No. 2 to Registration Statement on Form S-1 of U.S. Home Corporation (Registration No. 33-60638). 11 -- Computation of earnings per share 22 -- Subsidiaries of U.S. Home Corporation 23 -- Consent of Independent Public Accountants 27 -- Financial Data Schedule
(b) Report on Form 8-K The Company filed a Current Report on Form 8-K, on November 8, 1996, as amended on November 18, 1996, describing under Item 5 "Other Events" the terms of the preferred stock purchase rights which the Company distributed to the holders of the Company's Common Stock, $.01 par value per share, on December 4, 1996 by declaration of the Board of Directors of the Company on November 7, 1996. No other Current Report on Form 8-K was filed by the Company during October, November or December 1996. 42 43 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: February 21, 1997 U.S. HOME CORPORATION By: /s/ ISAAC HEIMBINDER ------------------------------------ Isaac Heimbinder President, Co-Chief Executive Officer and Chief Operating Officer By: /s/ CHESTER P. SADOWSKI ------------------------------------ Chester P. Sadowski Vice President, Controller and Chief Accounting Officer (principal accounting officer) By: /s/ THOMAS A. NAPOLI ------------------------------------ Thomas A. Napoli Vice President-Corporate Finance and Treasurer (principal financial officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ROBERT J. STRUDLER Director, Chairman and February 21, 1997 - ----------------------------------------------------- Co-Chief Executive Officer Robert J. Strudler (principal executive officer) /s/ ISAAC HEIMBINDER Director, President, February 21, 1997 - ----------------------------------------------------- Co-Chief Executive Officer Isaac Heimbinder and Chief Operating Officer /s/ GLEN ADAMS Director February 21, 1997 - ----------------------------------------------------- Glen Adams /s/ STEVEN L. GERARD Director February 21, 1997 - ----------------------------------------------------- Steven L. Gerard /s/ KENNETH J. HANAU, JR. Director February 21, 1997 - ----------------------------------------------------- Kenneth J. Hanau, Jr. /s/ MALCOLM T. HOPKINS Director February 21, 1997 - ----------------------------------------------------- Malcolm T. Hopkins /s/ JACK L. MCDONALD Director February 21, 1997 - ----------------------------------------------------- Jack L. McDonald
43 44
SIGNATURE TITLE DATE --------- ----- ---- /s/ CHARLES A. MCKEE Director February 21, 1997 - ----------------------------------------------------- Charles A. McKee /s/ GEORGE A. POOLE, JR. Director February 21, 1997 - ----------------------------------------------------- George A. Poole, Jr. /s/ HERVE RIPAULT Director February 21, 1997 - ----------------------------------------------------- Herve Ripault /s/ JAMES W. SIGHT Director February 21, 1997 - ----------------------------------------------------- James W. Sight
44 45 INDEX TO EXHIBITS
Exhibit Number ------- 3.2 Certificate of Designation, Preferences and Rights of Series A Junior Non-Cumulative Preferred Stock as filed with the State of Delaware on December 2, 1996 10.7 U.S. Home Corporation 1997 Employees' Stock Option Plan 10.8 U.S. Home Corporation Amended and Restated 1996 Employees' Stock Option Plan 10.9 U.S. Home Corporation's Amended and Restated 1993 Stock Option Plan 10.10 U.S. Home Corporation's Amended and Restated Non- Employee Directors' Stock Option Plan 10.11 U.S. Home Corporations' Amended and Restated Employee Stock Payment Plan 10.13 U.S. Home Corporation's Corporate Officers Incentive Compensation Program for the Incentive Period January 1, 1997 to December 31, 1997 10.14 U.S. Home Corporation's Key Employee Severance Plan 10.16 (i) First Amendment to Amended and Restated Employment and Consulting Agreement, dated as of February 11, 1997, between U.S. Home Corporation and Robert J. Strudler 10.17 (i) First Amendment to Amended and Restated Employment and Consulting Agreement, dated as of February 11, 1997, between U.S. Home Corporation and Isaac Heimbinder 10.22 Third Amendment to First Amended and Restated Warehousing Credit and Security Agreement (single- family mortgage loans), dated as of January 2, 1997, between U.S. Home Mortgage Corporation and Residential Funding Corporation 11 Computation of earnings per share 22 Subsidiaries of U.S. Home Corporation 23 Consent of Independent Public Accountants 27 Financial Data Schedule
EX-3.2 2 CERTIFICATE OF DESIGNATION 1 EXHIBIT 3.2 Exhibit A FORM OF CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A JUNIOR NON-CUMULATIVE PREFERRED STOCK of U.S. HOME CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware We, Robert J. Strudler, Chairman and Co-Chief Executive Officer, and Richard G. Slaughter, Vice President - Planning and Secretary, of U.S. Home Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "CORPORATION"), in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Corporation's Board of Directors (the "BOARD OF DIRECTORS") by the Restated Certificate of Incorporation, as amended, of the Corporation (the "CERTIFICATE OF INCORPORATION"), the Board of Directors on November 7, 1996 adopted by resolution this Certificate of Designation creating a series of 500,000 shares of Preferred Stock designated as Series A Junior Non-Cumulative Preferred Stock: Pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Certificate of Incorporation, a series of Preferred Stock of the Corporation be and it hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: 1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Non-Cumulative Preferred Stock," $.10 par value per share, and the number of shares constituting such series shall be 500,000. Such number of shares may be increased or decreased by the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Junior Non-Cumulative Preferred Stock to a number less than the number of shares outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Junior Non-Cumulative Preferred Stock. 2 2. Dividends and Distributions. (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock, including specifically holders of shares of the Corporation's Convertible Redeemable Preferred Stock, $.10 par value per share (the "CONVERTIBLE PREFERRED STOCK"), ranking prior and superior to the shares of Series A Junior Non-Cumulative Preferred Stock with respect to dividends, holders of record of the Series A Junior Non-Cumulative Preferred Stock will be entitled to receive if, when, and as declared by the Board of Directors, but only out of funds legally available for the payment of cash dividends under the laws of the State of Delaware, quarterly dividends payable on the last day of March, June, September and December in each year (each such date being referred to herein as a "QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Non-Cumulative Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock, $.01 par value per share ("COMMON STOCK"), or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), to be declared on the Common Stock with respect to the immediately preceding Quarterly Dividend Payment Date, or, in the case of the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Non-Cumulative Preferred Stock. In the event the Corporation shall at any time after November 7, 1996 (the "RIGHTS DECLARATION DATE") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Non-Cumulative Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Junior Non-Cumulative Preferred Stock as provided in paragraph (A) above immediately prior to the time when it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock) and at no other time. (C) Dividends on outstanding shares of Series A Junior Non-Cumulative Preferred Stock will not be cumulative. Dividends paid on the shares of Series A Junior Non-Cumulative Preferred Stock in an amount less than the total amount of such dividends at the time declared on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. Such dividends, if any, will be payable to holders of record on the date fixed for such purpose by the Board of Directors in advance of the payment of each such dividend. 2 3 3. Voting Rights. (A) The holders of the Series A Junior Non-Cumulative Preferred Stock, voting together as a single class (except as otherwise provided herein or by law) with the holders of the Convertible Preferred Stock and the holders of the Common Stock, will have the right to vote on all matters requiring action of the stockholders of the Corporation or submitted to such stockholders for action, except when otherwise required by law. (B) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Non-Cumulative Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Non-Cumulative Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (C) In the event the Board of Directors declares a dividend on the Series A Junior Non-Cumulative Preferred Stock, and the Corporation fails to pay such dividend for six consecutive fiscal quarters ("UNPAID DIVIDENDS") following the date of such declaration, the holders of the outstanding shares of Series A Junior Non-Cumulative Preferred Stock, voting as a single class, will be entitled, by written notice to the Corporation given by the holders of a majority of the Series A Junior Non-Cumulative Preferred Stock then outstanding or by ordinary resolution passed by the holders of a majority of the Series A Junior Non-Cumulative Preferred Stock then outstanding present in person or by proxy at a separate general meeting of such holders convened for the purpose, to elect two additional directors to the Board of Directors, to remove any such directors from office and to elect persons in place of such directors. No later than 30 days after such entitlement arises, if written notice by a majority of the holders of the Series A Junior Non- Cumulative Preferred Stock then outstanding has not been given as provided for in the preceding sentence, the Board of Directors, or an authorized committee thereof, will convene a separate general meeting for the foregoing purpose. In the event the Board of Directors or such authorized committee fails to convene such meeting within such 30-day period, the holders of 10 percent of the shares of the Series A Junior Non-Cumulative Preferred Stock then outstanding will be entitled to convene such meeting. The provisions of the Certificate of Incorporation relating to the convening and conduct of Special Meetings (as defined therein) will apply with respect to any such separate general meeting. Directors elected as aforesaid will serve until the next Annual Meeting (as defined in the Certificate of Incorporation). Upon the Corporation having paid all Unpaid Dividends in full, the term of any directors elected pursuant to this Section 3(C) will cease, and the number of directors of the Corporation will automatically be decreased by two. 3 4 (D) With respect to all matters upon which the holders of the Series A Junior Non-Cumulative Preferred Stock, the Convertible Preferred Stock and Common Stock may be entitled to vote, voting together as a single class, such matters will require the affirmative vote of the holders of a majority of the votes cast by the holders of the Series A Junior Non-Cumulative Preferred Stock, the Convertible Preferred Stock and Common Stock entitled to vote, voting together as a single class, except where a higher or lower vote is required by (i) the General Corporation Law of the State of Delaware, (ii) the provisions of the Certificate of Incorporation, (iii) the provisions of the Corporation's Amended and Restated By-Laws or (iv) the provisions of this Certificate of Designation, Preferences and Rights. (E) Except as set forth herein, holders of Series A Junior Non-Cumulative Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Convertible Preferred Stock and Common Stock as set forth herein) for taking any corporate action. 4. Certain Restrictions. For so long as any dividend declared on the Series A Junior Non-Cumulative Preferred Stock is unpaid, the Corporation shall not (i) declare or pay dividends on or make any other distributions on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Non-Cumulative Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Non-Cumulative Preferred Stock, except dividends paid ratably on the Series A Junior Non-Cumulative Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Non-Cumulative Preferred Stock; provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Non-Cumulative Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Junior Non-Cumulative Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Non-Cumulative Preferred Stock, 4 5 except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. 5. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Non-Cumulative Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Non-Cumulative Preferred Stock shall have received $100 per share, plus an amount equal to declared and unpaid dividends and distributions thereon to the date of such payment; provided, that the holders of shares of Series A Junior Non-Cumulative Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment as hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock or (ii) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Non-Cumulative Preferred Stock, except distributions made ratably on the Series A Junior Non-Cumulative Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up (the "SERIES A LIQUIDATION PREFERENCE"). (B) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the aggregate amount to which holders of shares of Series A Junior Non-Cumulative Preferred Stock were entitled immediately prior to such event under the proviso in clause (i) of Section 5(A) shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (C) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Non-Cumulative Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. (D) For the purpose hereof, the voluntary sale, lease, exchange or transfer, whether for cash, stock, property or otherwise, of all or substantially all or part of the Corporation's property or assets to, or a consolidation or merger of the Corporation with or into, 5 6 one or more other corporations or partnerships, or the reduction of the Corporation's capital stock, will not be deemed to be a liquidation, dissolution or winding up of the Corporation. 6. Ranking The Series A Junior Non-Cumulative Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock and senior to the Common Stock, as to the payment of dividends and the distribution of assets, unless the terms of any such other stock shall provide otherwise. 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Non-Cumulative Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Non-Cumulative Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 8. No Redemption. The shares of Series A Junior Non-Cumulative Preferred Stock shall not be redeemable. 9. Reacquired Shares. Any shares of Series A Junior Non-Cumulative Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designation creating a series of Preferred Stock of the Corporation or any similar stock or as otherwise required by law. 6 7 10. No Preemptive Rights Holders of Series A Junior Non-Cumulative Preferred Stock will have no preemptive rights to subscribe for or purchase additional shares of any class of stock or other security of the Corporation. 11. Legends In addition to any other legend required to be set forth on each certificate representing Series A Junior Non-Cumulative Preferred Stock pursuant to the Certificate of Incorporation or by law, each such certificate will bear the following legend: "U.S. HOME CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH HOLDER OF THE SERIES A JUNIOR NON-CUMULATIVE PREFERRED STOCK WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL, OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF U.S. HOME CORPORATION OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS." 12. Amendment. The Certificate of Incorporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Non-Cumulative Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Non-Cumulative Preferred Stock, voting separately as a class. 13. Fractional Shares. Series A Junior Non-Cumulative Preferred Stock may be issued in fractions of a share, which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Non- Cumulative Preferred Stock. 7 8 IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this 8th day of November, 1996. /s/ Robert J. Strudler ------------------------- Robert J. Strudler Chairman and Co-Chief Executive Officer (Corporate Seal) Attest: /s/ Richard G. Slaughter - -------------------------- Richard G. Slaughter Vice President - Planning and Secretary 8 EX-10.7 3 US HOME CORP. 97 EMPLOYEES' STOCK OPTION PLAN 1 EXHIBIT 10.7 U.S. HOME CORPORATION 1997 EMPLOYEES' STOCK OPTION PLAN 1. PURPOSES. The 1997 Employees' Stock Option Plan (the "Stock Option Plan") is intended to provide an incentive for key employees of U.S. Home Corporation (the "Company") and its subsidiaries in order to encourage them to remain in the employ of the Company and contribute to the Company's success by granting them stock options. 2. ADMINISTRATION. (a) The Board of Directors of the Company (the "Board") will (i) administer the Stock Option Plan, (ii) establish, subject to the provisions of the Stock Option Plan, such rules and regulations as it may deem appropriate for the proper administration of the Stock Option Plan and (iii) make such determinations under, and such interpretations of, and take such steps in connection with, the Stock Option Plan or the options issued thereunder as it may deem necessary or advisable. (b) The Board may from time to time appoint a Committee (the "Committee") which will be comprised of at least three members of the Board, all of whom are to be non-employee directors (as defined herein) and outside directors (as defined herein), and may delegate to the Committee full power and authority to take any and all action required or permitted to be taken by the Board under the Stock Option Plan, whether or not the power and the authority of the Committee is hereinafter fully set forth. The members of the Committee may be appointed from time to time by the Board and serve at the pleasure of the Board. The Board, if each member is an outside director, or the Committee, as applicable, will hereinafter be referred to as the "Administrator." (c) For the purposes hereof, (i) a "non-employee director" is a director who, on a given date, is a non-employee director within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) an "outside director" is a director who, on a given date, is an outside director within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "IRC"). 3. STOCK. The stock (the "Stock") to be made the subject of an option under the Stock Option Plan will be the shares of common stock, $.01 par value per share, of the Company, whether authorized and unissued or treasury stock. The total amount of Stock for which options may be granted under the Stock Option Plan will not exceed, in the aggregate, 500,000 shares, subject to adjustment in accordance with the provisions of Section 11 hereof. Any shares of Stock which were the subject of unexercised portions of any terminated or expired options may again be subject to the grant of options under the Stock Option Plan. 2 4. AWARD OF OPTIONS. (a) The Administrator may award options to those Officers (as defined herein) selected by the Administrator in the amounts determined by the Administrator, provided that the maximum number of shares of Stock which may be the subject of options granted to any individual in any calendar year is 250,000. Such options will be exercisable in accordance with the terms hereof. (b) The Administrator may, at any time prior to the expiration of 10 years from the date on which the Stock Option Plan is adopted, authorize the granting of options to such members of that class of the Company's key employees consisting of the officers and managerial or supervisory personnel, who are salaried employees of the Company (the "Officers"), as it may select, and in such amounts and in such installments as it will designate, subject to the provisions of this Section. The Administrator, in its sole discretion, will designate such options as (i) "Incentive Stock Options" within the meaning of Section 422 of the IRC, (ii) other stock options subject to the terms and conditions set forth herein ("Nonqualified Stock Options") or (iii) any combination of Incentive Stock Options and Nonqualified Stock Options. In the event that any portion of an option cannot be exercised as an Incentive Stock Option by reason of the limitation contained in Section 422(d) of the IRC, such portion will be treated as a Nonqualified Stock Option. (c) No person will be eligible to receive or hold an Incentive Stock Option under the Stock Option Plan if, immediately after such option is granted, such person owns (within the meaning of Section 422 of the IRC) stock possessing more than 10 percent of the total combined voting power or value of all classes of capital stock of the Company. (d) All Incentive Stock Options will be evidenced by a written agreement in substantially the form of Exhibit A annexed hereto, and all Nonqualified Stock Options will be evidenced by a written agreement in substantially the form of Exhibit B annexed hereto (each an "Option Agreement"). 5. PRICE. (a) The exercise price of an option will be the closing price of the Stock on the New York Stock Exchange ("NYSE") on the day that such option is granted if a sale is executed on such Exchange on that day, and if there was no such sale, the price will be the closing price of the Stock on the last preceding day on which a sale was executed. Notwithstanding the foregoing, the exercise price of such option will in no event be less than 95% of the average of the daily last sale prices of the Stock on the NYSE (or if no sale takes place on any such day on the NYSE, the average of the last reported closing bid and asked prices on such day as officially quoted on the NYSE) for the 20 consecutive trading days immediately prior to the date such option is granted, unless otherwise determined by the Administrator. 2 3 (b) The closing price of the Stock, as of any particular day, will be as reported in The Wall Street Journal; provided, however, that if the Stock is not listed on the New York Stock Exchange on the date the particular option is granted, the exercise price will be not less than the fair market value of the shares of Stock covered by the option at the time that the option is granted, as determined by the Administrator based on such empirical evidence as it deems to be necessary under the circumstances. 6. TERM. Subject to Sections 8 and 9 hereof, an option may be exercised by the holder thereof (a "Holder") at such times and in such installments, if any, as may be specified in such Holder's Option Agreement, which will provide that no option will be exercised in any amount later than 10 years from the date such option was granted. 7. TRANSFERABILITY. No option will be transferable by a Holder other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the IRC or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). During the lifetime of a Holder, the option will be exercisable only by such Holder. An Officer who acquires Stock hereunder will only transfer such Stock in compliance with applicable federal and state securities laws. 8. TERMINATION OF EMPLOYMENT. Except to the extent otherwise specified by the Administrator, if, on or after the date an option is granted under the Stock Option Plan, (i) (A) a Holder's employment with the Company is terminated by the Company for any reason other than (x) for Cause (as defined in the applicable Option Agreement), or (y) death or disability (within the meaning of Section 22(e)(3) of the IRC), (B) the Holder retires in accordance with the Company's normal retirement policy or with the consent of the Board, or (C) such Holder's employment with the Company is Constructively Terminated (as defined in the applicable Option Agreement), the Holder will have the right, not later than the earlier of (a) three months after such termination or retirement or (b) the termination date of the option, to exercise the option, to the extent the right to exercise such option will have accrued at the date of such termination of employment or retirement, except to the extent that such option theretofore will have been exercised, or (ii) a Holder's employment with the Company is terminated (A) by the Company for Cause, or (B) by the Holder for any reason other than due to (x) such Holder being Constructively Terminated, (y) such Holder's retirement in accordance with the Company's normal retirement policy or with the consent of the Board or (z) such Holder's death or disability, the right to exercise the option will thereupon terminate. 3 4 9. DEATH OR DISABILITY. (a) Except to the extent otherwise specified by the Administrator and as provided in paragraph (b) of this Section 9, if a Holder's employment with the Company is terminated because of disability (within the meaning of Section 22(e)(3) of the IRC), the disabled Holder will have the right, not later than the earlier of (i) one year after such termination or (ii) the termination date of the option, to exercise the option, to the extent the right to exercise such option will have accrued at the date of such termination of employment, except to the extent that such option theretofore has been exercised. (b) Except to the extent otherwise specified by the Administrator, if a Holder dies while in the employ of the Company or within three months after termination of employment with the Company because of disability, such Holder's personal representative or the person or persons to whom the option will have been transferred by will or by the laws of descent and distribution will have the right, not later than the earlier of (i) one year after the date of such Holder's death or (ii) the termination date of the option, to exercise such option, to the extent the right to exercise such option shall have accrued at the date of death or disability, except to the extent such option theretofore will have been exercised. 10. PAYMENT FOR STOCK. (a) The purchase price of Stock issued upon exercise of options granted hereunder will be paid in full on the date of purchase. Payment will be made either in cash or such other consideration as the Administrator deems appropriate, including, without limitation, Stock already owned by the Holder or Stock to be acquired by the Holder upon exercise of the option having a total fair market value, as determined by the Administrator, equal to the purchase price, or a combination of cash and Stock having a total fair market value, as so determined, equal to the purchase price. (b) The Company may make loans to such Holders as the Administrator, in its discretion, may determine in connection with the exercise of options granted under the Stock Option Plan; provided, however, that the Administrator will have no discretion to authorize the making of any loan where the possession of such discretion or the making of such loan would result in a "modification" (as defined in Section 424(h) of the IRC) of any Incentive Stock Option. Such loans will be subject to the following terms and conditions and such other terms and conditions as the Administrator will determine not inconsistent with the Stock Option Plan. Such loans will bear interest at such rates as the Administrator will determine from time to time, which rates may be below then current market rates (except in the case of Incentive Stock Options). In no event may any such loan exceed the fair market value, at the date of exercise, of the shares covered by the option, or portion thereof, exercised by the Holder. No loan will have an initial term exceeding five years, but any such loan may be renewable at the discretion of the Administrator. When a loan is made, the Holder will pledge to the Company shares of Stock having a fair market value at least equal to the principal amount of the loan. Every loan will 4 5 comply with all applicable laws, regulations and rules of the Federal Reserve Board and any other governmental agency having jurisdiction over the Company. (c) Stock will not be issued upon the exercise of options unless and until the aggregate amount of federal, state or local taxes of any kind required by law to be withheld with respect to the exercise of such options have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe, including, without limitation, payment of any such taxes by exchanging shares of Stock previously owned by the Holder or acquired upon the exercise of an option. 11. STOCK ADJUSTMENTS. (a) The total amount of Stock for which options may be granted under the Stock Option Plan and option terms (both as to the number of shares of Stock and the price of the option) will be appropriately adjusted for any increase or decrease in the number of outstanding shares of Stock resulting from payment of a stock dividend on the Stock, a subdivision or combination of the Stock, or a reclassification of the Stock, and (in accordance with the provisions contained in the following paragraph) in the event of a consolidation or a merger in which the Company will be the surviving corporation. (b) After any merger of one or more corporations into the Company in which the Company will be the surviving corporation, or after any consolidation of the Company and one or more other corporations, each Holder will, at no additional cost, be entitled, upon any exercise of his option, to receive, in lieu of the number of shares of Stock as to which such option will then be so exercised, the number and class of shares of stock, other securities or other consideration to which such Holder would have been entitled pursuant to the terms of the applicable agreement of merger or consolidation if at the time of such merger or consolidation such Holder had been a Holder of record of a number of shares of Stock equal to the number of shares for which such option may then be so exercised. Comparable rights will accrue to each Holder in the event of successive mergers or consolidations of the character described above. (c) In the event of any sale of all or substantially all of the assets of the Company, or any merger of the Company into another corporation, or any dissolution or liquidation of the Company or, in the discretion of the Board, any consolidation or other reorganization in which it is impossible or impracticable to continue in effect any options, all options granted under the Stock Option Plan and not previously exercised will become exercisable by Holders who are at such time in the employ of the Company or any of its subsidiaries or divisions, commencing 10 days before the scheduled closing of such event, and will terminate unless exercised at least one business day before the scheduled closing of such event; provided, that any such exercise will be conditioned on the closing of such transaction; and provided further, that the Administrator may, in its discretion, require instead that all options granted under the Stock Option Plan and not previously exercised will be assumed by such other corporation on the basis provided in the preceding paragraph. 5 6 (d) The adjustments described in this Section 11 and the manner of application of the foregoing provisions will be determined by the Administrator in its sole discretion. Any such adjustment may provide for the elimination of any fractional share which might otherwise become subject to an option. 12. RIGHTS AS A STOCKHOLDER. A Holder or a transferee of an option will have no rights as a stockholder with respect to any share of Stock covered by such Holder's option until such Holder has become the Holder of record of such share of Stock, and, except for stock dividends as provided in Section 11 hereof, no adjustment will be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights in respect of such share for which the record date is prior to the date on which he will become the holder of record thereof. 13. AMENDMENT AND TERMINATION. The Board may at any time terminate, amend or modify the Stock Option Plan in any respect it deems suitable; provided, however, that no such action of the Board, without the approval of the stockholders of the Company, may (i) materially increase the benefits accruing to employees eligible to receive options under the Stock Option Plan, (ii) materially increase the total amount of Stock for which options may be granted under the Stock Option Plan or (iii) materially modify the requirements for participation in the Stock Option Plan; provided, further, that no amendment, modification or termination of the Stock Option Plan may (A) in any manner affect any option theretofore granted under the Stock Option Plan without the consent of the then Holder or (B) modify the allocation of options to the persons designated by the Administrator. 14. INVESTMENT PURPOSE. At the time of exercise of any option, the Company may, if it will deem it necessary or desirable for any reason, require the Holder to (i) represent in writing to the Company that it is such Holder's then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable securities laws. 15. RIGHT TO TERMINATE EMPLOYMENT. Nothing contained herein or in any Option Agreement will restrict the right of the Company to terminate the employment of any Holder at any time, with or without Cause. 6 7 16. FINALITY OF DETERMINATIONS. Each determination, interpretation, or other action made or taken pursuant to the provisions of the Stock Option Plan by the Administrator will be final and be binding and conclusive for all purposes. 17. INDEMNIFICATION OF DIRECTORS. Each director of the Company will be indemnified by the Company against all costs and expenses reasonably incurred by such director in connection with any action, suit or proceeding to which he or she or any of the other directors may be a party by reason of any action taken or failure to act under or in connection with the Stock Option Plan, or any option granted thereunder, and against all amounts paid by the other directors in settlement thereof (provided such settlement will be approved by independent legal counsel) or paid by the other directors in satisfaction of a judgment in any such action, suit or proceeding, except a judgment based upon a finding of bad faith. Upon the institution of any such action, suit or proceeding, a director of the Company will notify the Company in writing, giving the Company an opportunity, at its own expense, to handle and defend the same before such director undertakes to handle it on his or her own behalf. 18. SUBSIDIARY AND PARENT CORPORATIONS. Unless the context requires otherwise, references under the Stock Option Plan to the Company will be deemed to include any divisions of the Company and any subsidiary corporations and parent corporations of the Company, as those terms are defined in Section 424 of the IRC. 19. GOVERNING LAW. The Stock Option Plan will be governed by the laws of the State of Delaware. 20. EFFECTIVE DATE. The Stock Option Plan will become effective upon the date of its adoption by the Board and options may be granted on or subsequent to such date but no option may be exercised under the Stock Option Plan unless and until the Stock Option Plan shall have been approved by the stockholders of the Company within 12 months after its adoption by the Board. If the Stock Option Plan is not so approved by the stockholders, all options granted hereunder shall be null and void. 21. OVERRIDE. With respect to persons subject to Section 16 of the Exchange Act, transactions under the Stock Option Plan are intended to comply with all applicable conditions of Rule 16b-3 7 8 or any successor provision under the Exchange Act. To the extent any provision of the Stock Option Plan or action by the Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Administrator. 8 9 EXHIBIT A U.S. HOME CORPORATION 1997 EMPLOYEES' STOCK OPTION PLAN INCENTIVE STOCK OPTION AGREEMENT OPTION AGREEMENT, dated as of ______________ __, ___ between U.S. HOME CORPORATION, a Delaware corporation (the "Company"), and _______________________ (the "Holder"). 1. PURPOSE. The purpose of this Incentive Option Agreement (this "Agreement") is to set forth the terms and conditions of the incentive stock option granted to the Holder under the U.S. Home Corporation 1997 Employees' Stock Option Plan (the "Stock Option Plan"). The terms and conditions (including defined terms) of the Stock Option Plan are expressly incorporated herein and made a part hereof with the same force and effect as if fully set forth herein. The acceptance by the Holder of the Option (as hereinafter defined) granted hereby will constitute acceptance of and agreement with all of the terms and conditions contained in this Agreement and the Stock Option Plan. 2. GRANT OF OPTION. The Company hereby grants to the Holder an option (the "Option") to purchase all or any part of an aggregate of _______ shares of the Company's common stock, $.01 par value per share (the "Stock"), at a price of $______* per share (the "Exercise Price"), subject to adjustment as herein provided. Such Option is intended to qualify as an "Incentive Stock Option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "IRC"); provided, however, that to the extent that any portion of this Option cannot be exercised as an Incentive Stock Option by reason of the $100,000 limitation contained in Section 422(d) of the IRC, such portion will be treated as a nonqualified stock option. 3. TERM OF OPTION. (a) Subject to Sections 4 and 5 hereof, the Option shall be exercisable as follows: __________________________________ * To be determined pursuant to Section 5 of the Stock Option Plan. 10 (b) The Option will expire on the date 10 years from the date hereof. Any exercise will be accompanied by a written notice to the Company in substantially the form attached hereto as Schedule 1. 4. TERMINATION OF EMPLOYMENT. (a) If, on or after the date an Option is granted under the Stock Option Plan, (i)(A) the Holder's employment with the Company is terminated by the Company for any reason other than (x) for Cause (as herein defined), or (y) death or disability (within the meaning of Section 22(e)(3) of the IRC), (B) the Holder retires in accordance with the Company's normal retirement policy or with the consent of the board of directors of the Company (the "Board"), or (C) the Holder's employment with the Company is Constructively Terminated (as defined herein), the Holder will have the right, not later than the earlier of (a) three months after such termination or retirement or (b) the termination date of the Option to exercise the Option, to the extent the right to exercise such Option will have accrued at the date of such termination of employment or retirement, except to the extent that such Option theretofore will have been exercised, or (ii) the Holder's employment with the Company is terminated (A) by the Company for Cause or (B) by the Holder for any reason other than due to (x) the Holder being Constructively Terminated, (y) the Holder's retirement in accordance with the Company's normal retirement policy or with the consent of the Board, or (z) the Holder's death or disability, the right to exercise the Option will thereupon terminate. (b) For purposes of this Agreement, the term "Cause" means (i) the Holder's continuing willful failure to perform his or her duties with respect to the Company (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by the Holder in the performance of his duties with respect to the Company, (iii) an act or acts on the Holder'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 Holder at the expense of the Company or (iv) any other circumstances set forth in an employment agreement between the Company and the Holder which would constitute grounds for the Company to terminate the employment of the Holder for Cause. (c) For purposes of this Agreement, the term "Constructively Terminated" means (i) a reduction in an amount equal to or greater than 15 percent of the Holder's base salary, (ii) a material reduction in the Holder's job function, duties or responsibilities or (iii) a required relocation of the Holder of more than 50 miles from the Holder's current job location; provided, however, that the employment with the Company will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President with the Company and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment with the Company will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President of a division other than the division he or she is currently employed by and has job functions, duties or responsibilities of a Division Chairman or Division President and/or A-2 11 is required to relocate in connection with such change in position; provided, further, that the employment of any person will not be deemed Constructively Terminated unless the Holder actually terminates his or her employment with the Company within 60 days after the occurrence of an event specified in clauses (i), (ii) or (iii) above. 5. DEATH OR DISABILITY. (a) Except as provided in paragraph (b) of this Section 5, if the Holder's employment with the Company is terminated because of his or her disability (within the meaning of Section 22(e)(3) of the IRC), the disabled Holder will have the right, not later than the earlier of (i) one year after such termination or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued hereunder at the date of such termination of employment, except to the extent the Option theretofore will have been exercised. (b) If the Holder dies while in the employ of the Company or within three months after termination of his or her employment with the Company or any Subsidiary or division thereof because of his or her disability, his personal representative or the person or persons to whom the Option will have been transferred by will or by the laws of descent and distribution will have the right, not later than the earlier of (i) one year after the date of the Holder's death or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued at the date of death or disability, except to the extent the Option theretofore will have been exercised. 6. TRANSFERABILITY. The Option will not be transferable by the Holder other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the IRC or Title I of the Employee Retirement Income Security Act of 1974, as amended. During the lifetime of the Holder, the Option will be exercisable only by such Holder. If the Holder acquires Stock hereunder, he or she will only transfer such Stock in compliance with applicable federal and state securities laws. 7. PAYMENT OF EXERCISE PRICE. Payment for shares of Stock issued upon exercise of the Option will be paid in full on the date of purchase. Payment will be made either in cash or in such other consideration as the Administrator (as defined in the Stock Option Plan) deems appropriate. Notwithstanding the foregoing, shares of Stock will not be issued upon exercise of the Option unless and until the aggregate amount of federal, state and local taxes of any kind required to be withheld with respect to such exercise have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe. A-3 12 8. ADJUSTMENT TO OPTION. The number of shares of Stock subject to the Option and the Exercise Price will be adjusted, as necessary, in accordance with the provisions of Section 11 of the Stock Option Plan. 9. NO RIGHTS AS STOCKHOLDER. The Holder will have no rights as a stockholder with respect to any Stock covered by the Option until he or she has become the holder of record of such Stock, and, except for stock dividends as provided in Section 11 of the Stock Option Plan, no adjustment will be made for dividends (ordinary or extra-ordinary, whether in cash, securities or other property) or distributions or other rights in respect of such Stock for which the record date is prior to the date on which he or she will become the holder of record thereof. 10. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained herein will restrict any right of the Company to terminate the employment of the Holder at any time, with or without Cause. 11. REPRESENTATIONS. At the time of any exercise of the Option, the Company may, if it will deem it necessary or desirable for any reason, require the Holder (i) to represent in writing to the Company that it is his then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) to postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable federal or state securities laws. 12. GOVERNING LAW. This Agreement will be governed by the laws of the State of Delaware. A-4 13 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. U.S. HOME CORPORATION By:__________________________ Name: Title: HOLDER _____________________________ Signature Name: _______________________ Address: _____________________ _____________________ A-5 14 SCHEDULE 1 U.S. Home Corporation 1800 West Loop South Houston, Texas 77252 Attention: Secretary Re: Notice of Exercise of Incentive Stock Option Dear Sir: I am the holder of the below-described incentive stock option granted under the U.S. Home Corporation (the "Company") 1997 Employees' Stock Option Plan:
Number of Shares Exercise Price Date of Option Subject to Option Per Share
I hereby exercise my option to purchase ______ shares of the common stock, $.01 par value per share, of the Company, reserving my right to purchase any remaining shares subject to the option in accordance with its terms. Dated: ____________ __, ____ Very truly yours, _________________________________ Signature Name: ___________________________ Address: ________________________ ________________________ 15 EXHIBIT B U.S. HOME CORPORATION 1997 EMPLOYEES' STOCK OPTION PLAN NONQUALIFIED STOCK OPTION AGREEMENT OPTION AGREEMENT, dated as of ______________ __, ____ between U.S. HOME CORPORATION, a Delaware corporation (the "Company"), and _______________________ (the "Holder"). 1. PURPOSE. The purpose of this Nonqualified Stock Option Agreement (this "Agreement") is to set forth the terms and conditions of the stock option granted to the Holder under the 1997 Employees' Stock Option Plan (the "Stock Option Plan"). The terms and conditions (including defined terms) of the Stock Option Plan are expressly incorporated herein and made a part of hereof with the same force and effect as if fully set forth herein. The acceptance by the Holder of the Option (as hereinafter defined) granted hereby will constitute acceptance of and agreement with all of the terms and conditions contained in this Agreement and the Stock Option Plan. 2. GRANT OF OPTION. The Company hereby grants to the Holder an option (the "Option") to purchase all or any part of an aggregate of _______ shares of the Company's common stock, $.01 par value per share (the "Stock"), at a price of $______* per share (the "Exercise Price"), subject to adjustment as herein provided. Such Option is not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "IRC"). 3. TERM OF OPTION. (a) Subject to Sections 4 and 5 hereof, the Option shall be exercisable as follows: __________________________________ * To be determined pursuant to Section 5 of the Stock Option Plan. 16 (b) The Option will expire on the date 10 years from the date hereof. Any exercise will be accompanied by a written notice to the Company in substantially the form attached hereto as Schedule 1. 4. TERMINATION OF EMPLOYMENT. (a) If, on or after the date an Option is granted under the Stock Option Plan, (i) (A) the Holder's employment with the Company is terminated by the Company for any reason other than (x) for Cause (as herein defined), or (y) death or disability (within the meaning of Section 22(e)(3) of the IRC), (B) the Holder retires in accordance with the Company's normal retirement policy or with the consent of the board of directors of the Company (the "Board"), or (C) the Holder's employment with the Company is Constructively Terminated (as defined herein), the Holder will have the right, not later than the earlier of (a) three months after such termination or retirement or (b) the termination date of the Option, to exercise the Option, to the extent the right to exercise the Option will have accrued hereunder at the date of such termination of employment or retirement, except to the extent that the Option theretofore will have been exercised or (ii) the Holder's employment with the Company is terminated (A) by the Company for Cause or (B) by the Holder for any reason other than due to (x) the Holder being Constructively Terminated, (y) the Holder's retirement in accordance with the Company's normal retirement policy or with the consent of the Board, or (z) the Holder's death or disability, the right to exercise the Option will thereupon terminate. (b) For purposes of this Agreement, the term "Cause" will mean (i) the Holder's continuing willful failure to perform his duties with respect to the Company (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by the Holder in the performance of his or her duties with respect to the Company, (iii) an act or acts on the Holder'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 Holder at the expense of the Company or (iv) any other circumstances set forth in an employment agreement between the Company and the Holder which would constitute grounds for the Company to terminate the employment of the Holder for Cause. (c) For purposes of this Agreement, the term "Constructively Terminated" means (i) a reduction in an amount equal to or greater than 15 percent of the Holder's base salary, (ii) a material reduction in the Holder's job function, duties or responsibilities or (iii) a required relocation of the Holder of more than 50 miles from such Holder's current job location; provided, however, that the employment with the Company will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President with the Company and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment with the Company will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President of a division other than the division he or she is currently employed by and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the B-2 17 employment of any person will not be deemed Constructively Terminated unless the Holder actually terminates his or her employment with the Company within 60 days after the occurrence of an event specified in clauses (i), (ii) or (iii) above. 5. DEATH OR DISABILITY. (a) Except as provided in paragraph (b) of this Section 5, if the Holder's employment with the Company is terminated because of his or her disability (within the meaning of Section 22(e)(3) of the IRC), the disabled Holder will have the right, not later than the earlier of (i) one year after such termination or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued hereunder at the date of such termination of employment, except to the extent the Option theretofore will have been exercised. (b) If the Holder dies while in the employ of the Company or any subsidiary or division thereof or within three months after termination of his or her employment with the Company because of his or her disability, his or her personal representative or the person or persons to whom the Option will have been transferred by will or by the laws of descent and distribution will have the right, not later than the earlier of (i) one year after the date of the Holder's death or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued at the date of death or disability, except to the extent the Option theretofore will have been exercised. 6. TRANSFERABILITY. The Option will not be transferable by the Holder other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the IRC or Title I of the Employee Retirement Income Security Act of 1974, as amended. During the lifetime of the Holder, the Option will be exercisable only by such Holder. If the Holder acquires Stock hereunder, he or she will only transfer such Stock in compliance with applicable federal and state securities laws. 7. PAYMENT OF EXERCISE PRICE. Payment for shares of Stock issued upon exercise of the Option will be paid in full on the date of purchase. Payment will be made either in cash or in such other consideration as the Administrator (as defined in the Stock Option Plan) deems appropriate. Notwithstanding the foregoing, shares of Stock will not be issued upon exercise of the Option unless and until the aggregate amount of federal, state and local taxes of any kind required to be withheld with respect to such exercise have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe. B-3 18 8. ADJUSTMENT TO OPTION. The number of shares of Stock subject to the Option and the Exercise Price will be adjusted, as necessary, in accordance with the provisions of Section 11 of the Stock Option Plan. 9. NO RIGHTS AS STOCKHOLDER. The Holder will have no rights as a stockholder with respect to any Stock covered by the Option until such person has become the holder of record of such Stock, and, except for stock dividends as provided in Section 11 of the Stock Option Plan, no adjustment will be made for dividends (ordinary or extra-ordinary, whether in cash, securities or other property) or distributions or other rights in respect of such Stock for which the record date is prior to the date on which he or she will become the holder of record thereof. 10. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained herein will restrict any right of the Company to terminate the employment of the Holder at any time, with or without Cause. 11. REPRESENTATIONS. At the time of any exercise of the Option, the Company may, if it will deem it necessary or desirable for any reason, require the Holder (i) to represent in writing to the Company that it is his then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) to postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable federal or state securities laws. B-4 19 12. GOVERNING LAW. This Agreement will be governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. U.S. HOME CORPORATION By:__________________________ Name: Title: HOLDER _____________________________ Signature Name: _______________________ Address: _____________________ _____________________ B-5 20 SCHEDULE 1 U.S. Home Corporation 1800 West Loop South Houston, Texas 77252 Attention: Secretary Re: Notice of Exercise of Nonqualified Stock Option Dear Sir: I am the holder of the below-described nonqualified stock option granted under the U.S. Home Corporation (the "Company") 1997 Employees' Stock Option Plan:
Number of Shares Exercise Price Date of Option Subject to Option Per Share
I hereby exercise my option to purchase ______ shares of the common stock, $.01 par value per share, of the Company, reserving my right to purchase any remaining shares subject to the option in accordance with its terms. Dated: ______________, ____ Very truly yours, _________________________________ Signature Name: ___________________________ Address:_________________________ _________________________________ EX-10.8 4 AMENDED & RESTATED 96 EMPLOYEES' STOCK OPTION PLAN 1 EXHIBIT 10.8 U.S. HOME CORPORATION AMENDED AND RESTATED 1996 EMPLOYEES' STOCK OPTION PLAN 1. PURPOSES. The Amended and Restated 1996 Employees' Stock Option Plan (the "Stock Option Plan") is intended to provide an incentive for key employees of U.S. Home Corporation (the "Company") and its subsidiaries and divisions in order to encourage them to remain in the employ of the Company and contribute to the Company's success by granting them stock options. 2. ADMINISTRATION. (a) The Board of Directors of the Company (the "Board") will (i) administer the Stock Option Plan, (ii) establish, subject to the provisions of the Stock Option Plan, such rules and regulations as it may deem appropriate for the proper administration of the Stock Option Plan and (iii) make such determinations under, and such interpretations of, and take such steps in connection with, the Stock Option Plan or the options issued thereunder as it may deem necessary or advisable. (b) The Board may from time to time appoint a Committee (the "Committee") which will be comprised of at least three members of the Board, all of whom are to be non-employee directors (as defined herein) and outside directors (as defined herein), and may delegate to the Committee full power and authority to take any and all action required or permitted to be taken by the Board under the Stock Option Plan, whether or not the power and the authority of the Committee is hereinafter fully set forth. The members of the Committee may be appointed from time to time by the Board and serve at the pleasure of the Board. The Board, if each member is an outside director, or the Committee, as applicable, will hereinafter be referred to as the "Administrator." (c) For the purposes hereof, (i) a "non-employee director" is a director who, on a given date, is a non-employee director within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) an "outside director" is a director who, on a given date, is an outside director within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "IRC"). 3. STOCK. The stock (the "Stock") to be made the subject of an option under the Stock Option Plan will be the shares of common stock, $.01 par value per share, of the Company, whether authorized and unissued or treasury stock. The total amount of Stock for which options may be granted under the Stock Option Plan will not exceed, in the aggregate, 500,000 shares, subject to adjustment in accordance with the provisions of Section 11 hereof. Any shares of 2 Stock which were the subject of unexercised portions of any terminated or expired options may again be subject to the grant of options under the Stock Option Plan. 4. AWARD OF OPTIONS. (a) The Administrator may award options to those Officers (as defined herein) selected by the Administrator in the amounts determined by the Administrator, provided that the maximum number of shares of Stock which may be the subject of options granted to any individual in any calendar year is 250,000. Such options will be exercisable in accordance with the terms hereof. (b) The Administrator may, at any time prior to the expiration of 10 years from the date on which the Stock Option Plan is adopted, authorize the granting of options to such members of that class of the Company's key employees consisting of the officers and managerial or supervisory personnel, who are salaried employees of the Company (the "Officers"), as it may select, and in such amounts and in such installments as it will designate, subject to the provisions of this Section. The Administrator, in its sole discretion, will designate such options as (i) "Incentive Stock Options" within the meaning of Section 422 of the IRC, (ii) other stock options subject to the terms and conditions set forth herein ("Nonqualified Stock Options") or (iii) any combination of Incentive Stock Options and Nonqualified Stock Options. In the event that any portion of an option cannot be exercised as an Incentive Stock Option by reason of the limitation contained in Section 422(d) of the IRC, such portion will be treated as a Nonqualified Stock Option. (c) No person will be eligible to receive or hold an Incentive Stock Option under the Stock Option Plan if, immediately after such option is granted, such person owns (within the meaning of Section 422 of the IRC) stock possessing more than 10 percent of the total combined voting power or value of all classes of capital stock of the Company. (d) All Incentive Stock Options will be evidenced by a written agreement in substantially the form of Exhibit A annexed hereto, and all Nonqualified Stock Options will be evidenced by a written agreement in substantially the form of Exhibit B annexed hereto (each an "Option Agreement"). 5. PRICE. (a) The exercise price of an option will be the closing price of the Stock on the New York Stock Exchange ("NYSE") on the day that such option is granted if a sale is executed on such Exchange on that day, and if there was no such sale, the price will be the closing price of the Stock on the last preceding day on which a sale was executed. Notwithstanding the foregoing, the exercise price of such option will in no event be less than 95% of the average of the daily last sale prices of the Stock on the NYSE (or if no sale takes 2 3 place on any such day on the NYSE, the average of the last reported closing bid and asked prices on such day as officially quoted on the NYSE) for the 20 consecutive trading days immediately prior to the date such option is granted, unless otherwise determined by the Administrator. (b) The closing price of the Stock, as of any particular day, will be as reported in The Wall Street Journal; provided, however, that if the Stock is not listed on the New York Stock Exchange on the date the particular option is granted, the exercise price will be not less than the fair market value of the shares of Stock covered by the option at the time that the option is granted, as determined by the Administrator based on such empirical evidence as it deems to be necessary under the circumstances. 6. TERM. Subject to Sections 8 and 9 hereof, an option may be exercised by the holder thereof (a "Holder") at such times and in such installments, if any, as may be specified in such Holder's Option Agreement, which will provide that no option will be exercised in any amount later than 10 years from the date such option was granted. 7. TRANSFERABILITY. No option will be transferable by a Holder other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the IRC or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). During the lifetime of a Holder, the option will be exercisable only by such Holder. An Officer who acquires Stock hereunder will only transfer such Stock in compliance with applicable federal and state securities laws. 8. TERMINATION OF EMPLOYMENT. Except to the extent otherwise specified by the Administrator, if, on or after the date an option is granted under the Stock Option Plan, (i) (A) a Holder's employment with the Company is terminated by the Company for any reason other than (x) for Cause (as defined in the applicable Option Agreement), or (y) death or disability (within the meaning of Section 22(e)(3) of the IRC), (B) the Holder retires in accordance with the Company's normal retirement policy or with the consent of the Board, or (C) such Holder's employment with the Company is Constructively Terminated (as defined in the applicable Option Agreement), the Holder will have the right, not later than the earlier of (a) three months after such termination or retirement or (b) the termination date of the option, to exercise the option, to the extent the right to exercise such option will have accrued at the date of such termination of employment or retirement, except to the extent that such option theretofore will have been exercised, or (ii) a Holder's employment with the Company is terminated (A) by the Company for Cause, or (B) by the Holder for any reason other than due to (x) such Holder being Constructively Terminated, 3 4 (y) such Holder's retirement in accordance with the Company's normal retirement policy or with the consent of the Board or (z) such Holder's death or disability, the right to exercise the option will thereupon terminate. 9. DEATH OR DISABILITY. (a) Except to the extent otherwise specified by the Administrator and as provided in paragraph (b) of this Section 9, if a Holder's employment with the Company is terminated because of disability (within the meaning of Section 22(e)(3) of the IRC), the disabled Holder will have the right, not later than the earlier of (i) one year after such termination or (ii) the termination date of the option, to exercise the option, to the extent the right to exercise such option will have accrued at the date of such termination of employment, except to the extent that such option theretofore has been exercised. (b) Except to the extent otherwise specified by the Administrator, if a Holder dies while in the employ of the Company or within three months after termination of employment with the Company because of disability, such Holder's personal representative or the person or persons to whom the option will have been transferred by will or by the laws of descent and distribution will have the right, not later than the earlier of (i) one year after the date of such Holder's death or (ii) the termination date of the option, to exercise such option, to the extent the right to exercise such option shall have accrued at the date of death or disability, except to the extent such option theretofore will have been exercised. 10. PAYMENT FOR STOCK. (a) The purchase price of Stock issued upon exercise of options granted hereunder will be paid in full on the date of purchase. Payment will be made either in cash or such other consideration as the Administrator deems appropriate, including, without limitation, Stock already owned by the Holder or Stock to be acquired by the Holder upon exercise of the option having a total fair market value, as determined by the Administrator, equal to the purchase price, or a combination of cash and Stock having a total fair market value, as so determined, equal to the purchase price. (b) The Company may make loans to such Holders as the Administrator, in its discretion, may determine in connection with the exercise of options granted under the Stock Option Plan; provided, however, that the Administrator will have no discretion to authorize the making of any loan where the possession of such discretion or the making of such loan would result in a "modification" (as defined in Section 424(h) of the IRC) of any Incentive Stock Option. Such loans will be subject to the following terms and conditions and such other terms and conditions as the Administrator will determine not inconsistent with the Stock Option Plan. Such loans will bear interest at such rates as the Administrator will determine from time to time, which rates may be below then current market rates (except in the case of Incentive Stock 4 5 Options). In no event may any such loan exceed the fair market value, at the date of exercise, of the shares covered by the option, or portion thereof, exercised by the Holder. No loan will have an initial term exceeding five years, but any such loan may be renewable at the discretion of the Administrator. When a loan is made, the Holder will pledge to the Company shares of Stock having a fair market value at least equal to the principal amount of the loan. Every loan will comply with all applicable laws, regulations and rules of the Federal Reserve Board and any other governmental agency having jurisdiction over the Company. (c) Stock will not be issued upon the exercise of options unless and until the aggregate amount of federal, state or local taxes of any kind required by law to be withheld with respect to the exercise of such options have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe, including, without limitation, payment of any such taxes by exchanging shares of Stock previously owned by the Holder or acquired upon the exercise of an option. 11. STOCK ADJUSTMENTS. (a) The total amount of Stock for which options may be granted under the Stock Option Plan and option terms (both as to the number of shares of Stock and the price of the option) will be appropriately adjusted for any increase or decrease in the number of outstanding shares of Stock resulting from payment of a stock dividend on the Stock, a subdivision or combination of the Stock, or a reclassification of the Stock, and (in accordance with the provisions contained in the following paragraph) in the event of a consolidation or a merger in which the Company will be the surviving corporation. (b) After any merger of one or more corporations into the Company in which the Company will be the surviving corporation, or after any consolidation of the Company and one or more other corporations, each Holder will, at no additional cost, be entitled, upon any exercise of his option, to receive, in lieu of the number of shares of Stock as to which such option will then be so exercised, the number and class of shares of stock, other securities or other consideration to which such Holder would have been entitled pursuant to the terms of the applicable agreement of merger or consolidation if at the time of such merger or consolidation such Holder had been a Holder of record of a number of shares of Stock equal to the number of shares for which such option may then be so exercised. Comparable rights will accrue to each Holder in the event of successive mergers or consolidations of the character described above. (c) In the event of any sale of all or substantially all of the assets of the Company, or any merger of the Company into another corporation, or any dissolution or liquidation of the Company or, in the discretion of the Board, any consolidation or other reorganization in which it is impossible or impracticable to continue in effect any options, all options granted under the Stock Option Plan and not previously exercised will become exercisable by Holders who are at such time in the employ of the Company or any of its 5 6 subsidiaries or divisions, commencing 10 days before the scheduled closing of such event, and will terminate unless exercised at least one business day before the scheduled closing of such event; provided, that any such exercise will be conditioned on the closing of such transaction; and provided further, that the Administrator may, in its discretion, require instead that all options granted under the Stock Option Plan and not previously exercised will be assumed by such other corporation on the basis provided in the preceding paragraph. (d) The adjustments described in this Section 11 and the manner of application of the foregoing provisions will be determined by the Administrator in its sole discretion. Any such adjustment may provide for the elimination of any fractional share which might otherwise become subject to an option. 12. RIGHTS AS A STOCKHOLDER. A Holder or a transferee of an option will have no rights as a stockholder with respect to any share of Stock covered by such Holder's option until such Holder has become the Holder of record of such share of Stock, and, except for stock dividends as provided in Section 11 hereof, no adjustment will be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights in respect of such share for which the record date is prior to the date on which he will become the holder of record thereof. 13. AMENDMENT AND TERMINATION. The Board may at any time terminate, amend or modify the Stock Option Plan in any respect it deems suitable; provided, however, that no such action of the Board, without the approval of the stockholders of the Company, may (i) materially increase the benefits accruing to employees eligible to receive options under the Stock Option Plan, (ii) materially increase the total amount of Stock for which options may be granted under the Stock Option Plan or (iii) materially modify the requirements for participation in the Stock Option Plan; provided, further, that no amendment, modification or termination of the Stock Option Plan may (A) in any manner affect any option theretofore granted under the Stock Option Plan without the consent of the then Holder or (B) modify the allocation of options to the persons designated by the Administrator. 14. INVESTMENT PURPOSE. At the time of exercise of any option, the Company may, if it will deem it necessary or desirable for any reason, require the Holder to (i) represent in writing to the Company that it is such Holder's then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable securities laws. 6 7 15. RIGHT TO TERMINATE EMPLOYMENT. Nothing contained herein or in any Option Agreement will restrict the right of the Company to terminate the employment of any Holder at any time, with or without Cause. 16. FINALITY OF DETERMINATIONS. Each determination, interpretation, or other action made or taken pursuant to the provisions of the Stock Option Plan by the Administrator will be final and be binding and conclusive for all purposes. 17. INDEMNIFICATION OF DIRECTORS. Each director of the Company will be indemnified by the Company against all costs and expenses reasonably incurred by such director in connection with any action, suit or proceeding to which he or she or any of the other directors may be a party by reason of any action taken or failure to act under or in connection with the Stock Option Plan, or any option granted thereunder, and against all amounts paid by the other directors in settlement thereof (provided such settlement will be approved by independent legal counsel) or paid by the other directors in satisfaction of a judgment in any such action, suit or proceeding, except a judgment based upon a finding of bad faith. Upon the institution of any such action, suit or proceeding, a director of the Company will notify the Company in writing, giving the Company an opportunity, at its own expense, to handle and defend the same before such director undertakes to handle it on his or her own behalf. 18. SUBSIDIARY AND PARENT CORPORATIONS. Unless the context requires otherwise, references under the Stock Option Plan to the Company will be deemed to include any divisions of the Company and any subsidiary corporations and parent corporations of the Company, as those terms are defined in Section 424 of the IRC. 19. GOVERNING LAW. The Stock Option Plan will be governed by the laws of the State of Delaware. 20. EFFECTIVE DATE. The Stock Option Plan will become effective upon the date of its adoption by the Board and options may be granted on or subsequent to such date but no option may be exercised under the Stock Option Plan unless and until the Stock Option Plan shall have been approved by 7 8 the stockholders of the Company within 12 months after its adoption by the Board. If the Stock Option Plan is not so approved by the stockholders, all options granted hereunder shall be null and void. 21. OVERRIDE. With respect to persons subject to Section 16 of the Exchange Act, transactions under the Stock Option Plan are intended to comply with all applicable conditions of Rule 16b-3 or any successor provision under the Exchange Act. To the extent any provision of the Stock Option Plan or action by the Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Administrator. 8 9 EXHIBIT A U.S. HOME CORPORATION AMENDED AND RESTATED 1996 EMPLOYEES' STOCK OPTION PLAN INCENTIVE STOCK OPTION AGREEMENT OPTION AGREEMENT, dated as of ______________ __, ___ between U.S. HOME CORPORATION, a Delaware corporation (the "Company"), and _______________________ (the "Holder"). 1. PURPOSE. The purpose of this Incentive Option Agreement (this "Agreement") is to set forth the terms and conditions of the incentive stock option granted to the Holder under the U.S. Home Corporation Amended and Restated 1996 Employees' Stock Option Plan (the "Stock Option Plan"). The terms and conditions (including defined terms) of the Stock Option Plan are expressly incorporated herein and made a part hereof with the same force and effect as if fully set forth herein. The acceptance by the Holder of the Option (as hereinafter defined) granted hereby will constitute acceptance of and agreement with all of the terms and conditions contained in this Agreement and the Stock Option Plan. 2. GRANT OF OPTION. The Company hereby grants to the Holder an option (the "Option") to purchase all or any part of an aggregate of _______ shares of the Company's common stock, $.01 par value per share (the "Stock"), at a price of $______* per share (the "Exercise Price"), subject to adjustment as herein provided. Such Option is intended to qualify as an "Incentive Stock Option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "IRC"); provided, however, that to the extent that any portion of this Option cannot be exercised as an Incentive Stock Option by reason of the $100,000 limitation contained in Section 422(d) of the IRC, such portion will be treated as a Nonqualified Stock Option. 3. TERM OF OPTION. (a) Subject to Sections 4 and 5 hereof, the Option shall be exercisable as follows: __________________________________ * To be determined pursuant to Section 5 of the Stock Option Plan. 10 (b) The Option will expire on the date 10 years from the date hereof. Any exercise will be accompanied by a written notice to the Company in substantially the form attached hereto as Schedule 1. 4. TERMINATION OF EMPLOYMENT. (a) Except to the extent otherwise specified by the Administrator, if, on or after the date an Option is granted under the Stock Option Plan, (i)(A) the Holder's employment with the Company is terminated by the Company for any reason other than (x) for Cause (as herein defined), or (y) death or disability (within the meaning of Section 22(e)(3) of the IRC), (B) the Holder retires in accordance with the Company's normal retirement policy or with the consent of the board of directors of the Company (the "Board"), or (C) the Holder's employment with the Company is Constructively Terminated (as defined herein), the Holder will have the right, not later than the earlier of (a) three months after such termination or retirement or (b) the termination date of the Option to exercise the Option, to the extent the right to exercise such Option will have accrued at the date of such termination of employment or retirement, except to the extent that such Option theretofore will have been exercised, or (ii) the Holder's employment with the Company is terminated (A) by the Company for Cause or (B) by the Holder for any reason other than due to (x) the Holder being Constructively Terminated, (y) the Holder's retirement in accordance with the Company's normal retirement policy or with the consent of the Board, or (z) the Holder's death or disability, the right to exercise the Option will thereupon terminate. (b) For purposes of this Agreement, the term "Cause" means (i) the Holder's continuing willful failure to perform his or her duties with respect to the Company (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by the Holder in the performance of his duties with respect to the Company, (iii) an act or acts on the Holder'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 Holder at the expense of the Company or (iv) any other circumstances set forth in an employment agreement between the Company and the Holder which would constitute grounds for the Company to terminate the employment of the Holder for Cause. (c) For purposes of this Agreement, the term "Constructively Terminated" means (i) a reduction in an amount equal to or greater than 15 percent of the Holder's base salary, (ii) a material reduction in the Holder's job function, duties or responsibilities or (iii) a required relocation of the Holder of more than 50 miles from the Holder's current job location; provided, however, that the employment with the Company will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President with the Company and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment with the Company will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President of a division other than the division he or she is currently employed by and A-2 11 has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment of any person will not be deemed Constructively Terminated unless the Holder actually terminates his or her employment with the Company within 60 days after the occurrence of an event specified in clauses (i), (ii) or (iii) above. 5. DEATH OR DISABILITY. (a) Except to the extent otherwise specified by the Administrator and as provided in paragraph (b) of this Section 5, if the Holder's employment with the Company is terminated because of his or her disability (within the meaning of Section 22(e)(3) of the IRC), the disabled Holder will have the right, not later than the earlier of (i) one year after such termination or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued hereunder at the date of such termination of employment, except to the extent the Option theretofore will have been exercised. (b) Except to the extent otherwise specified by the Administrator, if the Holder dies while in the employ of the Company or within three months after termination of his or her employment with the Company or any Subsidiary or division thereof because of his or her disability, his personal representative or the person or persons to whom the Option will have been transferred by will or by the laws of descent and distribution will have the right, not later than the earlier of (i) one year after the date of the Holder's death or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued at the date of death or disability, except to the extent the Option theretofore will have been exercised. 6. TRANSFERABILITY. The Option will not be transferable by the Holder other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the IRC or Title I of the Employee Retirement Income Security Act of 1974, as amended. During the lifetime of the Holder, the Option will be exercisable only by such Holder. If the Holder acquires Stock hereunder, he or she will only transfer such Stock in compliance with applicable federal and state securities laws. 7. PAYMENT OF EXERCISE PRICE. Payment for shares of Stock issued upon exercise of the Option will be paid in full on the date of purchase. Payment will be made either in cash or in such other consideration as the Administrator (as defined in the Stock Option Plan) deems appropriate. Notwithstanding the foregoing, shares of Stock will not be issued upon exercise of the Option unless and until the aggregate amount of federal, state and local taxes of any kind required to be withheld with respect to such exercise have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe. A-3 12 8. ADJUSTMENT TO OPTION. The number of shares of Stock subject to the Option and the Exercise Price will be adjusted, as necessary, in accordance with the provisions of Section 11 of the Stock Option Plan. 9. NO RIGHTS AS STOCKHOLDER. The Holder will have no rights as a stockholder with respect to any Stock covered by the Option until he or she has become the holder of record of such Stock, and, except for stock dividends as provided in Section 11 of the Stock Option Plan, no adjustment will be made for dividends (ordinary or extra-ordinary, whether in cash, securities or other property) or distributions or other rights in respect of such Stock for which the record date is prior to the date on which he or she will become the holder of record thereof. 10. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained herein will restrict any right of the Company to terminate the employment of the Holder at any time, with or without Cause. 11. REPRESENTATIONS. At the time of any exercise of the Option, the Company may, if it will deem it necessary or desirable for any reason, require the Holder (i) to represent in writing to the Company that it is his then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) to postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable federal or state securities laws. 12. GOVERNING LAW. This Agreement will be governed by the laws of the State of Delaware. A-4 13 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. U.S. HOME CORPORATION By:__________________________ Name: Title: HOLDER _____________________________ Signature Name: _______________________ Address: _____________________ _____________________ A-5 14 SCHEDULE 1 U.S. Home Corporation 1800 West Loop South Houston, Texas 77252 Attention: Secretary Re: Notice of Exercise of Incentive Stock Option Dear Sir: I am the holder of the below-described incentive stock option granted under the U.S. Home Corporation (the "Company") Amended and Restated 1996 Employees' Stock Option Plan: Number of Shares Exercise Price Date of Option Subject to Option Per Share
I hereby exercise my option to purchase ______ shares of the common stock, $.01 par value per share, of the Company, reserving my right to purchase any remaining shares subject to the option in accordance with its terms. Dated: ____________ __, ____ Very truly yours, _________________________________ Signature Name: ___________________________ Address: ________________________ ________________________ 15 EXHIBIT B U.S. HOME CORPORATION AMENDED AND RESTATED 1996 EMPLOYEES' STOCK OPTION PLAN NONQUALIFIED STOCK OPTION AGREEMENT OPTION AGREEMENT, dated as of ______________ __, ____ between U.S. HOME CORPORATION, a Delaware corporation (the "Company"), and _______________________ (the "Holder"). 1. PURPOSE. The purpose of this Nonqualified Stock Option Agreement (this "Agreement") is to set forth the terms and conditions of the stock option granted to the Holder under the Amended and Restated 1996 Employees' Stock Option Plan (the "Stock Option Plan"). The terms and conditions (including defined terms) of the Stock Option Plan are expressly incorporated herein and made a part of hereof with the same force and effect as if fully set forth herein. The acceptance by the Holder of the Option (as hereinafter defined) granted hereby will constitute acceptance of and agreement with all of the terms and conditions contained in this Agreement and the Stock Option Plan. 2. GRANT OF OPTION. The Company hereby grants to the Holder an option (the "Option") to purchase all or any part of an aggregate of _______ shares of the Company's common stock, $.01 par value per share (the "Stock"), at a price of $______* per share (the "Exercise Price"), subject to adjustment as herein provided. Such Option is not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "IRC"). 3. TERM OF OPTION. (a) Subject to Sections 4 and 5 hereof, the Option shall be exercisable as follows: __________________________________ * To be determined pursuant to Section 5 of the Stock Option Plan. 16 (b) The Option will expire on the date 10 years from the date hereof. Any exercise will be accompanied by a written notice to the Company in substantially the form attached hereto as Schedule 1. 4. TERMINATION OF EMPLOYMENT. (a) Except to the extent otherwise specified by the Administrator, if, on or after the date an Option is granted under the Stock Option Plan, (i) (A) the Holder's employment with the Company is terminated by the Company for any reason other than (x) for Cause (as herein defined), or (y) death or disability (within the meaning of Section 22(e)(3) of the IRC), (B) the Holder retires in accordance with the Company's normal retirement policy or with the consent of the board of directors of the Company (the "Board"), or (C) the Holder's employment with the Company is Constructively Terminated (as defined herein), the Holder will have the right, not later than the earlier of (a) three months after such termination or retirement or (b) the termination date of the Option, to exercise the Option, to the extent the right to exercise the Option will have accrued hereunder at the date of such termination of employment or retirement, except to the extent that the Option theretofore will have been exercised or (ii) the Holder's employment with the Company is terminated (A) by the Company for Cause or (B) by the Holder for any reason other than due to (x) the Holder being Constructively Terminated, (y) the Holder's retirement in accordance with the Company's normal retirement policy or with the consent of the Board, or (z) the Holder's death or disability, the right to exercise the Option will thereupon terminate. (b) For purposes of this Agreement, the term "Cause" will mean (i) the Holder's continuing willful failure to perform his duties with respect to the Company (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by the Holder in the performance of his or her duties with respect to the Company, (iii) an act or acts on the Holder'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 Holder at the expense of the Company or (iv) any other circumstances set forth in an employment agreement between the Company and the Holder which would constitute grounds for the Company to terminate the employment of the Holder for Cause. (c) For purposes of this Agreement, the term "Constructively Terminated" means (i) a reduction in an amount equal to or greater than 15 percent of the Holder's base salary, (ii) a material reduction in the Holder's job function, duties or responsibilities or (iii) a required relocation of the Holder of more than 50 miles from such Holder's current job location; provided, however, that the employment with the Company will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President with the Company and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment with the Company will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President of a division other than the division he or she is currently employed by and has job functions, duties or responsibilities of a Division Chairman or Division President and/or B-2 17 is required to relocate in connection with such change in position; provided, further, that the employment of any person will not be deemed Constructively Terminated unless the Holder actually terminates his or her employment with the Company within 60 days after the occurrence of an event specified in clauses (i), (ii) or (iii) above. 5. DEATH OR DISABILITY. (a) Except to the extent otherwise specified by the Administrator and as provided in paragraph (b) of this Section 5, if the Holder's employment with the Company is terminated because of his or her disability (within the meaning of Section 22(e)(3) of the IRC), the disabled Holder will have the right, not later than the earlier of (i) one year after such termination or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued hereunder at the date of such termination of employment, except to the extent the Option theretofore will have been exercised. (b) Except to the extent otherwise specified by the Administrator, if the Holder dies while in the employ of the Company or any subsidiary or division thereof or within three months after termination of his or her employment with the Company because of his or her disability, his or her personal representative or the person or persons to whom the Option will have been transferred by will or by the laws of descent and distribution will have the right, not later than the earlier of (i) one year after the date of the Holder's death or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued at the date of death or disability, except to the extent the Option theretofore will have been exercised. 6. TRANSFERABILITY. The Option will not be transferable by the Holder other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the IRC or Title I of the Employee Retirement Income Security Act of 1974, as amended. During the lifetime of the Holder, the Option will be exercisable only by such Holder. If the Holder acquires Stock hereunder, he or she will only transfer such Stock in compliance with applicable federal and state securities laws. 7. PAYMENT OF EXERCISE PRICE. Payment for shares of Stock issued upon exercise of the Option will be paid in full on the date of purchase. Payment will be made either in cash or in such other consideration as the Administrator (as defined in the Stock Option Plan) deems appropriate. Notwithstanding the foregoing, shares of Stock will not be issued upon exercise of the Option unless and until the aggregate amount of federal, state and local taxes of any kind required to be withheld with respect to such exercise have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe. B-3 18 8. ADJUSTMENT TO OPTION. The number of shares of Stock subject to the Option and the Exercise Price will be adjusted, as necessary, in accordance with the provisions of Section 11 of the Stock Option Plan. 9. NO RIGHTS AS STOCKHOLDER. The Holder will have no rights as a stockholder with respect to any Stock covered by the Option until such person has become the holder of record of such Stock, and, except for stock dividends as provided in Section 11 of the Stock Option Plan, no adjustment will be made for dividends (ordinary or extra-ordinary, whether in cash, securities or other property) or distributions or other rights in respect of such Stock for which the record date is prior to the date on which he or she will become the holder of record thereof. 10. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained herein will restrict any right of the Company to terminate the employment of the Holder at any time, with or without Cause. 11. REPRESENTATIONS. At the time of any exercise of the Option, the Company may, if it will deem it necessary or desirable for any reason, require the Holder (i) to represent in writing to the Company that it is his then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) to postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable federal or state securities laws. B-4 19 12. GOVERNING LAW. This Agreement will be governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. U.S. HOME CORPORATION By:__________________________ Name: Title: HOLDER _____________________________ Signature Name: _______________________ Address: _____________________ _____________________ B-5 20 SCHEDULE 1 U.S. Home Corporation 1800 West Loop South Houston, Texas 77252 Attention: Secretary Re: Notice of Exercise of Nonqualified Stock Option Dear Sir: I am the holder of the below-described nonqualified stock option granted under the U.S. Home Corporation (the "Company") Amended and Restated 1996 Employees' Stock Option Plan: Number of Shares Exercise Price Date of Option Subject to Option Per Share
I hereby exercise my option to purchase ______ shares of the common stock, $.01 par value per share, of the Company, reserving my right to purchase any remaining shares subject to the option in accordance with its terms. Dated: ______________, ____ Very truly yours, _________________________________ Signature Name: ___________________________ Address:_________________________ _________________________________ EX-10.9 5 AMENDED & RESTATED EMPLOYEES' 93 STOCK OPTION PLAN 1 EXHIBIT 10.9 U.S. HOME CORPORATION AMENDED AND RESTATED 1993 EMPLOYEES' STOCK OPTION PLAN 1. PURPOSES. The U.S. Home Corporation Amended and Restated 1993 Employees' Stock Option Plan (the "Stock Option Plan") is intended to provide an incentive to key employees of the Company and its subsidiaries and divisions in order to encourage them to remain in the employ of the Company and contribute to the Company's success by granting them stock options. 2. ADMINISTRATION. (a) The Board of Directors of the Company (the "Board") will (i) administer the Stock Option Plan, (ii) establish, subject to the provisions of the Stock Option Plan, such rules and regulations as it may deem appropriate for the proper administration of the Stock Option Plan and (iii) make such determinations under, and such interpretations of, and take such steps in connection with, the Stock Option Plan or the options issued thereunder as it may deem necessary or advisable. (b) The Board may from time to time appoint a Committee (the "Committee") which will be comprised of at least three members of the Board, all of whom are to be non-employee directors (as defined herein), and may delegate to the Committee full power and authority to take any and all action required or permitted to be taken by the Board under the Stock Option Plan, whether or not the power and the authority of the Committee is hereinafter fully set forth. The members of the Committee may be appointed from time to time by the Board and serve at the pleasure of the Board. The Board or the Committee, as applicable, will hereinafter be referred to as the "Administrator." (c) For the purposes of this Section 2, a "non-employee director" is a director who, on a given date, is a non-employee director within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 3. STOCK. The stock (the "Stock") to be made the subject of an option under the Stock Option Plan will be the shares of common stock of the Company, $.01 par value per share, authorized to be issued on and after the Effective Date (as defined herein), whether authorized and unissued or treasury stock. The total amount of Stock for which options may be granted under the Stock Option Plan will not exceed, in the aggregate, 500,000 shares (of which no more than 200,000 shares of Stock may be the subject of options granted on or prior to June 21, 1993 2 (the "Effective Date")), subject to adjustment in accordance with the provisions of Section 11 hereof. Any shares of Stock which were the subject of unexercised portions of any terminated or expired options may again be subject to options under the Stock Option Plan. 4. AWARD OF OPTIONS. (a) Subject to the effectiveness of this Stock Option Plan on the Effective Date, the Board may award options to those Officers (as defined herein) selected by the Board in the amounts determined by the Board. Such options will be exercisable in accordance with the terms hereof. (b) The Administrator may, at any time prior to the expiration of 10 years from the date on which the Stock Option Plan is adopted, authorize the granting of options to such members of that class of its key employees consisting of the officers and managerial or supervisory personnel, who are salaried employees of the Company and of its subsidiaries or divisions (the "Officers"), as it may select, and in such amounts and in such installments as it will designate, subject to the provisions of this Section and Section 3 hereof. The Administrator, in its sole discretion, will designate such options as (i) "Incentive Stock Options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "IRC"), (ii) other stock options subject to the terms and conditions set forth herein ("Nonqualified Stock Options") or (iii) any combination of Incentive Stock Options and Nonqualified Stock Options. In the event that any portion of an option cannot be exercised as an Incentive Stock Option by reason of the limitation contained in Section 422(d) of the IRC, such portion will be treated as a Nonqualified Stock Option. Prior to the Effective Date, no options were outstanding. Upon the Effective Date, the Company will issue 200,000 options in accordance with the first amended consolidated plan of reorganization of the Company. (c) No person will be eligible to receive or hold an Incentive Stock Option under the Stock Option Plan if, immediately after such option is granted, such person owns (within the meaning of Section 422 of the IRC) stock possessing more than 10 percent of the total combined voting power or value of all classes of capital stock of the Company. (d) All Incentive Stock Options will be evidenced by a written agreement in substantially the form of Exhibit A annexed hereto, and all Nonqualified Stock Options will be evidenced by a written agreement in substantially the form of Exhibit B annexed hereto (each an "Option Agreement"). 5. PRICE. (a) The exercise price of an Incentive Stock Option and/or a Nonqualified Stock Option will be the closing price of the Stock on the New York Stock Exchange on the day that is granted if a sale is executed on such Exchange on that day, and if there was no such sale, 2 3 the price will be the closing price of the Stock on the last preceding day on which a sale was executed. (b) The closing price of the Stock, as of any particular day, will be as reported in The Wall Street Journal; provided, however, that if the Stock is not listed on the New York Stock Exchange on the date the particular option is granted, the option price will be not less than the fair market value of the shares of Stock covered by the option at the time that the option is granted, as determined by the Administrator based on such empirical evidence as it deems to be necessary under the circumstances. 6. TERM. Subject to Sections 8 and 9 hereof, an option may be exercised by the holder thereof (a "Holder") at such times and in such installments, if any, as may be specified in such Holder's Option Agreement, which will provide that no option will be exercised in any amount later than 10 years from the date such option was granted. 7. TRANSFERABILITY. No option will be transferable by a Holder other than by will or the laws of descent and distribution. During the lifetime of a Holder, the option will be exercisable only by such Holder. An Officer who acquires Stock hereunder will only transfer such Stock in compliance with applicable federal and state securities laws. Officers who are affiliates of the Company may generally dispose of their shares in accordance with Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act"). 8. TERMINATION OF EMPLOYMENT. If, on or after the date an option is granted under the Stock Option Plan, (i) (A) a Holder's employment with the Company or a subsidiary or division thereof is terminated by the Company for any reason other than (x) for Cause (as defined in the applicable Option Agreement), or (y) death or disability (within the meaning of Section 22(e)(3) of the IRC), (B) the Holder retires in accordance with the Company's normal retirement policy or with the consent of the Board, or (C) such Holder's employment with the Company is Constructively Terminated (as defined in the applicable Option Agreement), the Holder will have the right, not later than the earlier of (a) three months after such termination or retirement or (b) the termination date of the option, to exercise the option, to the extent the right to exercise such option will have accrued at the date of such termination of employment or retirement, except to the extent that such option theretofore will have been exercised, or (ii) a Holder's employment with the Company or a subsidiary or division thereof is terminated (A) by the Company for Cause, or (B) by the Holder for any reason other than due to (x) such Holder being Constructively Terminated, (y) such Holder's retirement in accordance with the Company's 3 4 normal retirement policy or with the consent of the Board or (z) such Holder's death or disability, the right to exercise the option will thereupon terminate. 9. DEATH OR DISABILITY. (a) Except as provided in paragraph (b) of this Section 10, if a Holder's employment with the Company is terminated because of disability (within the meaning of Section 22(e)(3) of the IRC), the disabled Holder will have the right, no later than the earlier of (i) one year after such termination or (ii) the termination date of the option, to exercise the option, to the extent the right to exercise such option will have accrued at the date of such termination of employment, except to the extent that such option theretofore has been exercised. (b) If a Holder dies while in the employ of the Company or within three months after termination of employment with the Company because of disability, such Holder's personal representative or the person or persons to whom the option will have been transferred by will or by the laws of descent and distribution will have the right, not later than the earlier of (i) one year from the date of such Holder's death or (ii) the termination date of the option, to exercise such option, to the extent the right to exercise such option shall have accrued at the date of death or disability, except to the extent such option theretofore will have been exercised. 10. PAYMENT FOR STOCK. (a) The purchase price of Stock issued upon exercise of options granted hereunder will be paid in full on the date of purchase. Payment will be made either in cash or such other consideration as the Administrator deems appropriate, including, without limitation, Stock already owned by the Holder or Stock to be acquired by the Holder upon exercise of the option having a total fair market value, as determined by the Administrator, equal to the purchase price, or a combination of cash and Stock having a total fair market value, as so determined, equal to the purchase price. (b) The Company may make loans to such Holders as the Administrator, in its discretion, may determine in connection with the exercise of options granted under the Stock Option Plan, provided, however, that the Administrator will have no discretion to authorize the making of any loan where the possession of such discretion or the making of such loan would result in a "modification" (as defined in Section 425 of the IRC) of any Incentive Stock Option. Such loans will be subject to the following terms and conditions and such other terms and conditions as the Administrator will determine not inconsistent with the Stock Option Plan. Such loans will bear interest at such rates as the Administrator will determine from time to time, which rates may be below then current market rates (except in the case of Incentive Stock Options). In no event may any such loan exceed the fair market value, at the date of exercise, of the shares covered by the option, or portion thereof, exercised by the Holder. No loan will have an initial term exceeding five years, but any such loan may be renewable at the discretion of the 4 5 Administrator. When a loan is made, the Holder will pledge to the Company shares of Stock having a fair market value at least equal to the principal amount of the loan. Every loan will comply with all applicable laws, regulations and rules of the Federal Reserve Board and any other governmental agency having jurisdiction over the Company. (c) Stock will not be issued upon the exercise of options unless and until the aggregate amount of federal, state or local taxes of any kind required by law to be withheld with respect to the exercise of such options have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe, including, without limitation, payment of any such taxes by exchanging shares of Stock previously owned by the Holder or acquired upon the exercise of an option. 11. STOCK ADJUSTMENTS. (a) The total amount of Stock for which options may be granted under the Stock Option Plan and option terms (both as to the number of shares of Stock and the price of the option) will be appropriately adjusted for any increase or decrease in the number of outstanding shares of Stock resulting from payment of a stock dividend on the Stock, a subdivision or combination of the Stock, or a reclassification of the Stock, and (in accordance with the provisions contained in the following paragraph) in the event of a consolidation or a merger in which the Company will be the surviving corporation. (b) After any merger of one or more corporations into the Company in which the Company will be the surviving corporation, or after any consolidation of the Company and one or more other corporations, each Holder will, at no additional cost, be entitled, upon any exercise of his option, to receive, in lieu of the number of shares of Stock as to which such option will then be so exercised, the number and class of shares of stock or other securities to which such Holder would have been entitled pursuant to the terms of the applicable agreement of merger or consolidation if at the time of such merger or consolidation such Holder had been a Holder of record of a number of shares of Stock equal to the number of shares for which such option may then be so exercised. Comparable rights will accrue to each Holder in the event of successive mergers or consolidations of the character described above. (c) In the event of any sale of all or substantially all of the assets of the Company, or any merger of the Company into another corporation, or any dissolution or liquidation of the Company or, in the discretion of the Board, any consolidation or other reorganization in which it is impossible or impracticable to continue in effect any options, all options granted under the Stock Option Plan and not previously exercised will become exercisable by Holders who are at such time in the employ of the Company or any of its subsidiaries or divisions, commencing 10 days before the scheduled closing of such event, and will terminate unless exercised at least one business day before the scheduled closing of such event; provided, that any such exercise will be conditioned on the closing of such transaction; 5 6 and provided further, that the Board may, in its discretion, require instead that all options granted under the Stock Option Plan and not previously exercised will be assumed by such other corporation on the basis provided in the preceding paragraph. (d) The adjustments described in this Section 11 and the manner of application of the foregoing provisions will be determined by the Board in its sole discretion. Any such adjustment may provide for the elimination of any fractional share which might otherwise become subject to an option. 12. RIGHTS AS A STOCKHOLDER. A Holder or a transferee of an option will have no rights as a stockholder with respect to any share of Stock covered by such Holder's option until such Holder has become the Holder of record of such share of Stock, and, except for stock dividends as provided in Section 11 hereof, no adjustment will be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights in respect of such share for which the record date is prior to the date on which he will become the holder of record thereof. 13. AMENDMENT AND TERMINATION. The Board may at any time terminate, amend or modify the Stock Option Plan in any respect it deems suitable; provided, however, that no such action of the Board, without the approval of the stockholders of the Company, may (i) increase the benefits accruing to employees eligible to receive options under the Stock Option Plan, (ii) increase the total amount of Stock for which options may be granted under the Stock Option Plan or (iii) change the class of employees eligible to receive options; provided, further, that no amendment, modification or termination of the Stock Option Plan may (A) in any manner affect any option theretofore granted under the Stock Option Plan without the consent of the then Holder or (B) modify the allocation of options to the persons designated by the Board. 14. INVESTMENT PURPOSE. At the time of exercise of any option, the Company may, if it will deem it necessary or desirable for any reason, require the Holder to (i) represent in writing to the Company that it is such Holder's then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable securities laws. 6 7 15. RIGHT TO TERMINATE EMPLOYMENT. Nothing contained herein or in any Option Agreement will restrict the right of the Company to terminate the employment of any Holder at any time, with or without Cause. 16. FINALITY OF DETERMINATIONS. Each determination, interpretation, or other action made or taken pursuant to the provisions of the Stock Option Plan by the Administrator will be final and be binding and conclusive for all purposes. 17. INDEMNIFICATION OF DIRECTORS. Each director of the Company will be indemnified by the Company against all costs and expenses reasonably incurred by such director in connection with any action, suit or proceeding to which he or she or any of the other directors may be a party by reason of any action taken or failure to act under or in connection with the Stock Option Plan, or any option granted thereunder, and against all amounts paid by the other directors in settlement thereof (provided such settlement will be approved by independent legal counsel) or paid by the other directors in satisfaction of a judgment in any such action, suit or proceeding, except a judgment based upon a finding of bad faith. Upon the institution of any such action, suit or proceeding, a director of the Company will notify the Company in writing, giving the Company an opportunity, at its own expense, to handle and defend the same before such director undertakes to handle it on his or her own behalf. 18. FEDERAL INCOME TAX CONSEQUENCES. Under the present provisions of the IRC, the Federal income tax consequences of participating in the Stock Option Plan may be summarized as follows. This summary is of general application only and its application to any individual will depend on that individual's circumstances. The summary does not address the affect of state and local income tax laws. The Stock Option Plan is not subject to the provisions of Section 401(a) of the IRC or the Employee Retirement Income Security Act of 1974, as amended. Non-qualified Stock Options. The recipient of a Nonqualified Stock Option will not recognize income upon the grant of the Nonqualified Stock Option, but, upon exercise, generally will recognize ordinary income in an amount equal to the difference between the fair market value of the shares acquired on the exercise date and the option price. The Company generally will be entitled to a tax deduction at the same time and in the same amount as the income recognized. 7 8 If a Nonqualified Stock Option is exercised within six months of the date of grant and the holder thereof is restricted from selling the shares acquired upon exercise because of the restrictions of Section 16(b) of the Exchange Act, unless the holder elects under Section 83(b) of the IRC to be taxed immediately, he or she will recognize ordinary income (and the Company will be entitled to a deduction) at the end of the six-month holding period imposed by Section 16(b) in an amount equal to the difference between the fair market value of the shares at that time and the option price. If the recipient pays the option price entirely in cash for tax purposes, his or her basis in the shares received will be equal to their fair market value on the exercise date (or the date on which the Section 16(b) period expires, if applicable), and the holding period for tax purposes will begin on the day following the exercise date. Incentive Stock Options. The recipient of an Incentive Stock Option will not be required to recognize income upon either the grant or, if certain holding period requirements are met, exercise of the Incentive Stock Option. If the Incentive Stock Option is exercised during employment or within three months after termination of employment (12 months in the case of permanent and total disability) and the shares received on exercise are not disposed of until after the later of (i) one year from the date of transfer of the shares to the recipient, or (ii) two years from the date of grant of the Incentive Stock Option, the recipient must then recognize taxable income in an amount equal to the difference between the amount realized and the option price. If the amount realized is less than the option price, the loss will be a long-term capital loss. The Company will not receive a Federal income tax deduction in connection with either the grant or exercise of the option. If the shares are disposed of before the holding period described above, the recipient generally must recognize ordinary income in the year of disposition equal to the difference between the fair market value of the shares received or the amount realized on the disposition (if the shares are disposed of in a transaction on which loss would be recognized if sustained) on the date of exercise and the option price. The Company would then receive a Federal income tax deduction in an amount equal to any ordinary income so recognized. 19. SUBSIDIARY AND PARENT CORPORATIONS. Unless the context requires otherwise, references under the Stock Option Plan to the Company will be deemed to include any subsidiary corporations and parent corporations of the Company, as those terms are defined in Section 425 of the IRC. 8 9 20. GOVERNING LAW. The Stock Option Plan will be governed by the laws of the State of Delaware. 21. EFFECTIVE DATE. The Stock Option Plan will become effective upon the Effective Date; however, options may be granted on or prior to such date but will not be exercisable until the Effective Date in accordance with the terms hereof. 22. OVERRIDE. With respect to persons subject to Section 16 of the Exchange Act, transactions under the Stock Option Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Stock Option Plan or action by the Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Administrator. 9 10 EXHIBIT A U.S. HOME CORPORATION AMENDED AND RESTATED 1993 EMPLOYEES' STOCK OPTION PLAN INCENTIVE STOCK OPTION AGREEMENT OPTION AGREEMENT, dated as of ______________ __, 199_ between U.S. HOME CORPORATION, a Delaware corporation (the "Company"), and _______________________ (the "Holder"). 1. PURPOSE. The purpose of this Incentive Option Agreement (this "Agreement") is to set forth the terms and conditions of the incentive stock option granted to the Holder under the U.S. Home Corporation Amended and Restated 1993 Employees' Stock Option Plan (the "Stock Option Plan"). The terms and conditions (including defined terms) of the Stock Option Plan are expressly incorporated herein and made a part hereof with the same force and effect as if fully set forth herein. The acceptance by the Holder of the Option (as hereinafter defined) granted hereby will constitute acceptance of and agreement with all of the terms and conditions contained in this Agreement and the Stock Option Plan. 2. GRANT OF OPTION. The Company hereby grants to the Holder an option (the "Option") to purchase all or any part of an aggregate of _______ shares of the Company's common stock, $.01 par value per share (the "Stock"), at a price of $______* per share (the "Exercise Price"), subject to adjustment as herein provided. Such Option is intended to qualify as an "Incentive Stock Option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "IRC"); provided, however, that to the extent that any portion of this Option cannot be exercised as an Incentive Stock Option by reason of the $100,000 limitation contained in Section 422(d) of the IRC, such portion will be treated as a nonqualified stock option. 3. TERM OF OPTION. (a) Subject to Sections 4 and 5 hereof, the Option shall be exercisable in the following cumulative installments and maximum amounts: __________________________________ * To be determined pursuant to Section 5 of the Stock Option Plan. 11
Number of Shares Period Exercisable --------- --------------------------- 1/3rd commencing one (1) year from the date hereof; 2/3rds commencing two (2) years from the date hereof, less any portion of the Option previously exercised, until expiration of the Option; and All commencing three (3) years from the date hereof, less any portion of the Option previously exercised, until expiration of the Option.
(b) The Option will expire on the date 10 years from the date hereof. Any exercise will be accompanied by a written notice to the Company in substantially the form attached hereto as Schedule 1. 4. TERMINATION OF EMPLOYMENT. (a) If, on or after the date an Option is granted under the Stock Option Plan, (i)(A) a Holder's employment with the Company or a subsidiary or division thereof is terminated by the Company for any reason other than (x) for Cause (as herein defined), or (y) death or disability (within the meaning of Section 22(e)(3) of the IRC), (B) the Holder retires in accordance with the Company's normal retirement policy or with the consent of the board of directors of the Company (the "Board"), or (C) such Holder's employment with the Company is Constructively Terminated (as defined herein), the Holder will have the right, not later than the earlier of (a) three months after such termination or retirement or (b) the termination date of the option to exercise the Option, to the extent the right to exercise such Option will have accrued at the date of such termination of employment or retirement, except to the extent that such Option theretofore will have been exercised, or (ii) a Holder's employment with the Company or a subsidiary or division thereof is terminated (A) by the Company for Cause or (B) by the Holder for any reason other than due to (x) such Holder being Constructively Terminated, (y) such Holder's retirement in accordance with the Company's normal retirement policy or with the consent of the Board, or (z) such Holder's death or disability, the right to exercise the Option will thereupon terminate. (b) For purposes of this Agreement, the term "Cause" means (i) the Holder's continuing willful failure to perform his duties with respect to the Company (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by the Holder in the performance of his duties with respect to the Company, (iii) an act or acts on the Holder'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 Holder at the expense of the Company or (iv) any other circumstances set forth in an employment agreement between the Company and the Holder which would constitute grounds for the Company to terminate the employment of the Holder for Cause. (c) For purposes of this Agreement, the term "Constructively Terminated" means (i) a reduction in an amount equal to or greater than 15 percent of a Holder's base salary, A-2 12 (ii) a material reduction in a Holder's job function, duties or responsibilities or (iii) a required relocation of a Holder of more than 50 miles from such Holder's current job location; provided, however, that the employment with the Company or its subsidiaries or divisions of a President of Operations will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President with the Company or its subsidiaries or divisions and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment with the Company or its subsidiaries or divisions of a Division Chairman or Division President will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President of a division other than the division he or she is currently employed by and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment of any person will not be deemed Constructively Terminated unless such person actually terminates his or her employment with the Company within 60 days after the occurrence of an event specified in clauses (i), (ii) or (iii) above. 5. DEATH OR DISABILITY. (a) Except as provided in paragraph (b) of this Section 5, if the Holder's employment with the Company or any subsidiary or division thereof is terminated because of his or her disability (within the meaning of Section 22(e)(3) of the IRC), the disabled Holder will have the right, not later than the earlier of (i) one year after such termination or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued hereunder at the date of such termination of employment, except to the extent the Option theretofore will have been exercised. (b) If the Holder dies while in the employ of the Company or any Subsidiary or division thereof or within three months after termination of his employment with the Company or any Subsidiary or division thereof because of his disability, his personal representative or the person or persons to whom the Option will have been transferred by will or by the laws of descent and distribution will have the right, not later than the earlier of (i) one year from the date of the Holder's death or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued at the date of death or disability, except to the extent the Option theretofore will have been exercised. 6. TRANSFERABILITY. The Option will not be transferable by the Holder other than by will or the laws of descent and distribution. During the lifetime of the Holder, the Option will be exercisable only by such Holder. A Holder who acquires Stock hereunder will only transfer such Stock in compliance with applicable federal and state securities laws. Holders who are affiliates of the Company may generally dispose of their shares in accordance with Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act"). A-3 13 7. PAYMENT OF EXERCISE PRICE. Payment for shares of Stock issued upon exercise of the Option will be paid in full on the date of purchase. Payment will be made either in cash or in such other consideration as the Administrator (as defined in the Stock Option Plan) deems appropriate. Notwithstanding the foregoing, shares of Stock will not be issued upon exercise of the Option unless and until the aggregate amount of federal, state and local taxes of any kind required to be withheld with respect to such exercise have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe. 8. ADJUSTMENT TO OPTION. The number of shares of Stock subject to the Option and the Exercise Price will be adjusted, as necessary, in accordance with the provisions of Section 11 of the Stock Option Plan. 9. NO RIGHTS AS STOCKHOLDER. The Holder will have no rights as a stockholder with respect to any Stock covered by the Option until such person has become the holder of record of such Stock, and, except for stock dividends as provided in Section 11 of the Stock Option Plan, no adjustment will be made for dividends (ordinary or extra-ordinary, whether in cash, securities or other property) or distributions or other rights in respect of such Stock for which the record date is prior to the date on which he or she will become the holder of record thereof. 10. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained herein will restrict any right of the Company to terminate the employment of the Holder at any time, with or without Cause. 11. REPRESENTATIONS. At the time of any exercise of the Option, the Company may, if it will deem it necessary or desirable for any reason, require the Holder (i) to represent in writing to the Company that it is his then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) to postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable federal or state securities laws. A-4 14 12. GOVERNING LAW. This Agreement will be governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. U.S. HOME CORPORATION By:_________________________ Name: Title: Holder ____________________________ Signature Name: ______________________ Address: ____________________ ____________________ A-5 15 SCHEDULE 1 U.S. Home Corporation 1800 West Loop South Houston, Texas 77252 Attention: Secretary Re: Notice of Exercise of Incentive Stock Option Dear Sir: I am the holder of the below-described incentive stock option granted under the U.S. Home Corporation (the "Company") Amended and Restated 1993 Employees' Stock Option Plan:
Number of Shares Exercise Price Date of Option Subject to Option Per Share - -------------- ----------------- ---------------
I hereby exercise my option to purchase ______ shares of the common stock, $.01 par value per share, of the Company, reserving my right to purchase any remaining shares subject to the option in accordance with its terms. Dated: ____________ __, 199_ Very truly yours, _________________________________ Signature Name: ___________________________ Address:_________________________ _________________________ 16 EXHIBIT B U.S. HOME CORPORATION AMENDED AND RESTATED 1993 EMPLOYEES' STOCK OPTION PLAN NONQUALIFIED STOCK OPTION AGREEMENT OPTION AGREEMENT, dated as of ______________ __, 199_ between U.S. HOME CORPORATION, a Delaware corporation (the "Company"), and _______________________ (the "Holder"). 1. PURPOSE. The purpose of this Nonqualified Stock Option Agreement (this "Agreement") is to set forth the terms and conditions of the stock option granted to the Holder under the U.S. Home Corporation Amended and Restated 1993 Employees' Stock Option Plan (the "Stock Option Plan"). The terms and conditions (including defined terms) of the Stock Option Plan are expressly incorporated herein and made a part of hereof with the same force and effect as if fully set forth herein. The acceptance by the Holder of the Option (as hereinafter defined) granted hereby will constitute acceptance of and agreement with all of the terms and conditions contained in this Agreement and the Stock Option Plan. 2. GRANT OF OPTION. The Company hereby grants to the Holder an option (the "Option") to purchase all or any part of an aggregate of _______ shares of the Company's common stock, $.01 par value per share (the "Stock"), at a price of $______* per share (the "Exercise Price"), subject to adjustment as herein provided. Such Option is not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "IRC"). 3. TERM OF OPTION. The Option will expire on the date 10 years from the date hereof. Any exercise will be accompanied by a written notice to the Company in substantially the form attached hereto as Schedule 1. __________________________________ * To be determined pursuant to Section 5 of the Stock Option Plan. 17 4. TERMINATION OF EMPLOYMENT. (a) If, on or after the date an Option is granted under the Stock Option Plan, (i) (A) a Holder's employment with the Company or a subsidiary or a division thereof is terminated by the Company for any reason other than (x) for Cause (as herein defined), or (y) death or disability (within the meaning of Section 22(e)(3) of the IRC), (B) the Holder retires in accordance with the Company's normal retirement policy or with the consent of the board of directors of the Company (the "Board"), or (C) such Holder's employment with the Company is Constructively Terminated (as defined herein), the Holder will have the right, not later than the earlier of (a) three months after such termination or retirement or (b) the termination date of the Option, to exercise the Option, to the extent the right to exercise the Option will have accrued hereunder at the date of such termination of employment or retirement, except to the extent that the Option theretofore will have been exercised or (ii) a Holder's employment with the Company or a subsidiary or division thereof is terminated (A) by the Company for Cause or (B) by the Holder for any reason other than due to (x) such Holder being Constructively Terminated, (y) such Holder's retirement in accordance with the Company's normal retirement policy or with the consent of the Board, (z) such Holder's death or disability, the right to exercise the Option will thereupon terminate. (b) For purposes of this Agreement, the term "Cause" will mean (i) the Holder's continuing willful failure to perform his duties with respect to the Company (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by the Holder in the performance of his duties with respect to the Company, (iii) an act or acts on the Holder'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 Holder at the expense of the Company or (iv) any other circumstances set forth in an employment agreement between the Company and the Holder which would constitute grounds for the Company to terminate the employment of the Holder for Cause. (c) For purposes of this Agreement, the term "Constructively Terminated" means (i) a reduction in an amount equal to or greater than 15 percent of a Holder's base salary, (ii) a material reduction in a Holder's job function, duties or responsibilities or (iii) a required relocation of a Holder of more than 50 miles from such Holder's current job location; provided, however, that the employment with the Company or its subsidiaries or divisions of a President of Operations will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President with the Company or its subsidiaries or divisions and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment with the Company or its subsidiaries or divisions of a Division Chairman or Division President will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President of a division other than the division he or she is currently employed by and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment of any person will not be deemed Constructively Terminated unless such person actually terminates his or her employment with B-2 18 the Company within 60 days after the occurrence of an event specified in clauses (i), (ii) or (iii) above. 5. DEATH OR DISABILITY. (a) Except as provided in paragraph (b) of this Section 5, if the Holder's employment with the Company or any subsidiary or division thereof is terminated because of his or her disability (within the meaning of Section 22(e)(3) of the IRC), the disabled Holder will have the right, not later than the earlier of (i) one year after such termination or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued hereunder at the date of such termination of employment, except to the extent the Option theretofore will have been exercised. (b) If the Holder dies while in the employ of the Company or any subsidiary or division thereof or within three months after termination of his employment with the Company or any subsidiary or division thereof because of his disability, his or her personal representative or the person or persons to whom the Option will have been transferred by will or by the laws of descent and distribution will have the right, not later than the earlier of (i) one year from the date of the Holder's death or (ii) the date 10 years from the date hereof, to exercise the Option, to the extent the right to exercise the Option will have accrued at the date of death or disability, except to the extent the Option theretofore will have been exercised. 6. TRANSFERABILITY. The Option will not be transferable by the Holder other than by will or the laws of descent and distribution. During the lifetime of the Holder, the Option will be exercisable only by such Holder. A Holder who acquires Stock hereunder will only transfer such Stock in compliance with applicable federal and state securities laws. Holders who are affiliates of the Company may generally dispose of their shares in accordance with Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act"). 7. PAYMENT OF EXERCISE PRICE. Payment for shares of Stock issued upon exercise of the Option will be paid in full on the date of purchase. Payment will be made either in cash or in such other consideration as the Administrator (as defined in the Stock Option Plan) deems appropriate. Notwithstanding the foregoing, shares of Stock will not be issued upon exercise of the Option unless and until the aggregate amount of federal, state and local taxes of any kind required to be withheld with respect to such exercise have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe. B-3 19 8. ADJUSTMENT TO OPTION. The number of shares of Stock subject to the Option and the Exercise Price will be adjusted, as necessary, in accordance with the provisions of Section 11 of the Stock Option Plan. 9. NO RIGHTS AS STOCKHOLDER. The Holder will have no rights as a stockholder with respect to any Stock covered by the Option until such person has become the holder of record of such Stock, and, except for stock dividends as provided in Section 11 of the Stock Option Plan, no adjustment will be made for dividends (ordinary or extra-ordinary, whether in cash, securities or other property) or distributions or other rights in respect of such Stock for which the record date is prior to the date on which he or she will become the holder of record thereof. 10. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained herein will restrict any right of the Company to terminate the employment of the Holder at any time, with or without Cause. 11. REPRESENTATIONS. At the time of any exercise of the Option, the Company may, if it will deem it necessary or desirable for any reason, require the Holder (i) to represent in writing to the Company that it is his then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) to postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable federal or state securities laws. B-4 20 12. GOVERNING LAW. This Agreement will be governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. U.S. HOME CORPORATION By:_________________________ Name: Title: Holder ____________________________ Signature Name: ______________________ Address:____________________ ____________________ B-5 21 SCHEDULE 1 U.S. Home Corporation 1800 West Loop South Houston, Texas 77252 Attention: Secretary Re: Notice of Exercise of Nonqualified Stock Option Dear Sir: I am the holder of the below-described nonqualified stock option granted under the U.S. Home Corporation (the "Company") Amended and Restated 1993 Employees' Stock Option Plan:
Number of Shares Exercise Price Date of Option Subject to Option Per Share - -------------- ----------------- ---------------
I hereby exercise my option to purchase ______ shares of the common stock, $.01 par value per share, of the Company, reserving my right to purchase any remaining shares subject to the option in accordance with its terms. Dated: ____________ __, 199_ Very truly yours, ____________________________ Signature Name: ______________________ Address:____________________ ____________________ EX-10.10 6 AMENDED & RESTATED NON-EMPLOYEE DIRECTORS STOCK 1 EXHIBIT 10.10 U.S. HOME CORPORATION AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN 1. PURPOSES. The purposes of the U.S. Home Corporation Amended and Restated Non-Employee Directors' Stock Option Plan (the "Plan") are to attract and retain qualified and competent persons for service as members of the board of directors (the "Board") of U.S. Home Corporation (the "Company") by providing a means whereby such persons acquire an equity interest in the Company and to secure for the Company and its stockholders the benefit of the incentives inherent in such equity ownership by persons whose advice and counsel are important to the Company's future growth and continued success. 2. ADMINISTRATION. (a) The Board shall (i) administer the Plan, (ii) establish, subject to the provisions of the Plan, such rules and regulations as it may deem appropriate for the proper administration of the Plan and (iii) make such determinations under, and such interpretations of, and take such steps in connection with, the Plan or the options issued thereunder as it may deem necessary or advisable. (b) The Board may from time to time appoint a Committee (the "Committee"), which shall initially be the Nominating Committee of the Board, which shall be comprised of at least three members of the Board, all of whom are to be non-employee directors (within the meaning of Rule 16b-3 promulgated under the Securities Act of 1934, as amended (the "Exchange Act")) and may delegate to the Committee full power and authority to take any and all action required or permitted to be taken by the Board under the Plan, whether or not the power and the authority of the Committee is hereinafter fully set forth. The Board or the Committee, as applicable, shall hereinafter be referred to as the "Administrator." 3. STOCK. The stock (the "Stock") to be made the subject of an option under the Plan shall be the shares of common stock of the Company, $.01 par value per share, whether authorized and unissued or treasury stock. The total amount of Stock for which options may be granted under the Plan shall not exceed, in the aggregate, 100,000 shares, subject to adjustment in accordance with the provisions of Section 12 hereof. Any shares of Stock which were the subject of unexercised portions of any terminated or expired options may again be subject to the grant of options under the Plan during the remaining term of the Plan. 2 4. AWARD OF OPTIONS. (a) Options shall be granted only to non-employee directors of the Board. No individual who is, at the time of grant, an employee of the Company shall be eligible to receive options under the Plan. (b) All options granted under the Plan shall be non-qualified options not entitled to special tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended (the "IRC"). (c) Any and all options granted under this Plan shall be granted not later than 10 years from August 19, 1993, the date the Plan was adopted by the Board. (d) All options granted under the Plan shall be evidenced by a written agreement substantially in the form of Exhibit A annexed hereto (each an "Option Agreement"). 5. NUMBER OF SHARES TO BE GRANTED. (a) Each person who is a non-employee director of the Company at the time of adoption of the Plan by the Board shall be granted an option for 5,000 shares of Stock (an "Initial Stock Option Grant") at the time of such adoption. Each person who becomes a non-employee director of the Company after the adoption of the Plan by the Board shall be granted an option for 5,000 shares of Stock at the time such person first becomes a non-employee director of the Company (a "New Director Stock Option Grant"). On the date of each annual meeting or special meeting in lieu of annual meeting of the stockholders of the Company, each person who continues to serve as a non-employee director of the Company immediately after such meeting shall be granted an option for 1,000 additional shares of Stock (an "Annual Stock Option Grant"); provided, that he or she has served as a non-employee director for at least six months prior to such meeting. The options shall be deemed automatically granted at the times, in the amounts and at the option prices set forth herein without any further action on the part of the Administrator, and the proper officers of the Company are authorized, empowered and directed to execute and deliver an Option Agreement to reflect each such grant at the times, in the amounts and at the option prices determined in accordance with the Plan. (b) Each person who (i) is a non-employee director of the Company at the time of adoption of the Plan and (ii) has served as a non-employee director of the Company prior to June 21, 1993 shall be granted an option for 2,500 shares of Stock, in addition to the option granted pursuant to paragraph (a) of this Section 5, the aggregate of which shall be deemed an Initial Stock Option Grant for such directors. 2 3 6. PRICE. (a) In the case of an Initial Stock Option Grant, the exercise price of such Option shall be the greater of the (i) closing price of the Stock on the New York Stock Exchange (the "NYSE") on June 21, 1993 and (ii) average closing price of the Stock on the NYSE for the 10 consecutive trading days ending August 20, 1993. Notwithstanding the foregoing, the exercise price of such Option will in no event be less than 95% of the average closing price of the Stock on the NYSE for the 20 consecutive trading days immediately prior to August 19, 1993. (b) In the case of a New Director Stock Option Grant, the exercise price of such Option shall be the average closing price of the Stock on the NYSE for the 10 consecutive trading days prior to the date of the New Director Stock Option Grant. Notwithstanding the foregoing, the exercise price of such Option will in no event be less than 95% of the average closing price of the Stock on the NYSE for the 20 consecutive trading days immediately prior to the date of the New Director Stock Option Grant. (c) In the case of an Annual Stock Option Grant, the exercise price of such Option shall be the average closing price of the Stock on the NYSE for the 10 consecutive trading days prior to the date of the Annual Stock Option Grant. Notwithstanding the foregoing, the exercise price of such Option will in no event be less than 95% of the average closing price of the Stock on the NYSE for the 20 consecutive trading days immediately prior to the date of the Annual Stock Option Grant. (d) The closing price of the Stock as of any particular day, shall be as reported in The Wall Street Journal; provided, however, that if the Stock is not listed on the NYSE on the dates the option price is to be determined, the option price shall be not less than the fair market value of the shares of Stock covered by the option at the time that the option is granted, as determined by the Administrator based on such empirical evidence as it deems to be necessary under the circumstances. 7. TERM. Subject to Sections 9, 10 and 21 hereof, an option may be exercised by the holder thereof (a "Holder") in whole at any time or in part from time to time commencing with the date of grant of any option under the Plan, but no option may be exercised in any amount later than 10 years from the date such option was granted. 8. TRANSFERABILITY. No option may be transferable by a Holder other than by will or the laws of descent and distribution. During the lifetime of a Holder, the option may be exercisable only by such Holder. A Holder who acquires Stock hereunder may only transfer such Stock in compliance with applicable federal and state securities laws. 3 4 9. TERMINATION OF DIRECTORSHIP. If, on or after the date an option is granted under the Plan, a Holder (i) resigns as a director of the Company or (ii) is removed as a director of the Company by the stockholders of the Company, with or without cause, the Holder shall have the right, not later than the earlier of (A) three months after such resignation or removal or (B) the termination date of the option as set forth in the Option Agreement, to exercise such option, to the extent the right to exercise such option shall have accrued at the date of such resignation or removal, except to the extent that such option theretofore shall have been exercised. 10. RETIREMENT, DEATH OR DISABILITY. If a Holder retires at the age of 65 or above, dies, or becomes disabled (within the meaning of Section 22(e) (3) of the IRC) while a director of the Company, the Holder, the personal representative of the Holder or the person or persons to whom the option shall have been transferred by will or by the laws of descent and distribution, or the disabled Holder, shall have the right, not later than the earlier of (i) three years from the date of the Holder's retirement, death or disability or (ii) the termination date of the option as set forth in the Option Agreement, to exercise such option to the extent the right to exercise such option shall have accrued at the date of such retirement, death or disability, except to the extent such option theretofore shall have been exercised. 11. PAYMENT FOR STOCK. (a) The purchase price of Stock issued upon exercise of options granted hereunder shall be paid in full on the date of purchase. Payment shall be made either in cash or such other consideration as the Administrator deems appropriate, including, without limitation, Stock already owned by the Holder or Stock to be acquired by the Holder upon exercise of the option having a total fair market value, as determined by the Administrator, equal to the purchase price, or a combination of cash and Stock having a total fair market value, as so determined, equal to the purchase price. (b) Stock shall not be issued upon the exercise of options unless and until the aggregate amount of federal, state or local taxes of any kind required by law to be withheld, if any, with respect to the exercise of such options have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe, including, without limitation, payment of any such taxes by exchanging shares of Stock previously owned by the Holder or acquired upon the exercise of an option. 4 5 12. STOCK ADJUSTMENTS. (a) The total amount of Stock for which options shall be granted under the Plan and option terms (both as to the number of shares of Stock and the price of the option) shall be appropriately adjusted for any increase or decrease in the number of outstanding shares of Stock resulting from payment of a stock dividend on the Stock, a subdivision or combination of the Stock, or a reclassification of the Stock, and (in accordance with the provisions contained in the following paragraph) in the event of a consolidation or a merger in which the Company will be the surviving corporation. (b) After any merger of one or more corporations into the Company in which the Company shall be the surviving corporation, or after any consolidation of the Company and one or more other corporations, each Holder shall, at no additional cost, be entitled, upon any exercise of his option, to receive, in lieu of the number of shares of Stock as to which such option shall then be so exercised, the number and class of shares of stock or other securities to which such Holder would have been entitled pursuant to the terms of the applicable agreement of merger or consolidation if at the time of such merger or consolidation such Holder had been a Holder of record of a number of shares of Stock equal to the number of shares for which such option may then be so exercised. Comparable rights shall accrue to each Holder in the event of successive mergers or consolidations of the character described above. (c) In the event of any sale of all or substantially of the assets of the Company, or any merger of the Company into another corporation, or any dissolution or liquidation of the Company or, in the discretion of the Board, any consolidation or other reorganization in which it is impossible or impracticable to continue in effect any options, all options granted under the Plan and not previously exercised shall terminate unless exercised at least one business day before the scheduled closing of such event; provided, that any such exercise or termination shall be conditioned on the closing of such transaction; and provided further, that the Board may, in its discretion, require instead that all options granted under the Plan and not previously exercised shall be assumed by such other corporation on the basis provided in the preceding paragraph to the extent possible or practical. (d) The adjustments described in this Section 12 and the manner of application of the foregoing provisions shall be determined by the Board in its sole discretion. Any such adjustment may provide for the elimination of any fractional share which might otherwise become subject to an option. 13. RIGHTS AS A STOCKHOLDER. A Holder or a transferee of an option shall have no rights as a stockholder with respect to any share of Stock covered by such Holder's option until such Holder has become the holder of record of such share of Stock, and, except for stock dividends as provided in Section 12 hereof, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities 5 6 or other property) or distributions or other rights in respect of such share for which the record date is prior to the date on which he or she shall become the holder of record thereof. 14. AMENDMENT AND TERMINATION. The Board may at any time terminate, amend or modify the Plan in any respect it deems suitable; provided however, that no such action of the Board, without the approval of the stockholders of the Company, may (i) increase the total amount of Stock on which options may be granted under the Plan, (ii) change the manner of determining the option price, (iii) change the class of individuals eligible to receive options, (iv) change the number of options which may be granted to each director, or (v) change the times when such options are granted; provided, further, that no amendment, modification or termination of the Plan may in any manner affect any option theretofore granted under the Plan without the consent of the then Holder. Notwithstanding the foregoing, the Plan may not be amended more than once in any six-month period except to comply with changes in the IRC, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any rules or regulations promulgated under either the IRC or ERISA. 15. INVESTMENT PURPOSE. At the time of exercise of any option, the Company may, if it shall deem it necessary or desirable for any reason, require the Holder to (i) in the absence of an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), represent in writing to the Company that it is such Holder's then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable securities laws. 16. RIGHT TO REMOVE DIRECTOR. Nothing contained herein or in any Option Agreement shall restrict the right of the stockholders of the Company to remove any Holder as director at any time, with or without cause, or shall constitute or be evidence of any agreement or understanding, express or implied, that the Company shall retain a director for any period of time, or at any particular rate of compensation. 17. FINALITY OF DETERMINATIONS. Each determination, interpretation, or other action made or taken pursuant to the provisions of the Plan by the Administrator shall be final and be binding and conclusive for all purposes. 6 7 18. INDEMNIFICATION OF DIRECTORS. Each director of the Company, solely in his or her capacity as a director, shall be indemnified by the Company against all costs and expenses reasonably incurred by such director in connection with any action, suit or proceeding to which he or she or any of the other directors may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any option granted thereunder, and against all amounts paid in settlement thereof (provided such settlement shall be approved by independent legal counsel) or paid in satisfaction of a judgment in any such action, suit or proceeding, to the extent permitted by Delaware law. Upon the institution of any such action, suit or proceeding, a director of the Company shall notify the Company in writing, giving the Company an opportunity, at its own expense, to handle and defend the same before such director undertakes to handle it on his or her own behalf. 19. FEDERAL INCOME TAX CONSEQUENCES. Under the present provisions of the IRC, the federal income tax consequences of participating in the Plan may be summarized as follows: This summary is of general application only and its application to any individual will depend on that individual's circumstances. The summary does not address the effect of state and local income tax laws. The Plan is not subject to the provisions of Section 401 (a) of the IRC or ERISA. The recipient of an option shall not recognize income upon the grant of the option, but, upon exercise, generally shall recognize ordinary income in an amount equal to the difference between the fair market value of the Stock acquired on the exercise date and the option price. The Company generally shall be entitled to a tax deduction at the same time and in the same amount as the income recognized. If an option is exercised within six months of the date of grant and the Holder is restricted from selling the Stock acquired upon exercise because of the restrictions of Section 16(b) of the Exchange Act, unless the Holder elects under Section 83(b) of the IRC to be taxed immediately, he or she shall recognize ordinary income (and the Company shall be entitled to a deduction) at the end of the restricted period imposed by Section 16(b) in an amount equal to the difference between the fair market value of the Stock at that time and the option price. If the Holder pays the option price entirely in cash for tax purposes, his or her basis in the shares of Stock received shall be equal to their fair market value on the exercise date (or the date on which the Section 16(b) period expires, if applicable), and the holding period for tax purposes shall begin on the day following the exercise date. 7 8 20. GOVERNING LAW. The Plan shall be governed by the laws of the State of Delaware. 21. EFFECTIVE DATE. The Plan shall become effective upon the date of its adoption by the Board and options shall be deemed granted at the close of business that day to all non-employee directors of the Company serving on the Board at that time, but no option may be exercised under the Plan unless and until the Plan shall have been approved by the stockholders of the Company within 12 months after its adoption by the Board. If the Plan is not so approved by the stockholders, all options granted hereunder shall be null and void. 22. OVERRIDE. With respect to persons subject to Section 16 of the Exchange Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or action by the Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Administrator. 23. ADDITIONAL INFORMATION. Additional information regarding the Plan and the Administrator may be obtained by contacting Ms. Kelly Somoza, Vice President, U.S. Home Corporation, 1800 West Loop South, Houston, Texas 77027, telephone number (713) 877-2391. The Company shall make available without charge to all Holders, upon written or oral request to Ms. Somoza at the address and/or telephone number set forth above, the following documents, each of which is incorporated by reference into the Section 10(a) prospectus relating to the Plan: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 1995. (2) The Company's Current Report on Form 8-K dated January 31, 1996 and filed with the Securities and Exchange Commission on February 12, 1996. (3) The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. (4) The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. (5) The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. 8 9 (6) The Company's Current Report on Form 8-K dated November 7, 1996 and filed with the Securities and Exchange Commission on November 12, 1996. (7) The description of the Stock is contained in the Company's Prospectus, dated October 27, 1993, filed with the Securities and Exchange Commission on October 28, 1993 pursuant to Rule 424(b) promulgated under the Securities Act, relating to the Company's Amendment No. 3 to Registration Statement on Form S-3 under the Securities Act filed with the Securities and Exchange Commission on October 26, 1993 (Registration No. 33-68966), under the headings "Capital Stock and Class B Warrants - Common Stock" on page 51 and "Capital Stock and Class B Warrants - Certificate of Incorporation" on pages 54-55. Information concerning the Company will be periodically updated by the filing of reports by the Company pursuant to the Exchange Act. Such reports were incorporated by reference to the Section 10(a) prospectus relating to the Plan and will also be available to Holders upon written or oral request to the Company's offices as indicated above. ORIGINALLY APPROVED BY THE BOARD OF DIRECTORS ON AUGUST 19, 1993 AND, AS AMENDED AND RESTATED, ON DECEMBER 6, 1996 9 10 EXHIBIT A (TO DIRECTORS' PLAN) U.S. HOME CORPORATION AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN STOCK OPTION AGREEMENT OPTION AGREEMENT, dated as of , 199 between U.S. HOME CORPORATION, a Delaware corporation (the "Company"), and (the "Holder"). 1. PURPOSE. The purpose of this Stock Option Agreement (this "Agreement") is to set forth the terms and conditions of the stock option granted to the Holder under the Amended and Restated Non-Employee Directors' Stock Option Plan (the "Plan"). The terms and conditions (including defined terms) of the Plan are expressly incorporated herein and made a part hereof with the same force and effect as if fully set forth herein. The acceptance by the Holder of the Option (as hereinafter defined) granted hereby shall constitute acceptance of and agreement with all of the terms and conditions contained in this Agreement and the Plan. 2. GRANT OF OPTION. The Company hereby grants to the Holder an option (the "Option") to purchase all or any part of an aggregate of [5,000] [7,500] [1,000] shares of the Company's common stock, $.01 par value per share (the "Stock"), at a price of $ * per share (the "Exercise Price"), subject to adjustment as herein provided. Such Option is not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "IRC"). 3. TERM. Subject to Sections 4, 5 and 13 hereof, the Option shall be exercisable in whole or in part at any time on or after the date hereof; provided, however, that the Option shall expire on the date 10 years from the date hereof. Any exercise shall be accompanied by a written notice to the Company in substantially the form attached hereto as Schedule 1. __________________________________ *To be determined pursuant to Section 6 of the Stock Option Plan. A-1 11 4. TERMINATION OF DIRECTORSHIP. If, on or after the date the Option is granted, the Holder (i) resigns as a director of the Company or (ii) is removed as a director of the Company by the stockholders of the Company, with or without cause, the Holder shall have the right, not later than the earlier of (A) three months after such resignation or removal or (B) the termination date of the Option set forth herein, to exercise the Option, to the extent the right to exercise the Option shall have accrued at the date of such resignation or removal, except to the extent that the Option theretofore shall have been exercised. 5. RETIREMENT, DEATH OR DISABILITY. If the Holder retires at the age of 65 or above, dies, or becomes disabled (within the meaning of Section 22(e)(3) of the IRC) while a director of the Company, the Holder, the personal representative of the Holder or the person or persons to whom the Option shall have been transferred by will or by the laws of descent and distribution, or the disabled Holder, will have the right, not later than the earlier of (i) three years from the date of the Holder's retirement, death or disability or (ii) the termination date of the Option set forth herein, to exercise the Option to the extent the right to exercise the Option shall have accrued at the date of such retirement, death or disability, except to the extent the Option theretofore shall have been exercised. 6. TRANSFERABILITY. The Option shall not be transferable by the Holder other than by will or the laws of descent and distribution. During the lifetime of the Holder, the Option shall be exercisable only by such Holder. If the Holder acquires Stock hereunder, the Holder shall only transfer such Stock in compliance with applicable federal and state securities laws. 7. PAYMENT OF EXERCISE PRICE. Payment for shares of Stock issued upon exercise of the Option shall be paid in full on the date of purchase. Payment shall be made either in cash or in such other consideration as the Administrator (as defined in the Plan) seems appropriate. Notwithstanding the foregoing, shares of Stock shall not be issued upon exercise of the Option unless and until the aggregate amount of Federal, state and local taxes of any kind required to be withheld, if any, with respect to such exercise have been paid or satisfied or provision for their payment and satisfaction has been made upon such terms as the Administrator may prescribe. 8. ADJUSTMENT TO OPTION. The number of shares of Stock subject to the Option and the Exercise Price shall be adjusted, as necessary, in accordance with the provisions of Section 12 of the Plan. A-2 12 9. NO RIGHTS AS STOCKHOLDER. The Holder shall have no rights as a stockholder with respect to any Stock covered by the Option until such person has become the holder of record of such Stock, and, except for stock dividends as provided in Section 12 of the Plan, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights in respect of such Stock for which the record date is prior to the date on which he or she shall become the holder of record thereof. 10. RIGHT TO REMOVE DIRECTOR. Nothing contained herein or in any Option Agreement shall restrict the right of the stockholders of the Company to remove any Holder as director at any time, with or without cause, or shall constitute or be evidence of any agreement or understanding, express or implied, that the Company shall retain a director for any period of time, or at any particular rate of compensation. 11. REPRESENTATIONS. At the time of any exercise of the Option, the Company may, if it shall deem it necessary or desirable for any reason, require the Holder to (i) in the absence of an effective registration statement under the Securities Act of 1933, as amended, represent in writing to the Company that it is his then intention to acquire the Stock for investment and not with a view to the distribution thereof or (ii) postpone the date of exercise until such time as the Company has available for delivery to the Holder a prospectus meeting the requirements of all applicable federal or state securities laws. 12. GOVERNING LAW. This Agreement shall be governed by the laws of the State of Delaware. A-3 13 13. STOCKHOLDER APPROVAL. Any Option granted under the Agreement shall not be exercisable unless or until the Plan shall have been approved by the stockholders of the Company in accordance with the provisions of Section 21 of the Plan. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. U.S. HOME CORPORATION By: ------------------------- Name: Title: Holder ---------------------------- Signature Name: ----------------------- Address: -------------------- -------------------- A-4 14 SCHEDULE 1 U.S. Home Corporation 1800 West Loop South Houston, Texas 77252 Attention: Secretary Re: Notice of Exercise of Stock Option Dear Sir: I am the holder of the below-described option to acquire shares of common stock, $.01 par value per share (the "Common Stock"), of U.S. Home Corporation (the "Company") granted under the U.S. Home Corporation Amended and Restated Non-Employee Directors' Stock Option Plan:
NUMBER OF SHARES EXERCISE PRICE DATE OF OPTION SUBJECT TO OPTION PER SHARE -------------- ----------------- --------------
I hereby exercise my option to purchase shares of Common Stock and tender the purchase price therefor, reserving my right to purchase any remaining shares of Common Stock subject to the option in accordance with its terms. Dated: Very truly yours, ---------------------------- Signature Name: ----------------------- Address: -------------------- ---------------------------- EX-10.11 7 AMENDED & RESTATED EMPLOYEE STOCK PAYMENT PLAN 1 EXHIBIT 10.11 U.S. HOME CORPORATION AMENDED AND RESTATED EMPLOYEE STOCK PAYMENT PLAN 1. PURPOSE. The purpose of the U.S. Home Corporation Amended and Restated Employee Stock Payment Plan (the "Plan") is to increase the ownership stake of key employees of U.S. Home Corporation and its subsidiaries or divisions (the "Company") by paying a percentage of such employees' annual incentive compensation in shares of Stock (as defined herein) in lieu of cash. 2. ADMINISTRATION. (a) The board of directors of the Company (the "Board") will (i) administer the Plan, (ii) establish, subject to the provisions of the Plan, such rules and regulations as it may deem appropriate for the proper administration of the Plan and (iii) make such determinations under, and such interpretations of, and take such steps in connection with, the Plan or the Stock issued thereunder as it may deem necessary or advisable. (b) The Board may from time to time appoint a Committee (the "Committee"), which shall initially be the Compensation and Stock Option Committee of the Board, which will be comprised of at least three members, all of whom are non-employee directors (as defined herein), and may delegate to the Committee full power and authority to take any and all action required or permitted to be taken by the Board under the Plan, whether or not the power and the authority of the Committee is hereinafter fully set forth. The members of the Committee may be appointed from time to time by the Board and serve at the pleasure of the Board. The Board or the Committee, as applicable, will hereinafter be referred to as the "Administrator." (c) For the purposes of this Section 2, a "non-employee director" is a director who, on a given date, is a non-employee director within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 3. STOCK. The stock (the "Stock") which is the subject of the Plan will be the shares of common stock of the Company, $.01 par value per share, whether authorized and unissued or treasury stock. The total number of shares of Stock which may be issued under the Plan will not exceed, in the aggregate, 250,000, subject to adjustment in accordance with the provisions of Section 7 hereof. 2 4. AWARD OF STOCK. (a) All employees of the Company, including, but not limited to, corporate officers, presidents of operations and division presidents (each an "Employee" and collectively, "Employees"), are eligible to receive Stock in accordance with the terms hereof. (b) Up to 25%, which amount may be subject to change from time to time by the Administrator, of the annual incentive compensation (i.e., all amounts other than Base Salary (as defined herein)) payable to an Employee pursuant to any incentive compensation plans or the incentive compensation provisions of any employment or compensation agreement may be payable in shares of Stock under the Plan. (c) (i) Up to 50%, which amount may be subject to change from time to time by the Administrator, of the annual amount of Stock awarded to an Employee pursuant to Section 4(b) hereof may, at the sole discretion of the Administrator, vest not later than two years after the end of the incentive compensation year applicable to such award of Stock and, unless otherwise specified by the Administrator, shall not vest and will expire in the event the Employee is not employed by the Company on or prior to the date on which the Stock vests with the Employee due to (A) voluntary termination by the Employee or (B) termination by the Company for Cause (as defined herein). Notwithstanding the foregoing, Stock awarded to an Employee which remains subject to a vesting period hereunder will immediately vest upon the retirement of such Employee after attaining the age of 65. (ii) For purposes of the Plan, a voluntary termination by an Employee will not be deemed to occur in the event such Employee is Constructively Terminated (as defined herein). (iii) In the event an Employee dies while in the employ of the Company, all Stock awarded to such Employee which remains subject to a vesting period hereunder will immediately vest and be delivered to such Employee's estate as soon as practicable after such Employee's death. (iv) For purposes of the Plan: (A) "Cause" shall mean (1) an Employee's continuing willful failure to perform his duties with respect to the Company (other than as a result of total or partial incapacity due to physical or mental illness), (2) gross negligence or malfeasance by an Employee in the performance of his duties with respect to the Company, (3) an act or acts on an Employee'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 such Employee at the expense of the Company or (4) any other circumstances set forth in an employment agreement between the Company and such Employee which would constitute 2 3 grounds for the Company to terminate the employment of such Employee for cause (as defined in the applicable employment agreement). (B) "Constructively Terminated" shall mean (1) a reduction in an amount equal to or greater than 15 percent of an Employee's Base Salary (as defined herein), (2) a material reduction in an Employee's job function, duties or responsibilities or (3) a required relocation of an Employee of more than 50 miles from such Employee's current job location; provided, however, that the employment with the Company or its divisions or subsidiaries of a President of Operations will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President with the Company or its divisions or subsidiaries and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment with the Company or its divisions or subsidiaries of a Division Chairman or Division President will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President of a division other than the division he or she is currently employed by and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment of an Employee will not be deemed Constructively Terminated unless such Employee actually terminates his or her employment with the Company within 60 days after the occurrence of an event specified in clause (1), (2) or (3) above. (C) "Base Salary" shall mean an amount equal to an Employee's maximum annual base salary in effect at any time after the effective date of the Plan, excluding any incentive compensation or bonus payable or paid to an Employee. (d) (i) All Stock awarded to Employees hereunder but not subject to vesting pursuant to Section 4(c) hereof shall be delivered to such Employees within 30 days after the determination of the price of the Stock pursuant to Section 5 hereof. (ii) Subject to Section 4(c) hereof, all Stock awarded to Employees hereunder which is subject to a vesting period hereunder shall be delivered to such Employees within 31 days after the expiration of such vesting period. (e) In the event the Company is subject to an extraordinary corporate transaction, including, without limitation, a merger, consolidation or tender offer, the Administrator shall have the right, in its sole discretion, to accelerate the vesting period of any or all Stock subject to vesting hereunder. 3 4 5. PRICE AND VALUATION. (a) The Stock will be issued to Employees in consideration of services rendered to the Company by such Employees as reflected in any incentive compensation plans or the incentive compensation provisions of any employment or compensation agreement. (b) For purposes of determining the number of shares of Stock to be issued to an Employee hereunder in lieu of cash compensation, the Administrator shall divide the amount of cash that would otherwise be distributed to such Employee by the following as determined by the Administrator: (i) with respect to the incentive compensation plans of the Company or incentive agreements which are based on the financial results of the Company's fiscal year, the average closing price of the Stock on the New York Stock Exchange (the "NYSE") for the 10 consecutive trading days immediately following the date on which the Company releases such financial results for such fiscal year, but in no event will such average closing price of the Stock be less than 95% of the Current Market Price (as defined in the Warrant Agreement, dated as of June 21, 1993, as amended (the "Warrant Agreement"), between the Company and The First National Bank of Chicago, as Warrant Agent); (ii) with respect to any other incentive compensation plans of the Company or incentive agreements, the average closing price of the Stock on the NYSE for the later to occur of the (A) last 10 trading days of the month immediately following the conclusion of the specified period for such incentive compensation program and (B) 10 consecutive trading days immediately following the date on which the Company releases its financial results for its most recent fiscal year, but in no event will such average closing price of the Stock be less than 95% of the Current Market Price (as defined in the Warrant Agreement); or (iii) the closing price of the Stock on the NYSE on the last trading day of the most recent fiscal year, but in no event will such price of the Stock be less than 95% of the Current Market Price (as defined in the Warrant Agreement). (c) The closing price of the Stock, as of any particular day, will be as reported in The Wall Street Journal; provided, however, that if the Stock is not listed on the NYSE on any applicable day, the closing price for such day will be not less than the fair market value of the Stock on such day, as determined by the Administrator based on such empirical evidence as it deems to be necessary under the circumstances. 4 5 6. TERM AND EFFECTIVE DATE. The Plan will become effective upon (i) approval by the Board, and (ii) solely with respect to Employees subject to Section 16 of the Exchange Act, approval by the affirmative vote of a majority of the shares of voting capital stock of the Company present or represented and entitled to vote at the 1994 annual meeting of the Company's stockholders. When so approved, the Plan shall be deemed to have been in effect as of January 1, 1994 and shall terminate on December 31, 1998. 7. STOCK ADJUSTMENTS. (a) The total amount of Stock reserved and issuable under the Plan and Stock awarded but not yet vested will be appropriately adjusted for any increase or decrease in the number of outstanding shares of Stock resulting from payment of a stock dividend on the Stock, a subdivision or combination of the Stock, a reclassification of the Stock, or a consolidation or a merger in which the Company will be the surviving corporation. (b) After any merger of one or more corporations into the Company in which the Company will not be the surviving corporation, or after any consolidation of the Company and one or more other corporations, each Employee who is entitled to Stock hereunder will be entitled to receive, in lieu of the number of shares of Stock as to which such Employee was previously entitled, the number and class of shares of stock or other securities or other consideration to which such Employee would have been entitled pursuant to the terms of the applicable agreement of merger or consolidation if at the time of such merger or consolidation such Employee had been a holder of record of a number of shares of Stock equal to the number of shares for which such Employee was then entitled to receive subject to vesting. Comparable rights will accrue to each Employee in the event of successive mergers or consolidations of the character described above. (c) The adjustments described in this Section 7 and the manner of application of the foregoing provisions will be determined by the Administrator in its sole discretion. Any such adjustment may provide for the elimination of fractional shares. 8. TRANSFERABILITY. An Employee who acquires Stock hereunder will only transfer such Stock in compliance with applicable federal and state securities laws. Employees who are affiliates of the Company may generally dispose of their shares in accordance with Rule 144 promulgated under the Securities Act of 1933, as amended. Employees may not transfer or assign any interest in any Stock awarded hereunder until such Stock is vested with such Employee other than by will or the laws of descent and distribution. 5 6 9. RIGHTS AS A STOCKHOLDER. Any Employee entitled to receive Stock hereunder will have no rights as a stockholder with respect to any share of Stock until such Employee has become the holder of record of such share of Stock upon vesting, and, except for stock dividends as provided in Section 7 hereof, no adjustment will be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights in respect of such Stock for which the record date is prior to the date on which such Employee will become the holder of record thereof. 10. INVESTMENT PURPOSE. At the time of issuance of any Stock, the Company may, if it will deem it necessary or desirable for any reason, require an Employee to represent in writing to the Company that it is such Employee's then intention to acquire the Stock for investment purposes and not with a view to the distribution thereof. 11. RIGHT TO TERMINATE EMPLOYMENT. Nothing contained herein will restrict the right of the Company to terminate the employment of any Employee at any time. 12. FINALITY OF DETERMINATIONS. Each determination, interpretation, or other action made or taken pursuant to the provisions of the Plan by the Administrator will be final and be binding and conclusive for all purposes. 13. SUBSIDIARY AND PARENT CORPORATIONS. Unless the context requires otherwise, references under the Plan to the Company will be deemed to include any subsidiary corporations and parent corporations of the Company, as those terms are defined in Section 425 of the Internal Revenue Code, as amended. 14. GOVERNING LAW. The Plan will be governed by the laws of the State of Delaware. 15. AMENDMENT AND TERMINATION. The Administrator may at any time terminate, amend or modify the Plan in any respect it deems suitable; provided, however, that, solely with respect to persons subject to 6 7 Section 16 of the Exchange Act, no such action of the Administrator, without the approval of the stockholders of the Company, may (i) materially increase the benefits accruing to employees eligible to receive Stock under the Plan, (ii) materially increase the total amount of Stock which may be awarded under the Plan or (iii) materially modify the requirements for participation in the Plan; provided, further, that no amendment, modification or termination of the Plan may in any manner affect (A) any Stock (whether vested or not) theretofore awarded under the Plan without the consent of the Employee to whom Stock has been awarded or (B) modify the award of Stock to the Employee designated by the Administrator. 16. OVERRIDE. (a) With respect to persons subject to Section 16 of the Exchange Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or action by the Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Administrator. (b) All transactions pursuant to terms of the Plan, including, without limitation, awards and vesting of Stock, shall only be effective at such time as counsel to the Company shall have determined that such transaction will not violate federal or state securities or other laws. The Administrator may, in its sole discretion, defer the effectiveness of such transaction to pursue whatever actions may be required to ensure compliance with such federal or state securities or other laws. 7 EX-10.13 8 CORPORATE OFFICERS INCENTIVE COMPENSATION PROGRAM 1 EXHIBIT 10.13 U.S. HOME CORPORATION CORPORATE OFFICERS'(1) INCENTIVE COMPENSATION PROGRAM FOR THE INCENTIVE PERIOD JANUARY 1, 1997 TO DECEMBER 31, 1997 Set forth below is an outline of the Corporate Officers' Incentive Compensation Program for the incentive period January 1, 1997 to December 31, 1997 ("Incentive 1997"). Corporate Officers who are employed by the Corporation as of January 1, 1997 will be eligible to participate in the Corporate Officers' Incentive Compensation Program for the period commencing January 1, 1997 and ending December 31, 1997. Effective January 1, 1997, base salaries are established as set forth in Exhibit A hereto. Under this Program, an incentive compensation pool equal to the lessor of $800,000 or 2% of the pre-tax profits of the Corporation earned in fiscal 1997, shall be established to be distributed to the Corporate Officers at the sole discretion and upon approval of a majority of the non-management members of the Compensation Committee and of the Board of Directors of the Corporation based on its evaluation of the following factors: 1. The Board of Directors shall review the profit and loss of the Company for the fiscal year ended December 31, 1997 as compared to the projected profit and loss for the period January 1, 1997 through December 31, 1997 as set forth in the 1997 Business Plan as presented to the Board of Directors. 2. The Board of Directors shall review the cash flow of the Company as compared to the projected cash flow for the period January 1, 1997 through December 31, 1997 as set forth in the 1997 Business Plan as presented to the Board of Directors. 3. The Board of Directors shall review the overall performance of the Company in comparison to competitive industry performance taking into consideration, an analysis of rates of growth, return on equity and return on sales. 4. The Board of Directors shall review incentive bonus payments by competitors in relation to proposed payments to said officers to insure that they are designed to retain and motivate executives. 5. All other actions by said Officers to maximize the value of shareholders' equity. _______________ (1) Excludes Chairman and President who are subject to Employment and Consulting Agreements which govern payment of bonus (see Exhibit A). 2 Corporate Officers' Incentive Compensation Program Page 2 of 3 pages Upon the recommendation of the Chairman and President of the Company, the Board of Directors shall determine, in its sole discretion, the amount each respective Officer shall receive from the said incentive compensation pool, provided that the maximum incentive compensation payable to any Senior Vice President and any Vice President shall not exceed 100% and 75%, respectively, of the base compensation of such Officer. To be entitled to receive a bonus, a Corporate Officer must remain in the employ of the Company for the entire fiscal year. Notwithstanding the foregoing, the Corporation shall have the right to terminate employment of any Corporate Officer covered under this Program at will, without notice, and without cause, at any time. The total bonus earned pursuant to the incentive program set forth herein shall be paid upon approval of the Board of Directors of the Company as follows: A. 75% of the aggregate incentive bonus earned by the Corporate Officer shall be paid in cash within 30 days following receipt of 1997 audited financial statements. B. The balance of the aggregate incentive bonus earned by the Corporate Officer shall be paid as follows: 1. If the respective Corporate Officer shall own of record or beneficially, as of the last trading day of December, 1997, shares of common stock of the Corporation which shall have a market value on such date equal to or in excess of his/her base salary as of such date, the balance of such incentive bonus shall be paid in cash within 30 days following receipt of the 1997 audited financial statements. 2. If the respective Corporate Officer shall not own of record beneficially, as of the last trading day of December, 1997, shares of common stock of the Corporation which shall have a market value on such date(1) equal to or in excess of his/her base salary as of such date, the balance of such incentive bonus shall be paid in shares of stock as set forth below: 25% of the aggregate incentive bonus earned by the Corporate Officer shall be paid in shares of U.S. Home Corporation's common stock, with each share valued at the closing price of said shares on the New York Stock Exchange, as of the last trading day of December, 1997, but in no event will such price of such said shares be less than 95% of the Current Market Price (as defined in the Warrant Agreement, dated as of June 21, 1993, as amended, between the Company and The First National Bank of Chicago, as Warrant Agent). Said shares shall be held in escrow by the Company to be delivered to the respective Corporate Officers as follows: _______________ (1) Shares earned as part of prior year bonus but not delivered shall be included. Restricted shares not vested as of such date shall not be included. 3 Corporate Officers' Incentive Compensation Program Page 3 of 3 pages i) 1/2 of such shares shall be delivered to the Corporate Officer within thirty (30) days following receipt of the 1997 audited financial statements. ii) 1/2 of such shares shall be delivered to the Corporate Officer on or prior to January 31, 2000. However, in order to receive such shares, the Corporate Officer must remain in the employ of the Corporation as of December 31, 1999. Notwithstanding the foregoing, in the event that said Corporate Officer's employment with the Corporation is terminated by the Corporation other than for "Cause", all remaining shares not previously delivered to the Corporate Officer shall be delivered to said Corporate Officer within thirty (30) days following termination. For purposes of this Program, the term "Cause" shall mean (i) the Officer's continuing, willful failure to perform his/her duties required of his/her position (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by the Officer in the performance of his/her duties hereunder, (iii) an act or acts on the Officer'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 Officer at the expense of the Company, or (iv) breach of the provisions of Exhibit B hereto pertaining to confidentiality and competitive activities, but shall not mean (A) the refusal to relocate to another city more than 50 miles from the Officer's present place of business, nor (B) a refusal to perform the duties required of his/her position as a result of either a material change in the scope of his/her job responsibilities or a reduction in base compensation. The transfer of said shares by such Corporate Officer shall be required to conform to all applicable laws and regulations pertaining thereto. EX-10.14 9 US HOME CORP KEY EMPLOYEE SEVERANCE PLAN 1 EXHIBIT 10.14 U.S. HOME CORPORATION KEY EMPLOYEES' SEVERANCE PAY PLAN 1. PURPOSE U.S. Home Corporation (the "COMPANY") Key Employees' Severance Pay Plan (the "PLAN") is intended to encourage continuity of employment by key employees by providing them with an incentive to remain in the employ of the Company or its subsidiaries despite a potential for a change of control of the Company. 2. ELIGIBILITY The corporate officers, other than the Chairman and Co-Chief Executive Officer and President, Co-Chief Executive Officer and Chief Operating Officer, and the presidents of operations of the Company shall be eligible for, and shall participate in, benefits provided under the Plan (each an "ELIGIBLE EMPLOYEE"). Such individuals as of the Effective Date (as defined below) are set forth on Schedule A attached hereto. 3. BENEFITS An Eligible Employee whose employment with the Company or a subsidiary of the Company is terminated by the Company other than for Cause (as defined below) or whose employment is Constructively Terminated (as defined below) within two (2) years after the occurrence of a Change of Control (as defined below) shall be entitled to (A) receive an amount equal to the greater of (x) twelve (12) months of such Eligible Employee's Base Salary (as defined below) or (y) one (1) month of such Eligible Employee's Base Salary (as defined below) for each full year during which such Eligible Employee was employed by the Company or its subsidiaries, and (B) continue to participate in each of the Company's employee benefit plans, policies or arrangements, which provide insurance, including, without limitation, life insurance and long-term disability insurance, and medical benefits (the "COMPANY INSURANCE PLANS"), on the same basis as the Company's other executive officers for one year after the date of termination of employment (the "TERMINATION BENEFITS"). 2 4. PAYMENT OF BENEFITS The Termination Benefits payable pursuant to Section 3(A) hereunder shall be paid to an Eligible Employee in a single lump sum in cash as soon as practicable (but in no event later than thirty (30) days) after such Eligible Employee's employment is terminated pursuant to Section 3 hereunder. If continued coverage under any of the Company Insurance Plans is not possible under the terms of any insurance policy or applicable law following the date of termination of employment, the Company shall provide the Eligible Employee with coverage equivalent to that provided to the Company's other executive officers under a policy or arrangement reasonably acceptable to the Eligible Employee. If an Eligible Employee dies after becoming entitled to the Termination Benefits payable pursuant to Section 3(A) hereunder but before payment thereof is made to such Eligible Employee, such Termination Benefits shall be paid to the Eligible Employee's estate in a single lump sum in cash as soon as practicable after such Eligible Employee's death. If an Eligible Employee dies within one year after becoming entitled to the Termination Benefits pursuant to Section 3(B) hereunder, such Termination Benefits shall continue to be provided for one year after the date of termination of the Eligible Employee to the Eligible Employee's spouse and dependents on the same basis as provided to the Company's other executive officers. The Company may deduct from any Termination Benefit any federal, state or local taxes required by law to be withheld. 5. DEFINITIONS (a) "BASE SALARY" shall mean an amount equal to an Eligible Employee's maximum annual base salary in effect at any time after the Effective Date (as defined below), excluding any discretionary compensation or bonus payable or paid to an Eligible Employee. (b) "CHANGE OF CONTROL" shall mean any of the following: (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, as amended (the "EXCHANGE ACT"), disclosing that any person or group of persons (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 2 3 owner (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the combined voting power of the then outstanding equity of the Company (as determined under paragraph (d) of Rule 13d-3 under the Exchange Act, in the case of rights to acquire the common stock, $.01 par value per share (the "COMMON STOCK"), of the Company); (ii) any transaction or a series of related transactions (as a result of a tender offer, merger, consolidation or otherwise whether or not the Company is the continuing or surviving entity) that results in, or that is in connection with, any person or group of persons (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), acquiring beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the combined voting power of the then outstanding equity of the Company (as determined under paragraph (d) of Rule 13d-3 under the Exchange Act, in the case of rights to acquire the Common Stock) or of any person or group of persons (within the meaning of Section 13(d) of the Exchange Act) that possesses beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the combined voting power of the then outstanding equity of the Company; (iii) the sale, lease, exchange or other transfer of all or substantially all of the assets of the Company to any person or group of persons (within the meaning of Section 13(d) of the Exchange Act) in one transaction or a series of related transactions; provided, that a transaction where the holders of all classes of the then outstanding equity of the Company immediately prior to such transaction own, directly or indirectly, fifty percent (50%) or more of the aggregate voting power of all classes of equity of such person or group immediately after such transaction will not be a Change of Control under this clause (iii); (iv) the liquidation or dissolution of the Company; provided, that a liquidation or dissolution of the Company which is part of a transaction or series of related transactions that does not constitute a Change of Control under the "provided" clause of clause (iii) above will not constitute a Change of Control under this clause (iv); 3 4 or (v) 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. (c) "CONSTRUCTIVELY TERMINATED" shall mean (i) a reduction in an amount equal to or greater than fifteen percent (15%) of an Eligible Employee's Base Salary, (ii) a material reduction in an Eligible Employee's job function, duties or responsibilities or (iii) a required relocation of an Eligible Employee of more than fifty (50) miles from such Eligible Employee's current job location; provided, however, that the employment with the Company or its subsidiaries of a President of Operations who is an Eligible Employee will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President with the Company or its subsidiaries and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment of an Eligible Employee will not be deemed Constructively Terminated unless such Eligible Employee actually terminates his or her employment with the Company within sixty (60) days after the occurrence of an event specified in clause (i), (ii) or (iii) above. (d) "CAUSE" shall mean (i) an Eligible Employee's continuing willful failure to perform his or her duties (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by an Eligible Employee in the performance of his or her duties, (iii) an act or acts on the part of an Eligible Employee constituting a felony under the laws of the United States of America, or any state thereof that results or was intended to result directly or indirectly in gain or personal enrichment by such Eligible Employee at the expense of the Company or its subsidiaries or (iv) breach of any of the provisions set forth on Schedule B attached hereto pertaining to confidentiality and competitive activities. 6. MISCELLANEOUS (a) The Plan shall be effective as of December 6, 1996 (the "EFFECTIVE DATE"). 4 5 (b) The Company reserves the right to modify or amend, in whole or in part, the Plan; provided, however, that no such modification or amendment shall be made within two (2) years following the occurrence of a Change of Control. (c) The compensation committee of the Board of Directors of the Company (the "COMPENSATION COMMITTEE") shall respond to claims for benefits under the Plan within thirty (30) days of their receipt and, if a claim is wholly or partially denied, the Compensation Committee shall provide the Eligible Employee with a written explanation of the denial which shall state the specific reason or reasons the claim was denied; the exact references to the Plan provisions that dealt with the claim; a description of any additional material or information necessary for him or her to revise and perfect the claim; an explanation as to why such material or information is necessary; and an explanation of the Plan's claims procedure. Within forty-five (45) days after an Eligible Employee receives a denial of his or her claim, such Eligible Employee may appeal his or her claim denial to the Compensation Committee. The Eligible Employee or such Eligible Employee's authorized representative may make a written request for a review of the denial and to review applicable documents and may submit comments and issues in writing. The Compensation Committee shall decide an appeal within fifteen (15) days after receiving the request for review. The Compensation Committee's decision on the review shall be in writing, and shall include specific reasons for the decision and references to the Plan provision upon which it was based. (d) The Company shall reimburse an Eligible Employee (or such Eligible Employee's estate, as applicable) for any and all costs (including, but not limited to, legal fees) incurred by such Eligible Employee (or such Eligible Employee's estate, as applicable) in successfully appealing (whether pursuant to paragraph 6(c) above, in a court of competent jurisdiction or otherwise) a claim for benefits under the Plan which was denied. Such Eligible Employee's benefits under the Plan shall be paid to him or her (or to his or her estate, as applicable) as soon as practicable (but not later than ten (10) days) after such successful appeal, together with interest on such amount from his or her date of termination of employment to the date of payment at 5 6 the average prime or base lending rate of interest published or publicly announced by the financial institution then providing financing to the Company under the Company's credit facility (whether or not such rate is actually charged by such financial institution) in effect on such termination date. (e) The establishment of the Plan shall not be construed as conferring any legal rights upon any Eligible Employee or other person for a continuation of employment, nor will it interfere with the rights of the Company or any of its subsidiaries to discharge any Eligible Employee and to treat such Eligible Employee without regard to the effect which such treatment might have upon such Eligible Employee as an Eligible Employee under the Plan. (f) In the event that the Company finds that an Eligible Employee is unable to care for his or her affairs because of illness or accident, the Compensation Committee may direct that any payment due such Eligible Employee, unless claim has been made therefor by a duly appointed legal representative, be paid to such Eligible Employee's spouse, child, parent or other blood relative, or to a person with whom such Eligible Employee resides, and any such payment so made will be a complete discharge of the liabilities under the Plan therefor. (g) The Plan shall be construed, regulated and administered under the internal laws of the State of Delaware without regard to principles of conflicts of laws. (h) The Company shall request and use its best efforts to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or any of its subsidiaries expressly to assume and agree to perform the obligations under the Plan in the same manner and to the same extent that the Company would be required to perform such obligations if no such succession had taken place. 6 7 SCHEDULE A U.S. HOME CORPORATION KEY EMPLOYEES
Name Title ---- ----- Corporate Officers: Gary L. Frueh Vice President - Tax and Audit Craig M. Johnson Senior Vice President - Community Development Thomas A. Napoli Vice President - Finance and Chief Financial Officer Chester P. Sadowski Vice President - Controller and Chief Accounting Officer Richard G. Slaughter Vice President - Planning and Secretary Kelly F. Somoza Vice President Presidents of Operations: Sam B. Crimaldi President of Operations, U.S. Home South Florida James R. Petty President of Operations and Chief Executive Officer, U.S. Home Mortgage Corporation Christopher B. Rediger President of Operations, U.S. Home Mountain Michael T. Richardson President of Operations, U.S. Home South Philip J. Walsh, III President of Operations, U.S. Home North and California
All capitalized terms used but not defined herein have the meaning ascribed thereto in the U.S. Home Corporation Key Employees' Severance Plan. 8 SCHEDULE B All capitalized terms used but not defined herein have the meaning ascribed thereto in the U.S. Home Corporation Key Employees' Severance Plan. A. CONFIDENTIALITY. The Eligible Employee has and will acquire confidential information with respect to the business of the Company and its subsidiaries. The Eligible Employee will not, without the written consent of the Company as authorized by the Board of Directors of the Company, 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 Eligible Employee or to any person other than the Company and its subsidiaries. For this purpose, information will be considered confidential only if such information is uniquely proprietary to the Company or any of its subsidiaries and has not been made publicly available prior to its disclosure by the Eligible Employee. B. COMPETITIVE ACTIVITY. Until the end of his or her employment, the Eligible Employee will devote full business time to the business of the Company or its subsidiaries and will not, without the written 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 is in competition with any line of business being actively conducted by the Company or its subsidiaries during his or her employment period. Nothing herein, however, will prohibit the Eligible Employee from acquiring or holding not more than one percent (1%) of any class of publicly-traded securities of any such business. EX-10.16.I 10 AMEND #1 TO AMENDED & RESTATED EMPLMNT/CNSLT AGREE 1 EXHIBIT 10.16(i) FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AND CONSULTING AGREEMENT FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AND CONSULTING AGREEMENT, dated as of February 11, 1997, between U.S. Home Corporation (the "Company") and Robert J. Strudler (the "Executive"). WHEREAS, the Company and the Executive are parties to an Amended and Restated Employment and Consulting Agreement, dated as of October 17, 1995 (the "Agreement"). WHEREAS, the Company and the Executive intend to extend the Employment Term (as defined in the Agreement) and, in consideration of such extension, desire to amend 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 the Agreement as follows: FIRST Section 2 of the Agreement is hereby amended and restated in its entirety, to read as follows: "2. Term. The term of the Executive's employment hereunder shall continue until June 20, 2000; provided, however, that, unless either party otherwise elects by notice in writing delivered to the other at least 90 days prior to June 20, 1998, or any subsequent anniversary of June 20, 1998, such term shall be automatically extended for one additional year on June 20, 1998 (e.g., to June 20, 2001) and each subsequent anniversary thereof, 2 unless sooner terminated by the Executive's voluntary resignation or otherwise terminated pursuant to the terms of this Agreement (the "Employment Term")." SECOND Clause (ii) of Section 5(c) of the Agreement is hereby amended and restated in its entirety, to read as follows: "(ii) if such termination occurs during the Employment Term, an amount equal to the bonuses earned, including any amounts deferred, pursuant to Section 3(a)(ii) hereof and Appendix A hereto or otherwise, in respect of the most recently completed three calendar years;" THIRD Except as amended herein, the Agreement is hereby ratified and confirmed and shall continue in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the date first written above. U.S. HOME CORPORATION By: ------------------------------------- Isaac Heimbinder President, Co-Chief Executive Officer and Chief Operating Officer EXECUTIVE ---------------------------------------- Robert J. Strudler 2 EX-10.17.I 11 AMEND #1 TO AMENDED & RESTATED EMPLMNT/CNSLT AGREE 1 EXHIBIT 10.17(i) FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AND CONSULTING AGREEMENT FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AND CONSULTING AGREEMENT, dated as of February 11, 1997, between U.S. Home Corporation (the "Company") and Isaac Heimbinder (the "Executive"). WHEREAS, the Company and the Executive are parties to an Amended and Restated Employment and Consulting Agreement, dated as of October 17, 1995 (the "Agreement"). WHEREAS, the Company and the Executive intend to extend the Employment Term (as defined in the Agreement) and, in consideration of such extension, desire to amend 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 the Agreement as follows: FIRST Section 2 of the Agreement is hereby amended and restated in its entirety, to read as follows: "2. Term. The term of the Executive's employment hereunder shall continue until June 20, 2000; provided, however, that, unless either party otherwise elects by notice in writing delivered to the other at least 90 days prior to June 20, 1998, or any subsequent anniversary of June 20, 1998, such term shall be automatically extended for one additional year on June 20, 1998 (e.g., to June 20, 2001) and each subsequent anniversary thereof, 2 unless sooner terminated by the Executive's voluntary resignation or otherwise terminated pursuant to the terms of this Agreement (the "Employment Term")." SECOND Clause (ii) of Section 5(c) of the Agreement is hereby amended and restated in its entirety, to read as follows: "(ii) if such termination occurs during the Employment Term, an amount equal to the bonuses earned, including any amounts deferred, pursuant to Section 3(a)(ii) hereof and Appendix A hereto or otherwise, in respect of the most recently completed three calendar years;" THIRD Except as amended herein, the Agreement is hereby ratified and confirmed and shall continue in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the date first written above. U.S. HOME CORPORATION By: --------------------------------- Robert J. Strudler Chairman and Co-Chief Executive Officer EXECUTIVE ------------------------------------- Isaac Heimbinder 2 EX-10.22 12 AMEND #3 TO FIRST AMEND/RESTATED WAREHOUSING CRDT 1 EXHIBIT 10.22 THIRD AMENDMENT TO WAREHOUSING CREDIT AND SECURITY AGREEMENT THIS THIRD AMENDMENT TO FIRST AMENDED AND RESTATED WAREHOUSING CREDIT AND SECURITY AGREEMENT (this "Amendment") is entered into as of this 2nd day of January 1997, 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 First Amended and Restated Sublimit Promissory Note in the principal sum of Forty-Five Million Dollars ($45,000,000), dated as of August 29, 1996 (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"); and WHEREAS, the Company has requested the Lender to temporarily increase the Commitment Amount, and the Lender has agreed to such increase 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 1/2/97, the date on which the Company has complied with all the terms and conditions of this Amendment. 3. Section 1.1 of the Agreement is hereby amended to delete the definition of "Commitment Amount" in its entirety and to substitute the following in lieu thereof: "Commitment Amount" means Forty-Five Million Dollars ($45,000,000). Notwithstanding the foregoing, during the period from the Effective Date to and including April 15, 1997, the Commitment Amount shall be temporarily increased to Fifty-Five Million Dollars ($55,000,000). On the first Business Day following the expiration of the temporary increase of the Commitment Amount, the Company shall repay to -1- 2 the Lender the amount by which the outstanding Advances exceed the Commitment Amount. 4. The Warehousing Promissory Note is amended and restated in its entirety as set forth in the Second Amended and Restated Warehousing Promissory Note, in the form of Exhibit A-1 attached to this Amendment. All references in this Amendment and in the Agreement to the Warehousing Promissory Note shall be deemed to refer to the Second Amended and Restated Warehousing Promissory Note delivered in connection with this Amendment. 5. The First Amended and Restated Sublimit Promissory Note is amended and restated in its entirety as set forth in the Second 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 First Amended and Restated Sublimit Promissory Note shall be deemed to refer to the Second Amended and Restated Sublimit Promissory Note delivered in connection with this Amendment. 6. Exhibits A-1 and A-2 to the Agreement are hereby deleted in their entirety and replaced with the new Exhibits A-1 and A-2 attached to this Amendment. All references in the Agreement to Exhibits A-1 and A-2 shall be deemed to refer to the new Exhibits A-1 and A-2. 7. The Company shall deliver to the Lender (a) an executed original of this Amendment; (b) an executed original of the Second Amended and Restated Warehousing Promissory Note; (c) an executed original of the Second Amended and Restated Sublimit Promissory Note; (d) a Certificate of Secretary with Corporate Resolutions; and (e) a Two Hundred Fifty Dollar ($250) document production fee. 8. The Company represents, warrants and agrees that (a) there exists no Default or Event of Default under the Loan Documents, (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, except as disclosed to the Lender in the Company's letter dated August 16, 1996, 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. 9. 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. -2- 3 10. 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 ------------------------------- Its: Vice President ------------------------------ RESIDENTIAL FUNDING CORPORATION, a Delaware corporation By: /s/ DONNA A. WEST ------------------------------- Its: Director ------------------------------ STATE OF TEXAS ) ) ss COUNTY OF HARRIS) On January 6, 1997, 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 ----------------------------------- Notary Public (SEAL) My Commission Expires: 7-1-97 -3- 4 STATE OF FLORIDA ) ) ss COUNTY OF BROWARD) On January 10, 1997, before me, a Notary Public, personally appeared Donna 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 ----------------------------------- Notary Public (SEAL) My Commission Expires: 9/15/98 -4- 5 EXHIBIT A-1 SECOND AMENDED AND RESTATED WAREHOUSING PROMISSORY NOTE $55,000,000 Date: January 2, 1997 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 Fifty-Five Million Dollars ($55,000,000) or so much thereof as may be outstanding from time to time pursuant to the First Amended and Restated Warehousing Credit and Security 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 Warehousing 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 Warehousing 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 -1- 6 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. 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 By: ------------------------------- Its: ------------------------------ STATE OF _______________ ) ) ss COUNTY OF ______________ ) On __________, 1997, 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: ------------- -2- 7 EXHIBIT A-2 SECOND AMENDED AND RESTATED SUBLIMIT PROMISSORY NOTE $55,000,000 Date: January 2, 1997 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 Fifty-Five Million Dollars ($55,000,000) or so much thereof as may be outstanding from time to time pursuant to the First Amended and Restated Warehousing Credit and Security 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 Warehousing 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 princiapl amount of the Notes may exceed the Commitment Amount. This Note is given in replacement for, and not in satisfaction of, that certain First Amended and Restated Sublimit Promissory Note dated August 29, 1996, 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, -1- 8 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. 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 By: ------------------------------- Its: ------------------------------ STATE OF _______________ ) ) ss COUNTY OF ______________ ) On __________, 1997, 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: ------------- -2- EX-11 13 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 U.S. HOME CORPORATION AND SUBSIDIARIES INCOME PER COMMON SHARE FOR THE CONSOLIDATED STATEMENTS INCOME HAS BEEN COMPUTED ON THE WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING AS FOLLOWS: (Dollars in Thousands, Except Per Share Data)
Years Ended December 31, --------------------------------------------------- 1996 1995 1994 ----------- ----------- ----------- Income per common and common equivalent shares - Net income $ 44,188 $ 36,920 $ 32,829 =========== =========== =========== Weighted average common shares outstanding 11,585,855 11,576,829 11,366,810 Effect of assumed exercise of dilutive stock options and warrants 372,584 196,270 - ----------- ----------- ----------- Total common and common equivalent shares 11,958,439 11,773,099 11,366,810 =========== =========== =========== Income per common and common equivalent shares $ 3.70 $ 3.14 $ 2.89 =========== =========== =========== Income per common share, assuming full dilution - Net income $ 44,188 $ 36,920 $ 32,829 Add interest applicable to 4.875% convertible subordinated debentures, net of income taxes 2,480 2,006 1,220 ----------- ----------- ----------- Income per common share, assuming full dilution $ 46,668 $ 38,926 $ 34,049 =========== =========== =========== Total common and common equivalent shares 11,958,439 11,773,099 11,366,810 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 134,480 499,369 - Assumed conversion of 4.875% convertible subordinated debentures at $35.50 per share at date of issuance (see Note 2 of Notes to Consolidated Financial Statements) 2,253,521 2,253,521 2,253,521 ----------- ----------- ----------- Common shares, assuming full dilution 14,346,440 14,525,989 13,620,331 =========== =========== =========== Income per common share assuming full dilution $ 3.25 $ 2.68 $ 2.50 =========== =========== ===========
Note a - See Note 1 of Notes to Consolidated Financial Statements EX-22 14 SUBSIDIARIES OF U.S. HOME CORPORATION 1 EXHIBIT 22 Subsidiaries of the Company The following table sets forth the names of U.S. Home's subsidiaries and the state in which incorporated. All subsidiaries are directly or indirectly wholly-owned by U.S. Home. Certain insignificant subsidiaries are omitted.
Jurisdiction of Incorporation ----------------- Fidelity Guaranty and Acceptance Corporation Delaware U.S. Home Acceptance Corporation Delaware U.S. Home Insurors, Inc. Florida U.S.H. Indemnity Company, Ltd. Bermuda San Felipe Indemnity Company, Ltd. Bermuda U.S. Home Mortgage Corporation Florida USH II Corporation Delaware
EX-23 15 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 12, 1997 included in this Form 10-K, into the Company's previously filed Registration Statements No. 33-64712, 33-52993, 33-00583 and 33-02775. ARTHUR ANDERSEN LLP Houston, Texas February 21, 1997 EX-27 16 FINANCIAL DATA SCHEDULE
5 This Schedule Contains Summary Financial Information Extracted From The Consolidated Condensed Financial Statements As Of December 31, 1996 And For The Year Then Ended And Is Qualified In Its Entirety By Reference To Such Financial Statements. YEAR DEC-31-1996 DEC-31-1996 13,249 0 91,684 0 709,344 0 0 0 947,411 0 362,887 0 2,947 114 370,629 947,411 0 1,211,450 971,896 1,123,256 0 0 32,293 55,901 11,713 44,188 0 0 0 44,188 3.70 3.25
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