<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
CAPITAL PACIFIC HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
DONALD J. SAJOR
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
CAPITAL PACIFIC HOLDINGS, INC.
4100 MACARTHUR BOULEVARD
SUITE 200
NEWPORT BEACH, CALIFORNIA 92660
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 1998
The Annual Meeting of Stockholders (the "Meeting") of Capital Pacific
Holdings, Inc. (the "Company") will be held at the Four Seasons Hotel, 690
Newport Center Drive, Newport Beach, California on June 26, 1998 at 9:00 a.m.
(Pacific Daylight Savings Time) for the following purposes:
1. To elect directors whose terms expire at the Meeting;
2. To amend the Company's Certificate of Incorporation to authorize
the issuance of up to Thirty Million (30,000,000) shares of non-voting
common stock, par value $.10 per share; and
3. To consider such other matters as may properly come before the
Meeting or any adjournment thereof.
Only holders of record of the Company's Common Stock at the close of
business on May 29, 1998, will be entitled to notice of and to vote at the
Meeting or any adjournment thereof. The Company's stock transfer books will
remain open.
A Proxy Statement and Proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the Proxy promptly. All
stockholders are cordially invited to attend the Meeting.
By Order of the Board of Directors
[SIG]
DONALD J. SAJOR
Secretary
May 29, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES.
<PAGE> 3
CAPITAL PACIFIC HOLDINGS, INC.
4100 MACARTHUR BOULEVARD
SUITE 200
NEWPORT BEACH, CALIFORNIA 92660
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Capital Pacific Holdings, Inc. (the
"Company") for use at the Annual Meeting of Stockholders (the "Meeting") to be
held on June 26, 1998, and at any adjournment thereof, for the purposes set
forth herein. All properly completed proxies will be voted in the manner
specified therein, if no choice as to Proxy Item No. 1 (Election of Directors)
is specified, proxies will be voted for the election to the Board of Directors
of the nominees listed below under "ELECTION OF DIRECTORS" and if no choice as
to Proxy Item No. 2 (Amendment to Certificate of Incorporation to Authorize the
Issuance of up to Thirty Million (30,000,000) Shares of Non-Voting Common Stock)
is specified, proxies will be voted for the Amendment. Any proxy given pursuant
to this solicitation may be revoked prior to the Meeting by delivering an
instrument revoking it or by delivering a duly executed proxy bearing a later
date to the Secretary of the Company. A stockholder may elect to attend the
Meeting and vote in person notwithstanding the fact that such stockholder has a
proxy outstanding.
The Board of Directors has established May 29, 1998, as the record date for
determining the stockholders entitled to notice of and to vote at the Meeting.
At the close of business on the record date, there were outstanding and entitled
to vote 14,305,511 shares of the Company's common stock, $.10 par value per
share (the "Common Stock"), with each share being entitled to one vote.
The Company intends to mail this Proxy Statement and the accompanying form
of proxy to stockholders on or about June 1, 1998. Copies of the Company's 1998
Annual Report will be mailed to the Company's stockholders along with this Proxy
Statement.
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
The Company's Board of Directors is comprised of five directors, each of
whom are to serve until the next meeting at which directors are elected. At the
Meeting, five persons will be elected to serve as directors.
Each of the nominees listed below is currently a director and has been
nominated by the Board to serve as a director of the Company until the next
annual meeting of the stockholders of the Company following his election. When
properly executed and returned, the enclosed proxy will be voted in favor of the
election of each of the nominees, unless authority to vote for a nominee is
withheld. In the event that a nominee is unable to serve (an event which is not
anticipated) or does not receive sufficient votes to be elected, then the person
acting pursuant to the authority granted under the proxy will cast votes for the
remaining nominee and, in his best judgment, for such other person as he may
select in place of such nominee.
<PAGE> 4
The following table sets forth the name, age, and background information
concerning the nominees. Information regarding the nominee's ownership of Common
Stock appears under the heading "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT" below.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE INFORMATION ABOUT NOMINEES
---- --- -------- --------------------------
<S> <C> <C> <C>
Hadi Makarechian 50 1992 Mr. Makarechian has been Chairman of the Board of the
Company since August, 1992 and served as Chief Executive
Officer of the Company from March, 1993 until May, 1996
and since January 1998. Mr. Makarechian was the founder
and chairman of Capital Pacific Homes Inc., a real estate
development firm located in Newport Beach, California,
until it was merged into the Company in 1994.
Dale Dowers 42 1992 Mr. Dowers has served as President of the Company since
March, 1993. Mr. Dowers also served as Chief Executive
Officer of the Company from May, 1996 until January, 1998.
Mr. Dowers was President and Chief Operating Officer of
the Company from March, 1993 until May 1996 and since
January 1998. Prior thereto, he was Executive Vice
President and Chief Operating Officer of the Company from
August, 1992 until March, 1993. From December 1990 to
August 1992 he was the President of Capital Pacific Homes,
Inc.
Karlheinz M. Kaiser 39 1993 Mr. Kaiser is a principal with Christinger Partner AG, a
printing company in Switzerland. From August of 1992
through December 1994 Mr. Kaiser was a management
consultant with Friedli & Partner, a management consulting
firm in Switzerland.
Allan L. Acree 55 1992 Mr. Acree is a principal in A.L. Acree & Associates, a real
estate consulting firm based in Rockville, Maryland. Prior
to forming A.L. Acree & Associates in 1989, Mr. Acree was
Vice President and Regional Manager of Goldome Realty
Credit Corporation.
William A. Funk 57 1994 Mr. Funk is currently Senior Vice President with Holmes &
Narver, an international engineering, design and
construction company based in Orange, California. Until
June 1997, Mr. Funk was a principal and the Vice President
and Manager of The Austin Company, an international design
and construction firm based in Cleveland, Ohio. Except for
the period described below, Mr. Funk served in various
positions with The Austin Company for over 25 years. From
May 1984 to June 1985, Mr. Funk was a Vice President and
Manager of the Carlson Group, a design and construction
firm in Boston, Massachusetts.
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS; DIRECTORS' COMPENSATION
Each member of the Board of Directors of the Company who is not also an
officer of the Company is compensated at a rate of $4,000 per year, plus $1,000
for each meeting of the Board which he attends, and is reimbursed for the
expenses of attending meetings. The Board of Directors held 12 meetings during
the fiscal year ended February 28, 1998.
The Board of Directors has a standing Executive Committee whose current
members are Hadi Makarechian and Dale Dowers. Messrs. Makarechian and Dowers are
not compensated for serving on the Executive Committee.
2
<PAGE> 5
The Board of Directors has a standing Audit Committee whose current members
are William A. Funk and Karlheinz M. Kaiser. Messrs. Funk and Kaiser each
receive $2,000 per year for participating on the Audit Committee. The Audit
Committee has the responsibility of reviewing the Company's financial
statements, evaluating internal accounting controls, reviewing reports of
regulatory authorities and determining that all audits and examinations required
by law are performed. The Audit Committee held one meeting during the fiscal
year ended February 28, 1998.
The Board of Directors has a standing Compensation Committee whose current
members are William A. Funk and Karlheinz M. Kaiser. Messrs. Funk and Kaiser
each receive $500 for each meeting attended. The primary function of the
Compensation Committee is to advise the Board of Directors with respect to all
matters relating to executive compensation. The Compensation Committee held two
meetings for the fiscal year ended February 28, 1998.
The Board of Directors does not have a standing nominating committee or
other standing committees performing similar functions.
Each current director who was a director at the time of such meetings
attended at least 75% of the total of the Board meetings and meetings of the
committees of the Board of which he is a member.
3
<PAGE> 6
EXECUTIVE OFFICERS
In addition to Messrs. Makarechian and Dowers, the Company's executive
officers are as follows:
<TABLE>
<CAPTION>
NAME AND POSITION INFORMATION ABOUT
WITH COMPANY AGE EXECUTIVE OFFICERS
----------------- --- ------------------
<S> <C> <C>
Stephen P. Couig 32 Mr. Couig joined the Company in his current
Senior Vice President, Capital Markets position in January 1997. Prior to joining the
and New Business Development Company he served as Executive Vice President in
charge of acquisitions for Troon Golf, a
Scottsdale, AZ based golf course owner and
operator. After receiving his MBA from Dartmouth
College in 1993 he was an Associate at Morgan
Stanley in the Equity Capital Markets department
focusing on business development opportunities
until 1996.
Steven O. Spelman, Jr. 37 Mr. Spelman joined the Company in November, 1997
Vice President and as Vice President, Finance and assumed his
Chief Financial Officer current position in January, 1998. Prior to
joining the Company, Mr. Spelman served as a
Senior Audit Manager with Arthur Andersen LLP
for a period of more than five years.
Marquis L. Cummings 59 Prior to assuming his current position in January,
Vice President 1998, Mr. Cummings served as Vice President,
and Treasurer Finance, Chief Financial Officer and Secretary
from January, 1997 until January, 1998.
Previously, Mr. Cummings was Vice President,
Finance and Administration for the San Diego
division of the Company from August 1987 until
February 1991. He then served as Vice President
of the Company until October 1993 when he
assumed the position of Vice President, Sales
and Marketing. In May 1994 Mr. Cummings assumed
the position of Director of Subsidiary
Operations, Nevada. In April, 1995 Mr. Cummings
returned to California as Vice President. From
March, 1996 until January, 1997, Mr. Cummings
served as the Company's Vice President, Finance.
Donald J. Sajor 38 Mr. Sajor joined the Company as General Counsel in
Vice President, June 1994. Mr. Sajor was appointed Vice
General Counsel and Corporate Secretary President in 1996 and Corporate Secretary in
1998. Mr. Sajor served as Corporate Counsel with
Catellus Development Corporation from March 1993
to June 1994. From April 1987 to March 1993, Mr.
Sajor specialized in transactional real estate
and environmental law as an associate with
Pettis, Tester, Kruse & Krinsky. Mr. Sajor was
an associate with Gibson, Dunn & Crutcher from
September 1984 to April 1987.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME AND POSITION INFORMATION ABOUT
WITH COMPANY AGE EXECUTIVE OFFICERS
----------------- --- ------------------
<S> <C> <C>
Craig A. Foster 44 Since joining the Company in 1985, Mr. Foster has
President, Design Center been responsible for arranging home buyer
and Mortgage Operations mortgage financing. In 1987 Mr. Foster assumed
the additional responsibility for managing the
Company's escrow operation. In 1992 Mr. Foster
added the duties of President of the Company's
design center to his responsibilities. In 1994
Mr. Foster added the duties of President of the
Company's mortgage brokerage operation (Capital
Communities Mortgage, Inc.) to his
responsibilities.
Paul Makarechian 24 Mr. Makarechian joined the Company in January,
Vice President, Acquisitions 1997 and assumed his current position in
and Finance January, 1998. Prior to joining the Company, Mr.
Makarechian worked as a financial analyst for
McFarland, Dewey & Company. Mr. Makarechian is
the son of Hadi Makarechian, the Chairman of the
Board and Chief Executive Officer of the
Company.
Robert J. Trapp 54 From 1994 until he assumed his current position in
President, Southern California 1997, Mr. Trapp served as Vice President,
Operations Southern California Operations. From 1980 until
1994, Mr. Trapp was responsible for all of the
Company's activities relating to governmental
entitlement, civil engineering, offsite
construction, utility coordination, California
Department of Real Estate processing and
homeowners' associations.
Tim Hamilton 43 Mr. Hamilton joined the Company as Vice President,
Vice President, Southern California Sales and Marketing in May, 1994. Since 1989 Mr.
Product Development and Land Acquisition Hamilton had been a consultant to the real
estate industry. Prior to establishing his
consulting firm Mr. Hamilton spent more than 13
years with British homebuilder Barratt
Developments PLC, including seven years as Vice
President of Sales and Marketing for their
American division in Irvine, California.
Robin V. Koenemann 40 From 1992 until he assumed his current position in
Vice President, Southern California 1994, Mr. Koenemann served as Vice President of
Operations Construction. From December, 1988 until joining
the Company in October, 1992, Mr. Koenemann was
Project Manager for Barratt American.
Steven Cienfuegos 48 Mr. Cienfuegos joined the Company in June 1996 as
Vice President, Southern California Purchasing Manager and assumed his current
Purchasing position in May 1997. Prior to joining the
Company, Mr. Cienfuegos served at Birtcher
Construction Ltd. for 4 years as a Project
Manager and Director of Business Development.
Mr. Cienfuegos directed site development and
model construction for Southwest Diversified
Inc., a Irvine developer, at Dana Point prior to
joining Birtcher Construction Ltd. Prior to
Southwest Diversified Mr. Cienfuegos served as
President of Construction for Stein-Brief Group,
a Laguna Niguel developer.
</TABLE>
All executive officers serve at the pleasure of the Board of Directors.
5
<PAGE> 8
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash compensation paid during the fiscal
years ended February 28, 1998, February 28, 1997 and February 29, 1996 to each
of the five most highly compensated officers of the Company in all capacities in
which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
FISCAL --------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(D)
--------------------------- ------ -------- -------- ---------------
<S> <C> <C> <C> <C>
Hadi Makarechian -- Chairman and 1998 $270,625 $ -- $ 204
Chief Executive Officer 1997 257,500 190,426(a) 252
1996 135,420(b) 124,200(c) 252
Dale Dowers -- President and Chief 1998 270,625 -- 204
Operating Officer 1997 257,500 192,455(a) 252
1996 250,000 124,200(c) 252
Donald J. Sajor -- Vice President, 1998 125,625 98,350 204
General Counsel and Corporate Secretary 1997 113,750 33,500 252
1996 110,000 40,600 252
Tim Hamilton -- Vice President, 1998 143,000 55,750 204
Southern California Product Development 1997 143,000 42,250 252
and Land Acquisition 1996 130,000 64,242 252
Stephen P. Couig -- Senior Vice President, 1998 155,208 42,500 204
Capital Markets and New Business 1997 21,634(e) -- 34
Development 1996 -- -- --
</TABLE>
- ---------------
(a) Bonuses were earned in FY 1997 but were paid in FY 98.
(b) From July, 1995 until December, 1995, Mr. Makarechian voluntarily elected
to temporarily reduce his compensation to $1.00 per annum. This election
reduced his salary from $250,000 to $135,420 for FY 1996.
(c) Bonuses were earned in FY 1996 but were paid in FY 1997.
(d) Represents premiums paid by the Company for term life insurance for the
benefit of the insured.
(e) Represents amounts paid for the period January 1997 through February 1997.
STOCK OPTIONS
Effective February 28, 1995, the Company, as approved by the stockholders
of the Company in July, 1995, adopted the 1995 Stock Incentive Plan (the "1995
Plan"). The 1995 Plan permits a committee designated by the Board of the Company
to make awards to key employees and directors of the Company and its
subsidiaries. Subject to various restrictions, awards could be in the form of
stock options, restricted or unrestricted stock, stock appreciation rights or a
combination of the above. The maximum number of shares or share equivalents that
may be awarded under the 1995 Plan is 1,500,000. No awards have been made under
the 1995 Plan.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
None of the executive officers is currently working under an employment
contract.
COMPENSATION COMMITTEE DETERMINATION ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Company's Board of
Directors establishes the Company's general compensation policies, compensation
plans and specific compensation levels for the Company's Chief Executive Officer
and President and reviews the design, administration and effectiveness of
compensation programs for other key executives. The general policy and
philosophy of the Compensation Committee is to provide total compensation
opportunities that are competitive with the opportunities offered to executives
in similar positions at competing companies and that compensation with a strong
link to the
6
<PAGE> 9
financial performance of the Company enables the Company to attract and retain
the key personnel necessary to fuel continued growth and profitability.
The Committee has examined the compensation of the executives of
comparatively placed homebuilders to determine whether or not the compensation
of the Company's CEO and President is within the range of their peers. In
undertaking such examination, the Committee has sought publicly available
information regarding homebuilders which are at a similar stage in their growth
and development to that of the Company and therefore compete for the same
executive personnel.
PERFORMANCE BASED COMPENSATION
Last year, the Committee recommended for FY 1998 (ending February 28, 1998)
an annual performance bonus to each of Messrs. Makarechian and Dowers of four
percent (4%) of the pre-tax income of the Company for such fiscal year. In light
of the Company's net loss resulting from the $8 million non-cash charge the
resulting bonus is zero for each officer.
For FY 1999, the Committee noted the expansion of the Company and the
diversification of its activities among various geographic areas and to certain
non-homebuilding functions especially including commercial properties. It was
the sense of the Committee that further information regarding the expected
impact of diversification was needed before the appropriate basis for
calculating performance based bonuses could be identified. Such information
shall be requested of management and the Committee shall reconvene to consider
the basis on which such performance based compensation will be calculated for FY
1999.
Section 162(m) of the Internal Revenue Code of 1986 limits deductions for
certain executive compensation in excess of $1 million. The Code permits
deduction of compensation in excess of $1 million only if it is
performance-based, the criteria for award are specified in detail, and
stockholder approval is obtained prior to payment. The policy of the Company is
to maintain the tax deductibility of all compensation paid to its executives.
The annual cash bonus has been structured to meet the requirements for
deductibility. While the Compensation Committee does not anticipate any payments
exceeding $1 million under the compensation structure it has approved, any such
payments will be contingent upon shareholder approval.
BASE SALARY
The annualized base salary of the CEO and COO was $275,000 for Fiscal Year
1998. The Committee has determined to recommend a nominal increase of
twelve-thousand, five-hundred dollars ($12,500) in the base salary of each of
the CEO and President, primarily to take into account inflation.
/s/ WILLIAM A. FUNK
--------------------------------------
William A. Funk
/s/ KARLHEINZ M. KAISER
--------------------------------------
Karlheinz M. Kaiser
Dated: May 7, 1998
7
<PAGE> 10
PERFORMANCE GRAPH
The following graph shows a five year comparison of cumulative total
returns for Capital Pacific Holdings Inc., American Stock Exchange Market Value
Index and Dow Jones Home Construction Industry Group.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
CAPITAL
PACIFIC PEER AMEX
MEASUREMENT PERIOD HOLDINGS, GROUP MARKET
(FISCAL YEAR COVERED) INC. INDEX INDEX
<S> <C> <C> <C>
1993 100 100 100
1994 120 120.19 116.49
1995 84 89.41 106.86
1996 120 119.13 129.39
1997 84 127.98 137.85
1998 116 208.01 164.27
</TABLE>
- ---------------
(1) The above graph compares the performance of Capital Pacific Holdings, Inc.
with that of the American Stock Exchange Market Value Index and the Dow
Jones Home Construction Industry Group.
(2) The comparison of total return on investment (change in year end stock price
plus reinvested dividends) for each of the periods assumes that $100 was
invested on March 1, 1993 in each of Capital Pacific Holdings, Inc., the
American Stock Exchange Market Value Index and the Dow Jones Home
Construction Industry Group.
8
<PAGE> 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of May 29, 1998, the number of shares of
Common Stock beneficially owned by each person known to the Company to own more
than five percent (5%) of the outstanding shares of Common Stock, by each
director of the Company or nominee who owned shares of Common Stock on that
date, by each of the officers that are among the five most highly compensated
officers of the Company, and by all directors and officers of the Company as a
group.
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
NAME AND ADDRESS BENEFICIALLY OWNED(1) CLASS(1)
---------------- --------------------- ----------
<S> <C> <C>
CPH2, L.L.C. ...................................... 4,113,657 28.8%
4100 MacArthur Boulevard, Suite 200,
Newport Beach, California 92660
CPH3, L.L.C. ...................................... 4,640,694 32.4%
4100 MacArthur Boulevard, Suite 200
Newport Beach, California, 92660
Hadi Makarechian................................... 7,079,614(2) 49.5%
4100 MacArthur Boulevard, Suite 200,
Newport Beach, California 92660
California Housing Finance, L.P.................... 2,809,851(3) 19.6%
One Maritime Plaza, Suite 1325
San Francisco, California 94111
Dale Dowers........................................ 1,674,737(4) 11.7%
4100 MacArthur Boulevard, Suite 200,
Newport Beach, California 92660
All Directors and Officers of the Corporation
as a Group (15 persons).......................... 8,754,451 61.2%
</TABLE>
- ---------------
(1) Unless otherwise indicated, the Company believes the beneficial owner has
sole voting and investment power over such shares. The percentage of shares
of Common Stock is calculated assuming that the beneficial owner has
exercised any options or other rights to subscribe held by such beneficial
owner that are currently exercisable or exercisable within 60 days, and that
no other warrants, options or rights to subscribe have been exercised by
anyone else.
(2) Includes 2,438,920 shares of Common Stock held by CPH2, L.L.C., in which Mr.
Makarechian may be deemed to have a beneficial ownership interest due to his
ownership interest in CPH2, L.L.C. and 4,640,694 shares of Common Stock held
by CPH3, L.L.C. in which Mr. Makarechian may be deemed to have a beneficial
interest due to his ownership in CPH3, L.L.C. Mr. Makarechian and Mr. Dowers
as a group could be deemed beneficial owners of 8,754,351 shares of stock in
the Corporation.
(3) The number of shares beneficially owned by California Housing Finance, L.P.
is subject to adjustment based on contractual arrangements between the
Company and California Housing Finance, L.P.
(4) Includes 1,674,737 shares of Common Stock held by CPH2, L.L.C., in which Mr.
Dowers may be deemed to have a beneficial ownership interest due to his
ownership interest in CPH2, L.L.C. Mr. Dowers and Mr. Makarechian as a group
could be deemed beneficial owners of 8,754,351 shares of stock in the
Corporation.
9
<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH
OFFICERS, DIRECTORS AND AFFILIATES
The Company's policy is that all transactions between the Company and its
officers, directors and principal stockholder, and their respective affiliates,
must be on terms no less favorable to the Company than terms with unaffiliated
parties for similar transactions. All such transactions that are not in the
ordinary course of the Company's business must be approved by a majority of
independent directors who do not have a financial interest in the transaction.
INDEPENDENT AUDITORS
Arthur Andersen LLP served as the Company's independent auditors for the
fiscal year ended February 28, 1998, and it is anticipated that Arthur Andersen
LLP will be approved to serve as such for the current fiscal year.
Representatives of Arthur Andersen LLP will be present at the Meeting to
respond to appropriate questions and will have the opportunity to make a
statement if they desire to do so.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF
INCORPORATION TO AUTHORIZE THE ISSUANCE OF UP
TO THIRTY MILLION (30,000,000) SHARES OF COMMON STOCK
(PROXY ITEM NO. 2)
The Board of Directors of the Company has approved, subject to stockholder
approval, the amendment of Article Fourth of the Company's Second Restated
Certificate of Incorporation, as amended, to authorize the issuance of up to
30,000,000 shares of non-voting common stock, par value $.10 per share (the
"Non-Voting Common Stock").
GENERAL
The Board of Directors of the Company, at a meeting held April 21, 1998,
voted to recommend that the stockholders adopt an amendment to the Articles of
Incorporation to authorize the issuance of the Non-Voting Common Stock (the
"Amendment"). The Non-Voting Common Stock will have dividend and distribution
rights and rights on dissolution of the Company that are identical to those of
the Company's existing common stock, par value $.10 per share (the "Common
Stock"). The currently issued and outstanding Common Stock of the Company will
not be affected by the Amendment except for the potential indirect effects
described below and will remain issued and outstanding despite approval of the
Amendment.
If the Amendment is approved by the stockholders of the Company, the Board
of Directors intends to cause to be prepared and filed a Third Restated
Certificate of Incorporation incorporating the Amendment, which will become
effective immediately upon acceptance of the filing by the Secretary of State of
Delaware.
The full text of Article Fourth as proposed to be amended is set forth as
Exhibit A to this Proxy Statement and is incorporated herein by reference. The
following summary should be read in conjunction with, and is qualified in its
entirety by reference to, Exhibit A. Mr. Makarechian, the Chairman of the Board
of the Company, has indicated that he intends to cause the limited liability
companies through which he controls the majority of the Common Stock of the
Company, to vote all such shares of Common Stock for the approval and adoption
of the Amendment, meaning that the Amendment will be approved regardless of the
votes of the Company's stockholders other than such companies.
REASONS FOR THE AMENDMENT
The Board of Directors believes that the authorization of the Non-Voting
Common Stock will provide the Company with increased flexibility to issue in the
future common equity in connection with acquisitions and to
10
<PAGE> 13
raise equity capital or to issue convertible debt as a means to finance future
growth without diluting the voting power of the Company's existing stockholders,
including Mr. Makarechian. The Non-Voting Common Stock may also be used, rather
than voting Common Stock, for the Company's stock benefit plans in the event
they are implemented. The Company does not currently have any definite plans or
commitments that would require the issuance of any Non-Voting Stock. Adoption of
the Amendment, however, would afford the Company the flexibility to do so upon
such conditions and for such consideration as the Board of Directors may
determine. Except as otherwise required by law or by the applicable Rules of the
American Stock Exchange or any other exchange or trading system on which the
Company's shares may be listed, holders of Common Stock of the Company will have
no right to participate in any future decision to issue any shares of Non-Voting
Common Stock.
IMPACT OF AMENDMENT
While the Board of Directors has determined that the Amendment is in the
best interest of the Company and its Stockholders, the Board of Directors
recognizes that the Amendment and any subsequent issuance of the Non-Voting
Common Stock authorized thereby may have certain perceived disadvantages,
including the following.
Under the current capital structure of the Company, Mr. Makarechian
controls the majority of the voting power of the Company and has the ability to
prevent any reasonably foreseeable attempt to acquire the Company through a
merger, consolidation, sale of assets or successful tender offer. The Amendment
will not change this circumstance nor will it increase the voting power of the
majority owner of the Company. It will, however, permit the Company to in the
future make further issuances of shares of common equity without diluting the
voting power of the Company's existing stockholders. Therefore the Amendment, in
combination with any such future issuances, will make it less likely that a
merger proposal, an unfriendly tender offer, a proxy contest, or the removal of
incumbent Directors or management would take place. Consequently, the Amendment
and such future issuances, if they take place, might have the effect of reducing
the possibility that the stockholders of the Company would have an opportunity
to sell their shares at a premium over then prevailing market prices.
In making any future decision to issue Non-Voting Common Stock, the Company
will have to consider the effect of certain tax, regulatory and accounting
issues which may affect the capacity to utilize Non-Voting Common Stock as
opposed to Common Stock in any particular transaction. These considerations will
include the fact that certain tax-free reorganizations can only be accomplished
when the sole consideration is voting stock of the issuer; the fact that pooling
of interests accounting treatment is only available in the event that the
acquiring entity utilizes common voting stock in carrying out the transaction;
and the fact that certain state securities laws limit the exemptions available
for the issuance of non-voting stock where such stock is not listed on a
national securities exchange.
DESCRIPTION OF THE NON-VOTING COMMON STOCK
The Amendment will create the Non-Voting Common Stock as a new class of
common equity which will have no voting rights except in the limited
circumstances described below.
The rights, powers and limitations of the Non-Voting Common Stock are set
forth in full in Article Fourth of the Company's Restated Articles of
Incorporation, as proposed to be amended, and the summary set forth below should
be read in conjunction with and is qualified in its entirety by reference to
Exhibit A to this Proxy Statement.
Voting. Except as set forth below, the holders of Non-Voting Common Stock
shall have no voting rights. Under the Delaware General Corporation Law the
holders of Non-Voting Common Stock will have the right to vote on proposals to
change the par value of the Non-Voting Common Stock or to alter or change the
powers, preferences, or special rights, if any, of the Non-Voting Common Stock.
11
<PAGE> 14
Dividends and Distributions. Each share of Common Stock and Non-Voting
Common Stock will be equal in respect to dividends and other distributions of
cash, stock or property, including distribution in connection with any
liquidation, winding up or dissolution of the Company, except that dividends or
other distributions payable on the Non-Voting Common Stock and Common Stock in
shares of capital stock shall be made to all holders of the Common Stock and
Non-Voting Stock and may be made (i) in shares of Non-Voting Common Stock to the
holders of Non-Voting Common Stock and in shares of Common Stock to the holders
of Common Stock; (ii) in shares of Non-Voting Stock to holders of Non-Voting
Common Stock and holders of Common Stock; or (iii) in any other authorized class
or series of capital stock to the holders of Non-Voting Common Stock and Common
Stock. In no event will either the Non-Voting Common Stock or Common Stock be
split, subdivided, or combined unless the other is proportionately split,
subdivided or combined.
Mergers and Consolidations. Each holder of Non-Voting Common Stock and
Common Stock will be entitled to receive the same per share consideration in the
event of a merger or consolidation.
Stockholder Information. The Company will deliver to the holders of
Non-Voting Common Stock the same Proxy Statements (without proxies except as
required by law), and annual reports and other information and reports as it
delivers to holders of Common Stock.
STOCK OPTION PLAN
The Company has in place the 1995 Stock Incentive Plan under which the
Company may, through the processes described in the Plan, issue, among other
benefits, Common Stock of the Company. The Board of Directors anticipates
amending the 1995 Stock Incentive Plan to provide that Common Stock and options
to acquire Common Stock granted thereunder after the effective time may relate
solely to Common Stock, solely to Non-Voting Common Stock, or to a combination,
at the discretion of the committee administering the Plan, and will adjust the
shares of Common Stock reserved for issuance under the 1995 Stock Incentive Plan
accordingly.
IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, THE SHARES OF COMMON STOCK
REQUESTED BY A PROXY DELIVERED TO THE BOARD OF DIRECTORS WILL BE VOTED FOR THE
APPROVAL OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
AUTHORIZE THE ISSUANCE OF UP TO THIRTY MILLION (30,000,000) SHARES OF NON-
VOTING COMMON STOCK.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE TO
APPROVE THE AMENDMENT.
12
<PAGE> 15
MISCELLANEOUS
STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the next
annual meeting of stockholders of the Company, and who wishes to have such
proposal included in the proxy statement and form of proxy prepared by the
management of the Company for that meeting, must notify the Company in writing
not later than February 28, 1999. The notice should be directed to Capital
Pacific Holdings, Inc., 4100 MacArthur Boulevard, Suite 200, Newport Beach,
California 92660, Attention: Secretary.
SOLICITATION OF PROXIES
Proxies may be solicited on behalf of the Company by its officers and
employees, who will receive no additional compensation for such services,
through the mail, in person, and by telephone and by other telecommunication
methods. The cost of such solicitation will be borne by the Company. Brokers,
custodians, and other fiduciaries will be required to forward the Company's
proxy solicitation materials to the beneficial owners of Common Stock held in
their names, and the Company will reimburse such fiduciaries for the out-
of-pocket expenses incurred by them in connection with such activities.
The Company's Annual Report for the fiscal year ended February 28, 1998 is
being delivered to shareholders together with this Proxy Statement. Copies of
the annual report on Form 10-K for the fiscal year ended February 28, 1998 as
filed with the Securities and Exchange Commission (except for the Exhibits
thereto) may be obtained, free of charge, upon written request by any
stockholder delivered to Capital Pacific Holdings, Inc., 4100 MacArthur
Boulevard, Suite 200, Newport Beach, California 92660, Attention: Steven O.
Spelman, Jr., Vice President and Chief Financial Officer. Copies of all exhibits
to the annual report on Form 10-K are available upon a similar request, subject
to payment of a $.15 per page charge to reimburse the Company for its expenses
in supplying any exhibit.
THE COMPANY'S MANAGEMENT HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN, AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
The Board of Directors knows of no matters other than the election of
directors and the amendment of the Certificate of Incorporation to be brought
before the Meeting. However, if any other matter should be presented for
consideration, it is the intention of the persons named as proxies in the
enclosed form of Proxy to vote the Proxy in accordance with their judgment.
By Order of the Board of Directors
[SIG]
DONALD J. SAJOR
Secretary
Dated: May 29, 1998
13
<PAGE> 16
EXHIBIT A
CERTIFICATE OF AMENDMENT
TO
THE SECOND RESTATED
CERTIFICATE OF INCORPORATION
OF
CAPITAL PACIFIC HOLDINGS, INC.
(A DELAWARE CORPORATION)
THE UNDERSIGNED, Hadi Makarechian and Donald J. Sajor, do hereby certify
that:
1. They are the Chairman of the Board and Secretary, respectively, of
Capital Pacific Holdings, Inc., a Delaware corporation (the "Corporation"); and
2. Article FOURTH of the Corporation's Second Restated Certificate of
Incorporation is hereby deleted in its entirety and the following inserted in
lieu thereof:
"FOURTH. The total number of shares of capital stock that the
Corporation shall have authority to issue is Thirty Million (30,000,000)
shares of Common Stock, par value $.10 per share (the "Common Stock"),
Thirty Million (30,000,000) shares of Non-Voting Common Stock, par value
$.10 per share (the "Non-Voting Stock"), and Five Million (5,000,000)
shares of Preferred Stock, par value $.01 per share (the "Preferred
Stock").
A holder of record of one or more shares of the Common Stock shall
have one (1) vote on any matter submitted to a stockholder vote for each
share of the Common Stock held. Holders of the Common Stock are entitled to
the entire voting power, all dividends declared, and all assets of the
corporation upon liquidation, subject to the rights of the holders of the
Non-Voting Common Stock and the Preferred Stock to such voting power,
dividends, and assets upon liquidation. Holders of the Common Stock shall
not be entitled to any preemptive or other subscription rights.
The Non-Voting Common Stock may be issued from time to time pursuant
to a resolution or resolutions of the Board of Directors. The holders of
outstanding Non-Voting Common Stock shall not be entitled to vote on any
matter unless expressly required by applicable law. The holders of
Non-Voting Common Stock are entitled to receive dividends declared and, in
the event of the liquidation of the Corporation, the holders of outstanding
Non-Voting Common Stock shall be entitled to be paid out of the assets of
the Corporation, after payment to the holders of the outstanding Preferred
Stock of the amount to which they are entitled, the balance of such assets
according to their respective rights and on a parity with the Common Stock
according to the number of shares held. Holders of shares of Non-Voting
Common Stock are not entitled to preemptive or other subscription rights
with respect to any shares or other securities of the Corporation which may
be issued. In all respects, except voting rights, holders of Non-Voting
Common Stock shall have the same preferences, limitations and relative
rights as the holders of Common Stock.
The Preferred Stock may be issued from time-to-time in one or more
classes or series pursuant to a resolution or resolutions adopted by the
Board of Directors. The Board of Directors of the Corporation shall have
full and complete authority by resolution from time to time, to establish
one or more series and to fix, determine and vary the voting rights,
designations, preferences, qualifications, privileges, limitations,
options, conversion rights and other special rights of each series,
including but not limited to, dividend rates and manner of payment,
preferential amounts payable upon voluntary or involuntary liquidation,
voting rights, conversion rights, redemption prices, terms and conditions
and sinking fund and stock purchase prices, terms and conditions."
3. This Certificate of Amendment was duly adopted by the Board of Directors
of the Corporation and approved by the holders of a majority of the outstanding
shares of stock of each class entitled to vote thereon in accordance with the
requirements of Section 242 of the Delaware General Corporation Law.
<PAGE> 17
4. IN WITNESS WHEREOF, the undersigned have signed this certificate this
day of , 1998 and hereby affirm and acknowledge under
penalty of perjury that the filing of this Certificate of Amendment is the act
and deed of the Corporation.
--------------------------------------
Hadi Makarechian
Chairman of the Board
ATTEST:
- ---------------------------------------------------------
Donald J. Sajor
Secretary
2
<PAGE> 18
CAPITAL PACIFIC HOLDINGS, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JUNE 26, 1998.
The undersigned hereby appoints Donald J. Sajor and Steven O. Spelman, Jr.,
or either of them with individual power of substitution, proxies to vote all
shares of Common Stock of Capital Pacific Holdings, Inc. which the undersigned
may be entitled to vote at the Annual Meeting of Stockholders to be held on June
26, 1998, and at all adjournments thereof, as follows:
1. ELECTION OF DIRECTORS
Hadi Makarechian, Dale Dowers, Allan L. Acree, Karlheinz M. Kaiser, William
A. Funk
<TABLE>
<S> <C>
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below). for all nominees listed above.
</TABLE>
(Instructions: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
If no preference is indicated, this proxy will be voted "FOR" the nominees.
2. To approve an Amendment to the Company's Certificate of Incorporation to
authorize the issuance of up to Thirty Million (30,000,000) shares of
Non-Voting Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
If no preference is indicated, this proxy will be voted "FOR" the amendment to
authorize Thirty Million (30,000,000) shares of Non-Voting Common Stock.
<PAGE> 19
3. In accordance with their best judgment upon such other matters as may
properly come before the Meeting.
-------------------------------------
Signature of Stockholder
-------------------------------------
Signature of Stockholder
IMPORTANT: Please sign this Proxy
exactly as your name or names appear
hereon. If shares are held by more
than one owner, each must sign.
Executors, administrators, trustees,
guardians, and others signing in a
representative capacity should give
their full titles.
DATED: , 1998
------------------------
BE SURE TO DATE THIS PROXY
