<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from N/A to
------------------- ----------------------
Commission file number 1-10959
STANDARD PACIFIC CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0475989
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1565 W. MACARTHUR BLVD., 92626
COSTA MESA, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
Registrant's telephone number, including area code (714) 668-4300
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
REGISTERED
COMMON STOCK, $.01 PAR VALUE
(AND ACCOMPANYING PREFERRED SHARE NEW YORK STOCK EXCHANGE AND
PURCHASE RIGHTS) PACIFIC STOCK EXCHANGE
10 1/2% SENIOR NOTES DUE 2000 NEW YORK STOCK EXCHANGE
8 1/2% SENIOR NOTES DUE 2007 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 THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THE FORM 10-K. [_]
As of March 1, 1998, the aggregate market value of voting stock held by non-
affiliates of the registrant was $438,231,139.
Documents incorporated by reference:
Portions of the Company's Proxy Statement to be filed with the Securities
and Exchange Commission in connection with the Company's 1998 Annual Meeting
of Stockholders are incorporated by reference into Part III hereof.
As of March 1, 1998, there were 29,720,781 shares of common stock
outstanding.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
STANDARD PACIFIC CORP.
PART I
ITEM 1. BUSINESS
Standard Pacific Corp. ("the Company") operates primarily as a
geographically diversified builder of single-family homes for use as primary
residences with operations throughout the major metropolitan markets in
California and Texas. For the year ended December 31, 1997, approximately 79
percent and 21 percent of the Company's home deliveries (including
unconsolidated joint ventures) were in California and Texas, respectively.
The Company was incorporated in the State of Delaware in 1991. Through its
predecessors, Standard Pacific Corp. commenced its homebuilding operations in
1966 with a single tract of land in Orange County, California. As used herein,
"Company" refers to Standard Pacific Corp. and its predecessors.
STRATEGY
The Company believes that its long history of building high quality homes in
California and Texas and its conservative operating strategy have enabled the
Company to successfully weather cyclical downturns and position the Company to
capitalize on the improving California market. The main elements of the
Company's strategy include:
Focus on Broad Move-Up Market. The Company concentrates on the construction
of single-family homes for use as primary residences by move-up buyers. The
Company believes that the market for primary residences is more resistant to
economic downturns than the market for second or vacation homes. The average
selling price of the Company's homes for the year ended December 31, 1997 was
approximately $307,000. Currently, the Company expects to concentrate its
efforts on acquiring land that is suitable for the construction and sale of
homes generally in the price range of $150,000 to $400,000, which represents a
broad market segment in the Company's market areas. The Company also
constructs and sells homes in the $400,000 to $800,000 price range in certain
of its California markets.
Reputation for High Quality, Single-Family Homes. The Company believes that
it has an established reputation for providing high quality homes. The Company
prides itself on its ability to design unique and attractive homes and provide
its customer with a wide selection of options. The Company believes that its
long history of providing high quality homes has resulted in many repeat
buyers and word-of-mouth sales. The Company also uses extensive marketing to
sell its homes, and its homes are generally sold by its own staff of sales
personnel through the use of model homes which are usually maintained at each
project site. The Company also makes extensive use of advertisements in local
newspapers, illustrated brochures, billboards and on-site displays.
Conservative Operating Strategy. The Company customarily acquires unimproved
or improved land zoned for residential use which appears suitable for the
construction of 50 to 300 homes in increments of 10 to 30 homes. The Company
generally purchases land only when it projects commencement of construction
within a relatively short time period. The number of homes built in the first
increment of a project is based upon internal market studies. The timing and
size of subsequent increments depend to a large extent upon sales rates
experienced in the earlier increments. By developing projects in increments,
the Company has been able to respond to local market conditions and control
the number of its completed and unsold homes. Additionally, an increasing
percentage of the Company's lots are controlled through joint ventures. The
Company uses joint ventures for certain land development projects that have
long lead times or are of significant size requiring substantial capital
investments.
Strong Land Position. The Company has been operating in California for over
30 years and has established an excellent reputation with land owners. The
Company believes that its long standing relationships with land owners and
developers in California give the Company a competitive edge in securing
quality land
1
<PAGE>
positions at competitive prices. In order to ensure an adequate supply of land
for future homebuilding activities, the Company generally attempts to maintain
an inventory of building sites sufficient for construction of homes over a
period of approximately three to five years. The Company believes that its
9,016 owned or controlled building sites at December 31, 1997, in addition to
any land sites for which the Company may enter into negotiations, will be
sufficient for its operations over this period.
Geographic Diversification. The Company has focused its California
homebuilding activities in Orange, Riverside, San Bernardino, San Diego and
Ventura Counties in southern California, and in the San Francisco Bay area of
northern California. Additionally, the Company has projects in the Houston,
Dallas and Austin markets in Texas. The Company's policy of diversifying among
different geographic areas has enabled it to reduce the impact of adverse
local economic conditions. Additionally, the Company believes that it has
significant opportunities to expand in its existing markets and to enter new
geographic markets.
Control of Overhead and Operating Expenses. Throughout its history, the
Company has sought to minimize overhead expenses in order to be more flexible
in responding to the cyclical nature of its business. The Company strives to
control its overhead costs by centralizing certain of its administrative
functions and by limiting the number of middle level management positions.
Experienced Management and Decentralized Operations. The Company's senior
corporate and division operating managers average over 20 years of experience
in the homebuilding business. Each division is run by a local manager. One of
the essential criteria in the selection of a divisional manager is the
individual's in-depth familiarity with the geographic areas within which the
division operates. The decisions regarding selection of parcels of land for
purchase and development are made in conjunction with the officers of the
Company, and thereafter, each manager conducts the operations of the division
relatively autonomously as a separate profit center.
2
<PAGE>
OPERATIONS
The Company currently conducts activities in California and Texas through a
total of six geographic divisions, with 99 projects under development or held
for future development at December 31, 1997.
The table below sets forth certain information for each division and for the
Company as a whole for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED AS OF
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
------------------ -------------------------------------------------
TOTAL NUMBER
NUMBER OF BUILDING HOMES
AVERAGE OF PROJECTS PROJECTS SITES UNDER
HOME HELD FOR IN SALES OWNED OR CONSTRUC- PRESOLD
HOMES SELLING DEVELOPMENT STAGE CONTROLLED TION HOMES
DELIVERED PRICE (2) (3) (4) (5) (6)
--------- -------- ----------- -------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Orange County........... 456 $385,596 21 9 2,212 150 83
San Diego County........ 137 304,081 9 4 874 120 93
Ventura County.......... 256 255,395 8 5 513 136 94
San Francisco Bay area.. 628 345,531 30 10 2,880 172 151
Houston................. 168 142,159 8 7 472 53 52
Dallas/Austin........... 234 234,021 17 13 1,298 55 66
----- -------- --- --- ----- --- ---
Total Consolidated...... 1,879 307,265 93 48 8,249 686 539
Unconsolidated Joint
Ventures--California... 67 364,585 6 3 767 22 27
----- -------- --- --- ----- --- ---
Totals for and as of the
year ended December 31,
1997................... 1,946 $309,239 99 51 9,016 708 566
===== ======== === === ===== === ===
Totals for and as of the
year ended December 31,
1996................... 1,623 $261,681 77 53 6,527 599 485
===== ======== === === ===== === ===
</TABLE>
- --------
(1) Includes as of December 31, 1997, 102 model homes and 116 completed and
unsold homes, and as of December 31, 1996, 135 model homes and 206
completed and unsold homes.
(2) The total number of projects held for development as of the end of each
period shown includes projects with homes in the sales stage, under
construction and projects in various stages of planning.
(3) The number of projects in the sales stage includes projects where the
sales office has opened and/or the Company has begun to enter into sales
contracts for the sale of its homes.
(4) Includes homes reflected in Homes Under Construction and Presold Homes.
(5) Includes certain homes reflected in Presold Homes.
(6) See "--Marketing and Sales" for information concerning cancellation rates
and contractual arrangements under which homes are presold.
Each division is run by a local manager. One of the essential criteria in
the selection of a divisional manager is the person's in-depth familiarity
with the geographic areas within which the division operates. The decisions
regarding selection of parcels of land for purchase and development are made
in conjunction with the officers of the Company, and thereafter, each manager
conducts the operations of the division relatively autonomously as a separate
profit center.
Substantially all of the Company's homes sold are single-family detached
dwellings, although during the past few years approximately 5 percent to 10
percent have been townhouses or condominiums generally attached in varying
configurations of two, three, four and six dwelling units.
The Company's homes are designed to suit the particular area of the country
in which they are located and are available in a variety of models, exterior
styles and materials depending upon local preferences. Homes built by the
Company are targeted for occupancy as primary residences. While the homes
built by the Company
3
<PAGE>
typically range in size from approximately 1,800 to 2,800 square feet and
typically include three or four bedrooms, two or three baths, a living room,
kitchen, dining room, family room and a two or three-car garage, the Company
also has built single-family attached and detached homes ranging from 1,100 to
5,500 square feet. For the years ended December 31, 1997, 1996 and 1995, the
average selling prices of the Company's homes, including sales of the
unconsolidated joint ventures, were $309,239, $261,681, and $271,936,
respectively.
LAND ACQUISITION, DEVELOPMENT AND CONSTRUCTION
In considering the purchase of land for the development of a project, the
Company reviews such factors as proximity to existing developed areas;
population growth patterns; availability of existing community services such
as water, gas, electricity and sewers; school districts; employment growth
rates; the expected absorption rate for new housing; environmental condition
of the land; transportation availability and the estimated costs of
development. Generally, if all requisite governmental agency approvals are not
in place, the Company enters into a conditional agreement to purchase a parcel
of land, making only a nominal deposit on the property. The general policy of
the Company is to complete a purchase of land only when it can reasonably
project commencement of construction within a relatively short period of time.
Closing of the land purchase is, therefore, generally made contingent upon
satisfaction of conditions relating to the property and to the Company's being
able to obtain all requisite approvals from governmental agencies within a
certain period of time. The Company customarily acquires unimproved or
improved land zoned for residential use which appears suitable for the
construction of 50 to 300 homes, which construction is accomplished in smaller
sized increments. The number of homes built in the first increment of a
project is based upon the Company's internal market studies. The timing and
size of subsequent increments depends on the sales rates of earlier
increments. The Company's development work on a project includes obtaining any
necessary zoning, environmental and other regulatory approvals, and
constructing, as necessary, roads, sewer and drainage systems, recreational
facilities and other improvements.
The Company typically uses both its equity (internally generated funds) and
unsecured financing in the form of bank debt and other unsecured debt to fund
land acquisitions. The Company also uses purchase money trust deeds to finance
the acquisition of land. Generally, with the exception of joint ventures,
specific project financing is not used.
The Company has entered into joint venture arrangements to develop certain
parcels of land. During 1993, the Company's Orange County division entered
into a joint venture agreement to develop and deliver 469 homes. For the years
ended December 31, 1997, 1996, 1995 and 1994, the Company delivered 15, 151,
195 and 108 homes, respectively, through this unconsolidated joint venture. In
1995, the Company's Orange County division entered into a joint venture
arrangement to develop 209 lots in the city of Orange, California. The Company
will purchase all 209 lots for the construction and sale of homes.
Additionally, in 1996 the Company's Orange County division entered into
another joint venture to develop and deliver approximately 800 homes in
Fullerton and Brea, California. During 1997 and 1996, the Company delivered 52
and three new homes, respectively, from this unconsolidated joint venture. In
the first half of 1997, the Company's northern California division entered
into a joint venture to develop approximately 700 lots in Gilroy, California.
Fifty percent of these lots will be sold to the Company for the construction
and sale of homes. The Company has made an investment of approximately $9.4
million in this joint venture.
During 1997, the Company entered into a joint venture with affiliates of
Catellus Development Corporation and Starwood Capital Group L.L.C. to acquire
and develop a 3,470-acre masterplanned community located in south Orange
County (the "Talega Joint Venture"). The Talega Joint Venture plans to develop
and deliver in phases finished lots for up to approximately 4,500 attached and
detached homes, as well as a championship golf course, certain community
amenities and commercial and industrial components. As a one-third participant
in this long-term project, the Company is obligated to invest up to $20.0
million in the project and will receive certain rights of first offer
entitling the Company to purchase up to 1,000 finished lots from the joint
venture for construction and sale of homes by the Company. As of December 31,
1997, the Company had made investments of approximately $10.9 million in this
joint venture.
4
<PAGE>
The Company essentially functions as a general contractor with its
supervisory employees coordinating all work on the project. The services of
independent architectural, design, engineering and other consulting firms are
engaged to assist in project planning, and subcontractors are employed to
perform all of the physical development and construction work on the project.
The Company does not have long-term contractual commitments with any of its
subcontractors, consultants or suppliers of materials. However, because of its
market presence and long-term relationships, the Company has generally been
able to obtain sufficient materials and commitments from subcontractors and
consultants during times of market shortages. These types of agreements are
generally entered into on an increment-by-increment basis at a fixed price
after competitive bidding. The Company believes that the low fixed labor
expense resulting from conducting its operations in this manner has been
instrumental in enabling it to retain the necessary flexibility to react to
increases or decreases in demand for housing.
Although the construction time for the Company's homes varies from project
to project depending on the time of year, local labor situations, certain
governmental approval processes, availability of materials and supplies and
other factors, the Company can typically complete the construction phase of an
increment within one of its projects in approximately four to six months.
MARKETING AND SALES
The Company's homes are generally sold by its own staff of sales personnel.
Furnished and landscaped model homes are usually maintained at each project
site. Homebuyers are afforded the opportunity to select, at additional costs,
various optional amenities such as prewiring options, upgraded flooring,
cabinets and counter tops, varied interior and exterior color schemes,
additional appliances and some room configurations. The Company makes
extensive use of advertisements in local newspapers, illustrated brochures,
billboards and on-site displays.
The Company's homes are typically sold during construction using sales
contracts which are usually accompanied by a cash deposit, although some of
the Company's homes are sold after completion of construction. In some cases,
purchasers are permitted to cancel these contracts if they are unable to sell
their existing homes or fail to qualify for financing and under certain other
circumstances. During each of the years ended December 31, 1997, 1996 and
1995, the Company experienced cancellation rates of 22 percent, 24 percent and
25 percent, respectively. Although cancellations can delay the delivery of the
Company's homes, they have not, during the last few years, had a material
negative impact on sales, operations or liquidity because of the Company's
policy of closely monitoring the progress of prospective buyers in obtaining
financing and monitoring and adjusting its start plan to better match the
level of demand for its homes. Sales are recorded after construction is
completed, required down payments are received and title passes. At December
31, 1997, 1996 and 1995, the Company had an inventory of completed and unsold
homes of 116, 206 and 239, respectively.
FINANCING
Home purchase financing from local lending institutions generally averages
80 percent or more of the purchase price of the homes. During periods of high
mortgage rates or difficult economic times, the Company may assist its
homebuyers by "buying-down" the interest rates on mortgage loans or
subsidizing all or a part of the homebuyers' up front financing fees. The
amounts of such "buy-downs" or subsidies is dependent upon prevailing market
conditions and interest rate levels. During the past few years the amount of
such "buy-downs" has not been significant due to the generally low level of
mortgage interest rates.
The Company recently formed Family Lending Services, Inc. ("Family Lending
Services"), which will operate as a mortgage banking subsidiary of the
Company, offering mortgage financing to the Company's home buyers and others.
Family Lending Services is in the process of obtaining required regulatory
approvals and mortgage warehouse financing and is currently expected to begin
offering mortgage financing to home buyers in the second quarter of 1998.
5
<PAGE>
CERTAIN FACTORS AFFECTING THE COMPANY'S OPERATIONS
Set forth below are certain matters that may affect the Company.
Land Acquisition and Inventory Risks. The development, construction and sale
of homes are subject to various risks including, among other things, the
continued availability of suitable undeveloped land at reasonable prices and
adverse local market conditions resulting from changes in economic conditions
or competitive over-building. In the early 1990's and as a result of the
national and California recessions which began in 1990, the Company recorded
aggregate writedowns of approximately $8.8 million on several of the Company's
California projects to value the remaining homes in these projects at
estimated net realizable values in order to provide for reserves to cover
potential price concessions. At December 31, 1995, and as a result of
continued adverse trends experienced in some of the Company's markets,
particularly in San Diego, coupled with the adoption of FAS 121, the Company
recorded a $46.5 million noncash pretax charge against operations. FAS 121
required a change in the method of valuing long-lived assets, including assets
such as the Company's real estate holdings. See Note 2 of the Notes to the
Company's consolidated financial statements included elsewhere in this
Form 10- K.
Although the Company believes that it has acquired a sufficient number of
lots to provide for its home construction activities for the near term, no
assurances can be given that the Company will be able to sell the homes it
produces on a profitable basis.
Economic Conditions and Interest Rates. The Company's business is highly
cyclical and is affected by national, world and local economic conditions and
events and the effect such conditions and events have on the markets it serves
in California and Texas and in particular by the level of mortgage interest
rates and consumer confidence in those regions. The Company cannot predict
whether interest rates will be at levels attractive to prospective homebuyers.
If interest rates increase, and in particular mortgage interest rates, the
Company's operating results could be adversely impacted. The recent downturn
and continued uncertainty in Asian financial markets, including the
devaluation of various Asian currencies, could have an adverse impact on the
California and Texas economies and the demand for homes in those states.
Dependence on California Market. The Company presently conducts most of its
business in California. There have been periods of time in California where
economic growth has slowed and the average sales price of homes in certain
areas in California in which the Company does business have declined. There
can be no assurance that home sales prices will not decline in the future.
In past years, several cities and counties in California in which the
Company has delivered a significant number of homes have approved the
inclusion of "slow growth" initiatives and other election ballot measures
which could impact the affordability and availability of homes and land within
those localities. Although some of these initiatives have been defeated, the
Company believes that if, in the future, similar initiatives are introduced
and approved, future residential construction by the Company could be
negatively impacted.
Competition. The homebuilding industry is highly competitive, with
homebuilders competing for customers, desirable properties, financing, raw
materials and skilled labor. In each of the areas in which it operates, the
Company competes in terms of location, design, quality, price and available
mortgage financing with numerous other residential construction firms,
including large national and regional firms, some of which have greater
financial resources than the Company. In addition, the Company competes with
resales of existing residential housing by individuals, financial institutions
and others. The Company also competes with rental properties in certain
markets.
Regulatory and Environmental Matters. The housing industry is subject to
environmental, building, worker health and safety, zoning and real estate
regulations by various Federal, state and local authorities. The environmental
laws that apply to a given homebuilding site depend upon the site's location,
its environmental condition and the present and former uses of the site, as
well as adjoining properties. Environmental laws and
6
<PAGE>
conditions may result in delays, may cause the Company to incur substantial
compliance and other costs, and can prohibit or severely restrict homebuilding
activity in certain environmentally sensitive regions or areas. In addition,
certain new developments, particularly in southern California, are subject to
various assessments for schools, parks, streets and highways and other public
improvements, the costs of which can be substantial. By raising the price of
the Company's homes to its customers, an increase in such assessments could
have a negative impact on the Company's sales.
In developing a project, the Company must obtain the approval of numerous
governmental authorities regulating such matters as permitted land uses and
levels of density, the installation of utility services, such as water and
waste disposal, and the dedication of acreage for open space, parks, schools
and other community purposes. Furthermore, changes in prevailing local
circumstances or applicable law may require additional approvals or
modifications of approvals previously obtained, including environmental,
zoning and other entitlement issues and may cause delays in the development
process. Prior to acquiring a parcel of land, the Company may utilize deposit
arrangements which allow the Company ample time to perform proper diligence
and investigate and resolve necessary issues.
Risk of Material and Labor Shortages. The Company is not presently
experiencing any serious material or labor shortages; however, the residential
construction industry in the past has, from time to time, experienced serious
material and labor shortages, including shortages in insulation, drywall,
certain carpentry work and cement and fluctuating lumber prices and supply.
Delays in construction of homes and higher costs due to these shortages could
have an adverse effect on the Company's operations.
Natural Risks. Climatic conditions, such as unusually heavy or prolonged
rain, including "El Nino" conditions, or other natural disasters such as
earthquakes or fires, may affect operations in certain areas. In addition, the
state of California has periodically experienced drought conditions resulting
in water conservation measures and in some cases rationing by local
municipalities in which the Company does business. Restrictions by
governmental agencies on future construction activity as a result of limited
water supplies could have an adverse effect upon the Company's operations.
EMPLOYEES
At December 31, 1997, the Company had approximately 427 employees (excluding
employees of discontinued operations).
During the past five years, the Company has not directly experienced a work
stoppage in its operations caused by labor disputes. Construction of homes in
projects developed by the Company has, from time to time, been delayed due to
strikes by certain construction unions against subcontractors retained by the
Company or strikes against suppliers of materials used in the construction of
homes. Such delays have not had a significant adverse effect on the Company's
homebuilding operations. The Company believes that its relations with its
homebuilding employees and subcontractors are satisfactory.
ITEM 2. PROPERTIES
In addition to real estate held for development and sale, which is either
owned or under option to be purchased by the Company, the Company leases
approximately 4.8 acres of land in Costa Mesa, California under leases
expiring in 2002 on which the Company's executive office, the offices of the
Orange County housing division and a manufacturing facility (which is
subleased to an unrelated party) are located. The Company's other real estate
housing divisions occupy various facilities under leases which expire from
1998 through 2002.
The administrative office and branch location for Standard Pacific Savings,
F.A. ("Savings") is located in Newport Beach, California. A total of 5,072
square feet is leased under a lease which expires in 2004. In addition, Family
Lending Services occupies approximately 9,300 square feet of a facility in
Newport Beach, California under a lease that expires in February 2005.
7
<PAGE>
As of December 31, 1997, the Company was subleasing approximately 59,000
square feet of manufacturing facilities to unrelated parties under leases
expiring beginning in May 1998.
The Company believes that all of its properties are well suited for the
purposes for which they are used.
ITEM 3. LEGAL PROCEEDINGS
Various claims and actions, considered normal to the Company's business,
have been asserted and are pending against the Company and its subsidiaries.
The Company believes that such claims and actions should not have a material
adverse effect upon the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, their ages and positions with the
Company, and brief accounts of their business experience, are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Arthur E. Svendsen 74 Chairman of the Board and Chief Executive Officer; Director
Stephen J. Scarborough 49 President; Director
Andrew H. Parnes 39 Vice President--Finance, Treasurer and Chief Financial Officer
Clay A. Halvorsen 38 Vice President, General Counsel and Secretary
</TABLE>
Arthur E. Svendsen has served as the Chairman of the Board and Chief
Executive Officer of the Company since 1961.
Stephen J. Scarborough has served as a Director since May 1996 and as
President of the Company since October 1996. Mr. Scarborough served as
Executive Vice President of the Company from January 1996 until October 1996.
Prior to this and since 1981, Mr. Scarborough was President of the Company's
Orange County, California residential homebuilding division.
Andrew H. Parnes was appointed to the position of Vice President--Finance in
January 1997. In addition, he has served as the Company's Chief Financial
Officer since July 1996 and as the Company's Treasurer since January 1991.
From December 1989 until July 1996, Mr. Parnes served as the Company's
Controller.
Clay A. Halvorsen joined the Company as Vice President, General Counsel and
Secretary in January 1998. Previously, from 1985 through December 1997, Mr.
Halvorsen practiced with the law firm of Gibson, Dunn & Crutcher LLP, where he
became a partner in January 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's shares of common stock are listed on the New York Stock
Exchange and Pacific Stock Exchange. The following table sets forth, for the
fiscal quarters indicated, the reported high and low closing prices of the
common shares as reported on the New York Stock Exchange Composite Tape and
the amount of common dividends paid.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1996
------------------------ ----------------------
QUARTER ENDED HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------------- ------- ------- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
March 31.................. $ 8 3/4 $ 5 5/8 $.03 $7 1/4 $5 7/8 $.03
June 30................... 10 1/2 6 3/8 .03 7 3/8 6 3/8 .03
September 30.............. 13 10 1/8 .04 7 1/8 5 3/4 .03
December 31............... 16 1/4 9 3/4 .04 6 1/4 5 1/4 .03
</TABLE>
As of March 1, 1998, the approximate number of record holders of common
stock of the Company was 1,683.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995(1) 1994 1993
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 584,571 $ 399,863 $ 346,263 $ 374,783 $ 249,884
========== ========== ========== ========== ==========
Income (loss) from
continuing operations
before income taxes and
cumulative effect of
change in accounting
for income taxes....... $ 41,046 $ 12,948 $ (37,247) $ 11,200 $ (1,617)
(Provision) benefit for
income taxes........... (17,070) (5,197) 14,890 (4,595) 710
---------- ---------- ---------- ---------- ---------- ---
Income (loss) from
continuing operations
before cumulative
effect of change in
accounting for income
taxes.................. 23,976 7,751 (22,357) 6,605 (907)
Income (loss) from dis-
continued operations,
net of income taxes.... 48 642 (5,006) (718) 2,726
Gain on disposal of dis-
continued operation,
net of income taxes.... 3,302 -- -- -- --
Cumulative effect of
change in accounting
for income taxes....... -- -- -- -- 858
---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ 27,326 $ 8,393 $ (27,363) $ 5,887 $ 2,677
========== ========== ========== ========== ==========
Basic Income (Loss) Per
Share:
Income (loss) per share
from continuing opera-
tions.................. $ 0.82 $ 0.26 $ (0.73) $ 0.21 $ (0.03)
Income (loss) per share
from discontinued oper-
ations,
net of income taxes.... 0.00 0.02 (0.17) (0.02) 0.09
Gain on disposal of dis-
continued operation,
net of income taxes.... 0.11 -- -- -- --
Cumulative effect of
change in accounting
for income taxes....... -- -- -- -- 0.03
---------- ---------- ---------- ---------- ----------
Net income (loss) per
share.................. $ 0.93 $ 0.28 $ (0.90) $ 0.19 $ 0.09
========== ========== ========== ========== ==========
Diluted Income (Loss)
Per Share:
Income (loss) per share
from continuing opera-
tions.................. $ 0.81 $ 0.26 $ (0.73) $ 0.22 $ (0.03)
Income (loss) per share
from discontinued
operations, net of
income taxes........... 0.00 0.02 (0.17) (0.03) 0.09
Gain on disposal of dis-
continued operation,
net of income taxes.... 0.11 -- -- -- --
Cumulative effect of
change in accounting
for income taxes....... -- -- -- -- 0.03
---------- ---------- ---------- ---------- ----------
Net income (loss) per
share.................. $ 0.92 $ 0.28 $ (0.90) $ 0.19 $ 0.09
========== ========== ========== ========== ==========
Stockholders' equity per
share.................. $ 9.58 $ 8.79 $ 8.58 $ 9.56 $ 9.49
Cash dividends paid per
share.................. $ 0.14 $ 0.12 $ 0.12 $ 0.12 $ 0.12
Weighted average common
shares outstanding-
basic.................. 29,504,477 30,000,492 30,488,676 30,616,991 30,585,442
Weighted average common
and diluted shares out-
standing-diluted....... 29,807,702 30,011,595 30,488,676 30,674,349 30,633,471
Total assets............ $ 547,665 $ 449,114 $ 444,603 $ 531,768 $ 542,696
Long-term debt: continu-
ing operations......... $ 214,305 $ 80,000 $ 129,062 $ 134,360 $ 147,273
Stockholders' equity.... $ 283,778 $ 260,389 $ 257,926 $ 292,743 $ 290,395
</TABLE>
- --------
(1) The 1995 pretax loss from continuing operations of $37.2 million reflects
the adoption of Financial Accounting Standards No. 121 ("FAS 121") which
resulted in a $46.5 million noncash pretax charge to operations. See Note
2 to the Company's consolidated financial statements included elsewhere in
this Form 10-K.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's consolidated financial statements
and the related notes included elsewhere in this Form 10-K.
RESULTS OF OPERATIONS
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues...................................... $584,571 $399,863 $346,263
Cost of sales................................. 490,876 348,066 307,794
Noncash charge for impairment of long-lived
assets....................................... -- -- 46,491
-------- -------- --------
Gross margin................................ 93,695 51,797 (8,022)
-------- -------- --------
Gross margin percentage..................... 16.0% 13.0% 11.1%(1)
-------- -------- --------
Selling, general and administrative expenses.. 52,141 37,351 34,873
Income from unconsolidated joint ventures..... 3,787 4,708 6,953
Interest expense.............................. 4,981 7,142 1,860
Amortization of excess of cost over net assets
acquired..................................... 245 -- --
Other income.................................. 931 936 555
-------- -------- --------
Income (loss) from continuing operations
before income taxes........................ $ 41,046 $ 12,948 $(37,247)
======== ======== ========
- --------
</TABLE>
(1) The 1995 homebuilding gross margin percentage excludes the $46.5 million
noncash charge for the adoption of FAS 121.
OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS,
EXCEPT
AVERAGE SELLING PRICES)
<S> <C> <C> <C>
New homes delivered:
California......................................... 1,477 1,131 942
Texas.............................................. 402 338 299
Joint ventures (California)........................ 67 154 195
-------- -------- --------
Total.............................................. 1,946 1,623 1,436
======== ======== ========
Net new orders:
California......................................... 1,599 1,458 1,145
Texas.............................................. 428 340 335
-------- -------- --------
Total.............................................. 2,027 1,798 1,480
======== ======== ========
Backlog at year end (in units)....................... 566 485 312
Backlog at year end (in dollars)..................... $191,682 $168,674 $ 77,945
Active selling communities at year end............... 51 53 49
Average selling price:
California deliveries (excluding joint ventures)... $337,649 $292,007 $308,383
Texas deliveries................................... $195,631 $185,622 $180,058
Combined (excluding joint ventures)................ $307,265 $267,529 $277,465
Combined (including joint ventures)................ $309,239 $261,681 $271,936
</TABLE>
10
<PAGE>
Fiscal Year 1997 Compared to Fiscal Year 1996
Net income from continuing operations for the year ended December 31, 1997
increased 209 percent from the previous year to $24.0 million, or $0.81 per
diluted share, compared to $7.8 million, or $0.26 per diluted share, in 1996.
The strong increase in earnings resulted from a record number of new home
deliveries, an increase in the average selling price of homes and continued
gross margin improvement from the Company's California homebuilding
operations.
The Company delivered 1,946 new homes in 1997 (including 67 homes delivered
by the Company's unconsolidated joint ventures), a new fiscal year high, at an
average selling price of $309,239 compared to 1,623 new homes (including 154
homes delivered by the Company's unconsolidated joint ventures) at an average
selling price of $261,681 during 1996.
Homebuilding revenues (excluding the Company's unconsolidated joint
ventures) also reached a new high of $584.6 million in 1997, an increase of
46.2 percent from the prior year. The increase in revenues from the prior year
of approximately $184.7 million resulted primarily from an increase of $109.7
million attributable to a 27.9 percent increase in new home deliveries, a
$74.7 million increase due to a 14.9 percent higher average selling price,
with the balance of the increase attributable to land sales. The Company's
Northern California division experienced an increase in deliveries over last
year of 71.6 percent to 628 homes, while deliveries from the southern
California operations were in line with the strong level of deliveries
generated in 1996. The increase in the average selling price in 1997 resulted
primarily from a greater distribution of homes delivered in the $400,000 to
$800,000 price range in California.
Cost of sales increased by $142.8 million from the previous year, or 41.0
percent, of which $95.1 million was due to an increase in the number of new
homes delivered while $48.2 million was attributable to an increase in the
average cost of new homes delivered. The increase in cost of sales was
partially offset by a reduction in costs associated with land sales. The
increase in the average cost of new homes delivered in 1997 was primarily due
to the changing product mix towards higher-priced homes.
The gross margin percentage for 1997 increased to 16.0 percent from 13.0
percent in 1996. This increase was primarily due to the healthy California
housing market.
Selling, general and administrative expenses decreased as a percentage of
revenues from 9.3 percent in 1996 to 8.9 percent in 1997. This decrease is
attributable to the fixed level of certain general and administrative
expenses, as well as a reduction in selling costs as a percent of revenues due
to the improving housing market in California.
Income from unconsolidated joint ventures declined from approximately $4.7
million in 1996 to $3.8 million in 1997 as a result of fewer unit deliveries
as compared to the previous year. Although joint venture unit deliveries were
down from the prior year, both gross margins and average selling prices for
the ventures increased respectively from 1996 levels.
Interest incurred for 1997 was $17.0 million of which $12.0 million was
capitalized to real estate inventories and approximately $5.0 million was
expensed compared to $16.7 million incurred in 1996 of which $9.5 million was
capitalized and $7.1 million expensed. The increase in the amount of interest
capitalized in 1997 was due primarily to more projects under development
throughout 1997 as compared to the year earlier period.
Amortization of excess of cost over net assets acquired relates to the
acquisition on September 30, 1997 of Duc Development Company, a privately held
northern California homebuilder. The excess of cost over net assets acquired
is being amortized over a seven-year period.
11
<PAGE>
The Company generated a record net new order total of 2,027 homes for 1997,
a 12.7 percent increase from the previous year. The Company's Northern
California orders increased 28.1 percent to 607 homes while the Texas
operations combined for a 25.9 percent improvement in net new orders over the
prior year. This strong order trend translated into a backlog of presold homes
of 566, a 16.7 percent increase over the 1996 year-end total, and the highest
level in eight years. Net orders in 1997 for the Company's southern California
operations were in line with the strong level generated in 1996.
As a result of higher than expected deliveries and orders in the fourth
quarter of 1997, which had the effect of reducing the Company's inventory of
homes available for sale entering 1998, and the anticipated timing of the
Company's new project openings, the Company expects that net new orders for
the first quarter of 1998 will be less than the record level of net new orders
for the first quarter of 1997. However, the Company anticipates opening 35 to
40 new model home complexes during 1998, with many of these openings occurring
in the second and third quarters. Consequently, the Company anticipates that
its order volume for the year will be weighted more towards the middle and
second half of the year.
Net income for 1997, including discontinued operations, was $27.3 million,
or $0.92 per diluted share, compared to $8.4 million, or $0.28 per diluted
share in 1996. The discontinued operations reflect the Company's savings and
loan subsidiary and the Company's former office furniture subsidiary, which
was sold in December for a net gain of approximately $3.3 million, or $0.11
per diluted share. See "--Discontinued Operations" for further discussion of
the discontinued operating segments of the Company.
Fiscal Year 1996 Compared to Fiscal Year 1995
Net income from continuing operations for the year ended December 31, 1996
increased to $7.8 million, or $0.26 per diluted share, compared to a loss of
($22.4) million, or ($0.73) per diluted share, in 1995. The increase in
earnings resulted from an increase in new home deliveries and an improvement
in gross margins. In addition, 1995 reflects a pretax noncash charge of
approximately $46.5 million for the adoption of FAS 121 (See Note 2 to the
Company's consolidated financial statements included elsewhere in this
Form 10-K).
During the year ended December 31, 1996, the Company delivered 1,623 new
homes (including 154 homes delivered by the Company's unconsolidated joint
ventures) at an average selling price of $261,681 compared to 1,436 new homes
(including 195 homes delivered by the Company's unconsolidated joint venture)
at an average selling price of $271,936 during 1995.
Homebuilding revenues increased by 15.5 percent from 1995, while cost of
sales (before the impairment charge in 1995) increased by 13.1 percent. The
increase in revenues from 1995 of approximately $53.6 million resulted
primarily from an increase of $63.3 million attributable to 228 more homes
delivered and a $4.9 million increase in revenues attributable to land sales,
which were partially offset by a decrease of $14.6 million due to a
3.6 percent lower average selling price of new homes delivered. The increase
in unit deliveries was primarily attributable to a 45.8 percent increase in
deliveries from the Northern California division to 366 homes, an 18.7 percent
increase in deliveries from the Ventura division to 184 homes and a 13.0
percent increase in Texas deliveries to 338 homes. The increase in deliveries
was attributed to, among other things, improved market conditions in the
geographic markets the Company serves, particularly in California, as well as
lower mortgage interest rates during most of 1996 as compared to fiscal 1995.
The average selling price of the Company's homes is impacted by product mix,
geographic mix and changing prices on homes sold. The decrease in the average
selling price from 1995 to 1996 was due primarily to a reduction in deliveries
of higher priced homes from the Company's Orange County division.
The $40.3 million increase in cost of sales (before the impairment charge in
1995) included $56.2 million attributable to an increased number of new home
deliveries and a $5.8 million increase in cost of sales attributable to
undeveloped lots sold, which were partially offset by a decrease of $21.7
million due to a decline in the average cost of new homes delivered. The
reduction in the average cost of new homes delivered was primarily due to the
changing product mix discussed above.
12
<PAGE>
The gross margin percentage for 1996 was 13.0 percent compared to 11.1
percent (before the impairment charge) in 1995. The increase in the gross
margin percentage was primarily due to improved market conditions in the
California markets, higher absorption rates, as well as proportionately more
deliveries from newer projects in 1996 as compared to 1995. The newer projects
generally carry higher margins than older projects, which include land
acquired in prior years at higher prices.
Selling, general and administrative expenses decreased as a percentage of
revenues from 10.1 percent in 1995 to 9.3 percent in 1996. This decline can be
attributed to increased revenues of 15.5 percent from the prior year period.
Income from the unconsolidated joint ventures decreased from approximately
$7.0 million in 1995 to $4.7 million in 1996 as a result of fewer unit
deliveries as well as more deliveries of lower priced product from one of the
joint ventures. This joint venture delivered 151 new homes in 1996 compared to
195 new homes in 1995. The Company delivered three homes from a new joint
venture during the fourth quarter of 1996.
Interest incurred for 1996 was $16.7 million of which $9.5 million was
capitalized to real estate inventories and $7.1 million was expensed compared
to $19.2 million incurred in 1995 of which $17.3 million was capitalized and
$1.9 million expensed.
CARRYING COSTS, REAL ESTATE INVENTORIES AND COST OF SALES
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Carrying costs in inventory and the percent-
age of total real estate inventory:
Interest.................................. $13.7 3.0% $25.1 6.7% $32.5 8.8%
Property taxes............................ 8.6 1.9 8.0 2.1 8.8 2.4
----- --- ----- --- ----- ----
$22.3 4.9% $33.1 8.8% $41.3 11.2%
===== === ===== === ===== ====
Total real estate inventories............... $452 $373 $368
Cost of sales for the year then ended (be-
fore FAS 121
adjustment for 1995) ...................... 491 348 308
Ratio of cost of sales to ending inventory
(Inventory turn ratio)..................... 1.09 .93 .84
</TABLE>
The increase in the 1997 inventory turn ratio is due to a 41 percent
increase in cost of sales while real estate inventories increased only 21
percent. This positive trend is primarily due to a 28 percent increase in unit
deliveries resulting from strong housing market conditions in California.
Additionally, during 1997 the Company delivered homes from certain of its
older projects which have been in the Company's inventory balances for several
years. These projects generally had higher land and interest costs than more
recent acquisitions. The newer projects generally develop and deliver more
quickly than the older projects which results in a higher inventory turn ratio
and a lower amount of carrying costs in ending inventory.
Capitalized interest in real estate inventory at December 31, 1997 decreased
approximately $11.4 million from December 31, 1996, a reduction of
approximately 45 percent. This decrease can be attributed to (i) the sale of
homes from older projects which generally include higher carry costs than
newer projects and (ii) improving market conditions which have resulted in
shorter holding periods and a higher inventory turnover rate.
13
<PAGE>
UTILIZATION OF DEBT AND EQUITY IN FUNDING REAL ESTATE INVENTORIES
Sources of financing for the Company's real estates inventories were as
follows for the three years ended December 31, 1997:
<TABLE>
<CAPTION>
AT DECEMBER
31,
----------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Purchase money deeds of trust................................. 4% 1% 4%
Unsecured debt................................................ 44 42 40
Equity........................................................ 52 57 56
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
DISCONTINUED OPERATIONS
Disposition of Panel Concepts. In December 1997, the Company completed the
sale of Panel Concepts, Inc. ("Panel Concepts") to HON Industries, Inc., a
national furniture manufacturer, for a cash sales price of approximately $9.5
million, after distribution of certain non-operating assets to the Company
totaling approximately $9 million. Panel Concepts has been accounted for as a
discontinued operation and the results of its operations have been segregated
in the Company's consolidated financial statements included elsewhere in this
Form 10-K.
Disposition of Standard Pacific Savings. In May 1997, the Company's Board of
Directors adopted a plan of disposition for Savings. Pursuant to the plan, the
Company sold substantially all of Savings' mortgage loan portfolio in June
1997. The Company also entered into a definitive agreement to sell the
remainder of Savings' business, including Savings' charter. The definitive
agreement was subject to a number of conditions, including approval of the
transaction by the Office of Thrift Supervision ("OTS"). As a result of the
failure of the OTS to approve the transaction prior to the definitive
agreement's termination date, the definitive agreement terminated on January
31, 1998. The Company plans to continue pursuing a disposition strategy with
respect to Savings and, therefore, Savings has been accounted for as a
discontinued operation and the results of its operations have been segregated
in the Company's consolidated financial statements included elsewhere in this
Form 10-K. Savings has not offered mortgage financing to the Company's home
buyers since July 1994, and the sale of Savings is not expected to have any
impact on sales of the Company's homes. Management currently estimates that
both the disposition of Savings under the plan and the operating results of
Savings for the period through the disposition will not result in a
significant gain or loss to the Company.
RECENT DEVELOPMENTS
The Company has entered into a non-binding letter of intent to acquire The
Olson Company, a leading southern California urban in-fill homebuilder, for
proposed consideration consisting of the issuance of 942,723 shares of the
Company's common stock and the grant of options to acquire an additional
360,296 shares of the Company's common stock. The proposed acquisition offers
the Company the opportunity to develop a leading presence in a complementary
and growing homebuilding market segment. If completed, it is expected that the
acquisition would be accounted for as a pooling of interests. This transaction
is subject to customary conditions, including execution of a definitive
acquisition agreement and satisfactory completion of the Company's due
diligence examination. No assurances can be given that the transaction will be
consummated.
In August 1997, the Company formed Family Lending Services, which will
operate as a mortgage banking subsidiary of the Company, offering mortgage
financing to the Company's home buyers and others. Family Lending Services is
in the process of obtaining required regulatory approvals and mortgage
warehouse financing and is currently expected to begin offering mortgage
financing to home buyers in the second quarter of 1998. Accordingly, the
financial position and related results of operations of Family Lending
Services for the year ended December 31, 1997 have been reflected as
continuing operations in the accompanying consolidated balance sheets and
statements of operations.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of cash have been for operating expenses, land
acquisitions, construction expenditures, market expansion, principal and
interest payments on debt and dividends to shareholders. Cash requirements
were provided from internally generated funds and outside borrowings,
including a bank revolving credit facility and note offerings. Management
believes that these sources of cash are sufficient to finance its current
working capital requirements and other needs.
In August 1997, the Company and its bank group amended the Company's
unsecured revolving credit facility (the "Revolving Credit Facility") to,
among other things, increase the commitment to $275 million, increase the term
of the facility from three years to four years and reduce the cost of
borrowings and other fees. The facility has a current maturity date of
July 31, 2001. This agreement contains covenants, including certain financial
covenants. This agreement also contains provisions which may, in certain
circumstances, limit the amount the Company may borrow under the Revolving
Credit Facility. At December 31, 1997, the Company had borrowings of $19.0
million outstanding under this facility.
The Company made its first $20 million sinking fund payment on the 10 1/2%
Senior Notes on March 1, 1997. As of December 31, 1997, there was $78.8
million outstanding of the 10 1/2% Senior Notes. A second $20 million sinking
fund payment was made by the Company on March 1, 1998, reducing the balance
outstanding on such notes to $58.8 million.
To finance land purchases, the Company may utilize, among its other sources,
purchase money mortgage financing of which approximately $17.2 million was
outstanding for this purpose at December 31, 1997, an increase of $12.7
million from December 31, 1996.
Additionally, the Company has utilized joint venture structures over the
past few years whereby these joint ventures have obtained secured construction
financing. This type of structure minimizes the use of funds from the
Company's Revolving Credit Facility. The Company plans to continue using this
type of arrangement to finance the development of properties as opportunities
arise.
The Company paid approximately $4.1 million in dividends to its stockholders
for the year ended December 31, 1997. Payments of dividends on the Company's
common stock is within the discretion of the Company's Board of Directors and
is dependent upon various factors, including the earnings, cash flow, capital
requirements and operating and financial condition of the Company. Certain of
the Company's senior credit and debt agreements impose restrictions on the
amount of dividends the Company may pay. On January 27, 1998, the Board of
Directors declared a quarterly cash dividend of $.04 per share of common
stock. This dividend was paid on February 27, 1998 to shareholders of record
on February 13, 1998.
During the year ended December 31, 1997, the Company issued 292,100 shares
of common stock pursuant to the exercise of stock options for aggregate
proceeds of $1.7 million.
Pursuant to the previously announced stock repurchase program, the Company
repurchased 284,800 shares of its common stock for approximately $2.1 million
during 1997. Since inception of the program, the Company has repurchased an
aggregate of 1,285,750 shares of its common stock for approximately $8.3
million as of December 31, 1997, leaving a balance of approximately $11.7
million available to be repurchased.
In June 1997, the Company issued $100 million of 8 1/2% Senior Notes due in
2007 (the "8 1/2% Senior Notes"). The notes were issued at a discount to yield
approximately 8.6 percent. The 8 1/2% Senior Notes are subject to certain
restrictive financial covenants, which, among other things, impose certain
limitations on the ability of the Company to (i) incur additional
indebtedness, (ii) create liens, (iii) make restricted payments, as defined,
and (iv) sell assets. These notes are callable at the Company's option
commencing June 15, 2002 at a premium of 104.25 percent of par value, with the
call price reducing ratably to par on June 15, 2005. Net proceeds to the
Company after offering expenses were approximately $96.9 million. The Company
used the net proceeds to repay indebtedness outstanding under the Company's
Revolving Credit Facility.
15
<PAGE>
In February 1998, the Company issued $100 million of 8% Senior Notes due
February 15, 2008 (the "8% Senior Notes"). The 8% Senior Notes were issued at
a discount to yield approximately 8.1 percent. These notes are senior
unsecured obligations of the Company and rank pari passu with the Company's
other existing unsecured indebtedness. In addition, the 8% Senior Notes
contain restrictive covenants similar to those in the 8 1/2% Senior Notes
which, among other things, impose certain limitations on the ability of the
Company to (i) incur additional indebtedness, (ii) create liens, (iii) make
restricted payments, as defined, and (iv) sell assets. The 8% Senior Notes are
redeemable at the option of the Company, in whole or in part, commencing
February 15, 2003 at 104.00 percent of par, with the call price reducing
ratably to par on February 15, 2006. Net proceeds to the Company after
offering expenses were approximately $97.3 million. Approximately $54.3
million of the net proceeds were used to repay the indebtedness outstanding
under the Revolving Credit Facility on the date of closing (February 10,
1998), with the balance of the net proceeds used or to be used (i) to fund a
$20 million sinking fund payment due on March 1, 1998 on the Company's 10 1/2%
Senior Notes, (ii) to repay an approximately $11.2 million trust deed note
payable in March of 1998 and (iii) for general corporate purposes.
The Company has no material commitments or off balance sheet financing
arrangements that would tend to affect future liquidity.
YEAR 2000 COMPLIANCE
The Company has assessed the vulnerability of its computer systems to the
"Year 2000 issue" and the cost of addressing Year 2000 compliance.
Modifications and replacements of computer systems, primarily the replacement
of computer software, to attain Year 2000 compliance have begun, and the
Company expects to attain Year 2000 compliance and institute appropriate
testing of its modifications and replacements before the Year 2000 date
change. Presently, the Company does not believe that Year 2000 compliance will
result in material investments by the Company, nor does the Company anticipate
the Year 2000 issue will have material adverse effects on the business
operations or financial performance of the Company. There can be no assurance,
however, that the Year 2000 issue will not adversely affect the Company and
its business.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130 "Reporting Comprehensive Income" ("FAS 130") and Statement
No. 131 "Disclosures about Segments of an Enterprise and Related Information"
("FAS 131"). Both FAS 130 and 131 are required to be adopted by the Company
for the year ended December 31, 1998. The Company believes the adoption of
these statements will not have a material impact on its consolidated financial
statements.
16
<PAGE>
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
This Form 10-K contains "forward looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which represent the Company's
expectations or beliefs concerning future events, including, but not limited
to, the following: statements regarding the price range of future homes
constructed by the Company; statements regarding the inventory turn ratio and
carrying costs on newer projects; statements regarding the impact of the
proposed acquisition of The Olson Company; statements regarding the backlog of
homes; statements regarding the adequacy of the Company's inventory of
building sites; statements regarding the availability of building sites for
purchase from joint ventures; statements regarding the time typically required
to complete the construction phase of an increment of a project; statements
regarding the sufficiency of the Company's cash provided by internally
generated funds and outside borrowings; statements regarding future net new
orders; statements regarding the gain or loss to be recognized by the Company
from the planned disposition of Savings and the operating results of Savings
for the period through disposition; statements regarding the future operations
of Family Lending Services; statements regarding expected year 2000 compliance
and the anticipated impact of the year 2000 issue on the Company's business
operations and financial performance; statements regarding the intended use of
proceeds of the Company's offering of the 8% Senior Notes; and statements
regarding the expected impact of the adoption of accounting statements on the
Company's consolidated financial statements. The Company cautions that these
statements are further qualified by important factors that could cause actual
results to differ materially from those in the forward looking statements,
including, without limitation, the following: change in the demand for new
homes attributable to the cyclical and competitive nature of the homebuilding
business; changes in general economic conditions; uncertainty in or changes in
the continued availability of suitable undeveloped land at reasonable prices;
adverse local market conditions; existing and changing governmental
regulations, including regulations concerning environmental matters, the
permitting process for home construction, savings and loan institutions and
mortgage banking; increases in prevailing interest rates; the level of real
estate taxes and energy costs; the cost and availability of materials and
labor; the availability of construction financing and home mortgage financing
attractive to the purchasers of homes; and inclement weather and other natural
disasters. Results actually achieved thus may differ materially from expected
results included in these and any other forward looking statements contained
herein.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Standard Pacific Corp.:
We have audited the accompanying consolidated balance sheets of STANDARD
PACIFIC CORP. (a Delaware corporation) and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Standard Pacific Corp. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Orange County, California
January 23, 1998
18
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues................................... $ 584,571 $ 399,863 $ 346,263
Cost of sales.............................. 490,876 348,066 307,794
Noncash charge for impairment of long-lived
assets.................................... -- -- 46,491
---------- ---------- ----------
Gross margin............................. 93,695 51,797 (8,022)
---------- ---------- ----------
Selling, general and administrative ex-
penses.................................... 52,141 37,351 34,873
Income from unconsolidated joint ventures.. 3,787 4,708 6,953
Interest expense........................... 4,981 7,142 1,860
Amortization of excess of cost over net as-
sets acquired............................. 245 -- --
Other income............................... 931 936 555
---------- ---------- ----------
Income (loss) from continuing operations
before income taxes....................... 41,046 12,948 (37,247)
(Provision) benefit for income taxes....... (17,070) (5,197) 14,890
---------- ---------- ----------
Income (loss) from continuing operations... 23,976 7,751 (22,357)
Income (loss) from discontinued operations,
net of income taxes of $(1,034), $(408)
and $3,636, respectively.................. 48 642 (5,006)
Gain on disposal of discontinued operation,
net of income taxes of $(51), $0 and $0,
respectively.............................. 3,302 -- --
---------- ---------- ----------
Net Income (Loss).......................... $ 27,326 $ 8,393 $ (27,363)
========== ========== ==========
Basic Net Income (Loss) Per Share:
Income (loss) per share from continuing
operations.............................. $ 0.82 $ 0.26 $ (0.73)
Income (loss) per share from discontinued
operations, net of income taxes......... 0.00 0.02 (0.17)
Gain on disposal of discontinued
operation, net of income taxes.......... 0.11 -- --
---------- ---------- ----------
Net Income (Loss) Per Share.............. $ 0.93 $ 0.28 $ (0.90)
========== ========== ==========
Weighted average common shares
outstanding............................. 29,504,477 30,000,492 30,488,676
========== ========== ==========
Diluted Net Income (Loss) Per Share:
Income (loss) per share from continuing
operations.............................. $ 0.81 $ 0.26 $ (0.73)
Income (loss) per share from discontinued
operations, net of income taxes......... 0.00 0.02 (0.17)
Gain on disposal of discontinued
operation, net of income taxes.......... 0.11 -- --
---------- ---------- ----------
Net Income (Loss) Per Share.............. $ 0.92 $ 0.28 $ (0.90)
========== ========== ==========
Weighted average common and diluted
shares outstanding...................... 29,807,702 30,011,595 30,488,676
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
19
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Cash and equivalents..................................... $ 8,381 $ 5,252
Investment securities held to maturity................... -- 5,329
Mortgage notes receivable and accrued interest........... 12,095 3,741
Other notes and accounts receivable, net................. 11,686 8,648
Inventories:
Real estate in process of development and completed
model homes........................................... 448,951 363,718
Real estate held for sale.............................. 2,897 8,927
Property and equipment, net of accumulated depreciation
and amortization of $3,570 and $3,320, respectively..... 2,515 1,741
Investments in and advances to unconsolidated joint
ventures................................................ 26,217 885
Deferred income taxes.................................... 12,136 16,481
Other assets............................................. 7,455 6,325
Excess of cost over net assets acquired, net ............ 6,605 --
-------- --------
Total assets of continuing operations.................... 538,938 421,047
-------- --------
Net assets of discontinued operations.................... 8,727 28,067
-------- --------
Total Assets........................................... $547,665 $449,114
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses................. $ 49,582 $ 26,958
Unsecured notes payable............................... 19,000 57,300
Trust deed notes payable.............................. 17,174 4,467
10 1/2% senior notes due 2000......................... 78,800 100,000
8 1/2% senior notes due 2007, net..................... 99,331 --
-------- --------
Total Liabilities..................................... 263,887 188,725
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 10,000,000 shares
authorized; none issued.............................. -- --
Common stock, $.01 par value; 100,000,000 shares
authorized; 29,637,281 and 29,629,981 shares
outstanding at December 31, 1997 and 1996,
respectively......................................... 296 296
Paid-in capital....................................... 283,525 283,331
Accumulated deficit................................... (43) (23,238)
-------- --------
Total stockholders' equity............................ 283,778 260,389
-------- --------
Total Liabilities and Stockholders' Equity.......... $547,665 $449,114
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
20
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON RETAINED
NUMBER OF STOCK EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1996 COMMON PAR PAID-IN (ACCUMULATED
AND 1997 SHARES VALUE CAPITAL DEFICIT)
- ------------------------------------- ---------- ------ -------- ------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994........... 30,621,931 $306 $289,447 $ 2,990
Exercise of stock options and related
income tax benefit.................. 9,000 -- 64 --
Repurchase of common shares.......... (570,650) (5) (3,856) --
Cash dividends declared ($.12 per
share).............................. -- -- -- (3,657)
Net (loss)........................... -- -- -- (27,363)
---------- ---- -------- --------
BALANCE, DECEMBER 31, 1995........... 30,060,281 301 285,655 (28,030)
Repurchase of common shares.......... (430,300) (5) (2,324) --
Cash dividends declared ($.12 per
share).............................. -- -- -- (3,601)
Net income........................... -- -- -- 8,393
---------- ---- -------- --------
BALANCE, DECEMBER 31, 1996........... 29,629,981 296 283,331 (23,238)
Exercise of stock options and related
income tax benefit.................. 292,100 3 2,315 --
Repurchase of common shares.......... (284,800) (3) (2,121) --
Cash dividends declared ($.14 per
share) ............................. -- -- -- (4,131)
Net income........................... -- -- -- 27,326
---------- ---- -------- --------
BALANCE, DECEMBER 31, 1997........... 29,637,281 $296 $283,525 $ (43)
========== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
21
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................... $ 27,326 $ 8,393 $(27,363)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities of continuing operations:
Discontinued operations....................... (3,350) (642) 5,006
Noncash charge for impairment of long-lived
assets....................................... -- -- 46,491
Depreciation and amortization................. 586 555 231
Amortization of excess of cost over net assets
acquired..................................... 245 -- --
Changes in cash and equivalents due to:
Inventories................................. (615) (5,376) 52,459
Receivables and accrued interest............ (1,804) (992) 5,988
Investment in and advances to unconsolidated
joint ventures............................. (25,332) 3,576 (3,015)
Accounts payable and accrued expenses....... 21,083 2,797 (4,665)
Deferred income taxes....................... 4,345 1,124 (15,805)
Other, net.................................. 4,555 299 206
-------- -------- --------
Net cash provided by (used in) continuing
operations..................................... 27,039 9,734 59,533
Net cash provided by (used in) discontinued
operations..................................... 37,088 (22,785) 21,371
-------- -------- --------
Net cash provided by (used in) operating
activities..................................... 64,127 (13,051) 80,904
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid for acquisition................... (65,842) -- --
Net additions to property and equipment......... (1,264) (242) (183)
Sales (purchases) of investment securities...... 5,329 81 (1,539)
Proceeds from the sale of discontinued
operations..................................... 8,379 -- --
-------- -------- --------
Net cash provided by (used in) investing
activities..................................... (53,398) (161) (1,722)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) bank lines of
credit and term loans.......................... (38,300) 8,800 (37,750)
Net proceeds from the issuance of 8 1/2% senior
notes.......................................... 96,931 -- --
Principal payments on senior notes and trust
deed notes payable............................. (27,707) (11,021) (12,885)
Dividends....................................... (4,131) (3,601) (3,657)
Repurchase of common shares..................... (2,124) (2,329) (3,861)
Proceeds from exercise of stock options......... 1,705 -- 64
-------- -------- --------
Net cash provided by (used in) financing
activities..................................... 26,374 (8,151) (58,089)
-------- -------- --------
Net increase (decrease) in cash and equivalents. 37,103 (21,363) 21,093
Cash and equivalents at beginning of period..... 16,234 37,597 16,504
-------- -------- --------
Cash and equivalents at end of period........... $ 53,337 $ 16,234 $ 37,597
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
22
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
SUMMARY OF CASH BALANCES:
Continuing operations ................................. $ 8,381 $ 5,252 $ 290
Discontinued operations................................ 44,956 10,982 37,307
------- ------- -------
$53,337 $16,234 $37,597
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest--continuing operations.................... $17,026 $16,687 $19,200
Income taxes....................................... 15,500 1,477 530
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Land acquisitions financed by purchase money trust
deeds............................................... $19,214 $ 635 $ 9,444
Expenses capitalized in connection with the issuance
of the 8 1/2% senior notes due 2007................. 2,377 -- --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
23
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. COMPANY ORGANIZATION AND OPERATIONS
Standard Pacific Corp., a Delaware corporation (hereinafter referred to as
the "Company"), operates primarily as a geographical diversified builder of
single-family homes for use as primary residences with operations throughout
the major metropolitan markets in California and Texas. Approximately 79
percent of the Company's home deliveries (including the unconsolidated joint
ventures) were in California for the year ended December 31, 1997. There have
been periods of time in California where economic growth has slowed and the
average sales price of homes in certain areas in California in which the
Company does business have declined. There can be no assurance that home sales
prices will not decline in the future.
The Company's business is affected by national, world and local economic
conditions and events and the effect such conditions and events have on the
markets it serves in California and Texas and in particular by the level of
mortgage interest rates and consumer confidence in those regions. The Company
cannot predict whether interest rates will be at levels attractive to
prospective homebuyers. If interest rates increase, and in particular mortgage
interest rates, the Company's operating results could be adversely impacted.
In August 1997, the Company formed Family Lending Services, Inc. ("Family
Lending Services"), which will operate as a mortgage banking subsidiary of the
Company, offering mortgage financing to the Company's home buyers and others.
Certain assets were contributed from Standard Pacific Savings, F.A.
("Savings") to capitalize this entity. Family Lending Services is in the
process of obtaining required regulatory approvals and mortgage warehouse
financing and is currently expected to begin offering mortgage financing to
home buyers in the second quarter of 1998. Accordingly, the financial position
and related results of operations of Family Lending Services for the year
ended December 31, 1997 have been reflected as continuing operations in the
accompanying consolidated balance sheets and statements of operations.
The consolidated financial statements also include Standard Pacific Savings,
F.A., a federally chartered savings and loan institution, and Panel Concepts,
Inc., an office furniture manufacturing subsidiary, which have been treated as
discontinued operations (See Note 12).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Investments in unconsolidated joint
ventures in which the Company has less than a controlling interest are
accounted for using the equity method.
b. Use of Estimates in the Preparation of Financial Statements
The preparation of 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 contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
c. Cash and Equivalents
For purposes of the consolidated statements of cash flows, cash and
equivalents include cash on hand, demand deposits, and all highly liquid
short-term investments, including interest bearing securities purchased with a
remaining maturity of three months or less.
24
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
d. Real Estate Inventories
For real estate under development the Company capitalizes direct carrying
costs, including interest, property taxes and related development costs. Field
construction supervision and related direct overhead are also included in the
capitalized cost of real estate inventories. General and administrative costs
are expensed as incurred.
Effective December 31, 1995, the Company adopted the provisions of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to be Disposed Of" (FAS 121). FAS 121
requires long-lived assets, including real estate inventories, that are
expected to be held and used in operations to be carried at the lower of cost
or, if impaired, the fair value of the asset, rather than the net realizable
value. Long-lived assets to be disposed of should be reported at the lower of
carrying amount or fair value less cost to sell. In evaluating long-lived
assets held for use, an impairment loss is recognized if the sum of the
expected future cash flows (undiscounted and without interest charge) is less
than the carrying amount of the asset. Once a determination has been made that
an impairment loss should be recognized for real estate inventories expected
to be held and used, various assumptions and estimates are used to determine
fair value including, among others, estimated costs of construction,
development and marketing, sales absorption rates, anticipated sales prices
and carrying costs. The calculation of the impairment loss is based on
estimated future cash flows which are calculated to include an appropriate
return and interest. The estimates used to determine the impairment adjustment
could change in the near term as the economy in the Company's key markets
change.
The effect of the adoption of FAS 121, plus the effects of continued adverse
trends experienced during 1995 in certain of the geographic markets in which
the Company operates, on the values of certain of the Company's land holdings,
particularly in San Diego county, resulted in a pretax noncash charge of $46.5
million for the year ended December 31, 1995. These adverse developments
included, among other things, record high foreclosure rates, declines in
median home prices and continued anemic economic recovery.
e. Capitalization of Interest
The Company follows the practice of capitalizing interest on real estate
inventories during the period of development in accordance with Financial
Accounting Standards No. 34, "Capitalization of Interest Cost." Interest
capitalized as a cost of real estate under development is included in cost of
sales as related units are sold. The following is a summary of interest
capitalized and expensed from continuing operations for the following periods:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Total interest incurred during the period........... $17,026 $16,687 $19,200
Less: Interest capitalized as a cost of real estate
under development.................................. 12,045 9,545 17,340
------- ------- -------
Interest expense.................................... $ 4,981 $ 7,142 $ 1,860
======= ======= =======
Interest previously capitalized as a cost of real
estate under development, included in cost of
sales.............................................. $23,475 $16,920 $27,638(1)
======= ======= =======
Capitalized interest in ending inventories.......... $13,712 $25,142 $32,517
======= ======= =======
</TABLE>
- --------
(1) Excludes $11.6 million of interest included in the FAS 121 adjustment.
25
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
f. Property and Equipment
Property and equipment is recorded at cost. Depreciation and amortization is
recorded using the straight-line method over the estimated useful lives of the
assets.
g. Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
statement requires a liability approach for measuring deferred taxes based on
temporary differences between the financial statement and tax bases of assets
and liabilities existing at each balance sheet date using enacted tax rates
for years in which taxes are expected to be paid or recovered.
h. Excess of Cost Over Net Assets Acquired
The excess amount paid for a business acquisition over the net fair value of
assets acquired and liabilities assumed has been capitalized in the
accompanying consolidated balance sheets and is being amortized on a straight-
line basis over seven years. Amortization expense for the year ended December
31, 1997 was $245,000. (See Note 4)
i. Revenue Recognition
Revenues of residential housing are recorded after construction is
completed, required down payments are received and title passes.
j. Warranty Costs
Estimated future warranty costs are charged to cost of sales in the period
when the revenues from home closings are recognized.
k. Net Income Per Share
Effective December 31, 1997 the Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings per Share" (FAS 128). This statement
requires the presentation of both basic and diluted net income per share for
financial statement purposes. Basic net income per share is computed by
dividing income available to common stockholders by the weighted average
number of common shares outstanding. Diluted net income per share includes the
effect of the potential shares outstanding, including dilutive stock options
using the treasury stock method. The table below reconciles the components of
the basic net income per share calculation to diluted net income per share.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1997 1996 1995
------------------------ ----------------------- ---------------------------
INCOME SHARES EPS INCOME SHARES EPS INCOME SHARES EPS
------- ---------- ----- ------ ---------- ----- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Net Income (Loss)
Per Share:
Income (loss) available
to common stockholders
before discontinued
operations............ $23,976 29,504,477 $0.82 $7,751 30,000,492 $0.26 $(22,357) 30,488,676 $(0.73)
Effect of Dilutive
Securities:
Stock options.......... -- 303,225 -- 11,103 -- --
------- ---------- ------ ---------- -------- ----------
Diluted Net Income
(Loss) Per Share: $23,976 29,807,702 $0.81 $7,751 30,011,595 $0.26 $(22,357) 30,488,676 $(0.73)
======= ========== ===== ====== ========== ===== ======== ========== ======
</TABLE>
26
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
In January 1998, the Company granted an additional 400,000 stock options
which were not considered in the calculation above for 1997, however, the
effect of these stock options would not have had an impact on the above
calculation as they were antidilutive for purposes of computing diluted net
income per share.
l. Stock-Based Compensation
The Company accounts for its stock-based compensation plan using the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25).
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). Under the provisions of FAS 123, companies can elect
to account for stock-based compensation plans using a fair-value-based method
or continue measuring compensation expense for those plans using the intrinsic
value method prescribed in APB 25. FAS 123 requires that companies electing to
continue using the intrinsic value method must make pro forma disclosures of
net income and earnings per share as if the fair-value-based method of
accounting had been applied.
Effective December 31, 1996, the Company adopted FAS 123 for financial
statement disclosure purposes only and accordingly, the adoption had no impact
on the Company's results of operations or financial position for the year then
ended.
m. Reclassifications
Effective January 1, 1997, the Company changed its presentation of selling
costs in its consolidated statements of operations whereby selling costs are
now combined with general and administrative expenses. This presentation is
consistent with industry practice. Previously, the Company included these
costs as a component of cost of sales. The Company reclassified the prior
period amounts to conform with the 1997 presentation.
Additionally, certain other items in prior period financial statements have
been reclassified to conform with current year presentation.
3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
Summarized financial information related to the Company's joint ventures
accounted for under the equity method are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1997 1996
------- -------
<S> <C> <C>
Assets:
Cash...................................................... $ 5,545 $ 545
Real estate in process of development and completed model
homes.................................................... 74,835 9,809
Other assets.............................................. 1,319 3,355
------- -------
$81,699 $13,709
======= =======
Liabilities and Equity:
Accounts payable and accrued expenses..................... $ 5,248 $ 3,409
Construction loans payable................................ 17,442 7,153
Equity.................................................... 59,009 3,147
------- -------
$81,699 $13,709
======= =======
</TABLE>
27
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Company's share of equity shown above is approximately $23.5 million and
$943,000 at December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Revenues............................................. $24,427 $32,168 $46,166
Cost of revenues..................................... 17,591 23,817 32,881
------- ------- -------
Net earnings of joint ventures....................... $ 6,836 $ 8,351 $13,285
======= ======= =======
</TABLE>
The Company's share of earnings in the joint ventures detailed above varies,
but in no case is its share of earnings greater than 50 percent. Additionally,
the Company's ownership interests in the joint ventures varies, but in no case
does it exceed 50 percent.
In addition, the sole purpose of two of the joint ventures which the Company
is party to is to develop finished lots whereby the Company will purchase the
lots from the joint venture to construct homes thereon. The Company does not
anticipate recording any income or loss from these two joint ventures.
4. ACQUISITION
On September 30, 1997, the Company acquired all of the outstanding common
stock of Duc Development Company ("Duc"), a privately held northern California
homebuilding company, for cash consideration of approximately $16 million of
which approximately $5 million is contingent consideration which is to be paid
upon the Company obtaining entitlement approvals on a certain parcel of land.
Upon such payment, the amount will be recorded as real estate inventory. In
connection with this acquisition, the Company acquired certain other real
estate assets related to Duc's operations for approximately $55 million in
cash and the assumption of approximately $8 million of debt.
The acquisition has been accounted for as a purchase, and accordingly, the
purchase price has been allocated to the net assets acquired based upon their
estimated fair market values as of the date of acquisition. The excess of the
purchase price over the estimated fair value of net assets acquired totaled
approximately $6.85 million, which has been recorded as excess of cost over
net assets acquired in the accompanying consolidated balance sheets and is
being amortized on a straight-line basis over seven years. In addition,
operations for Duc are included in the accompanying statement of operations
commencing October 1, 1997.
The pro forma effect of including Duc's operations in the Company's
consolidated operating results since January 1, 1997 is not presented, as the
impact is not material.
5. UNSECURED NOTES PAYABLE AND TRUST DEED NOTES PAYABLE
a. Unsecured Notes Payable to Banks
In August 1997, the Company and its bank group amended the unsecured
Revolving Credit Facility (the "Facility") to, among other things, increase
the commitment to $275 million, increase the term of the Facility from three
years to four years and reduce the cost of borrowings and other fees. The
Facility has a current maturity date of July 31, 2001. The Facility contains
covenants which require, among other things, the maintenance of certain
amounts of tangible stockholders' equity, the maintenance of debt-to-equity
ratios, and minimum interest coverage ratio provisions, as defined. The
Facility also contains provisions which may, in certain circumstances, limit
the amount the Company may borrow under the credit facility. At December 31,
1997, the Company had borrowings of $19.0 million outstanding under this
Facility. Interest rates charged under this Facility primarily include
Eurodollar and prime rate pricing options. In addition to fees charged on the
28
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
commitment and unused portion of the Facility, this Facility also requires the
Company to maintain a compensating balance, as defined.
As of December 31, 1997, and throughout the year, the Company was in
compliance with the covenants of the Revolving Credit Facility.
b. Trust Deed Notes Payable
At December 31, 1997 and 1996, trust deed notes payable primarily consist of
trust deeds on land purchases. At December 31, 1997, the weighted average
interest rate on these trust deeds was approximately 8.0 percent.
c. Borrowings and Maturities
The following summarizes the borrowings during the three years ended
December 31, 1997 for the unsecured notes payable and trust deed notes
payable:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Maximum borrowings outstanding during year at
month end...................................... $98,295 $91,299 $101,947
Average outstanding balance during the year..... $45,395 $78,552 $ 86,377
Weighted average interest rate for the year..... 7.3% 6.8% 7.5%
Weighted average interest rate on borrowings
outstanding at year end........................ 7.9% 7.1% 6.8%
</TABLE>
Maturities of the trust deed notes payable and the 8 1/2% and 10 1/2% Senior
Notes (see Note 6 below) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
<S> <C>
1998............................................................. $ 34,836
1999............................................................. 22,338
2000............................................................. 38,800
2001............................................................. --
2002............................................................. --
Thereafter....................................................... 99,331
--------
$195,305
========
</TABLE>
6. SENIOR NOTES
In 1993, the Company issued $100 million principal amount of its 10 1/2%
Senior Notes due March 1, 2000 (the "10 1/2% Senior Notes"). Interest is due
and payable on March 1 and September 1 of each year. The 10 1/2% Senior Notes
are not redeemable at the option of the Company prior to maturity. The Company
is required to make annual mandatory sinking fund payments sufficient to
retire 20 percent of the original aggregate principal amount of the Notes ($20
million per year) commencing on March 1, 1997, at a redemption price of 100
percent of the principal amount, with the balance of the notes ($38.8 million)
retired on March 1, 2000. The Company made its first $20 million sinking fund
payment on the 10 1/2% Senior Notes on March 1, 1997.
In June 1997, the Company issued $100 million of 8 1/2% Senior Notes due
June 15, 2007 (the "8 1/2% Senior Notes"). The 8 1/2% Senior Notes were issued
at a discount to yield approximately 8.6 percent and have been reflected net
of the unamortized discount in the accompanying consolidated balance sheets.
Interest is due and payable on June 15 and December 15 of each year until
maturity. These notes are redeemable at the option of the Company, in whole or
in part, commencing June 15, 2002 at a price of 104.25 percent of par value,
with the call price reducing ratably to par on June 15, 2005. Net proceeds to
the Company after offering expenses were approximately $96.9 million.
29
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Both the 10 1/2% and 8 1/2% Senior Notes (the "Notes") are senior unsecured
obligations of the Company and rank pari passu with the Company's other
existing senior unsecured indebtedness. The Company will, under certain
circumstances, be obligated to make an offer to purchase a portion of both the
10 1/2% and 8 1/2% Senior Notes in the event of the Company's failure to
maintain a minimum consolidated net worth, as defined, and under certain other
circumstances. In addition, the Notes contain other restrictive covenants
which, among other things, impose certain limitations on the ability of the
Company to (i) incur additional indebtedness, (ii) create liens, (iii) make
restricted payments, as defined, and (iv) sell assets. As of December 31,
1997, the Company was in compliance with the covenants of both the 10 1/2% and
8 1/2% Senior Notes.
7. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate:
Cash and Equivalents--The carrying amount is a reasonable estimate of
fair value. These assets primarily consist of short term investments and
demand deposits.
Investment Securities Held to Maturity--These investments for 1996
consist primarily of U.S. government and corporate debt securities which
are publicly traded. The fair value of these issues is based on their
quoted market prices at year end.
Revolving Credit Facility--The carrying amounts of the revolving credit
obligations approximate market value because of the frequency of repricing
the borrowings (usually 7 to 90 day maturities).
Trust Deed Notes Payable--These notes are primarily for purchase money
deeds of trust on land acquired. These notes have maturities ranging from 3
months to three years. The rates of interest paid on these notes
approximate the current rates available for secured real estate financing
with similar terms and maturities, therefore, carrying amounts approximate
fair value.
10 1/2% Senior Notes due 2000--This issue is publicly traded on the New
York Stock Exchange. Consequently, the fair value of this issue is based on
its quoted market price at year end.
8 1/2% Senior Notes due 2007--This issue is also publicly traded on the
New York Stock Exchange. As a result, the fair value of this issue is based
on its quoted market price at year end.
The estimated fair values of the Company's financial instruments from
continuing operations are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------
1997 1996
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and equivalents.................. $ 8,381 $ 8,381 $ 5,252 $ 5,252
Investment securities held to
maturity............................. -- -- 5,329 5,379
Financial Liabilities:
Revolving credit facility............. $19,000 $ 19,000 $ 57,300 $ 57,300
Trust deed notes payable.............. 17,174 17,174 4,467 4,467
10 1/2% senior notes due 2000......... 78,800 82,669 100,000 103,375
8 1/2% senior notes due 2007.......... 99,331 102,990 -- --
</TABLE>
30
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities under noncancelable operating leases.
Generally, the Company is required to pay taxes and insurance and maintain the
assets under such operating leases. Future minimum rental payments on
operating leases having an initial term in excess of one year as of December
31, 1997, including Savings, are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 990
1999.............................................................. 950
2000.............................................................. 954
2001.............................................................. 859
2002.............................................................. 344
Thereafter........................................................ 210
------
Subtotal........................................................ 4,307
Less--Sublease income............................................. (323)
------
Net rental obligations.......................................... $3,984
======
</TABLE>
Rent expense, net of sublease income, under noncancelable operating leases
for the three years ended December 31, 1997 was approximately $1.3 million,
$1.4 million and $1.4 million, respectively.
The Company and certain of its subsidiaries are parties to claims and
litigation proceedings arising in the normal course of business. Although the
legal responsibility and financial impact with respect to certain claims and
litigation cannot presently be ascertained, the Company does not believe that
these matters will result in the payment by the Company of monetary damages,
net of any applicable insurance proceeds, that, in the aggregate, would be
material in relation to the consolidated financial position of the Company. It
is reasonably possible that the reserves provided for by the Company with
respect to such claims and litigation could change in the near term.
9. INCOME TAXES
The Company's provision (benefit) for income taxes from continuing
operations includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------ --------
<S> <C> <C> <C>
Current:
Federal.......................................... $12,909 $ 766 $ 3,301
State............................................ 3,471 209 991
------- ------ --------
16,380 975 4,292
------- ------ --------
Deferred:
Federal.......................................... 535 3,254 (14,731)
State............................................ 155 968 (4,451)
------- ------ --------
690 4,222 (19,182)
------- ------ --------
Total Provision (Benefit).......................... $17,070 $5,197 $(14,890)
======= ====== ========
</TABLE>
31
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The components of the Company's deferred income tax asset (liability) from
continuing operations as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Inventory adjustments...................................... $10,610 $12,093
Financial accruals......................................... 5,885 4,144
Nondeductible purchase price............................... (4,613) --
Other...................................................... 254 244
------- -------
$12,136 $16,481
======= =======
</TABLE>
At December 31, 1997, the Company has a consolidated net deferred tax asset
of approximately $12.1 million reflecting the balance of the benefit created
primarily as a result of the $46.5 million noncash charge taken during 1995
related to the impairment of long-lived assets. A significant portion of this
asset's realization is dependent upon the Company's ability to generate
sufficient taxable income in future years. Although realization is not
assured, management believes it is more likely than not that the net deferred
tax asset will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income are reduced or if tax rates are lowered.
The effective tax rate differs from the Federal statutory rate of 35 percent
for 1997 and 34 percent for 1996 and 1995 due to the following items:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Financial income (loss) from continuing
operations before income taxes............... $41,046 $12,948 $(37,247)
======= ======= ========
Provision (benefit) for income taxes at
statutory rate............................... $14,366 $ 4,402 $(12,664)
Increases (decreases) in tax resulting from:
State income taxes, net..................... 2,481 796 (2,286)
Other....................................... 223 (1) 60
------- ------- --------
Provision (benefit) for income taxes.......... $17,070 $ 5,197 $(14,890)
======= ======= ========
Effective tax (benefit) rate.................. 41.6% 40.1% (40.0)%
======= ======= ========
</TABLE>
10. STOCK OPTION PLAN
In 1991, the Company adopted the 1991 Employee Stock Incentive Plan (the
"Plan") pursuant to which officers, directors and employees of the Company are
eligible to receive options to purchase common stock of the Company. Under the
Plan the maximum number of shares of Company stock that may be issued pursuant
to awards granted is one million. On May 13, 1997, the shareholders of the
Company approved the 1997 Stock Incentive Plan (the "1997 Plan"). Under the
1997 Plan, the maximum number of shares of Company stock that may be issued is
two million.
Options are typically granted to purchase shares at prices equal to the fair
market value of the shares at the date of grant. The options typically vest
over a one to five year period and are generally exercisable at various dates
over one to 10 year periods. When the options are exercised, the proceeds are
credited to equity along with the related income tax benefits, if any.
32
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following is a summary of the transactions relating to the two
respective Plans for the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------ -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Options, beginning of
year................... 928,590 $ 6.30 721,590 $9.73 771,990 $9.80
Granted................. 343,000 10.70 365,000 6.35 20,000 5.75
Exercised............... (292,100) 5.81 -- -- (9,000) 6.88
Canceled................ (20,500) 7.83 (158,000) 9.48 (61,400) 9.76
--------- ------ -------- ----- ------- -----
Outstanding, end of
year................... 958,990 $ 7.99 928,590 $6.30 721,590 $9.73
========= ====== ======== ===== ======= =====
Options exercisable at
end of year............ 360,990 588,590 671,590
========= ======== =======
Options available for
future grant........... 1,685,275 7,775 214,775
========= ======== =======
</TABLE>
In January 1998, the Company granted an additional 400,000 stock options
pursuant to the 1997 Plan.
During the fourth quarter of 1996 the Company repriced 326,100 options which
were previously granted to nonexecutive employees. The new price represents
the fair market value of the shares at the date of repricing. Additionally,
the weighted average exercise price for all options outstanding as of December
31, 1996 reflects the repriced options at their new exercise price.
The following information is provided pursuant to the requirements of FAS
123.
The fair value of each option granted during the three years in the period
ended December 31, 1997 is estimated using the Black--Scholes option-pricing
model on the date of grant using the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Dividend yield.................................... 1.31% 2.0% 2.1%
Expected volatility............................... 43.80% 46.30% 53.46%
Risk-free interest rate........................... 6.17% 6.12% 6.70%
Expected life..................................... 5 years 5 years 5 years
</TABLE>
The 958,990 options outstanding as of December 31, 1997 have exercise prices
between $5.38 and $13.75, with a weighted average exercise price of $7.99 and
a weighted average remaining contractual life of 7.72 years. As of December
31, 1997, 360,990 of these options are exercisable with a weighted average
exercise price of $6.47. The weighted average fair value of options granted
during the years ended December 31, 1997, 1996 and 1995 was $6.55, $2.75 and
$2.66, respectively.
33
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
During the years ended December 31, 1997, 1996 and 1995, no compensation
expense was recognized related to the stock options granted, however, had
compensation cost been determined consistent with FAS 123 for the Company's
1997, 1996 and 1995 grants for its stock-based compensation plan, the
Company's net income (loss), and diluted net income (loss) per share for the
years ended December 31, 1997, 1996 and 1995 would approximate the pro forma
amounts below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss)....... $27,326 $27,100 $8,393 $7,619 $(27,363) $(27,394)
Diluted net income
(loss) per common
share.................. $ .92 $ .91 $ .28 $ .25 $ (.90) $ (.90)
</TABLE>
The effects of applying FAS 123 in this pro forma disclosure are not
indicative of future amounts.
11. STOCKHOLDER RIGHTS PLAN AND COMMON STOCK REPURCHASE PLAN
The Company has a stockholder rights agreement (the "Agreement") in place.
Under the Agreement, one right will be granted for each share of the Company's
outstanding common stock. Each right entitles the holder, in certain takeover
situations, as defined, and after paying the exercise price (currently $40),
to purchase Company common stock having a market value equal to two times the
exercise price. Also, if the Company is merged into another corporation, or if
50 percent or more of the Company's assets are sold, the rightholders may be
entitled, upon payment of the exercise price, to buy common shares of the
acquiring corporation at a 50 percent discount from the then current market
value. In either situation, these rights are not available to the acquiring
party. However, these exercise features will not be activated if the acquiring
party makes an offer to acquire all of the Company's outstanding shares at a
price which is judged by the Board of Directors to be fair to all Company
stockholders. The rights may be redeemed by the Company under certain
circumstances at the rate of $.01 per right. The rights will expire on
December 31, 2001, unless earlier redeemed or exchanged.
In July 1995, the Board of Directors of the Company authorized the
repurchase of up to $10 million of the Company's common stock. In January
1997, the Board increased the repurchase limit to $20 million. For the year
ended December 31, 1997, the Company repurchased 284,800 shares of its common
stock for an aggregate price of $2.1 million. Since July 1995, the Company has
repurchased an aggregate of 1,285,750 shares of its common stock for
approximately $8.3 million through the year ended December 31, 1997.
12. DISCONTINUED OPERATIONS
In May 1997, the Company's Board of Directors adopted a plan of disposition
(the "Plan") for the Company's savings and loan subsidiary. Pursuant to the
Plan, the Company sold substantially all of Savings' mortgage loan portfolio
in June 1997. The proceeds from the sale of the mortgages were used to pay off
substantially all of the outstanding balances of Federal Home Loan Bank
advances with the remaining amount temporarily invested until the savings
deposits are sold along with Savings' remaining assets. In June 1997, the
Company also entered into a definitive agreement to sell the remainder of
Savings' business, including Savings' charter. The definitive agreement was
subject to a number of conditions, including, approval of the transaction by
the Office of Thrift Supervision ("OTS"). As a result of the failure of the
OTS to approve the transaction prior to the definitive agreement's termination
date, the definitive agreement terminated on January 31, 1998. The Company
plans to continue pursuing a disposition strategy with respect to Savings and,
therefore, Savings has been accounted for as a discontinued operation and the
results of its operations have been segregated in the accompanying
consolidated financial statements. Management currently estimates that both
the disposition of
34
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Savings under the Plan and the operating results of Savings for the period
through the disposition will not result in a significant gain or loss to the
Company.
In November 1997, the Company entered into a definitive agreement to sell
all of the outstanding stock of Panel Concepts, Inc. ("Panel") to a third
party which closed December 1, 1997. A net gain of approximately $3.3 million
has been reflected in the accompanying consolidated results of operations.
Proceeds from the sale of Panel were approximately $9.5 million before
transaction and other related costs. In addition, certain non-operating assets
of Panel totaling approximately $9 million were distributed to the Company
prior to the closing.
Panel has also been accounted for as a discontinued operation and,
accordingly, the results of its operations have been segregated in the
accompanying consolidated statements of operations. Additionally, the assets
and liabilities of both Savings and Panel have been classified in the
accompanying consolidated balance sheets as "Net assets of discontinued
operations."
Interest income and product sales from these discontinued operations
aggregated $31,784,000, $39,383,000, and $40,982,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
The components of net assets of discontinued operations included in the
consolidated balance sheets at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------
1997 1996
------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Cash and equivalents...................................... $44,956 $ 10,982
Accounts receivable, net.................................. -- 2,425
Investment securities available for sale.................. 22,559 42,440
Mortgage notes receivable and accrued interest, net....... 317 199,135
Manufacturing inventories................................. -- 1,432
Property and equipment, net of accumulated depreciation
and amortization of $598 and $4,189, respectively........ 98 4,527
Real estate acquired in settlement of loans, net.......... -- 2,079
Deferred income taxes..................................... 1,273 1,581
Investment in FHLB stock.................................. 8,465 7,958
Other assets.............................................. 108 1,813
------- --------
Total assets--discontinued operations................... $77,776 $274,372
------- --------
LIABILITIES
Savings accounts.......................................... $50,230 $132,813
FHLB advances............................................. 18,000 109,000
Accounts payable and accrued expenses..................... 819 4,492
------- --------
Total liabilities--discontinued operations.............. 69,049 246,305
------- --------
Net assets of discontinued operations..................... $ 8,727 $ 28,067
======= ========
</TABLE>
35
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. RESULTS OF QUARTERLY OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1997:
Revenues..................... $111,303 $140,578 $177,150 $155,541 $584,571
Income from continuing
operations before taxes..... 5,146 7,955 11,660 16,285 41,046
Income (loss) from
discontinued operations, net
of income taxes............. 484 (24) 367 (779) 48
Gain on disposal of
discontinued operation, net
of income taxes............. -- -- -- 3,302 3,302
Net income................... $ 3,517 $ 4,667 $ 7,241 $ 11,901 $ 27,326
======== ======== ======== ======== ========
Diluted Net Income Per Share:
Income per share from
continuing operations....... $ 0.10 $ 0.16 $ 0.23 $ 0.32 $ 0.81
Income (loss) per share from
discontinued operations, net
of income taxes............. 0.02 0.00 0.01 (0.03) 0.00
Gain per share on disposal of
discontinued operation, net
of income taxes............. -- -- -- 0.11 0.11
-------- -------- -------- -------- --------
Net income per share......... $ 0.12 $ 0.16 $ 0.24 $ 0.40 $ 0.92
======== ======== ======== ======== ========
1996:
Revenues..................... $ 61,584 $101,727 $105,417 $131,135 $399,863
Income from continuing
operations before taxes..... 715 2,902 4,158 5,173 12,948
Income (loss) from
discontinued operations, net
of income taxes............. 144 478 (472) 492 642
Net income................... $ 573 $ 2,211 $ 2,025 $ 3,584 $ 8,393
======== ======== ======== ======== ========
Diluted Net Income Per Share:
Income per share from
continuing operations....... $ 0.02 $ 0.06 $ 0.08 $ 0.10 $ 0.26
Income (loss) per share from
discontinued operations, net
of income taxes............. -- 0.01 (0.01) 0.02 0.02
-------- -------- -------- -------- --------
Net income per share......... $ 0.02 $ 0.07 $ 0.07 $ 0.12 $ 0.28
======== ======== ======== ======== ========
</TABLE>
- --------
(1) Some amounts do not add across due to rounding differences in quarterly
amounts.
14. SUBSEQUENT EVENT (UNAUDITED)
In February 1998, the Company issued $100 million of 8% Senior Notes due
February 15, 2008 (the "8% Senior Notes"). The 8% Senior Notes were issued at
a discount to yield approximately 8.1 percent. Interest is due and payable on
February 15 and August 15 of each year until maturity. These notes are
redeemable at the option of the Company, in whole or in part, commencing
February 15, 2003 at 104.00 percent of par, with the call price reducing
ratably to par on February 15, 2006. Net proceeds to the Company after
offering expenses were approximately $97.3 million. Approximately $54.3
million of the net proceeds was used to repay the indebtedness outstanding
under the Revolving Credit Facility on the date of closing (February 10,
1998), with the balance of the net proceeds to be used (i) to fund a $20
million sinking fund payment due on March 1, 1998 on the Company's 10 1/2%
Senior Notes, (ii) to repay an approximately $11.2 million trust deed note
payable due in March of 1998 and (iii) for general corporate purposes.
36
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The 8% Senior Notes are senior unsecured obligations of the Company and rank
pari passu with the Company's other existing senior unsecured indebtedness.
The Company will, under certain circumstances, be obligated to make an offer
to purchase a portion of the 8% Senior Notes in the event of the Company's
failure to maintain a minimum consolidated net worth, as defined, and under
certain other circumstances. In addition, the 8% Senior Notes contain other
restrictive covenants which, among other things, impose certain limitations on
the ability of the Company to (i) incur additional indebtedness, (ii) create
liens, (iii) make restricted payments, as defined, and (iv) sell assets.
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain of the information required by this Item with respect to executive
officers is set forth under the caption "Executive Officers of the Company" in
Part I. The remaining information required by Items 401 and 405 of Regulation
S-K is set forth in the Company's 1998 Annual Meeting Proxy Statement which
will be filed with the Securities and Exchange Commission not later than
120 days after December 31, 1997. The Company's 1998 Annual Meeting Proxy
Statement, exclusive of the information set forth under the captions "Report
of the Compensation Committee" and "Company Performance," is incorporated
herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K is set forth in the
Company's 1998 Annual Meeting Proxy Statement which will be filed with the
Securities and Exchange Commission not later than 120 days after December 31,
1997. The Company's 1998 Annual Meeting Proxy Statement, exclusive of the
information set forth under the captions "Report of the Compensation
Committee" and "Company Performance," is incorporated herein by this
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 403 of Regulation S-K is set forth in the
Company's 1998 Annual Meeting Proxy Statement which will be filed with the
Securities and Exchange Commission not later than 120 days after December 31,
1997. The Company's 1998 Annual Meeting Proxy Statement, exclusive of the
information set forth under the captions "Report of the Compensation
Committee" and "Company Performance," is incorporated herein by this
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
38
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
REFERENCE
---------
<S> <C>
(a) (1) Financial Statements, included in Part II of this report:
Report of Independent Public Accountants......................... 18
Consolidated Statements of Operations for each of the three years
in the period ended
December 31, 1997............................................... 19
Consolidated Balance Sheets at December 31, 1997 and 1996........ 20
Consolidated Statements of Stockholders' Equity for each of the
three years in the period ended December 31, 1997............... 21
Consolidated Statements of Cash Flows for each of the three years
in the period ended
December 31, 1997............................................... 22
Notes to Consolidated Financial Statements....................... 24
(2) Financial Statement Schedules:
Financial Statement Schedules are omitted since the required in-
formation is not present or is not present in the amounts suffi-
cient to require submission of the schedule, or because the in-
formation required is included in the consolidated financial
statements, including the notes thereto.
(3) Index to Exhibits
See item (a) (3) below.
</TABLE>
(b)Reports on Form 8-K. No Current Reports on Form 8-K were filed during the
last quarter of the period covered by this Annual Report on Form 10-K.
(c)INDEX TO EXHIBITS. See Item 14(a)(3) below.
(d)Financial Statements required by Regulation S-X excluded from the annual
report to shareholders by Rule 14(a)-3(b)(1). Not applicable.
39
<PAGE>
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, IN THE CITY OF
COSTA MESA, CALIFORNIA, ON THE 10TH DAY OF MARCH 1998.
STANDARD PACIFIC CORP.
(Registrant)
By: /s/ Arthur E. Svendsen
__________________________________
Arthur E. Svendsen
Chairman of the Board and
Chief Executive 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 IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Arthur E. Svendsen Chairman of the Board, Chief March 10, 1998
____________________________________ Executive Officer and
(Arthur E. Svendsen) Director
/s/ Stephen J. Scarborough President and Director March 10, 1998
____________________________________
(Stephen J. Scarborough)
/s/ Andrew H. Parnes Vice President of Finance March 10, 1998
____________________________________ and Treasurer and Principal
(Andrew H. Parnes) Financial and Accounting
Officer
/s/ Robert J. St. Lawrence Director March 10, 1998
____________________________________
(Robert J. St. Lawrence)
/s/ William H. Langenberg Director March 10, 1998
____________________________________
(William H. Langenberg)
/s/ James L. Doti Director March 10, 1998
____________________________________
(James L. Doti)
/s/ Keith D. Koeller Director March 10, 1998
____________________________________
(Keith D. Koeller)
/s/ Donald H. Spengler Director March 10, 1998
____________________________________
(Donald H. Spengler)
/s/ Ronald R. Foell Director March 10, 1998
____________________________________
(Ronald R. Foell)
</TABLE>
40
<PAGE>
INDEX TO EXHIBITS
(a)(3)
*3.1 Certificate of Incorporation of the Registrant incorporated by
reference to Exhibit 3.1 of the Registrant's Registration Statement on
Form S-4 (file no. 33-42293).
*3.2 Certificate of Correction of Certificate of Incorporation of the
Registrant incorporated by reference to Exhibit 3.2 of the
Registrant's Registration Statement on Form 8-B filed with the
Securities and Exchange Commission on December 17, 1991.
*3.3 Form of Certificate of Amendment to Certificate of Incorporation of
the Registrant incorporated by reference to Exhibit 3.3 of the
Registrant's Registration Statement on Form 8-B filed with the
Securities and Exchange Commission on December 17, 1991.
*3.4 Form of Certificate of Merger of the Registrant incorporated by
reference to Exhibit 3.4 of the Registrant's Registration Statement on
Form 8-B filed with the Securities and Exchange Commission on December
17, 1991.
*3.5 Bylaws of the Registrant incorporated by reference to Exhibit 3.2 of
the Registrant's Registration Statement on Form S-4 (file no. 33-
42293).
*4.1 Rights Agreement, dated as of December 31, 1991, between the
Registrant and Manufacturers Hanover Trust Company of California, as
Rights Agent, incorporated by reference to Exhibit 4.1 of the
Registration Statement on Form S-4 (file no. 33-42293).
*4.2 Standard Pacific Corp. Officers' Certificate dated March 5, 1993 with
respect to the Company's 10 1/2% Senior Notes due 2000, incorporated
by reference to Exhibit 4 of the Company's Current Report on Form 8-K
dated March 5, 1993.
*4.3 Standard Pacific Corp. Officers' Certificate dated June 17, 1997 with
respect to the Registrant's 8 1/2% Senior Notes due 2007, incorporated
by reference to Exhibit 4.1 of the Registrant's Current Report on Form
8-K dated June 17, 1997.
4.4 Standard Pacific Corp. Officers' Certificate dated February 5, 1998
with respect to the Registrant's 8% Senior Notes due 2008.
4.5 Registration Rights Agreement dated as of February 5, 1998 between the
Registrant and SBC Warburg Dillon Read Inc., BancAmerica Robertson
Stephens and Donaldson Lufkin & Jenrette Securities Corporation.
*4.6 Indenture dated as of April 1, 1992 by and between the Company and
United States Trust Company of New York, Trustee, incorporated by
reference to Exhibit 4 to the Company's Current Report on Form 8-K
dated February 24, 1993.
*10.1 Acquisition Agreement dated March 6, 1987 between the Federal Savings
and Loan Insurance Corporation and Standard Pacific Savings, F.A.
incorporated by reference to Exhibit C of the Company's Current Report
on Form 8-K dated March 6, 1987.
*10.2 Sixth Amended and Restated Revolving Credit Agreement dated as of
August 8, 1997, among the Company, Bank of America National Trust and
Savings Association, The First National Bank of Chicago, Credit
Lyonnais Los Angeles Branch, Fleet National Bank, Sanwa Bank
California, Comerica Bank and PNC Bank, National Association,
incorporated by reference to Exhibit 10.8 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
*10.3 Standard Pacific Corp. 1991 Employee Stock Incentive Plan,
incorporated by reference to Annex B of the Company's prospectus
dated October 11, 1991, filed with the Securities and Exchange
Commission pursuant to Rule 424(b).
*10.4 Form of Stock Option Agreement to be used in connection with the
Standard Pacific Corp. 1991 Employee Stock Incentive Plan,
incorporated by reference to Exhibit 28.2 of the Company's
Registration Statement on Form S-8 filed on January 3, 1992.
41
<PAGE>
*10.5 Standard Pacific Corp. 1997 Stock Incentive Plan, incorporated by
reference to Exhibit 99.1 of the Company's Registration Statement on
Form S-8 filed on August 21, 1997.
*10.6 Form of Non-Qualified Stock Option Agreement to be used in Company's
1997 Stock Incentive Plan, incorporated by reference to Exhibit 99.2
of the Company's Registration Statement on Form S-8 filed on August
21, 1997.
*10.7 Form of Non-Qualified Director's Stock Option Agreement to be used in
connection with the Company's 1997 Stock Incentive Plan, incorporated
by reference to Exhibit 99.3 of the Company's Registration Statement
on Form S-8 filed on August 21, 1997.
*10.8 Form of Incentive Stock Option Agreement to be used in connection
with the Company's 1997 Stock Incentive Plan, incorporated by
reference to Exhibit 99.4 of the Company's Registration Statement on
Form S-8 filed on August 21, 1997.
*10.9 Stock Purchase Agreement, dated as of September 30, 1997, by and
between the Company, Duc Development Company and Daniel A. Duc,
incorporated by reference to Exhibit 10.9 of the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997.
10.10 Share Purchase Agreement, dated as of November 7, 1997, by and
between the Company and HON Industries, Inc.
22.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
27.1 Financial Data Schedule.
- --------
(*) Previously filed.
42
<PAGE>
EXHIBIT 4.4
STANDARD PACIFIC CORP.
OFFICERS' CERTIFICATE
---------------------
Pursuant to Sections 2.01 and 2.03(a) of the Indenture, dated as of April
1, 1992 (the "Indenture"), between Standard Pacific Corp., a Delaware
corporation (the "Company"), and United States Trust Company of New York, as
Trustee (the "Trustee"), the undersigned, Stephen J. Scarborough and Andrew H.
Parnes, the President and Vice President, Treasurer and Chief Financial Officer
of the Company, respectively, hereby certify on behalf of the Company as
follows:
1. AUTHORIZATION. The establishment of 8% Senior Notes as a series
of Securities of the Company (the "Notes") has been approved and authorized
in accordance with the provisions of the Indenture. The form of Note
attached hereto as Exhibit A has been approved and authorized in accordance
with the provisions of the Indenture.
2. COMPLIANCE WITH CONDITIONS PRECEDENT. All conditions precedent
provided for in the Indenture relating to the establishment and issue of
the Notes as a series of Securities of the Company and the establishment of
a form of Note as a Security have been complied with.
3. TERMS. The terms of the series of Securities established
pursuant to this Officers' Certificate shall be as follows:
(A) TITLE. The title of the series of Securities established
hereby is the "8% Senior Notes due 2008."
(B) AGGREGATE PRINCIPAL AMOUNT. The limit upon the aggregate
principal amount of the Notes which may be authenticated and delivered
under the Indenture (except for Notes authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Notes pursuant to Sections 2.08, 2.09, 2.11, 3.06 and 9.05 of the
Indenture and except for any Notes which, pursuant to Section 2.04 of
the Indenture, are deemed never to have been authorized and delivered
thereunder) is $175,000,000 of which $100,000,000 will be issued on
the date hereof and the remainder of which will remain available for
future issuance.
<PAGE>
(C) FORM; RESTRICTIVE LEGENDS; BOOK-ENTRY PROVISION FOR GLOBAL
NOTES; SPECIAL TRANSFER PROVISIONS.
(I) FORM. Securities offered and sold in reliance on Rule
144A promulgated under the Securities Act of 1933, as amended,
(the "Securities Act") shall be issued initially in the form of
one or more permanent global Notes (each a "Restricted Global
Note"), registered in the name of the Depositary (as defined in
the Indenture) or its nominee, substantially in the form of
Exhibit A, deposited with the Trustee, as custodian for the
Depositary or its nominee, duly executed by the Company and
authenticated by the Trustee as herein provided. The aggregate
principal amount of the Restricted Global Note may from time to
time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depositary or its nominee,
as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S promulgated under the Securities Act shall be issued
initially in the form of one or more temporary global Notes,
registered in the name of the Depositary or its nominee,
substantially in the form of Exhibit A (the "Regulation S
Temporary Global Notes") deposited with the Trustee, as custodian
for the Depositary or its nominee, duly executed by the Company
and authenticated by the Trustee as provided herein. Thereafter,
following receipt by the Trustee of an Officers' Certificate of
the Company to such effect, at any time on or after March 23,
1998 (the "Offshore Notes Exchange Date"), the Trustee shall
exchange the outstanding principal amount of Notes represented by
the Regulation S Temporary Global Notes for one or more permanent
global Notes registered in the name of the Depositary or its
nominee, substantially in the form hereinabove recited without
the Securities Act Legend (as defined below) (the "Regulation S
Permanent Global Notes"; and together with the Regulation S
Temporary Global Note, the "Regulation S Global Notes") duly
executed by the Company and authenticated by the Trustee as
provided herein. In connection with such exchange, the Trustee
shall hold the Regulation S Permanent Global Notes as custodian
for the Depositary or its nominee, reflect on its
2
<PAGE>
books and records the date of such exchange and cancel the
Regulation S Temporary Global Notes. Restricted Global Notes and
Regulation S Global Notes are sometimes referred to herein as the
"Global Notes". The aggregate principal amount of Regulation S
Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Following the original issuance of Notes, Notes offered and sold
to an institutional "accredited investor" (within the meaning of
Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under
the Securities Act and which is not a Qualified Institutional
Buyer (as defined below), an "Institutional Accredited
Investor"), shall be issued in the form of one or more physical
certificated Notes (each a "Certificated Note") registered in the
name of the purchaser thereof. Certificated Notes may only be
issued in the circumstances described in subparagraph (c)(iii)(B)
and subparagraph (c)(iv)(A) below.
(II) RESTRICTIVE LEGENDS.
(A) Each Restricted Global Note, each Regulation S Global Note
and each Certificated Note shall bear the following legend (the
"Securities Act Legend") on the face thereof until the provisions
of subparagraph (c)(iv)(C) or the second subparagraph of
paragraph (c)(i) relating to the removal of such legend are
complied with:
THE SECURITY (OR ITS PREDECESSORS) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) (a) TO A PERSON WHO THE
SELLER REASONABLY
3
<PAGE>
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 OF THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT PROVIDED THAT IN THE CASE OF A
TRANSFER PURSUANT TO THIS CLAUSE (d), SUCH TRANSFER IS EFFECTED
BY THE DELIVERY TO THE TRANSFEREE OF DEFINITIVE SECURITIES
REGISTERED IN ITS NAME (OR ITS NOMINEE'S NAME) IN THE BOOKS
MAINTAINED BY THE REGISTRAR, AND IS SUBJECT TO THE RECEIPT BY THE
REGISTRAR (AND THE COMPANY, IF IT SO REQUESTS) OF A CERTIFICATION
OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO
THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
(B) Each Global Note shall also bear the following legend (the
"Global Legend") on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET,
NEW YORK, NEW YORK), A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
4
<PAGE>
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS GLOBAL
SECURITY IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.
(III) BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.
(A) Each Restricted Global Note initially shall (i) be
registered in the name of a nominee of the Depositary and (iii)
bear legends as set forth in paragraph (c)(ii) above. Each
Regulation S Temporary Global Note initially shall (i) be
registered in the name of a nominee for the Depositary for the
accounts of Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System ("Euroclear") and
Cedel Bank, societe anonyme ("Cedel"), (ii) be delivered to the
Trustee as custodian on behalf of the Depositary and (iii) bear
legends as set forth in paragraph (c)(ii) above. Each Regulation
S Permanent Global Note initially shall (i) be registered in the
name of a nominee of the Depositary, (ii) be delivered to the
Trustee as custodian on behalf of the Depositary and (iii) bear
the legend as set forth in subparagraph (c)(ii)(B) above. Prior
to the Offshore Notes Exchange Date, interests in the Regulation
S Temporary Global Note may only be held through Euroclear and
Cedel. Following the Offshore Notes Exchange Date, interests in
the Regulation S Permanent Global Note may be held by any member
of, or participants in, the Depositary ("Agent Members").
Agent Members shall have no rights under the Indenture with
respect to any Global Note held on their behalf by the
Depositary, or the Trustee as its custodian, or under the Global
Note, and the Depositary may be treated by the Company, the
Trustee and any agent of any of them as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding
the
5
<PAGE>
foregoing, nothing herein shall prevent the Company, the Trustee
or any agent of any of them from giving effect to any written
certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Global Note.
(B) Except as provided in paragraph (c)(iv), transfers of a
Global Note shall be limited to transfers of such Global Note in
whole, but not in part, to the Depositary, its successors or
their respective nominees. Certificated Notes shall be
transferred to all beneficial owners in exchange for their
beneficial interests in any Restricted Global Note or Regulation
S Global Note, respectively, if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository
for such Restricted Global Note or Regulation S Global Note, as
the case may be, and a successor depository is not appointed by
the Company within 90 days of such notice, (ii) the Company, in
its sole discretion, shall so request or (iii) an Event of
Default has occurred and is continuing and the Registrar shall
have received a request from the Depository to issue such
Certificated Notes.
(C) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an
interest in another Global Note will, upon transfer, cease to be
an interest in such Global Note and become an interest in the
other Global Note and, accordingly, will thereafter be subject to
all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for
as long as it remains such an interest.
(D) In connection with the transfer of an entire Restricted
Global Note or Regulation S Global Note to beneficial owners
pursuant to subparagraph (B) of this paragraph, the Restricted
Global Note or Regulation S Global Note, as the case may be,
shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee
shall authenticate and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial
interest in such Restricted Global Note or Regulation S Global
6
<PAGE>
Note, as the case may be, an equal aggregate principal amount of
Certificated Notes of authorized denominations.
(E) Any Certificated Note delivered in exchange for an interest
in a Restricted Global Note pursuant to subparagraph (B) or (D)
of this paragraph shall, except as otherwise provided by
subparagraph (C) of paragraph (c)(iv), bear the Securities Act
Legend.
(IV) SPECIAL TRANSFER PROVISIONS. Unless and until the
Securities Act Legend is removed from a Certificated Note or
Global Note pursuant to subparagraph (C) below (including as a
result of an exchange completed on the Offshore Notes Exchange
Date pursuant to paragraph (c)(i) above), the following
additional provisions shall apply to the proposed transfer,
exchange or replacement of Certificated Notes:
(A) Transfers to Non-QIB Institutional Accredited Investors.
-------------------------------------------------------
The following provisions shall apply with respect to the
registration of any proposed transfer of a Note (or interest in a
Global Note) to any Institutional Accredited Investor which is
not a Qualified Institutional Buyer (within the meaning of Rule
144A under the Securities Act, a "Qualified Institutional Buyer")
or to a Non-U.S. Person (as defined in Regulation S):
(1) The Registrar shall register the transfer of any
Certificated Note containing the Securities Act Legend or
any interest in a Restricted Global Note if (x) the
requested transfer is after the time period referred to in
Rule 144(k) under the Securities Act as in effect with
respect to such transfer or (y) the proposed transferee
(excluding Non-U.S. Persons) has delivered to the Registrar
a certificate substantially in the form of Exhibit B hereto
or if the transferee is a Non-U.S. Person, the proposed
transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit C hereto.
(2) If the proposed transferor is an Agent Member holding a
beneficial interest in a Restricted Global Note and the
proposed transferee is an Institutional Accredited Investor
which is not a Qualified
7
<PAGE>
Institutional Buyer, upon receipt by the Depositary and
Registrar of (x) the documents required by subparagraph (1)
above (if such transfer is pursuant to clause (y) of
subparagraph (1) above) and (y) instructions given in
accordance with the Registrar's procedures, the Registrar
shall reflect on its books and records the date of such
transfer and a decrease in the principal amount of such
Restricted Global Note in an amount equal to the principal
amount of the beneficial interest in such Restricted Global
Note to be transferred and the Company shall execute, and
the Trustee shall authenticate and deliver, one or more
Certificated Notes of like tenor and amount.
(B) Transfers to Qualified Institutional Buyers. The following
-------------------------------------------
provisions shall apply with respect to the registration of any
proposed transfer of a Note (or interest in a Global Note) to a
Qualified Institutional Buyer:
(1) The Registrar shall register the transfer of any
Certificated Note containing the Securities Act Legend if
(x) the requested transfer is after the time period referred
to in Rule 144(k) under the Securities Act as in effect with
respect to such transfer or (y) such transfer is being made
by a proposed transferor who has checked the box provided
for on the form of Note stating, or has otherwise advised
the Company and the Registrar in writing, that the sale has
been made in compliance with the provisions of Rule 144A to
a transferee who has signed the certification provided for
on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing
the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it
and any such account is a Qualified Institutional Buyer
within the meaning of Rule 144A, and is aware that the sale
to it is being made in reliance on Rule 144A and the
transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by
Rule 144A.
(2) If the Note to be transferred is a
8
<PAGE>
Certificated Note containing the Securities Act Legend and
the proposed transferee is an Agent Member holding such
interest on behalf of a Qualified Institutional Buyer, upon
receipt by the Registrar of (x) the documents referred to in
subparagraph (1) above (if such transfer is pursuant to
clause (y) of subparagraph (1) above) and (y) instructions
given in accordance with the Registrar's procedures, the
Registrar shall reflect on its books and records the date of
such transfer and an increase in the principal amount of the
Restricted Global Note in an amount equal to the principal
amount of the Certificated Note to be transferred and the
Trustee shall cancel the Certificated Note so transferred.
(C) Securities Act Legend. Upon the registration of transfer,
---------------------
exchange or replacement of Notes bearing the Securities Act
Legend, the Registrar shall deliver only Notes that bear the
Securities Act Legend unless the requested transfer, exchange or
replacement (i) is after the time period referred to in Rule
144(k) under the Securities Act as in effect with respect to such
transfer, exchange or replacement, (ii) is made under the
circumstances contemplated by the second subparagraph of
paragraph (c)(i) or (iii) there is delivered to the Registrar an
opinion of counsel reasonably satisfactory to the Company to the
effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the
provisions of the Securities Act. Upon the registration of
transfer, exchange or replacement of Notes not bearing the
Securities Act Legend, the Registrar shall deliver Notes that do
not bear the Securities Act Legend.
(D) General. By its acceptance of any Note bearing the
-------
Securities Act Legend, each Holder of such a Note acknowledges
the restrictions on transfer of such Note set forth herein and in
the Securities Act Legend and agrees that it will transfer such
Note only as provided herein. The Registrar shall not register a
transfer of any Note unless such transfer complies with the
restrictions on transfer of such Note set forth herein. In
connection with any transfer of Notes, each Holder agrees by its
acceptance of the Notes to furnish the Registrar or the Company
such
9
<PAGE>
certifications, legal opinions or other information as either of
them may reasonably require to confirm that such transfer is
being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act;
provided that the Registrar shall not be required to determine
(but may rely on a determination made by the Company with respect
to) the sufficiency of any such certifications, legal opinions or
other information.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to paragraph
(c)(iii) or this paragraph (c)(iv) in accordance with its
customary procedures. The Company shall have the right to
inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of
reasonable written notice to the Registrar.
(D) PERSONS TO WHOM INTEREST PAYABLE. Interest on the Notes
shall be payable to the person in whose name a Note is registered at
the close of business (whether or not a Business Day) on the Regular
Record Date (as defined in the Indenture), for such interest payment,
except (i) that interest payable on February 15, 2008 shall be payable
to the person to whom principal is payable, and (ii) that default
interest shall be payable in the manner provided in Section 2.13 of
the Indenture.
(E) STATED MATURITY. The date on which the principal of the
Notes shall be payable, unless accelerated pursuant to the Indenture,
is February 15, 2008.
(F) RATE OF INTEREST; INTEREST PAYMENT DATES; REGULAR RECORD
DATES; OVERDUE PRINCIPAL AND INTEREST.
(I) RATE OF INTEREST. The principal amount of each of the
Notes shall bear simple interest at the rate of 8% per annum.
The date from which interest shall accrue for each of the Notes
shall be February 10, 1998 or in the case of Notes issued after
August 15, 1998, the Interest Payment Date next preceeding the
date of issuance of such Notes. Interest shall be computed on
the basis of a 360-day year of twelve 30-day months.
(II) INTEREST PAYMENT DATES. Interest on the
10
<PAGE>
Notes shall be payable semiannually in arrears on February 15 and
August 15 of each year, commencing August 15, 1998.
If any Interest Payment Date or Maturity of the Notes falls
on a day that is not a Business Day, the payment due on such
Interest Payment Date or at Maturity will be made on the
following day that is a Business Day as if it were made on the
date such payment was due and no interest shall accrue on the
amount so payable for the period from and after such Interest
Payment Date or Maturity, as the case may be.
(III) REGULAR RECORD DATES. The Regular Record Dates for
interest payable on each February 15 and August 15 will be the
immediately preceding February 1 and August 1 (whether or not a
Business Day), respectively.
(IV) OVERDUE PRINCIPAL AND INTEREST. Overdue principal
and, to the extent payment of such interest shall be legally
enforceable, overdue installments of interest shall bear interest
at the rate of 8% per annum.
(G) PLACE OF PAYMENT; REGISTRATION OF TRANSFER AND EXCHANGE;
NOTICES TO COMPANY.
(I) PLACE OF PAYMENT. Payment of the principal of and
interest on the Notes will be made at the Corporate Trust Office
of the Trustee in the Borough of Manhattan, The City of New York,
and at any other office or agency designated by the Company for
such purpose; provided, however, that at the option of the
-------- -------
Company, payment of interest due (other than at Maturity or upon
Redemption) may be made by check mailed to the address of the
person entitled thereto as such address shall appear in the
register of Securities.
(II) REGISTRATION OF EXCHANGE AND TRANSFER. Notes may be
presented for exchange and registration of transfer at the
Corporate Trust Office of the Trustee in the Borough of
Manhattan, The City of New York, or at the office of any transfer
agent hereafter designated by the Company for such purpose.
11
<PAGE>
(III) NOTICES TO COMPANY. Notices and demands to or upon
the Company in respect to the Notes and the Indenture may be
served at Standard Pacific Corp., 1565 West MacArthur Boulevard,
Costa Mesa, California 92636, Attention: Vice President and
Treasurer.
(H) OPTIONAL REDEMPTION. Except as set forth in the following
paragraph, the Notes will not be redeemable at the option of the
Company prior to February 15, 2003. Thereafter, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time
or from time to time, upon not less than 30 nor more than 60 days'
prior notice mailed by first-class mail to each Holder's registered
address, at the following redemption prices (expressed in percentages
of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest
payment date), if redeemed during the 12-month period commencing on
February 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003................................... 104.00%
2004................................... 102.67%
2005................................... 101.33%
2006 and thereafter.................... 100.00%
</TABLE>
If less than all of the Notes are to be redeemed, the Trustee
will select the Notes to be redeemed on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem to
be fair and appropriate.
(I) ACCELERATION. The principal amount of the Notes shall be
payable upon declaration of acceleration of the maturity thereof
pursuant to Section 6.02 of the Indenture.
(J) CHANGE OF CONTROL. Upon the occurrence of a Change of
Control, each Holder shall have the right to require that the Company
repurchase all or a portion of such Holder's Notes at a purchase price
in cash equal to 101 percent of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase (subject to the
right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date), in accordance
with the
12
<PAGE>
provisions of the next paragraph.
Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee stating:
(aa) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Notes
at a purchase price in cash equal to 101 percent of the principal
amount outstanding at the repurchase date plus accrued and unpaid
interest to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest
on the relevant interest payment date) (the "Repurchase Price");
(bb) the circumstances and relevant facts and relevant financial
information regarding such Change of Control;
(cc) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed) (the
"Repurchase Date");
(dd) that any Note not tendered or accepted for payment will continue
to accrue interest;
(ee) that any Note accepted for payment shall cease to accrue interest
after the Repurchase Date;
(ff) that Holders electing to have a Note purchased will be required
to surrender the Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse side of the Note completed, to
the Paying Agent at the address specified in the Notice at least
five days before the Repurchase Date;
(gg) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than three days prior to the
Repurchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount
of the Note the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have the Note
purchased; and
(hh) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the unpurchased
portion of the Notes
13
<PAGE>
surrendered.
On the Repurchase Date, the Company shall (i) accept for payment
Notes or portions thereof properly tendered, (ii) deposit with the
Paying Agent money sufficient to pay the purchase price of all Notes
or portions thereof so accepted and (iii) deliver to the Trustee Notes
so accepted together with an Officers' Certificate stating the Notes
or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail or deliver to Holders of Notes so accepted,
payment in an amount equal to the Repurchase Price, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new
Note equal in principal amount of any unpurchased portion of the Note
surrendered. The Company will publicly announce the results on or as
soon after as practical the Repurchase Date. For purposes of this
paragraph (j), the Trustee shall act as the Paying Agent.
(K) REGISTRAR OF SECURITIES; PAYING AGENT. The Company hereby
appoints the Trustee as the Registrar and initial Paying Agent. The
books of the Registrar of the Securities for the Notes will be
initially maintained at the Corporate Trust Office of the Trustee.
(L) COMPLIANCE WITH SECURITIES LAWS. The Company shall comply,
to the extent applicable, with the requirements of Section 14(e) of
the Exchange Act and any other securities laws or regulations in
connection with the repurchase of Notes pursuant to Section 3(h),
3(j), 3(m)(i) or 3(m)(v) hereunder. To the extent that the provisions
of any securities laws or regulations conflict with said provisions
hereunder, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its
obligations under said provisions hereunder by virtue thereof.
(M) CERTAIN COVENANTS OF THE COMPANY. The Company covenants as
follows:
(I) MAINTENANCE OF CONSOLIDATED NET WORTH. The Company
shall furnish to the Trustee a certificate (signed by a Vice
President, and by its Treasurer, its Secretary or an Assistant
Secretary) within 45 days after the end of each fiscal quarter of
the Company (90 days after the end of its fiscal year) setting
forth the Consolidated Net Worth of the Company and its
Restricted Subsidiaries at the end of such fiscal
14
<PAGE>
quarter. If the Consolidated Net Worth of the Company and its
Restricted Subsidiaries at the end of any two consecutive fiscal
quarters is less than $200,000,000, then the Company shall make
an offer to all Holders to acquire (the "Offer") on the last day
of the fiscal quarter next following such second fiscal quarter
or, if such second fiscal quarter ends on the last day of the
Company's fiscal year, 135 days after the end of such second
fiscal quarter (the "Purchase Date"), 10% of the aggregate
principal amount of Notes originally issued (or, if less than 10%
of the principal amount of the Notes originally issued are then
outstanding, then all of the Notes outstanding at that time, such
amount being referred to as the "Offer Amount") at a purchase
price equal to 100% of the aggregate principal amount thereof
together with accrued and unpaid interest to the Purchase Date.
In no event shall the failure to meet the minimum Consolidated
Net Worth stated above at the end of any fiscal quarter be
counted toward more than one Offer.
The Company shall provide the Trustee with notice of the
Offer at least 45 days before any such Purchase Date and at least
10 days before the notice of any Offer is mailed to Holders. The
Company shall notify the Trustee promptly after the occurrence of
any of the events specified in this paragraph (i).
Notice of an Offer shall be mailed by the Trustee not less
than 30 days nor more than 60 days before the Purchase Date to
the Holders of the Notes at their last registered address. The
Offer shall remain open from the time of mailing until 5 days
before the Purchase Date. The Notice shall be accompanied by a
copy of the information regarding the Company required to be
contained in a Quarterly Report on Form 10-Q for the second
fiscal quarter referred to above if such second fiscal quarter is
one of the Company's first three fiscal quarters. If such second
fiscal quarter is the Company's last fiscal quarter, a copy of
the information required to be contained in an Annual Report to
Shareholders pursuant to Rule 14a-3 under the Exchange Act for
the fiscal year ending with such second fiscal quarter shall
either accompany the notice or be mailed to Holders not less than
15 days before the Purchase Date. The Notice shall contain all
instructions and materials necessary to enable such Holders to
tender
15
<PAGE>
Notes pursuant to the Offer. The Notice, which shall
govern the terms of the Offer, shall state:
(aa) that the Offer is being made pursuant to this paragraph
(m)(i);
(bb) the Offer Amount, the purchase price and the Purchase Date;
(cc) that any Note not tendered or accepted for payment will
continue to accrue interest;
(dd) that any Note accepted for payment pursuant to the Offer
shall cease to accrue interest after the Purchase Date;
(ee) that Holders electing to have a Note purchased pursuant to
an Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the
reverse side of the Note completed, to the Paying Agent at
the address specified in the Notice at least five days
before the Purchase Date;
(ff) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than three days prior
to the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder,
the principal amount of the Note the Holder delivered for
purchase and a statement that such Holder is withdrawing his
election to have the Note purchased;
(gg) that if Notes in a principal amount in excess of the Offer
Amount are tendered pursuant to the Offer, the Company shall
purchase Notes on a pro rata basis or by lot or in such
other manner as the Trustee shall deem fair and appropriate;
and
(hh) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
On the Purchase Date, the Company shall (i) accept for
payment Notes or portions thereof properly tendered pursuant to
the Offer (on a pro rata basis, by lot or in such other manner
specified by the Trustee if required pursuant to
16
<PAGE>
paragraph (gg) above), (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions
thereof so accepted and (iii) deliver to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes
or portions thereof accepted for payment by the Company. The
Paying Agent shall promptly mail or deliver to Holders of Notes
so accepted, payment in an amount equal to the purchase price,
and the Trustee shall promptly authenticate and mail or deliver
to such Holders a new Note equal in principal amount of any
unpurchased portion of the Note surrendered. Any Notes not so
accepted shall be promptly mailed or delivered by the Company to
the Holder thereof. The Company will publicly announce the
results of the Offer on or as soon as practicable after the
Purchase Date. For purposes of this paragraph (m)(i), the Trustee
shall act as the Paying Agent.
(II) LIMITATION ON ADDITIONAL INDEBTEDNESS. The Company
will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, Incur any Indebtedness unless, after
giving effect thereto, either (i) the ratio of Indebtedness of
the Company and the Restricted Subsidiaries (excluding, for
purposes of this calculation only, (A) purchase money mortgages
that are Non-Recourse Indebtedness, and (B) Indebtedness Incurred
under letters of credit, escrow agreements and surety bonds
obtained in the ordinary course of business) to Consolidated
Tangible Net Worth of the Company is less than 2.25 to 1; or (ii)
the Consolidated Coverage Ratio exceeds 2.0 to 1.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may Incur: (A) Indebtedness under one or more Bank
Credit Facilities in an amount not in excess of $275 million; (B)
purchase money mortgages that are Non-Recourse Indebtedness; (C)
obligations Incurred under letters of credit, escrow agreements
and surety bonds in the ordinary course of business; (D)
Indebtedness Incurred under a Warehouse Facility, provided that
the amount of such Indebtedness (excluding funding drafts issued
thereunder) outstanding at any time pursuant to this clause (D)
may not exceed 98 percent of the value of the Mortgages pledged
to secure Indebtedness thereunder; and (E) Indebtedness Incurred
solely for the purpose of refinancing or repaying any existing
Indebtedness so long as
17
<PAGE>
(I) the principal amount of such new Indebtedness does not exceed
the principal amount of the existing Indebtedness refinanced or
repaid (plus the premiums or other payments required to be paid
in connection with such refinancing or repayment and the expenses
incurred in connection therewith), (II) the maturity of such new
Indebtedness is not earlier than that of the existing
Indebtedness to be refinanced or repaid, (III) such new
Indebtedness, determined as of the date of incurrence, has an
Average Life at least equal to the remaining Average Life of the
Indebtedness to be refinanced or repaid, (IV) the new
Indebtedness is pari passu with or subordinate to the
Indebtedness being refinanced or repaid, and (V) the existing and
new Indebtedness are obligations of the same entity.
(III) LIMITATIONS ON LIENS. The Company will not, and will
not permit any Restricted Subsidiary to, issue, assume, guarantee
or suffer to exist any Indebtedness secured by any mortgage,
pledge, lien or other encumbrance of any nature (herein
collectively referred to as a "lien" or "liens") upon any
property of the Company or any Restricted Subsidiary, or on any
shares of stock of any Restricted Subsidiary, without in any such
case effectively providing that the Notes (together with, if the
Company shall so determine, any other Indebtedness of the Company
or such Restricted Subsidiary ranking pari passu with the Notes)
shall be secured equally and ratably with such Indebtedness,
except that the foregoing restrictions shall not apply to: (A)
liens existing on December 31, 1997; (B) pledges, guarantees and
deposits under workers' compensation laws, unemployment insurance
laws or similar legislation, good faith deposits under bids,
tenders or contracts, deposits to secure public or statutory
obligations or appeal or similar bonds, and liens created by
special assessment districts used to finance infrastructure
improvements; (C) liens existing on property or assets of any
entity on the date on which it becomes a Restricted Subsidiary,
which secured Indebtedness is not Incurred in contemplation of
such entity becoming a Restricted Subsidiary; (D) liens on or
leases of model home units; (E) liens on property, inventory and
receivables of Panel Concepts, Inc. ("Panel Concepts") to provide
working capital (exclusive of cash and cash equivalents) for
Panel Concepts in the ordinary course of business;
18
<PAGE>
(F) Capitalized Lease Obligations entered into in the ordinary
course of business in amounts not in excess of $10,000,000 in the
aggregate; (G) the replacement of any of the items set forth in
clauses (A) through (F) above, provided that (i) the principal
amount of the Indebtedness secured by liens shall not be
increased, (ii) such Indebtedness, determined as of the date of
Incurrence, has an Average Life at least equal to the remaining
Average Life of the Indebtedness to be refinanced, (iii) the
maturity of such Indebted ness is not earlier than that of the
Indebtedness to be refinanced, and (iv) the liens shall be
limited to the property or part thereof which secured the lien so
replaced or property substituted therefor as a result of the
destruction, condemnation or damage of such property; (H) liens
on property acquired, constructed or improved by the Company or
any Restricted Subsidiary, which liens are either existing at the
time of such acquisition or at the time of completion of
construction or improvement or created within 120 days after such
acquisition, completion or improvement, to secure Indebtedness
Incurred or assumed to finance all or part of such property,
including any increase in the principal amount of such
Indebtedness and any extension of the repayment schedule and
maturity of such Indebtedness Incurred or entered into in the
ordinary course of business; (I) liens or priorities incurred in
the ordinary course of business, such as laborers', employees',
carriers', mechanics', vendors' and landlords' liens or
priorities; (J) liens for certain taxes and certain survey and
title exceptions; (K) liens arising out of judgments or awards
against the Company or any Restricted Subsidiary with respect to
which the Company or such Restricted Subsidiary is in good faith
prosecuting an appeal or proceeding for review and with respect
to which it has secured a stay of execution pending such appeal
or proceeding for review; (L) liens on property owned by any
Homebuilding Joint Venture; (M) liens securing a Warehouse
Facility, provided that such liens shall not extend to any assets
other than the mortgages, promissory notes and other collateral
that secures mortgage loans made by the Company or any of its
Restricted Subsidiaries; and (N) liens which would otherwise be
subject to the foregoing restrictions which, when the
Indebtedness relating to those liens is added to all other then
outstanding Indebtedness of the Company and the Restricted
19
<PAGE>
Subsidiaries secured by liens and not listed in clauses (A)
through (M) above, does not exceed $50,000,000.
20
<PAGE>
(IV) LIMITATION ON RESTRICTED PAYMENTS. The Company will
not, nor will it permit any Restricted Subsidiary to, directly or
indirectly, (A) declare or pay any dividend on, or make any
distribution in respect of, or purchase, redeem or otherwise
acquire or retire for value, any Capital Stock of the Company
other than through the issuance solely of the Company's own
Capital Stock (other than Disqualified Stock), or rights thereto;
(B) make any principal payment on, or redeem, repurchase, defease
or otherwise acquire or retire for value prior to scheduled
principal payments or maturity, Indebtedness of the Company or
any Restricted Subsidiary which is expressly subordinated in
right of payment to the Notes (other than Indebtedness Incurred
after the issuance of the Notes provided that such repayment,
redemption, repurchase, defeasance or other retirement is made
substantially concurrent with the receipt of proceeds from the
Incurrence of Indebtedness that by its terms is both subordinated
in right of payment to the Notes and matures, by sinking fund or
otherwise, after February 15, 2008; or (C) make any Restricted
Investment (such payments or any other actions described in (A),
(B) and (C) being referred to herein collectively as, "Restricted
Payments") unless (I) at the time of, and after giving effect to,
the proposed Restricted Payment, no Event of Default (and no
event that, after notice or lapse of time, or both, would become
an Event of Default) shall have occurred and be continuing, (II)
the Company is able to Incur an additional $1.00 of Indebtedness
pursuant to the first paragraph of Section (m)(ii) herein, and
(III) at the time of, and after giving effect thereto, the sum of
the aggregate amount expended (or with respect to guaranties or
similar arrangements the amount then guaranteed) for all such
Restricted Payments (the amount expended for such purposes, if
other than in cash, to be determined by the Board of Directors of
the Company, whose determination shall be conclusive and
evidenced by a resolution of such Board of Directors filed with
the Trustee) subsequent to June 30, 1997 shall not exceed the sum
of (aa) 50% of the aggregate Consolidated Net Income (or, in case
such aggregate Consolidated Net Income shall be a deficit, minus
100% of such deficit) of the Company accrued on a cumulative
basis subsequent to June 30, 1997, (bb) the aggregate net
proceeds,
21
<PAGE>
including the fair market value of property other than cash (as
determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a resolution
of such Board of Directors filed with the Trustee), received by
the Company from the issuance or sale, after the date of issuance
of the Notes, of Capital Stock (other than Disqualified Stock) of
the Company, including Capital Stock (other than Disqualified
Stock) of the Company issued subsequent to the date of issuance
of the Notes upon the conversion of Indebtedness of the Company
initially issued for cash, (cc) 100% of dividends or
distributions (the fair value of which, if other than cash, to be
determined by the Board of Directors, in good faith) paid to the
Company (or any Restricted Subsidiary) by an Unrestricted
Subsidiary, Homebuilding Joint Venture or any other person in
which the Company (or any Restricted Subsidiary), directly or
indirectly, has an ownership interest but less than a 100%
ownership interest to the extent that such dividends or
distributions do not exceed the amount of loans, advances or
capital contributions made to any such entity or person
subsequent to the date of issuance of the Notes and included in
the calculation of Restricted Payments, and (dd) $40,000,000;
provided, however, that the foregoing shall not prevent (i) the
-------- -------
payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration the making of
such payment would have complied with the provisions of this
limitation on dividends; provided, however, that such dividend
shall be included in future calculations of Restricted Payments,
(ii) the retirement of any shares of the Company's Capital Stock
by exchange for, or out of proceeds of the substantially
concurrent sale of, other shares of its Capital Stock (other than
Disqualified Stock); provided, however, that the aggregate net
proceeds from such sale shall be excluded from the calculation of
the amounts under subclause (bb) above, (iii) the redemption,
repayment, repurchase, defeasance or other retirement of
Indebtedness with proceeds received from the substantially
concurrent sale of shares of the Company's Capital Stock (other
than Disqualified Stock); provided however, that the aggregate
net proceeds from such sale shall be excluded from the
calculation of the amounts under subclause (bb) above, or (iv)
any investment or investments in Standard Pacific Savings, F.A.
22
<PAGE>
("Savings") by the Company or any of its Restricted Subsidiaries
for the purpose of causing Savings to comply with any regulatory
agreements existing on the date of issuance of the Notes or with
any applicable law, rule, regulation, official interpretation of
law, rule or regulation or official directive which governs the
capital maintenance, net worth or similar regulatory requirements
applicable to Savings.
(V) LIMITATION ON ASSET SALES. The Company will not, and
will not permit any Restricted Subsidiary to, make an Asset
Disposition, other than for fair market value and in the ordinary
course of business, with an aggregate net book value as of the
end of the immediately preceding fiscal quarter greater than 10%
of the Company's total consolidated assets as of that date,
unless (A) the consideration received by the Company (or a
Restricted Subsidiary, as the case may be) for such disposition
consists of at least 70% cash; provided, however, that for
-------- -------
purposes of this provision (A), the amount of any liabilities
assumed by the transferee and any notes or other obligations
received by the Company or a Restricted Subsidiary which are
immediately converted into cash shall be deemed to be cash, and
(B) the Company shall within one year after the date of such sale
or sales, apply the Net Proceeds from such sale or sales in
excess of an amount equal to 10% of the Company's total
consolidated assets to (I) a purchase of or an Investment in
Additional Assets (other than cash or cash equivalents), (II)
repayment of indebtedness of the Company which is pari passu with
---- -----
the Notes, and/or (III) make an offer to acquire all or part of
the Notes at a purchase price equal to the principal amount
thereof plus accrued and unpaid interest thereon to the purchase
date.
In the event the Company elects to or shall be required to
offer to redeem Notes pursuant to the provisions of this
paragraph (m)(v), the Company shall deliver to the Trustee an
Officers' Certificate specifying the Asset Sale Offer Amount (as
defined below) and the Asset Sale Purchase Date (as defined
below). Within 15 days thereafter, the Company shall mail or
cause the Trustee to mail (in the Company's name and at its
expense) an offer to redeem (the "Asset Sale Offer") to each
Holder of Notes. The redemption price shall
23
<PAGE>
be 100% of the principal amount of the Notes plus accrued
interest to the redemption date and upon surrender to the Trustee
or the Paying Agent, the Holders of such Notes shall be paid the
redemption price. The date designated for repurchase of Notes
pursuant to an Asset Sale Offer (the "Asset Sale Purchase Date")
shall be a date designated by the Company that is not less than
30 days nor more than 60 days before notice of an Asset Sale
Offer is to be and shall be mailed by the Trustee to the Holders
of the Notes at their last registered address. The Asset Sale
Offer shall remain open from the time of mailing until 5 days
before the Asset Sale Purchase Date. The Notice shall contain all
instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Asset Sale Offer. The Notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(aa) that the Asset Sale Offer is being made pursuant to this
paragraph (m)(v);
(bb) the amount of Notes offered to be redeemed (the "Asset Sale
Offer Amount"), the purchase price and the Asset Sale
Purchase Date;
(cc) that any Note not tendered or accepted for payment will
continue to accrue interest;
(dd) that any Note accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Asset
Sale Purchase Date;
(ee) that Holders electing to have a Note purchased pursuant to
an Asset Sale Offer will be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase"
on the reverse side of the Note completed, to the Paying
Agent at the address specified in the Notice at least five
days before the Asset Sale Purchase Date;
(ff) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than three days prior
to the Asset Sale Purchase Date, a telegram, telex,
facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Note the Holder
delivered for purchase and a statement that such Holder is
withdrawing his election to have the Note
24
<PAGE>
purchased;
(gg) that if Notes in a principal amount in excess of the Asset
Sale Offer Amount are tendered pursuant to the Asset Sale
Offer, the Company shall purchase Notes on a pro rata basis
or by lot or in such other manner as the Trustee shall deem
fair and appropriate; and
(hh) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
On the Asset Sale Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof properly tendered
pursuant to the Asset Sale Offer (on a pro rata basis, by lot or
in such other manner specified by the Trustee if required
pursuant to paragraph (gg) above), (ii) deposit with the Paying
Agent money sufficient to pay the purchase price of all Notes or
portions thereof so accepted and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating
the Notes or portions thereof accepted for payment by the
Company. The Paying Agent shall promptly mail or deliver to
Holders of Notes so accepted, payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and
mail or deliver to such Holders a new Note equal in principal
amount of any unpurchased portion of the Note surrendered. Any
Notes not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company will publicly
announce the results of the Asset Sale Offer on or as soon after
as practical the Asset Sale Purchase Date. For purposes of this
paragraph (m)(v), the Trustee shall act as the Paying Agent.
(VI) TRANSACTIONS WITH AFFILIATES. (A) The Company shall
not, and shall not permit any Restricted Subsidiary to, enter
into or permit to exist any transaction or series of related
transactions (including the purchase, sale, lease or exchange of
any property, employee compensation arrangements or the rendering
of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless the terms thereof (I) are no less favorable
to the Company or such Restricted Subsidiary than those that
could be obtained at the time of such transaction in arm's-length
25
<PAGE>
dealings with a person who is not such an Affiliate; and (II) if
such Affiliate Transaction (or series of related Affiliate
Transactions) involve aggregate payments in an amount in excess
of $10 million in any one year, (aa) are set forth
in writing, (bb) comply with clause (I) above and (cc) have been
approved by a majority of the disinterested members of the Board
of Directors.
(B) The provisions of the foregoing paragraph (A) shall not
prohibit (I) any Restricted Payment permitted to be paid pursuant
to the covenant described under clause (m)(iv) above; (II) any
issuance of securities, or other payments, awards or grants in
cash, securities or otherwise, pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans
in the ordinary course of business and approved by the Board of
Directors or a committee thereof; (III) the grant of stock
options or similar rights to employees and directors of the
Company in the ordinary course of business and pursuant to plans
approved by the Board of Directors or a committee thereof; (IV)
loans or advances to employees in the ordinary course of business
of the Company or its Restricted Subsidiaries; (V) fees,
compensation or employee benefit arrangements paid to and
indemnity provided for the benefit of directors, officers or
employees of the Company or any Subsidiary in the ordinary course
of business; or (VI) any Affiliate Transaction between the
Company and a Restricted Subsidiary or between Restricted
Subsidiaries.
(VII) LIMITATION ON PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES. The Company will not, and will not
permit any Restricted Subsidiary to, create or otherwise cause or
permit to exist or become effective, any consensual encumbrance
or consensual restriction on the ability of any Restricted
Subsidiary (I) to pay dividends or make any other distributions
on its Capital Stock to the Company or a Restricted Subsidiary or
pay any Indebtedness owed to the Company, (II) to make any loans
or advances to the Company or (III) transfer any of its property
or assets to the Company, except: (aa) any encumbrance or
restriction pursuant to an agreement in effect at or entered into
on the date of issuance of the Notes; (bb) any encumbrance or
restriction with respect to a Restricted
26
<PAGE>
Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary which was entered into on
or prior to the date on which such Restricted Subsidiary was
acquired by the Company (other than as consideration in, or to
provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became
a Restricted Subsidiary or was acquired by the Company) and
outstanding on such date; (cc) any encumbrance or restriction
pursuant to an agreement effecting a Refinancing of Indebtedness
Incurred pursuant to an agreement referred to in clause (aa) or
(bb) of this covenant (or effecting a Refinancing of such
Refinancing Indebtedness pursuant to this clause (cc)) or
contained in any amendment to an agreement referred to in clause
(aa) or (bb) of this covenant or this clause (cc); provided,
however, that the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in any such refinancing
agreement or amendment are no more restrictive in any material
respect than the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in such agreements; (dd) any
such encumbrance or restriction consisting of customary
contractual non-assignment provisions to the extent such
provisions restrict the transfer of rights, duties or obligations
under such contract; (ee) in the case of clause (III) above,
restrictions contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject
to such security agreements or mortgages; (ff) any restriction
with respect to a Restricted Subsidiary imposed pursuant to an
agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition; and
(gg) any restriction imposed by applicable law.
(VIII) RESTRICTED AND UNRESTRICTED SUBSIDIARIES. The
Company will not permit any Restricted Subsidiary to be
designated as an Unrestricted Subsidiary unless the Company and
its Restricted Subsidiaries would thereafter be permitted to (A)
Incur at least $1.00 of Indebtedness under the first paragraph
(m)(ii)
27
<PAGE>
above and (B) make a Restricted Payment of at least $1.00
under paragraph (m)(iv) above.
The Company will not permit any Unrestricted Subsidiary to
be designated as a Restricted Subsidiary unless such Subsidiary
has outstanding no Indebtedness except such Indebtedness as the
Company could permit it to become liable for immediately after
becoming a Restricted Subsidiary under paragraph (m)(ii) above.
Promptly after the adoption of any Board Resolution
designating a Restricted Subsidiary as an Unrestricted Subsidiary
or an Unrestricted Subsidiary as a Restricted Subsidiary, a copy
thereof shall be filed with the Trustee, together with an
Officers' Certificate stating that the provisions of this
paragraph (m)(viii) have been complied with in connection with
such designation.
The Company will not permit Standard Pacific of Texas, Inc.
to be designated as an Unrestricted Subsidiary or permit the
assets of the Company or any Subsidiary employed in the
homebuilding operations to be transferred to an Unrestricted
Subsidiary, except in amounts permitted under paragraph (m)(iv)
above.
(IX) SUCCESSOR CORPORATION. The Company will not
consolidate with, merge into or transfer all or substantially all
of its assets to another person unless (i) such person (if other
than the Company) is a corporation organized under the laws of
the United States or any state thereof or the District of
Columbia and expressly assumes all the obligations of the Company
under the Indenture and the Notes; (ii) immediately after giving
effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; (iii) the Consolidated Net Worth
of the obliger of the Notes immediately after giving effect to
such transaction (exclusive of any adjustments to Consolidated
Net Worth relating to transaction costs and accounting
adjustments resulting from such transaction) is not less than the
Consolidated Net Worth of the Company immediately prior to such
transaction; and (iv) the surviving corporation would be able to
Incur at least an additional $1.00 of Indebtedness pursuant to
the first paragraph of the covenant described under paragraph
(m)(ii).
28
<PAGE>
(X) REPORTS TO HOLDERS OF THE NOTES. So long as the Company
is subject to the periodic reporting requirements of the Exchange
Act, it shall continue to furnish the information required
thereby to the SEC. Even if the Company is entitled under the
Exchange Act not to furnish such information to the SEC or to the
holders of the Notes, it will nonetheless continue to furnish
information under Section 13 or 15(d) of the Exchange Act to the
SEC and the Trustee as if it were subject to such periodic
reporting requirements.
(N) ADDITIONAL EVENTS OF DEFAULT. In addition to the Events of
Default specified in the Indenture, the following shall constitute
Events of Default under Section 6.01 of the Indenture with respect to
the Notes: (i) default under any mortgage, indenture (including the
Indenture) or instrument under which is issued or which secures or
evidences Indebtedness of the Company or any Restricted Subsidiary
(other than Non-Recourse Indebtedness) which default constitutes a
failure to pay principal of such Indebtedness in an amount of
$20,000,000 or more when due and payable (other than as a result of
acceleration) or results in Indebtedness (other than Non-Recourse
Indebtedness) in the aggregate of $20,000,000 or more becoming or
being declared due and payable before it would otherwise become due
and payable, and (ii) entry of a final judgment for the payment of
money against the Company or any Restricted Subsidiary in an amount of
$5,000,000 or more which remains undischarged or unstayed for a period
of 60 days after the date on which the right to appeal such judgment
has expired or becomes subject to an enforcement proceeding.
(O) CERTAIN DEFINITIONS. The following terms shall have the
meanings indicated for purposes of this Officers' Certificate. All
capitalized terms used in this Officers' Certificate and not otherwise
defined herein shall have the meanings set forth in the Indenture.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; or (ii) the
Capital Stock of a person that becomes a Restricted Subsidiary as a
result of the acquisition of such Capital Stock by the Company or
another Restricted Subsidiary; provided, however, that any such
Restricted Subsidiary is primarily engaged in a Related Business. For
purposes of this definition, "Related Business" means any business
related,
29
<PAGE>
ancillary or complimentary (as defined in good faith by the Board of
Directors) to the business of the Company and the Restricted
Subsidiaries on the date of issuance of the Notes.
"Affiliate" of any specified person means any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person. For the purposes
of this definition, "control" when used with respect to any specified
person means the power to direct or cause the direction of the
management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or
dispositions) by the Company or any Restricted Subsidiary, including
any disposition by means of a merger, consolidation or similar
transaction (each referred to for the purposes of this definition as
a "disposition"), of (i) any shares of Capital Stock of a Restricted
Subsidiary (other than directors' qualifying shares and, to the extent
required by local ownership laws in foreign countries, shares owned by
foreign shareholders); (ii) all or substantially all the assets of any
division, business segment or comparable line of business of the
Company or any Restricted Subsidiary; or (iii) any other assets of the
Company or any Restricted Subsidiary having a fair market value (as
determined in good faith by the Board of Directors) in excess of
$250,000 disposed of in a single transaction or series of related
transactions outside of the ordinary course of business of the Company
or such Restricted Subsidiary (other than, in the case of (i), (ii)
and (iii) above, a disposition by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal
payment (assuming the exercise by the obligor of such Indebtedness of
all unconditional (other than as to the giving of notice) extension
options of each such scheduled payment date) of such Indebtedness
multiplied by the amount of such principal payment by (ii) the sum of
30
<PAGE>
all such principal payments.
"Bank Credit Facility" means the Revolving Credit Facility and
any bank credit agreement or credit facility entered into in the
future by the Company or any Restricted Subsidiary, as any of the same
may be amended, waived, modified, refinanced or replaced from time to
time.
"Capitalized Lease Obligations" means any obligations under a
lease that is required to be capitalized for financial reporting
purposes in accordance with generally accepted accounting principles.
"Capital Stock" of any person means any and all shares,
interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) equity of
such person, including any Preferred Stock, but excluding any debt
securities convertible into such equity.
"Change of Control" means the occurrence of any of the following
events:
(i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause such person or
group shall be deemed to have "beneficial ownership" of all shares
that any such person or group has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50 percent of the total voting
power of the Voting Stock of the Company;
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
(together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a majority vote of the directors of the
Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; or
(iii) the merger or consolidation of the Company with or into
another person or the merger of another person with or into the
Company, or the sale of all or
31
<PAGE>
substantially all the assets of the Company to another person, other
than any such sale to one or more Restricted Subsidiaries, and in the
case of any such merger or consolidation, the securities of the
Company that are outstanding immediately prior to such transaction and
which represent 100 percent of the aggregate voting power of the
Voting Stock of the Company are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, securities of the surviving corporation, or a parent
corporation that owns all of the Capital Stock of such surviving
corporation, that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of
the surviving corporation or such parent corporation, as the case may
be.
"Consolidated Coverage Ratio" with respect to the Company as of
any date of determination means the ratio of the Company's EBITDA to
its Consolidated Interest Incurred for the four fiscal quarters ending
immediately prior to the date of determination. Notwithstanding
clause (ii) of the definition of Consolidated Net Income, if the
Indebtedness which is being Incurred is Incurred in connection with an
acquisition by the Company or a Restricted Subsidiary, the
Consolidated Coverage Ratio shall be determined after giving effect to
both the Consolidated Interest Incurred related to the Incurrence of
such Indebtedness and the EBITDA as if the acquisition had occurred at
the beginning of the four fiscal quarter period (x) of the person
becoming a Restricted Subsidiary,or (y) in the case of an acquisition
of assets that constitute substantially all of an operating unit or
business, relating to the assets being acquired by the Company or a
Restricted Subsidiary.
"Consolidated Interest Expense" of the Company means, for any
period, the aggregate amount of interest which, in accordance with
generally accepted accounting principles as in effect on the date of
the issuance of the Notes, would be included on an income statement
for the Company and its Restricted Subsidiaries on a consolidated
basis, whether expensed directly, or included as a component of cost
of goods sold, or allocated to joint ventures or otherwise (including,
but not limited to, imputed interest included on Capitalized Lease
Obligations, all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance
financing,
32
<PAGE>
the net costs associated with Hedging Obligations, amortization of
other financing fees and expenses, the interest portion of any
deferred payment obligation, amortization of discount or premium, if
any, and all other non-cash interest expense), excluding interest
expense related to mortgage banking operations plus the product of (i)
cash dividends paid on any Preferred Stock of the Company times (ii) a
fraction, the numerator of which is one and the denominator of which
is one minus the then current effective aggregate federal, state and
local tax rate of the Company, expressed as a decimal.
"Consolidated Interest Incurred" of the Company means, for any
period, (i) the aggregate amount of interest which, in accordance with
generally accepted accounting principles as in effect on the date of
the issuance of the Notes, would be included on an income statement
for the Company and its Restricted Subsidiaries on a consolidated
basis, whether expensed directly, or included as a component of cost
of goods sold, or allocated to joint ventures or otherwise (including,
but not limited to, imputed interest included on Capitalized Lease
Obligations, all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with Hedging Obligations,
amortization of discount or premium, if any, and all other non-cash
interest expense), excluding interest expense related to mortgage
banking operations, plus or minus, without duplication; (ii) the
difference between capitalized interest for such period and the
interest component of cost of goods sold for such period; plus (iii)
the product of (A) cash dividends paid on any Preferred Stock of the
Company, times (B) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective aggregate
federal, state and local tax rate of the Company, expressed as a
decimal.
"Consolidated Net Income" for any period, means the aggregate of
the Net Income of the Company and its Restricted Subsidiaries for such
period on a consolidated basis determined in accordance with generally
accepted accounting principles as in effect on the date of the
issuance of the Notes, provided that (i) the Net Income of any person
in which the Company or any Restricted Subsidiary has, a joint
interest with a third party (other than an Unrestricted Subsidiary)
shall be included only to the extent of the lesser of (A) the amount
of dividends or distributions actually
33
<PAGE>
paid to the Company or a Restricted Subsidiary or (B) the Company's
direct or indirect proportionate interest in the Net Income of such
person, provided that, so long as the Company or a Restricted
Subsidiary has an unqualified legal right to require the payment of a
dividend or distribution, Net Income shall be determined solely
pursuant to clause (B); (ii) the Net Income of any person acquired in
a pooling of interests transaction for any period prior to the date of
such acquisition shall be excluded; and (iii) the Net Income of any
Unrestricted Subsidiary shall be included only to the extent of the
amount of dividends or distributions (the fair value of which, if
other than in cash, to be determined by the Board of Directors, in
good faith) by such Subsidiary to the Company or to any of its
consolidated Restricted Subsidiaries; and (iv) the Net Income of any
Unrestricted Subsidiary, any Homebuilding Joint Venture or any other
person in which the Company or any Restricted Subsidiary has a joint
interest with a third party that is not existing on December 31, 1997
shall be included only to the extent that the aggregate amount of
dividends or distributions (the fair value of which, if other than
cash, to be determined by the Board of Directors, in good faith) by
such Subsidiary or Homebuilding Joint Venture to the Company or to any
of its consolidated Restricted Subsidiaries exceeds the aggregate
amount of unpaid loans or advances and unreturned capital
contributions made by the Company or any Restricted Subsidiary in or
to such Subsidiary or Homebuilding Joint Venture.
"Consolidated Net Worth" of the Company means consolidated
stockholders' equity less any increase in stockholders' equity of each
of the Unrestricted Subsidiaries subsequent to December 31, 1997
attributable to the Company or any of its Restricted Subsidiaries, as
determined in accordance with generally accepted accounting principles
as in effect on the date of the issuance of the Notes.
"Consolidated Tangible Net Worth" with respect to the Company
means the consolidated stockholders' equity of the Company, as
determined in accordance with generally accepted accounting
principles, as in effect on the date of the issuance of the Notes,
less (i) that portion of any increase in each of the Unrestricted
Subsidiaries' stockholders' equity subsequent to December 31, 1997
attributable to the Company or any of its Restricted Subsidiaries, as
determined in accordance with generally accepted accounting
principles, as in effect on the date of the issuance of the Notes, and
(ii) the Intangible Assets of the Company and the
34
<PAGE>
Restricted Subsidiaries. "Intangible Assets" means the amount (to the
extent reflected in determining consolidated stockholders' equity) of
(A) all write-ups (other than write-ups of tangible assets of a going
concern business made within twelve months after the acquisition of
such business) in the book value of any asset owned by the Company or
any Restricted Subsidiary, and (B) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other
like intangibles.
"Disqualified Stock" means, with respect to any person, any
Capital Stock which by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable) or upon the
happening of any event (i) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise; (ii) is
convertible or exchangeable, at the option of the holder thereof, for
Indebtedness or Disqualified Stock; or (iii) is redeemable at the
option of the holder thereof, in whole or in part, in each case on or
prior to February 15, 2009. Notwithstanding the foregoing,
"Disqualified Stock" shall not include Capital Stock which is
redeemable solely pursuant to a change in control provision that does
not (A) cause such Capital Stock to become redeemable in circumstances
which would not constitute a Change of Control and (B) require the
Company to pay the redemption price therefor prior to the repurchase
date specified under "Change of Control" above.
"EBITDA" of the Company for any period means the sum of
Consolidated Net Income plus Consolidated Interest Expense plus,
without duplication, the following to the extent deducted in
calculating such Consolidated Net Income: (i) income tax expense,
(ii) depreciation expense, (iii) amortization expense and (iv) all
other non-cash items reducing Consolidated Net Income (other than
items that will require cash payments in the future and for which an
accrual or reserve is, or is required by generally accepted accounting
principals as in effect on the date of issuance of the Notes to be,
made), less all non-cash items increasing Consolidated Net Income, in
each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Subsidiary of the Company shall be
added to Consolidated Net Income to compute EBITDA only to the extent
(and in the same proportion) that the net income of such Subsidiary
was included in calculating Consolidated Net Income.
35
<PAGE>
"Hedging Obligations" of any person means the net obligations of
such person pursuant to any Interest Rate Agreement or any foreign
exchange contract, currency swap agreement or other similar agreement
to which such person is a party or a beneficiary.
"Homebuilding Joint Venture" means (i) any Unrestricted
Subsidiary and (ii) any person in which the Company or any of its
Subsidiaries has an ownership interest but less than a 100% ownership
interest that, in each case, was formed for and is engaged in
homebuilding operations.
"Incur" means issue, assume, guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock
of a person existing at the time such person becomes a Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be
deemed to be Incurred by such Subsidiary at the time it becomes a
Subsidiary; provided further, however, that in the case of a discount
security, neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of
Indebtedness. The term "Incurrence" when used as a noun shall have a
correlative meaning.
"Indebtedness" means on any date of determination (without
duplication), (i) the principal of and premium (if any) in respect of
(A) indebtedness of such person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such person is responsible or
liable; (ii) all Capitalized Lease Obligations of such person; (iii)
all obligations of such person issued or assumed as the deferred
purchase price of property or services, all conditional sale
obligations of such person and all obligations of such person under
any title retention agreement (but excluding accounts payable and
accrued expenses arising in the ordinary course of business and which
are not more than 90 days past due and not in dispute) which would
appear as a liability on a balance sheet of a person prepared on a
consolidated basis in accordance with generally accepted accounting
principles, which purchase price or obligation is due more than six
months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services
(provided that, in the case of obligations of an acquired person
assumed in connection with an acquisition of such person, such
obligations would constitute Indebtedness of such person); (iv) all
obligations of such person for the reimbursement of any
36
<PAGE>
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such
person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than
the tenth Business Day following receipt by such person of a demand
for reimbursement following payment on the letter of credit); (v) the
amount of all obligations of such person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock
or, with respect to any Subsidiary of such person, any Preferred Stock
(but excluding, in each case, any accrued dividends); (vi) all
obligations of the type referred to in clauses (i) through (v) of
other persons and all dividends of other persons for the payment of
which, in either case, such person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including by means
of any guarantee; (vii) all obligations of the type referred to in
clauses (i) through (vi) of other persons secured by any lien on any
property or asset of such person (whether or not such obligation is
assumed by such person), the amount of such obligation being deemed to
be the lesser of the value of such property or assets or the amount of
the obligation so secured; and (viii) to the extent not otherwise
included in this definition, Hedging Obligations of such Person. The
amount of Indebtedness of any person at any date shall be the
outstanding balance at such date of all unconditional obligations as
described above and the maximum liability, upon the occurrence of the
contingency, other than a contingency solely within the control of
such person, giving rise to the obligation, of any contingent
obligations as described above at such date; provided, however, that
the amount outstanding at any time of any Indebtedness issued with
original issue discount shall be deemed to be the face amount of such
Indebtedness less the remaining unamortized portion of the original
issue discount of such indebtedness at such time as determined in
conformity with generally accepted accounting principles.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Restricted
Subsidiary against fluctuations in interest rates.
37
<PAGE>
"Investment" in any person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet
of such person) or other extensions of credit (including by way of
guarantee or similar arrangement) or capital contribution to (by means
of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such person.
"Mortgage" means a first priority mortgage or first priority deed
of trust on improved real property.
"Net Income" of any person means the net income (loss) of such
person, determined in accordance with generally accepted accounting
principles, as in effect on the date of issuance of the Notes;
excluding, however, from the determination of Net Income all gains (to
the extent that they exceed all losses) realized upon the sale or
other disposition (including, without limitation, dispositions
pursuant to sale leaseback transactions) of any real property or
equipment of such person, which is not sold or otherwise disposed of
in the ordinary course of business, or of any capital stock of such
person or its subsidiaries owned by such person.
"Net Proceeds" means with respect to any sale, assignment,
exchange, lease, transfer or other disposition of assets, the
consideration received by the Company (or a Restricted Subsidiary, as
the case may be) for such disposition after (a) provision for all
income and other taxes resulting from such asset disposition, (b)
payment of all brokerage commissions, underwriting, legal, accounting,
appraisal and other fees and expenses related to such asset sale and
(c) deduction of appropriate amounts to be provided by the Company or
a Restricted Subsidiary as a reserve, in accordance with generally
accepted accounting principles, against any liabilities associated
with the assets sold or disposed of in such asset disposition and
retained by the Company or a Restricted Subsidiary after such asset
sale, including, without limitation, pension and other post-employment
benefit liabilities and against any indemnification obligations
associated with the assets sold or disposed of in such asset sale.
"Non-Recourse Indebtedness" means Indebtedness or other
obligations secured by a lien on property to the extent that the
liability for such Indebtedness or
38
<PAGE>
other obligations is limited to the security of the property without
liability on the part of the Company or any Subsidiary (other than the
Subsidiary which holds title to such property) for any deficiency.
"Person" means an individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company,
limited liability partnership, trust, unincorporated organization, or
government or any agency or political subdivision thereof.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends, or as
assets upon any voluntary or involuntary liquidation or dissolution of
such corporation, over shares of Capital Stock of any other class of
such corporation.
"Refinance" means, in respect of Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to
issue other Indebtedness in exchange or replacement for, such
Indebtedness. "Refinancing" shall have a correlative meaning.
"Restricted Investment" means any loan, advance, capital
contribution or transfer (including by way of guaranty or other
similar arrangement) in or to any Unrestricted Subsidiary,
Homebuilding Joint Venture or any person in which the Company,
directly or indirectly, has an ownership interest but less than 100
percent ownership interest; provided, however, that loans, advances,
capital contributions or transfers (including by way of guaranty or
other similar arrangement) to a Homebuilding Joint Venture shall be
counted as a Restricted Investment only to the extent that the
aggregate at any one time outstanding of all such amounts expended (or
with respect to guaranties or similar arrangements the amounts then
guaranteed) exceed, subsequent to December 31, 1996, $20 million for
any one Homebuilding Joint Venture or $80 million in the aggregate for
all Homebuilding Joint Ventures. Restricted Investment shall include
the fair market value of the net assets of any Restricted Subsidiary
that at any time is designated an Unrestricted Subsidiary. Any
property transferred to an Unrestricted Subsidiary, and the net assets
of a Restricted Subsidiary that is designated an Unrestricted
Subsidiary, shall be valued at fair market value at the time of such
transfer, in each case as
39
<PAGE>
determined by the Board of Directors of the Company in good faith. The
net assets of Panel Concepts shall not be counted as a Restricted
Investment if (i) a sale of all or a portion of the Capital Stock of
Panel Concepts causes Panel Concepts to become an Unrestricted
Subsidiary; (ii) at the time of such sale, the net book value of the
assets of Panel Concepts represent less than 10 percent of the
consolidated assets of the Company and its Restricted Subsidiaries;
and (iii) the net proceeds of any such sale and any subsequent sale of
the Capital Stock of Panel Concepts to any person other than the
Company or any Restricted Subsidiary are paid or distributed to the
Company or any Restricted Subsidiary.
"Restricted Subsidiary" means any Wholly-Owned Subsidiary that
has not been designated an Unrestricted Subsidiary.
"Subsidiary" means a corporation, a majority of the capital stock
with voting power to elect directors of which is directly or
indirectly owned by the Company and its Subsidiaries, or any person in
which the Company and its Subsidiaries have at least a majority
ownership interest.
"Unrestricted Subsidiary" means (i) any Subsidiary in which the
Company, directly or indirectly, has less than a 100% ownership
interest; (ii) any Wholly Owned Subsidiary which in accordance with
paragraph (m)(viii) above has been designated in a resolution adopted
by the Board of Directors of the Company as an Unrestricted
Subsidiary, in each case unless and until such Subsidiary shall be
designated as a Restricted Subsidiary in accordance with paragraph
(m)(viii) above; and (iii) any Wholly-Owned Subsidiary a majority of
the voting stock of which shall at the time be owned directly or
indirectly by one or more Unrestricted Subsidiaries.
"Voting Stock", with respect to any person, means securities of
any class of Capital Stock of such person entitling the holders
thereof (whether at all times or only so long as no senior class of
stock has voting power by reason of any contingency) to vote in the
election of members of the board of directors of such person.
"Warehouse Facility" means a Bank Credit Facility to finance the
making of Mortgage loans originated by the Company or any of its
Subsidiaries.
40
<PAGE>
"Wholly Owned Subsidiary" means a Subsidiary, all of the capital
stock (whether or not voting, but exclusive of directors' qualifying
shares) of which is owned by the Company or a Wholly-Owned Subsidiary.
(remainder of page left intentionally blank)
41
<PAGE>
Each of the undersigned, for himself, states that he has read and is
familiar with the provisions of Article Two of the Indenture relating to the
establishment of a series of Securities thereunder and the establishment of
forms of Securities representing a series of Securities thereunder and, in each
case, the definitions therein relating thereto; that he is generally familiar
with the other provisions of the Indenture and with the affairs of the Company
and its acts and proceedings and that the statements and opinions made by him in
this Officers' Certificate are based upon such familiarity; and that he has made
such examination or investigation as is necessary to enable him to determine
whether or not the covenants and conditions referred to above have been complied
with; and in his opinion, such covenants and conditions have been complied with.
IN WITNESS WHEREOF, the undersigned has hereunto signed this
Certificate on behalf of the Company this 10th day of February, 1998.
STANDARD PACIFIC CORP.
By:_______________________________
Name: Stephen J. Scarborough
Title: President
By:_______________________________
Name: Andrew H. Parnes
Title: Vice President-Finance,
Treasurer and Chief
Financial Officer
S-1
<PAGE>
EXHIBIT A
NO. R-1 STANDARD PACIFIC CORP. $[_________]
CUSIP NO.: [_________]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXCEPT FROM REGISTRATION UNDER SECTION 5 OF THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER
OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) (A) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (B) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (D) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT PROVIDED THAT IN THE CASE OF A TRANSFER PURSUANT TO THIS
CLAUSE (D), SUCH TRANSFER IS EFFECTED BY THE DELIVERY TO THE TRANSFEREE OF
DEFINITIVE SECURITIES REGISTERED IN ITS NAME (OR ITS NOMINEE'S NAME) IN THE
BOOKS MAINTAINED BY THE REGISTRAR, AND IS SUBJECT TO THE RECEIPT BY THE
REGISTRAR (AND THE COMPANY, IF IT SO REQUESTS) OF A CERTIFICATION OF THE
TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR NOTES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER
THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK), A NEW YORK
CORPORATION, TO THE ISSUER OR ITS AGENT FOR THE REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
Standard Pacific Corp., a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of [____________] Million Dollars
($[____________]) on February 15, 2008.
<PAGE>
8% SENIOR NOTE DUE 2008
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Dated: February 10, 1998
STANDARD PACIFIC CORP.
By:______________________________________
Name:____________________________________
Title:___________________________________
Attest:
________________________________________
Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Note is one of the Securities
referred to in the within
mentioned Indenture.
UNITED STATES TRUST COMPANY OF NEW YORK, as
Trustee
By:______________________________________
Authorized Signatory
<PAGE>
STANDARD PACIFIC CORP.
8% SENIOR NOTE DUE 2008
1. Interest.
Standard Pacific Corp., a Delaware corporation (the "Company"), promises to
pay interest on the principal amount of this Note at the rate per annum shown
above. The Company will pay interest semiannually on February 15 and August 15
of each year (the "Interest Payment Date"), commencing August 15, 1998.
Interest on the Note will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from February 10, 1998 or, in the
case of a note issued after August 15, 1998, the Interest Payment Date next
preceding the date of issuance of such note. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Overdue principal and, to the
extent payment of such interest shall be legally enforceable, overdue
installments of interest shall bear interest at the rate per annum shown above.
2. Method of Payment.
The Company will pay interest on the Notes (except default interest, which
shall be payable in the manner provided in Section 2.13 of the Indenture) to the
persons who are registered holders of Notes at the close of business on the
February 1 or August 1 next preceding the Interest Payment Date (the "Record
Date"). Holders must surrender Notes to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal and interest by its check
payable in such money. It may mail an interest check to a Holder's registered
address.
3. Paying Agent and Registrar.
Initially, United States Trust Company of New York (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without notice. The Company or any of its
subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture.
The Company issued the Notes under an Indenture dated as of April 1, 1992
(the "Indenture") between the Company and the Trustee. The terms of the Notes
include those stated in the Indenture, those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)77aaa-77bbbb)
(the "Act") as in effect on the date of the Indenture and as may be amended from
time to time, and those incorporated by reference into the Indenture pursuant to
an Officers' Certificate of the Company dated February 10, 1998 (the "Officers'
Certificate") delivered pursuant to Sections 2.01 and 2.03(a) of the Indenture.
The Notes are subject to and governed by all such terms, and holders of Notes
are referred to the Indenture, the Officers' Certificate and the Act for a
statement of them. All capitalized terms used in this Note and not otherwise
defined herein shall have the meanings set forth in the Indenture and the
Officers' Certificate. The Notes are general unsecured obligations of the
Company limited to the
A-3
<PAGE>
aggregate principal amount of $175,000,000.
5. Optional Redemption.
The Notes will not be redeemable at the option of the Company prior to
February 15, 2003. Thereafter, the Notes will be redeemable, at the Company's
option, in whole or in part, at any time or from time to time, upon not less
than 30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's registered address, at the following redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on February 15 of the years set
forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003........................................... 104.00%
2004........................................... 102.67%
2005........................................... 101.33%
2006 and thereafter............................ 100.00%
</TABLE>
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at his
registered address. Notes in denominations larger than $1,000 may be redeemed
in part. On and after the redemption date interest ceases to accrue on Notes or
portions of them called for redemption.
7. Selection.
If less than all of the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed on a pro rata basis, by lot or by such other method as
the Trustee in its sole discretion shall deem to be fair and appropriate.
8. Mandatory Repurchase Obligation.
If there is a Change of Control of the Company, the Holder of this Note
shall have the right to require the Company to repurchase all or a portion of
this Note at a purchase price equal to 101% of the principal amount hereof plus
accrued and unpaid interest to the date of repurchase, as provided in, and
subject to the terms of, the Indenture. In addition, under certain
circumstances, if the Company fails to maintain a certain specified minimum
Consolidated Net Worth or engages in certain asset sales, the Company shall be
required to offer to purchase a portion of the aggregate principal amount of
Notes outstanding together with accrued and unpaid interest to the date of
purchase, as provided in, and subject to the terms of, the Indenture.
A-4
<PAGE>
9. Denominations, Transfer, Exchange.
If the Notes are issued in global form, and this Note contains a legend in
the face hereof to such effect, the provisions of this Section 9 shall be deemed
superseded by such legend and Section 3(c) of the Officers Certificate, to the
extent the provisions of this Section 9 are inconsistent with such legend of
Section 3(c).
The Notes are issuable in registered form, without coupons, in
denominations of $1,000 and any amount in excess thereof which is an integral
multiple of $1,000. As provided in the Indenture and subject to certain
limitations therein set forth, Notes are exchangeable for a like aggregate
principal amount of Notes of like tenor of any authorized denomination, as
requested by the Holder surrendering the same, upon surrender of the Note or
Notes to be exchanged at any office or agency where Notes may be presented for
registration of transfer.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of Notes is registrable in the register of Notes upon
surrender of a Note for registration of transfer at the Corporate Trust Office
of the Trustee in the Borough of Manhattan, The City of New York, or at the
office of any transfer agent hereafter designated by the Company for such
purpose, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more new
Notes of like tenor, of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
No service charge shall be made by the Company, the Trustee or the
Registrar for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax, assessment or other
governmental charge payable in connection therewith (other than exchanges
pursuant to Sections 2.11, 3.06 or 9.05 of the Indenture not involving any
transfer).
10. Person Deemed Owner.
The registered holder of a Note may be treated as the owner of it for all
purposes.
11. Amendment, Waiver.
The Indenture permits, in certain circumstances therein specified, the
amendment thereof without the consent of the Holders of the Notes. The
Indenture also permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations under the
Indenture of the Company and the rights of Holders of the Notes at any time by
the Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Notes at the time Outstanding. The Indenture
also contains provisions permitting the Holders of a majority in aggregate
principal amount of the Notes at the time Outstanding, on behalf of the Holders
of all the Notes, to waive compliance by the Company with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holders shall be conclusive and
binding upon the Holder of this Note and upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Note.
A-5
<PAGE>
12. Successor Corporation.
When a successor corporation assumes all the obligations of its predecessor
under the Notes and the Indenture, the predecessor corporation will be released
from those obligations.
13. Defaults and Remedies.
The following are Events of Default: (i) failure by the Company to pay
interest on the Notes when due which default continues for a period of 30 days
or the principal of the Notes when due; (ii) failure by the Company to perform
any other covenant in the Notes or the Indenture for 45 days after receipt by
the Company of a Notice of Default; (iii) default under any mortgage, indenture
(including the Indenture) or instrument under which is issued or which secures
or evidences Indebtedness of the Company or any Restricted Subsidiary (other
than Non-Recourse Indebtedness) which default constitutes a failure to pay
principal of such Indebtedness in an amount of $20,000,000 or more when due and
payable (other than as a result of acceleration) or results in Indebtedness
(other than Non-Recourse Indebtedness) in the aggregate of $20,000,000 or more
becoming or being declared due and payable before it would otherwise become due
and payable; (iv) entry of a final judgment for the payment of money against the
Company or any Restricted Subsidiary in an amount of $5,000,000 or more which
remains undischarged or unstayed for a period of 60 days after the date on which
the right to appeal such judgment has expired or become subject to an
enforcement proceeding; or (v) certain events of bankruptcy, insolvency or
reorganization.
In case an Event of Default (other than arising out of certain events of
bankruptcy, insolvency or reorganization) occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of the Notes at the
time Outstanding, by notice in writing to the Company (and to the Trustee if
given by the Holders), may declare to be due and payable immediately that
portion of the principal amount of the Notes at the time Outstanding and accrued
and unpaid interest if any, to the date of acceleration and upon such
declaration the same shall become and be immediately due and payable. In case
an Event of Default arising out of certain events of bankruptcy, insolvency or
reorganization occurs and is continuing, the outstanding principal of and
accrued and unpaid interest if any, on the Notes shall become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any of the Holders.
Such declaration or acceleration and its consequences may be rescinded by
Holders of a majority in aggregate principal amount of Notes at the time
Outstanding if all existing Events of Default have been cured or waived (except
non-payment of principal that has become due solely because of the acceleration)
and if the rescission would not conflict with any judgment or decree.
An existing Default (other than a default in payment of principal of or
interest on the Notes or default with respect to a provision which cannot be
modified under the terms of the Indenture without the consent of each Note
Holder affected) may be waived by the Holders of a majority in aggregate
principal amount of Notes at the time Outstanding upon the conditions provided
in the Indenture.
A-6
<PAGE>
14. Trustee Dealings with Company.
United States Trust Company of New York, the Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company or its Affiliates, with the same
rights it would have if it were not Trustee.
15. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder of a Note by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
16. Authentication.
This Security shall not be valid until the Trustee signs the certificate of
authentication on the second page of this Note.
A-7
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT......Custodian.....
(Cust.) (Minor)
TEN ENT - as tenants by the Under Uniform Gifts to
entireties Minors Act
JT TEN - as joint tenants with right
of survivorship and not as
.....................
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
-----------------------
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Please Insert Social Security or Employer
Identification Number of Assignee
- --------------------------------------
- -
- --------------------------------------
________________________________________________________________________________
Please Print or Typewrite Name and Address
Including Postal Zip Code of Assignee
_____________________________________________________________________________the
within Security and all rights thereunder, hereby irrevocably constituting
and appointing
________________________________________________________________________attorney
to Transfer said Security on the books of the Company, with full power of
substitution in the premises.
Dated: ______________________________ Signature _______________________________
NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within note in every particular, without
alteration or enlargement or any change whatever.
A-8
<PAGE>
CERTIFICATE OF TRANSFER
-----------------------
In connection with the transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Securities and Exchange Commission of the effectiveness of a registration
statement under the Securities Act of 1933, as amended (the "Securities Act")
covering resale of this Security (which effectiveness shall not have been
suspended or terminated at the date of the transfer) and (ii) February 10, 2000,
the undersigned confirms that it has not utilized any general solicitation or
general advertisement in connection with this transfer and that this Security is
being transferred:
[Check One]
(1) _________ to the Company or a subsidiary thereof; or
(2) _________ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) _________ to an institutional "accredited investor" (as defined in Rule
501(a)(1),(2),(3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which can be
obtained from the Trustee); or
(4) _________ outside of the United States to a "Non-U.S. Person" in
compliance with Rule 904 of Regulation S under the Securities
Act; or
(5) _________ pursuant to an exemption from registration provided by Rule 144
under the Securities Act; or
(6) _________ pursuant to an effective registration statement under the
Securities Act; or
(7) _________ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the items is checked, the Trustee will refuse to
register any of the Securities evidenced by this Certificate in the name of any
person other than the registered Holder thereof; provided that if box (3), (4),
(5) or (7) is checked, the Company or the Trustee may require, prior to
registering any such transfer of the Securities, in its sole discretion, such
legal opinions, certifications (including an investment letter in the case of
box (3) or (4)) and other information as the Trustee or the Company has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
If none of the foregoing items is checked, the Trustee shall not be
obligated to register this Security in the name of any person other than the
Holder hereof, unless and until the conditions to any such transfer of
registration set forth herein and in paragraph (c)(iv) of the Officers'
Certificate, dated February 10, 1998, relating to the Securities shall have been
satisfied.
Dated:_______________
Your Signature:_________________________
Sign exactly as your name
appears on the first page
of this Security
A-9
<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and the undersigned is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information, regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
Signature:_________________________________
Name:
Title:
A-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased or redeemed by the
Company pursuant to the Indenture, check the box:
[_]
If you want to elect to have only part of this Security purchased by
the Company pursuant to paragraphs 3(j), 3(m)(i) or 3(m)(v) of the Officers'
Certificate adopted pursuant to Sections 2.01 and 2.03 of the Indenture, state
the amount.
$_____________
Date:_________________ Your Signature:_________________________________________
(Sign exactly as your name appears on the
first page of this Security)
Signature Guarantee:_____________________________
NOTICE: Signature(s) must be guaranteed by a member firm of a major stock
exchange or a commercial bank or Trust company.
A-11
<PAGE>
EXHIBIT B
FORM OF INSTITUTIONAL ACCREDITED INVESTOR LETTER
We are delivering this letter in connection with a proposed purchase of 8%
Senior Notes due 2008 (the "Notes") of Standard Pacific Corp. (the "Company").
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act (an "Institutional Accredited Investor");
(ii) any purchase of Notes by us will be for our own account or for
the account of one or more other Institutional Accredited Investors;
(iii) in the event that we purchase Notes, we will acquire Notes
having a minimum purchase price of at least $100,000 for our own account
and for each separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of
purchasing Notes;
(v) we are not acquiring Notes with a view to any distribution
thereof in a transaction that would violate the Securities Act or the
securities laws of any State of the United States or any other applicable
jurisdiction; provided that the disposition of our property and the
property of any accounts for which we are acting as fiduciary shall remain
at all times within our control; and
(vi) we acknowledge that we have had access to such financial and
other information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto, as
we deem necessary in connection with our decision to purchase Notes.
We understand that the Notes are being offered in a transaction not
involving any public offering within the meaning of the Securities Act and that
the Notes have not been registered under the Securities Act, and we agree, on
our own behalf and on behalf of each account for which we acquire Notes, that
such Notes may be offered, resold, pledged or otherwise transferred only (i) to
a person whom we reasonably believe to be a qualified institutional buyer (as
defined in Rule 144A under the Securities Act) in a transaction meeting the
requirements of Rule 144A, in a transaction meeting the requirements of Rule
144, outside the
B-1
<PAGE>
United States in a transaction meeting the requirements of Rule 904 under the
Securities Act, or in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel if the
Company so requests), (ii) to the Company or (iii) pursuant to an effective
registration statement, and, in each case, in accordance with any applicable
securities laws of any State of the United States or any other applicable
jurisdiction. We understand that the registrar will not be required to accept
for registration of transfer any Notes, except upon presentation of evidence
satisfactory to the Company that the foregoing restrictions on transfer have
been complied with. We further understand that the Notes purchased by us will be
in the form of definitive physical certificates and that such certificates will
bear a legend reflecting the substance of this paragraph.
We acknowledge that you and others will rely upon our confirmations,
acknowledgments and agreements set forth herein, and we agree to notify you
promptly in writing if any of our representations or warranties herein ceases to
be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
________________________________
(Name of Purchaser)
By: ___________________________
Name:
Title:
Address: ________________________________
________________________________
________________________________
B-2
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
[Date]
United States Trust Company
of New York
[Address]
Re: Standard Pacific Corp (the "Company")
8% Senior Notes Due 2008 (the "Note")
-------------------------------------
Ladies and Gentlemen:
In connection with the proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) The offer of the Notes was not made to a person in the United
States;
(2) Either (a) at the time the buy offer was originated, the
transferee was outside of the United States or we and any person acting on
our behalf reasonably believe that the transferee was outside of the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged for a buyer in the United States;
(3) No directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) The transaction is not part of a plan or a scheme to evade the
registration requirements of the Securities Act; and
(5) We have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a
C-1
<PAGE>
copy hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:______________________________
Authorized Signature
C-2
<PAGE>
EXHIBIT 4.5
________________________________________________________________________________
REGISTRATION RIGHTS AGREEMENT
Dated as of February 5, 1998
by and among
STANDARD PACIFIC CORP.,
SBC WARBURG DILLON READ INC.,
BANCAMERICA ROBERTSON STEPHENS
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. DEFINITIONS............................................. 1
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT.................... 4
(a) Transfer Restricted Securities............................ 4
------------------------------
(b) Holders of Transfer Restricted Securities................. 4
-----------------------------------------
SECTION 3. REGISTERED EXCHANGE OFFER............................... 4
SECTION 4. SHELF REGISTRATION...................................... 6
(a) Shelf Registration........................................ 6
------------------
(b) Provision by Holders of Certain Information in
----------------------------------------------
Connection with the Shelf Registration Statement.......... 7
------------------------------------------------
SECTION 5. LIQUIDATED DAMAGES...................................... 7
SECTION 6. REGISTRATION PROCEDURES................................. 8
(a) Exchange Offer Registration Statement..................... 8
-------------------------------------
(b) Shelf Registration Statement.............................. 10
----------------------------
(c) General Provisions........................................ 10
------------------
SECTION 7. REGISTRATION EXPENSES................................... 18
SECTION 8. INDEMNIFICATION......................................... 19
SECTION 9. RULE 144A............................................... 24
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS............ 24
SECTION 11. SELECTION OF UNDERWRITERS.............................. 25
SECTION 12. MISCELLANEOUS.......................................... 25
(a) Remedies.................................................. 25
--------
(b) No Inconsistent Agreements................................ 25
--------------------------
(c) Adjustments Affecting the Notes........................... 25
-------------------------------
(d) Amendments and Waivers.................................... 25
----------------------
(e) Notices................................................... 26
-------
(f) Successors and Assigns.................................... 26
----------------------
(g) Counterparts.............................................. 26
------------
(h) Captions.................................................. 26
--------
(i) Governing Law............................................. 27
-------------
(j) Submission to Jurisdiction................................ 27
--------------------------
(k) Severability.............................................. 27
------------
(l) Entire Agreement.......................................... 27
----------------
</TABLE>
i
<PAGE>
This Registration Rights Agreement (the "Agreement") is made and entered
---------
into as of February 5, 1998 by and among STANDARD PACIFIC CORP., a Delaware
corporation (the "Company"), and SBC WARBURG DILLON READ INC., BANCAMERICA
-------
ROBERTSON STEPHENS and DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION (the
"Initial Purchasers"). The execution and delivery of this Agreement is a
------------------
condition to the obligations of the Initial Purchasers to purchase $100,000,000
of the Company's 8% Senior Notes due 2008 under the Purchase Agreement, dated as
of February 5, 1998 (the "Purchase Agreement"), by and among the Company and the
------------------
Initial Purchasers.
The Company and the Initial Purchasers hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended, and the rules and regulations
---
promulgated by the Commission pursuant thereto.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Business day: Any day except Saturday, Sunday or any day which shall be a
------------
legal holiday or a day on which banking institutions in the State of New York
generally are authorized or required by law or other governmental actions to
close.
Closing Date: The date that the Notes are purchased by the Initial
------------
Purchasers pursuant to the Purchase Agreement.
Commission: The Securities and Exchange Commission.
----------
Consummate: The Exchange Offer shall be deemed "Consummated" for purposes
----------
of this Agreement upon the occurrence of (i) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the New Notes
to be issued in the Exchange Offer, (ii) the maintenance of such Registration
Statement continuously effective and the keeping of the Exchange Offer open for
a period not less than the minimum period required pursuant to Section 3(b) of
this Agreement and (iii) the delivery by the Company to the Registrar under the
Indenture of New Notes in the same aggregate principal amount as the aggregate
principal amount of Old Notes that were so tendered.
Damages Payment Date: With respect to the Notes, each Interest Payment
--------------------
Date.
1
<PAGE>
Effectiveness Target Date: As defined in Section 5 of this Agreement.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations promulgated by the Commission pursuant thereto.
Exchange Offer: The registration under the Act by the Company of the New
--------------
Notes pursuant to a Registration Statement pursuant to which the Company offers
the Holders of all outstanding Transfer Restricted Securities the opportunity to
exchange all such outstanding Old Notes that are Transfer Restricted Securities
held by such Holders for New Notes in an aggregate principal amount equal to the
aggregate principal amount of the Old Notes that are Transfer Restricted
Securities tendered in such exchange offer by such Holders.
Exchange Offer Effective Date: The dated on which the Exchange Offer
-----------------------------
Registration Statement is declared effective by the Commission.
Exchange Offer Registration Statement: The Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
--------------
to sell the Notes to (i) certain "qualified institutional buyers," as such term
is defined in Rule 144A under the Act, and (ii) other eligible purchasers
pursuant to Regulation S under the Act.
Holder(s): As defined in Section 2(b) of this Agreement.
---------
Indenture: The Indenture, dated as of April 1, 1992, by and between the
---------
Company and United States Trust Company of New York, as trustee (the "Trustee"),
-------
pursuant to which the Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with its terms.
Interest Payment Date: As defined in the Notes.
---------------------
NASD: National Association of Securities Dealers, Inc.
----
New Notes: The Company's 8% Senior Notes due 2008 to be issued pursuant to
---------
the Indenture in connection with the Exchange Offer and evidencing the same debt
as the Old Notes.
Notes: Old Notes and New Notes.
-----
Old Notes: The Company's 8% Senior Notes due 2008 to be issued pursuant to
---------
the Indenture on the Closing Date.
2
<PAGE>
Participating Broker Dealer: As defined in Section 6(a)(iii) of this
---------------------------
Agreement.
Person: An individual, partnership, corporation, trust or unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in any Registration Statement, as
----------
amended or supplemented by any prospectus supplement and by all other amendments
and supplements thereto, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if any, in
such Prospectus.
Registration Default: As defined in Section 5 of this Agreement.
--------------------
Registration Statement: Any registration statement of the Company relating
----------------------
to (a) an offering of New Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement that is filed pursuant to the provisions of this
Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including pre-and post-effective amendments)
and all exhibits and material incorporated by reference or deemed to be
incorporated by reference, if any, therein.
Shelf Filing Deadline: As defined in Section 4(a) of this Agreement.
---------------------
Shelf Registration Statement: As defined in Sec tion 4(a) of this
----------------------------
Agreement.
Subsidiary: With respect to any Person, any other Person of which a
----------
majority of the equity ownership or the voting securities is at the time owned,
directly or indirectly, by such Person or by one or more other subsidiaries of
such Person or a combination thereof.
TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section
---
77aaa-77bbbb), as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note until the earliest to occur of
------------------------------
(i) the date on which each such Old Note has been exchanged by a person other
than a Broker-Dealer for a New Note in the Exchange Offer, (ii) following the
exchange by a Broker-Dealer in the Exchange Offer of an Old Note for a New Note,
the date on which such New Note is sold to a purchaser who receives from such
Broker-Dealer on or prior to the date of such sale a copy of the Prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Note has
3
<PAGE>
been effectively registered under the Act and disposed of in accordance with the
Shelf Registration Statement or (iv) the date on which such Note is distributed
(or is eligible to be) to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public pursuant to an effective Registration Statement.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
------------------------------
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
-----------------------------------------
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
------
beneficially owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless, due to a change in law or Commission policy after the date
hereof, the Exchange Offer shall not be permissible under applicable federal law
or Commission policy, the Company shall (i) cause to be filed with the
Commission as soon as practicable on or prior to 60 days after the Closing Date,
a Registration Statement under the Act relating to the New Notes and the
Exchange Offer and (ii) use its best efforts to cause such Registration
Statement to be declared effective by the Commission as soon as practicable on
or prior to 120 days after the Closing Date. In connection with the foregoing,
the Company shall (A) file all pre-effective amendments to such Registration
Statement as may be necessary to cause such Registration Statement to become
effective, (B) if applicable, file a post-effective amendment to such
Registration Statement pursuant to Rule 430A under the Act, (C) cause all
necessary filings in connection with the registration and qualification of the
New Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer (provided, however, that
the Company shall not be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to take any action that would
subject it to general service of process or taxation in any jurisdiction where
it is not so subject, except service of process with respect to the offering and
sale of the Notes) and (D) upon the effectiveness of such Registration
Statement, commence the Exchange Offer and use its best efforts to issue on or
prior to 45 days after the Exchange Offer Effective Date, New Notes in exchange
for all Old Notes tendered in the Exchange Offer. The Exchange Offer
Registration Statement shall be on the appropriate form permitting registration
of the New Notes to be offered in
4
<PAGE>
exchange for the Transfer Restricted Securities and to permit resales of New
Notes held by Broker-Dealers as contemplated by Section 3(c) below. If, after
such Exchange Offer Registration Statement initially is declared effective by
the Commission, the Exchange Offer or the issuance of New Notes under the
Exchange Offer or the resale of New Notes received by Broker-Dealers in the
Exchange Offer as contemplated by Section 3(c) below is interfered with by any
stop order, injunction or other order or requirement of the Commission or any
other governmental agency or court, such Registration Statement shall be deemed
not to have become effective for purposes of this Agreement during the period
that such stop order, injunction or other similar order or requirement shall
remain in effect.
(b) The Company shall cause the Exchange Offer Registration Statement to be
continuously effective and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
-------- -------
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. The Company shall only offer to exchange New Notes for Old Notes in the
Exchange Offer, and only the New Notes shall be registered under the Exchange
Offer Registration Statement.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus included in the Exchange Offer Registration
Statement that any Broker-Dealer that holds Old Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such Old
Notes pursuant to the Exchange Offer; provided, however, that such Broker-Dealer
-------- -------
may be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the New Notes received by such Broker-Dealer in
the Exchange Offer. Such "Plan of Distribution" section shall allow the use of
the Prospectus by all Persons subject to the prospectus delivery requirements of
the Act, including Participating Broker-Dealers, and shall also contain all
other information with respect to such resales by Broker-Dealers that the
Commission may require to permit such resales pursuant thereto, but such "Plan
of Distribution" shall not name any such Broker-Dealer or disclose the amount of
Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
During the period required by Section 3(b) above, the Company shall use its
best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and
5
<PAGE>
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time. The Company shall provide sufficient
copies of the latest version of such Prospectus to Broker-Dealers promptly upon
request at any time during such period in order to facilitate such resales.
Unless otherwise agreed by the Company, no Broker-Dealer shall deliver such
Prospectus after the expiration of the period required by Section 3(b).
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
------------------
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any Holder of Transfer Restricted Securities shall notify the
Company within 20 business days after the commencement of the Exchange Offer
that such Holder (A) is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
is a Broker-Dealer and holds Old Notes (including the Initial Purchaser who
holds Old Notes as part of an unsold allotment from the original offering of the
Notes) acquired directly from the Company or one of its affiliates or (iii) the
Company does not consummate the Exchange Offer within 45 days following the
effectiveness date of the Exchange Offer Registration Statement, then the
Company shall (x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration Statement"), on
----------------------------
or prior to the earliest to occur of (1) the 60th day after the date on which
the Company determines that it is not required to file the Exchange Offer
Registration Statement or (2) the 60th day after the date on which the Company
receives notice from a Holder of Transfer Restricted Securities as contemplated
by clause (ii) above (such earliest date being the "Shelf Filing Deadline"),
---------------------
which Shelf Registration Statement shall provide for resales of all Transfer
Restricted Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) of this Agreement, and (y) use its best
efforts to cause such Shelf Registration Statement to be declared effective by
the Commission on or before the 120th day after the Shelf Filing Deadline. The
Company shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
6
<PAGE>
of Sections 6(b) and (c) of this Agreement to the extent necessary to ensure
that it is available for resales of Notes by the Holders of Transfer Restricted
Securities entitled to the benefit of this Section 4(a) and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
continuous period of two years following the date on which such Shelf
Registration Statement becomes effective under the Act or such shorter period
that will terminate when all the Notes covered by the Shelf Registration
Statement have been sold pursuant to such Shelf Registration Statement.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 10 business days after receipt of a request
therefor, such information regarding such Holder as the Company may reasonably
request for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included in such Shelf Registration
Statement. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed to make the information previously furnished to the Company by such
Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
-------------------------
Exchange Offer has not been Consummated within 30 business days after the
Exchange Offer Effective Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or
usable in connection with the Exchange Offer or resales of Transfer Restricted
Securities, as applicable, during the periods required by this Agreement (each
such event referred to in clauses (i) through (iv), a "Registration Default"),
--------------------
the Company hereby agrees to pay liquidated damages to each Holder of Transfer
Restricted Securities with respect to the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal to
$.05 per week per $1,000 principal amount of Notes constituting Transfer
Restricted Securities held by such Holder for each week or portion thereof that
the Registration Default continues. The amount of the liquidated damages shall
increase by an additional $.05 per week per $1,000
7
<PAGE>
in principal amount of Notes constituting Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of liquidated damages of $.30 per week per
$1,000 in principal amount of Notes constituting Transfer Restricted Securities
(regardless of whether one or more than one Registration Default is
outstanding). Notwithstanding the foregoing, the Company shall not be required
to pay liquidated damages to Holders of Transfer Restricted Securities if the
Registration Default arises from the failure of the Company to file, or cause to
become effective, a Shelf Registration Statement within the time period required
by Section 4 of this Agreement and such Registration Default is by reason of the
failure of a Holder to provide the information regarding the Holder reasonably
requested by the Company, the NASD or any other regulatory agency having
jurisdiction over the Company or any of the Holders at least 10 business days
prior to such Registration Default. All accrued liquidated damages shall be
paid by the Company on each Damages Payment Date to the Holders by wire transfer
of immediately available funds or by federal funds check and to the Holders of
certificated securities by mailing a check to such Holders' registered
addresses. Following the cure of all Registration Defaults relating to any
particular Transfer Restricted Securities, the accrual of liquidated damages
with respect to such Transfer Restricted Securities will cease.
All obligations of the Company set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Security at the time
such security ceases to be a Transfer Restricted Security shall survive until
such time as all such obligations with respect to such Transfer Restricted
Security shall have been satisfied in full.
The parties hereto agree that the liquidated damages provided in this
Section 5 constitute a reasonable estimate of, and are intended to constitute,
the sole damages that will be suffered by the holders by reason of any
Registration Default.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
-------------------------------------
Offer, the Company shall comply with all of the provisions of Section 6(c)
below, shall use its best efforts to effect such exchange, and shall comply with
all of the following provisions:
(i) If, due to a change in law or Commission policy after the date
hereof, in the reasonable opinion of counsel to the Company there is a
question as to whether the Exchange Offer is permitted by applicable
federal law or Commission policy, the Company hereby agrees to seek a no-
8
<PAGE>
action letter or other favorable decision from the Commission allowing the
Company to Consummate an Exchange Offer for such Old Notes. The Company
hereby agrees to pursue the issuance of such a no-action letter or
favorable decision to the Commission staff level but shall not be required
to take commercially unreasonable action to effect a change of Commission
policy. The Company hereby agrees, however, to (A) participate in
telephonic conferences with the Commission, (B) deliver to the Commission
an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that such an Exchange
Offer should be permitted and (C) diligently pursue a resolution (which
need not be favorable) by the Commission of such submission. The Initial
Purchasers shall be given prior notice of any action taken by the Company
under this clause (i).
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation of the Exchange Offer, a written representation to the Company
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the New Notes to be issued in the
Exchange Offer and (C) it is acquiring the New Notes in its ordinary course
of business. In addition, all such Holders of Transfer Restricted
Securities shall otherwise cooperate in the Company's preparations for the
Exchange Offer.
(iii) The Company and the Initial Purchasers acknowledge that the
staff of the Commission has taken the position that any broker-dealer that
owns New Notes that were received by such broker-dealer for its own account
in the Exchange Offer (a "Participating Broker-Dealer") may be deemed to be
---------------------------
an "underwriter" within the meaning of the Act and must deliver a
prospectus meeting the requirements of the Act in connection with any
resale of such New Notes (other than a resale of an unsold allotment
resulting from the original offering of the Notes).
The Company and the Initial Purchasers also acknowledge that it is the
Commission staff's position that if the Prospectus contained in the Exchange
Offer Registration Statement includes a plan of distribution containing a
statement to the above effect and the means by which Participating Broker-
Dealers may resell the New Notes, without naming the Participating Broker-
Dealers or specifying the amount of New Notes owned by them, such Prospectus may
be delivered by Participating Broker-Dealers to satisfy their
9
<PAGE>
prospectus delivery obligations under the Act in connection with resales of New
Notes for their own accounts, so long as the Prospectus otherwise meets the
requirements of the Act.
(b) Shelf Registration Statement. In the event that a Shelf
----------------------------
Registration Statement is required by this Agreement, the Company shall comply
with all the provisions of Section 6(c) of this Agreement and shall use its best
efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution of such Transfer Restricted Securities and, in
connection therewith, the Company will as expeditiously as possible prepare and
file with the Commission a Shelf Registration Statement relating to the
registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution of such Transfer Restricted
Securities.
(c) General Provisions. In connection with any Registration Statement
------------------
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus, to the extent that the same are required
to be available to permit resales of Notes by Broker-Dealers), the Company
shall:
(i) use its best efforts to keep such Registration Statement
continuously effective for the applicable time period required hereunder
and provide all requisite financial statements for the periods specified
in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of
any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for the Exchange Offer or
the resale of Transfer Restricted Securities, as applicable, during the
period required by this Agreement, the Company shall promptly notify the
Holders to suspend use of the Prospectus, and the Holders shall suspend use
of the Prospectus, and such Holders shall not communicate non-public
information to any third party, in violation of the securities laws, until
the Company has made an appropriate amendment to such Registration
Statement, in the case of clause (A), correcting any such misstatement or
omission, and, in the case of either clause (A) or (B), the Company shall
use its best efforts to cause such amendment to be declared effective and
such Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to such Registration
10
<PAGE>
Statement as may be necessary to keep the Registration Statement effective
for the applicable periods set forth in Section 3 or 4 of this Agreement,
as applicable, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been
sold; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act during the applicable time period required hereunder and to comply
fully with the applicable provisions of Rules 424 and 430A under the Act in
a timely manner; and comply with the provisions of the Act and the Exchange
Act with respect to the disposition of all Transfer Restricted Securities
covered by such Registration Statement during such period in accordance
with the intended method or methods of distribution by the sellers of such
securities set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented;
(iii) advise the underwriter(s), if any, the Initial Purchasers, and,
in the case of a Shelf Registration Statement, each of the selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any prospectus supplement or post-
effective amendment has been filed and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating to such Registration Statement or
Prospectus, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or
of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement to such Registration
Statement or Prospectus, as the case may be, or any document incorporated
by reference in such Registration Statement or Prospectus untrue in any
material respect, or that requires the making of any additions to or
changes in the Registration Statement or the Prospectus in order to make
the statements in such Registration Statement or Prospectus not misleading
and that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If at any
time the Commission shall issue any stop order
11
<PAGE>
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company shall use its best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time;
(iv) furnish to each of the underwriter(s), if any, the Initial
Purchasers and, in the case of a Shelf Registration Statement, each of the
selling Holders before filing with the Commission, copies of any
Registration Statement or any Prospectus included in such Registration
Statement or Prospectus or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents incorporated
by reference after the initial filing of such Registration Statement),
which documents will be subject to the reasonable review of such
underwriter(s), if any, the Initial Purchasers, and such Holders for a
period of at least five business days prior to the initial filing of such
Registration Statement (or two business days in the case of any amendment
or supplement to any Prospectus or any document incorporated by reference),
and the Company will not file any such Registration Statement or Prospectus
or any amendment or supplement to any such Registration Statement or
Prospectus, as the case may be, (including all such documents incorporated
by reference) to which any underwriter, Initial Purchaser or selling Holder
shall reasonably object within such five or two, as applicable, business
days after the receipt of such Registration Statement or Prospectus. A
selling Holder or underwriter, if any, shall be deemed to have reasonably
objected to such filing if such Registration Statement, Prospectus,
amendment or supplement, as applicable, as proposed to be filed, contains a
material misstatement or omission;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, (a)
provide copies of such document to the selling Holders and to the
underwriter(s), if any, (b) make the Company's representatives available to
respond to inquiries regarding such document and other customary due
diligence matters as the selling Holders or underwriter(s), if any, may
reasonably request; provided that such discussion and due diligence shall
--------
be coordinated on behalf of the selling Holders by one counsel designated
by and on behalf of such selling Holders and (c) include such information
in such document prior to the filing of such document as such selling
Holders or underwriter(s), if any, may reasonably request;
(vi) make available at reasonable times for inspection by the selling
Holders, any underwriter participating in any
12
<PAGE>
disposition pursuant to such Registration Statement and any attorney or
accountant retained by such selling Holders or any of the underwriter(s),
if any, at the offices where normally kept, during reasonable business
hours, all relevant financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's officers,
directors and employees to supply all information reasonably requested by
any such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior to
its effectiveness; provided, however, that such persons shall first agree
-------- -------
in writing with the Company that any information that is designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such persons, unless and to the
extent that (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to federal securities laws
in connection with the filing of the Shelf Registration Statement or the
use of any Prospectus), (iii) such information becomes generally available
to the public other than as a result of a disclosure or failure to
safeguard such information by such person or (iv) such information becomes
available to such person from a source other than the Company and its
Subsidiaries and such source is not bound by a confidentiality agreement;
(vii) if requested by any selling Holders or the underwriter(s), if
any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid for Transfer Restricted Securities and any other
terms of the offering of the Transfer Restricted Securities to be sold in
such offering; and make all required filings of such Prospectus supplement
or post-effective amendment as soon as practicable after the Company is
notified of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
-------- -------
required to take any action pursuant to this Section 6(c)(vii) that would,
in the opinion of counsel for the Company, violate applicable law;
(viii) furnish to each underwriter, if any, the Initial Purchasers
and, upon request to the Company, to a selling
13
<PAGE>
Holder without charge, at least one conformed copy of the Registration
Statement, as first filed with the Commission, and of each amendment
thereto, including, upon the request of such Person, all documents
incorporated by reference therein and all exhibits to the extent requested
(including exhibits incorporated therein by reference);
(ix) deliver to each selling Holder, each of the underwriter(s), if
any, and the Initial Purchasers, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons may reasonably request; the Company
hereby consents to the use of the Prospectus and any amendment or
supplement to the Prospectus by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities in accordance with the terms hereof and
thereof and with U.S. Federal securities laws and Blue Sky laws covered by
the Prospectus or any amendment or supplement thereto;
(x) enter into such agreements (including an underwriting agreement
in form, scope and substance as is customary in underwritten offerings of
securities of this type) and take all such other reasonable actions in con-
nection therewith in order to expedite or facilitate the disposition of the
Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement, all as may be reasonably requested by any
Holder of Transfer Restricted Securities or the underwriter(s), if any, in
connection with any sale or resale of Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement; and
whether or not an underwriting agreement is entered into and whether or not
the registration is an Underwritten Registration, the Company shall (i)
make such representations and warranties to the Holders of such Transfer
Restricted Securities and the underwriters, if any, with respect to the
business of the Company and its Subsidiaries (including with respect to
businesses or assets acquired or to be acquired by any of them), and the
Shelf Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
customarily requested; (ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the underwriters, if any, and special
counsel to the Holders of the Transfer Restricted Securities being sold),
addressed to each selling Holder of Transfer Restricted Securities and each
of the underwriters, if any, covering the matters customarily covered in
opinions
14
<PAGE>
requested in underwritten offerings and such other matters as may be
reasonably requested by such underwriters, if any, and special counsel to
Holders of Transfer Restricted Securities; (iii) use its best efforts to
obtain customary "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company or any such subsidiary
for which financial statements and financial data is, or is required to be,
included in the Registration Statement), addressed (where reasonably
possible) to each selling Holder of Transfer Restricted Securities and each
of the underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters
in connection with underwritten offerings; (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling Holders and the
underwriters, if any, than those set forth in Section 8 hereof (or such
other provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Transfer Restricted Securities covered by
such Shelf Registration Statement and the underwriters, if any); and (v)
deliver such documents and certificates as may be reasonably requested by
the Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold and the underwriters, if any, to evidence
the continued validity of the representations and warranties made pursuant
to clause (i) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company.
If at any time the representations and warranties of the Company
contemplated in clause (X)(i) above cease to be true and correct, the Company
shall so advise the Initial Purchasers and the underwriter(s), if any, and each
selling Holder promptly and, if requested by any of them, shall confirm such
advice in writing;
(xi) prior to any public offering of Transfer Re stricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification
(or exemption from such registration or qualification) of the Transfer
Restricted Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions as the selling Holders and underwriter(s), if
any, may reasonably request in writing and take reasonable steps necessary
or advisable to enable the disposition in such jurisdictions of the
Transfer Restricted Securities covered by the Registration Statement;
provided, however, that the Company shall not be required to register or
-------- -------
qualify as a foreign
15
<PAGE>
corporation where it is not now so qualified or to take any action that
would subject it to the service of process or to taxation, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xii) if a Shelf Registration is filed pursuant to Section 2(b),
cooperate with the selling Holders of Registrable Securities and the
managing Underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be
sold, which certificates shall not bear any restrictive legends and shall
be in a form eligible for deposit with The Depository Trust Company; and
enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the managing Underwriters, if any, or Holders
may reasonably request;
(xiii) in connection with any sale or transfer of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and delivery
of certificates representing Transfer Restricted Securities to be sold and
not bearing any restrictive legends; and enable such Transfer Restricted
Securities to be in such denominations and registered in such names as the
Holders or the underwriter(s), if any, may request at least two business
days prior to any sale of Transfer Restricted Securities made by such
underwriter(s);
(xiv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers of such Transfer Restricted
Securities or the underwriter(s), if any, to consummate the disposition of
such Transfer Restricted Securities, subject to the proviso contained in
clause (xi) above;
(xv) if any fact or event contemplated by Section 6(c)(iii)(D) of
this Agreement shall exist or have occurred, prepare a supplement or post-
effective amendment to the Registration Statement or related Prospectus or
any document incorporated in such Registration Statement or Prospectus by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the
Registration Statement will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein not misleading and the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to
16
<PAGE>
make the statements contained therein, in the light of the circumstances
under which they were made, not misleading;
(xvi) provide a CUSIP number for all New Notes not later than the
effective date of the Registration Statement and provide the Trustee under
the Indenture with printed certificates for the Transfer Restricted
Securities that are in a form eligible for deposit with The Depository
Trust Company;
(xvii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of the
NASD);
(xviii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission in regards to any Registration
Statement, and make generally available to its securityholders, as soon as
practicable, a consolidated earning statement of the Company meeting the
requirements of Rule 158 (which need not be audited) for the twelve-month
period (A) commencing at the end of any fiscal quarter in which Transfer
Restricted Securities are sold to underwriters in a firm commitment or
reasonable best efforts Underwritten Offering or (B) if not sold to
underwriters in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement;
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture, if any, as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute, and use its best efforts to cause the Trustee to
execute, all customary documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) of this Agreement, such Holder
will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xv) of this Agreement, or until it is advised in writing (the "Advice") by
------
17
<PAGE>
the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event that the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 of this Agreement, as applicable, shall be
extended by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 6(c)(iii)(D) of this Agreement to
and including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xv) of this Agreement or shall have
received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All fees and expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made with the NASD (and, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel that may be required by the rules and
regulations of the NASD)); (ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) all expenses of printing
(including printing certificates for the New Notes to be issued in the Exchange
Offer and printing of Prospectuses); (iv) all fees and disbursements of counsel
for the Company and, subject to Section 7(b) below, the Holders of Transfer
Restricted Securities; and (v) all fees and disbursements of independent
certified public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by them.
Notwithstanding the foregoing or anything in this Agreement to the
contrary, each Holder of Transfer Restricted Notes shall pay all underwriting
discounts and commissions of any underwriters with respect to any Notes sold by
or on behalf of it.
18
<PAGE>
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
O'Melveny & Myers LLP or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) the Initial
Purchasers, each Holder of Transfer Restricted Securities and each Participating
Broker Dealer, (ii) each person, if any, who controls any of the foregoing
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
(any of the persons referred to in this clause (ii) being hereinafter referred
to as a "controlling person") and (iii) its agents, employees, officers and
------------------
directors and the agents, employees, officers and directors of any such
controlling person (collectively, the "Indemnified Persons") from and against
-------------------
any and all losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to reasonable attorneys' fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all reasonable amounts paid in settlement of any claim or litigation) to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company will not be liable in
-------- -------
any such case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Indemnified Person relating to
such Indemnified Person expressly for use therein. This indemnity agreement will
be in addition to any liability that the Company may otherwise have, including,
but
19
<PAGE>
not limited to, liability under this Agreement.
If any action is brought against any Indemnified Persons or any such
person in respect of which indemnity may be sought against the Company pursuant
to the foregoing paragraph, such Indemnified Persons or such person shall
promptly notify the indemnifying party in writing of the institution of such
action and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to such indemnified
party and payment of all fees and expenses, provided, however, except to the
extent that the indemnifying party shall be materially prejudiced thereby
(through the forfeiture of substantive rights or defenses), that the omission to
so notify the indemnifying party shall not relieve the indemnifying party from
any liability which they may have to the Indemnified Persons or any such person
or otherwise. Such Indemnified Persons shall have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Persons unless the employment of such counsel
shall have been authorized in writing by the indemnifying party in connection
with the defense of such action or the indemnifying party shall not have
employed counsel to have charge of the defense of such action or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the indemnifying party and paid as incurred (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel (together with appropriate local
counsel) in any one action or series of related actions in the same jurisdiction
representing the indemnified parties who are parties to such action). The
indemnifying party shall not be liable for any settlement of any such claim or
action effected without its written consent but if settled with the written
consent of the indemnifying party, the indemnifying party agrees to indemnify
and hold harmless any Indemnified Persons and any such person from and against
any loss or liability by reason of such settlement. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 60 business days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the indemnifying
party at least 30 days'
20
<PAGE>
prior notice of its intention to settle and the proposed terms thereof. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(b) In connection with any Registration Statement or Prospectus
pursuant to which a Holder of Transfer Restricted Securities offers or sells
Transfer Restricted Securities, such Holder agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors and officers and any
person controlling the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and each of its agents, employees, officers and
directors and the agents, employees, officers and directors of such controlling
person from and against any losses, liabilities, claims, damages and expenses
whatsoever (including but not limited to reasonable attorneys' fees and any and
all reasonable expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever and any and all reasonable amounts paid in settlement of any claim or
litigation) to which they or either of them may become subject under the Act,
the Exchange Act or otherwise insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that any such loss, liability, claim, damage or expense arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information relating to such Holder furnished to the Company by
such Holder expressly for use in such Registration Statement or Prospectus.
If any action is brought against the Company or any such person in
respect of which indemnity may be sought against any Holder of Transfer
Restricted Securities pursuant to foregoing paragraph, the Company or such
person shall promptly notify such Holder in writing of the institution of such
action and such Holder shall assume the defense of such action, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses, provided, however, except to the extent that
the indemnifying party shall be materially prejudiced thereby (through the
21
<PAGE>
forfeiture of substantive rights or defenses), that the omission to so notify
such Holder shall not relieve such Holder from any liability which they may have
to the Company or any such person or otherwise. The Company or such person shall
have the right to employ its own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the Company or such person
unless the employment of such counsel shall have been authorized in writing by
such Holder of Transfer Restricted Securities in connection with the defense of
such action or such Holder shall not have employed counsel to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to such Holder (in which
case such Holder shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties, but such Holder may employ
counsel and participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such Holder), in any of which events such
fees and expenses shall be borne by such Holder and paid as incurred (it being
understood, however, that such Holder shall not be liable for the expenses of
more than one separate counsel in any one action or series of related actions in
the same jurisdiction representing the indemnified parties who are parties to
such action). Anything in this paragraph to the contrary notwithstanding, any
Holder of Transfer Restricted Securities shall not be liable for any settlement
of any such claim or action effected without the written consent of such Holder
but if settled with the written consent of such Holder, such Holder agrees to
indemnify and hold harmless the Company and any such person from and against any
loss or liability by reason of such settlement. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 60 business days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall not have reimbursed
the indemnifying party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the indemnifying
party at least 30 days' prior notice of its intention to settle and the proposed
terms thereof. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
22
<PAGE>
(c) In order to provide for contribution in circumstances in which
the indemnification provided for in paragraphs (a) and (b) of this Section 8 is
for any reason held to be unavailable from the indemnifying party, or is
insufficient to hold harmless a party indemnified under this Section 8, the
Company and the Indemnified Parties shall contribute to the aggregate losses,
claims, damages, liabilities and expenses of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action or
any claims asserted) to which the Company and the Indemnified Parties may be
subject, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Indemnified Parties,
on the other hand, from the offering of the Old Notes or, (ii) if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, on the one hand, and the
Indemnified Parties, on the other hand, in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Indemnified Parties,
on the other hand, shall be deemed to be in the same proportion as the total
proceeds from the offering of Old Notes (net of discounts but before deducting
expenses) received by the Company as set forth in the table on the cover page of
the Offering Memorandum bear to the total proceeds received by such Holder with
respect to its sale of Transfer Restricted Securities or New Notes. The
relative fault of the Company, on the one hand, and the Indemnified Parties, on
the other hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Indemnified Parties and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this paragraph (c) of this Section 8
were determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to above.
Notwithstanding the provisions of paragraph (c) of this Section 8, (i) in no
case shall an Indemnified Party be required to contribute any amount in excess
of the amount by which the total received by such Indemnified Party with respect
to its sale of its Transfer Restricted Securities or New Notes, as the case may
be, exceeds the amount of any damages that such Indemnified Party has otherwise
been required to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission and (ii) no person guilty of fraudulent
misrepresentation (within the
23
<PAGE>
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes
of this paragraph (c) of this Section 8, each person, if any, who controls an
Indemnified Party within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Indemnified
Party, and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company, subject in each case to clauses (i) and
(ii) of this paragraph. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action against such party in respect of
which a claim for contribution may be made against another party or parties
under this paragraph 8(c), notify such party or parties from whom contribution
may be sought, but, except to the extent that the indemnifying party shall be
materially prejudiced thereby (through the forfeiture of substantive rights and
defenses), the omission to so notify such party or parties shall not relieve the
party or parties from whom contribution may be sought from any obligation it or
they may have under this paragraph (c) or otherwise. No party shall be liable
for contribution with respect to any action or claim settled without its written
consent; provided, however, that such written consent was not unreasonably
-------- -------
withheld.
SECTION 9. RULE 144A
The Company shall use its best efforts, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
of such securities and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A. Notwithstanding the foregoing,
nothing in this Section 9 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration under this
Agreement unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled under this Agreement to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorneys, indemnities, underwriting agreements, lock-up letters and
other documents required under the terms of such underwriting arrangements.
24
<PAGE>
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
--------
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise
--------
all rights provided in this Agreement, in the Indenture, the Purchase Agreement
or granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agree to waive the defense in any Action for specific performance
that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the
--------------------------
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions of this Agreement. The Company has not
previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
under this Agreement do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company's securities under any
agreement in effect on the date of this Agreement.
(c) Adjustments Affecting the Notes. Without the written consent of
-------------------------------
the Holders of a majority in aggregate principal amount of outstanding Transfer
Restricted Notes, the Company will not take any action, or permit any change to
occur, with respect to the Notes that would materially and adversely affect the
ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions of this Agreement may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions of this Agreement
that relates exclusively to the
25
<PAGE>
rights of Holders whose securities are being sold or tendered pursuant to a
Registration Statement and that does not affect directly or indirectly the
rights of other Holders whose securities are not being sold or tendered pursuant
to such Registration Statement may be given by the Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities being so sold or
tendered.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivering, first-class
mail (registered or certified, return receipt requested), telex, telecopier or
air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company, at:
Standard Pacific Corp.
1565 West MacArthur Boulevard
Costa Mesa, California 92626
Attention: Chief Financial Officer
All such notices and communications shall be deemed to have been duly
given: (i) at the time delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) when answered back, if telexed; (iv) when receipt acknowledged, if
telecopied; and (v) on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and permitted assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties to this Agreement in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Captions. The captions included in this Agreement are included
--------
solely for convenience of reference and are not to be considered a part of this
Agreement.
26
<PAGE>
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Submission to Jurisdiction. The Company irrevocably submits to
--------------------------
the nonexclusive jurisdiction of any State or Federal court sitting in New York
over any suit, action or proceeding arising out of or relating to this
agreement. The Company irrevocably waives, to the fullest extent permitted by
law, any objection it may now or thereafter have to the laying of venue of any
such court and any claim that any such suit, action or proceeding brought in
such a court has been brought in an inconvenient forum. The Company agrees that
a final judgment in any such suit, action or proceeding brought in any such
court shall be conclusive and binding upon the Company and may be enforced in
any other courts to the jurisdiction of which the Company is or may be subject,
by suit upon such judgment.
(k) Severability. In the event that any one or more of the provisions
------------
contained in this Agreement, or the application of any such provision in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained in this Agreement shall not be affected or
impaired thereby.
(l) Entire Agreement. This Agreement together with the other
----------------
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties to
this Agreement in respect of the subject matter contained in this Agreement.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to in this Agreement with respect to the
registration rights granted by the Company with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[Signatures on Next Page]
27
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
STANDARD PACIFIC CORP.
By: _________________________
Name:
Title:
SBC WARBURG DILLON READ INC.
By: _________________________
Name:
Title:
By: _________________________
Name:
Title:
BANCAMERICA ROBERTSON STEPHENS
By: _________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: _________________________
Name:
Title:
28
<PAGE>
EXHIBIT 10.10
SHARE PURCHASE AGREEMENT
BETWEEN
STANDARD PACIFIC CORP.
AND
HON INDUSTRIES, INC.
REGARDING
PANEL CONCEPTS, INC.
Dated as of November 7, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 TERMS OF THE TRANSACTION.......................................... 1
1.1 Purchase and Sale of Shares....................................... 1
1.2 Purchase Price.................................................... 1
1.3 Payment of Purchase Price......................................... 1
1.4 Closing Balance Sheet Adjustments................................. 2
(a) Preparation of Closing Balance Sheet......................... 2
(b) Review of Adjustment Statement............................... 2
(c) Adjusted Book Value.......................................... 2
(d) Purchase Price Adjustment.................................... 3
1.5 Adjustment for Uncollected Receivables............................ 4
1.6 Sale or Distribution of Certain Property.......................... 5
1.7 Adjustment for Physical Inventory................................. 6
ARTICLE 2 CLOSING.......................................................... 6
2.1 Time and Place.................................................... 6
2.2 Deliveries by Standard Pacific.................................... 6
2.3 Deliveries by HON................................................. 7
2.4 Other Closing Documents........................................... 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF STANDARD PACIFIC................ 8
3.1 Organization; Power and Authority................................. 8
3.2 Authorization, Execution and Validity of Agreement................ 8
3.3 Subsidiaries, Affiliates, Joint Ventures and
Investments....................................................... 9
3.4 Capitalization.................................................... 9
3.5 Title to Shares................................................... 9
3.6 Organizational Records............................................ 9
3.7 Consents and Approvals; No Violation.............................. 9
3.8 Financial Information............................................. 10
(a) Financial Statements......................................... 10
(b) Absence of Undisclosed Liabilities........................... 11
3.9 Absence of Certain Changes........................................ 11
3.10 Payables.......................................................... 11
3.11 Real Property..................................................... 12
3.12 Personal Property................................................. 12
3.13 Condition of Assets............................................... 12
3.14 Contracts......................................................... 13
3.15 Litigation........................................................ 14
3.16 Permits........................................................... 15
3.17 Environmental Matters............................................. 15
3.18 Regulatory Compliance............................................. 17
3.19 Customers and Suppliers........................................... 17
3.20 Intellectual Property............................................. 18
3.21 Employees......................................................... 18
3.22 Employee Benefits................................................. 19
3.23 Taxes............................................................. 21
3.24 Brokers........................................................... 23
3.25 Product Warranties and Returns; Warranty Costs.................... 23
3.26 Insurance......................................................... 24
3.27 Absence of Certain Commercial Practices........................... 24
3.28 Banking and Agency Arrangements................................... 24
3.29 Affiliated Transactions; Certain Advances;
Insider Interests................................................. 25
3.30 Backlog........................................................... 25
3.31 Pre-closing Transfer Transactions................................. 25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF HON............................. 25
4.1 Organization; Power and Authority................................. 25
4.2 Authorization, Execution and Validity............................. 25
4.3 No Conflict; HON Consents......................................... 26
4.4 Brokers........................................................... 26
4.5 Purchase for Investment........................................... 26
4.6 Investigation..................................................... 26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.7 Financing......................................................... 26
4.8 Legal Proceedings................................................. 26
ARTICLE 5 COVENANTS......................................................... 26
5.1 Pre-closing Access to Information................................. 26
5.2 Conduct of Business............................................... 27
5.3 Insurance......................................................... 29
5.4 Consents and Approvals............................................ 29
5.5 Legal Proceedings; Injunctions.................................... 29
5.6 Acquisition Proposals............................................. 29
5.7 Notice............................................................ 30
5.8 Intercompany Indebtedness......................................... 30
5.9 Best Efforts; Cooperation......................................... 30
5.10 Contact with Customers and Suppliers.............................. 30
5.11 Plant Closing Obligations......................................... 30
5.12 Payment of Bonuses at Closing..................................... 30
ARTICLE 6 POST CLOSING COVENANTS............................................ 30
6.1 Limitation on Competition......................................... 30
(a) Period and Conduct........................................... 30
(b) Territory.................................................... 31
(c) Definition................................................... 31
(d) Remedies..................................................... 31
(e) Severability................................................. 31
6.2 Books and Records................................................. 32
6.3 Confidentiality................................................... 32
6.4 Employee Matters.................................................. 32
6.5 Trade Names....................................................... 33
6.6 Product Warranty.................................................. 34
6.7 Further Assurances................................................ 34
6.8 Cooperation in Third-Party Litigation............................. 34
6.9 Omnific Chair Inventory........................................... 34
ARTICLE 7 CONDITIONS PRECEDENT TO CLOSING................................... 35
7.1 Conditions Precedent to HON's Obligations......................... 35
(a) Accuracy of Representations and Warranties................... 35
(b) Litigation................................................... 35
(c) Covenants.................................................... 35
(d) Deliveries................................................... 35
(e) Consents..................................................... 35
(f) No Material Adverse Change................................... 35
7.2 Conditions Precedent to Standard Pacific's
Obligations....................................................... 35
(a) Accuracy of Representations and Warranties................... 35
(b) Litigation................................................... 36
(c) Covenants.................................................... 36
(d) Deliveries................................................... 36
(e) Consents..................................................... 36
ARTICLE 8 CERTAIN TAX MATTERS............................................... 36
8.1 Tax Indemnification............................................... 36
8.2 Procedures Relating to Tax Indemnification........................ 37
8.3 Tax Dispute Resolution Mechanism.................................. 39
8.4 Survival of Tax Provisions........................................ 39
8.5 Conveyance Taxes.................................................. 39
8.6 Return Filings, Refunds and Credits............................... 39
8.7 Exclusivity....................................................... 40
8.8 Tax Sharing Agreements............................................ 40
8.9 Adjustment to Purchase Price...................................... 41
8.10 Carryforwards of Losses........................................... 41
8.11 Section 338(h)(10) Election....................................... 41
ARTICLE 9 TERMINATION PRIOR TO CLOSING DATE................................. 41
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.1 Termination...................................................... 41
9.2 Effect of Termination............................................ 42
ARTICLE 10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION...... 42
10.1 Survival of Representations and Warranties....................... 42
10.2 Indemnification by Standard Pacific.............................. 43
10.3 Indemnification by HON........................................... 44
10.4 Limits on Indemnification........................................ 44
10.5 Indemnification Procedures....................................... 45
(a) Notice....................................................... 45
(b) Third Party Claims........................................... 45
10.6 Indemnification for Taxes........................................ 46
10.7 Adjustment to Purchase Price..................................... 47
10.8 Subrogation...................................................... 47
10.9 Remedies Exclusive............................................... 47
ARTICLE 11 MISCELLANEOUS.................................................... 47
11.1 Severability..................................................... 47
11.2 Successors and Assigns........................................... 47
11.3 Counterparts..................................................... 48
11.4 Headings......................................................... 48
11.5 Waiver........................................................... 48
11.6 No Third-party Beneficiaries..................................... 48
11.7 Expenses......................................................... 48
11.8 Notices.......................................................... 48
11.9 Governing Law; Interpretation.................................... 49
11.10 Exclusive Jurisdiction and Consent to Service of Process........ 49
11.11 Entire Agreement; Amendment...................................... 49
11.12 Definitions...................................................... 50
11.13 Representations and Warranties................................... 50
</TABLE>
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A Pre-Closing Balance Sheet
Schedule 1.6 Sale or Distribution of Certain Property
Schedule 2.4 Form of Transition Services Agreement
Schedule 3.7 Consents and Approvals
Schedule 3.8(a) Financial Statements
Schedule 3.8(b) Other Liabilities
Schedule 3.9 Certain Changes
Schedule 3.11 Real Property
Schedule 3.12 Personal Property
Schedule 3.14 Contracts
Schedule 3.15 Litigation
Schedule 3.17 Environmental Matters
Schedule 3.18 Compliance with Other Laws
Schedule 3.19 Customers and Suppliers
Schedule 3.20 Intellectual Property
Schedule 3.22 Employee Benefits
Schedule 3.23 Taxes
Schedule 3.25 Product Warranties and Product Warranty Claims
Schedule 3.26 Insurance
Schedule 3.28 Banking and Agency Arrangements
Schedule 3.29 Affiliated Transactions
Schedule 6.4 Employee Matters
Schedule 6.8 Third Party Litigation
Schedule 7.1(e) Consents
<PAGE>
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT ("Agreement") is made as of November 7,
---------
1997 by and between STANDARD PACIFIC CORP., a Delaware corporation ("Standard
--------
Pacific"), and HON INDUSTRIES INC., an Iowa corporation ("HON").
- ------- ---
R E C I T A L S:
---------------
A. Standard Pacific owns all of the issued and outstanding Common
Stock, $0.01 par value (the "Shares") of Panel Concepts, Inc., a Delaware
------
corporation ("Panel Concepts"), with its principal offices located in Santa Ana,
--------------
California.
B. Panel Concepts is in the business (the "Business") of designing,
--------
manufacturing, supplying and selling office furniture systems, office
partitions, office furniture (including seating), and office furniture
components, including shelves, work surfaces and drawer pedestals (collectively,
the "Products" ).
--------
C. Standard Pacific desires to sell, and HON desires to purchase, the
Shares pursuant to this Agreement.
NOW, THEREFORE, HON and Standard Pacific, intending to be legally
bound, hereby agree as follows:
ARTICLE 1
TERMS OF THE TRANSACTION
------------------------
1.1 Purchase and Sale of Shares. On the terms and subject to the
---------------------------
conditions of this Agreement, on the Closing Date (as hereinafter defined),
Standard Pacific shall sell, transfer and assign to HON, and HON shall purchase
and acquire from Standard Pacific, all of the Shares, free and clear of all
claims, liens, charges, assessments, security interests, pledges, restrictions
and other encumbrances of any nature whatsoever (collectively, "Liens").
-----
1.2 Purchase Price. The purchase price (the "Purchase Price") for the
-------------- --------------
Shares shall be the Adjusted Book Value (as hereinafter defined) of Panel
Concepts as of the Closing Date, plus $6,000,000.
1.3 Payment of Purchase Price. At the Closing (as defined in (Section
------------------------- -------
2.1) of the transactions contemplated hereby, HON shall wire transfer the amount
of $8,378,856 (the "Closing Date Payment Amount"), which is equal to the sum of
(i) the Adjusted Bo ok Value (as hereinafter defined) of Panel Concepts as of
September 30, 1997 (the "Target Book Value Amount") as agreed to by the parties
-------------------------
and set forth in the balance sheet attached hereto as Exhibit A (the "Pre-
--------- ---
Closing Balance Sheet"), plus (ii) $6,000,000, minus (iii) $500,000 (the
- ---------------------
"Holdback Amount"), in immediately available funds to such bank account
---------------
designated by Standard Pacific in writing at least one business day prior to the
Closing.
<PAGE>
1.4 Closing Balance Sheet Adjustments.
---------------------------------
(a) Preparation of Closing Balance Sheet. As soon as reasonably
------------------------------------
practicable, but not later than 30 days after the Closing Date, Standard
Pacific, with the assistance and cooperation of the personnel of Panel Concepts
(who, for these purposes, will be under the direction and supervision of
Standard Pacific), will prepare and deliver to HON (i) a balance sheet (the
"Closing Balance Sheet") of Panel Concepts as of the close of business on the
- ----------------------
Closing Date and (ii) a calculation of Adjusted Book Value as of the Closing
Date (the "Adjustment Statement"). Except as otherwise provided in this Section
-------------------- -------
1.4, the Closing Balance Sheet shall be prepared and Adjusted Book Value shall
- ---
be calculated in accordance with generally accepted accounting principles as in
effect on the date of this Agreement ("GAAP"), applied on a basis consistent
----
with the preparation of the Pre-Closing Balance Sheet. After the Closing Date,
for the purpose of preparing the Closing Balance Sheet, Standard Pacific and its
employees, accountants and representatives shall have full access, at all
reasonable times and in a manner not disruptive to the ongoing operation of
Panel Concepts, to the books, records and properties of Panel Concepts
reasonably necessary for the preparation of the Closing Balance Sheet, and all
personnel of Panel Concepts reasonably requested by Standard Pacific.
(b) Review of Adjustment Statement. HON shall have 30 days in which
to review the Closing Balance Sheet and the Adjustment Statement. For such
purpose, Standard Pacific shall afford HON and HON's agents and representatives
reasonable access to all work papers used by Standard Pacific to prepare the
Closing Balance Sheet and the Adjustment Statement. Within 30 days after receipt
of the Closing Balance Sheet, HON shall either inform Standard Pacific in
writing that the Adjusted Book Value is acceptable or object to the Adjustment
Statement in writing setting forth a description of its objections. If HON so
objects and HON and Standard Pacific do not resolve such objections on a
mutually agreeable basis within 90 days after Standard Pacific's receipt
thereof, the disagreement shall be resolved within an additional 60 day period
by an independent accounting firm of national reputation jointly selected by
HON and Standard Pacific (the "Independent Firm"). The decision of the
Independent Firm shall be final and binding upon HON and Standard Pacific. Upon
the agreement of HON and Standard Pacific or the decision of the Independent
-----------
Firm, or if HON fails to deliver an objection to Standard Pacific within the 30
- ----
day period provided above, the Closing Balance Sheet (as adjusted, if necessary)
and the determination of Adjusted Book Value shall be deemed the final and
conclusive. HON and Standard Pacific shall bear the fees, costs and expenses of
their own accountants and shall share equally the fees, costs and expenses of
the Independent Firm.
(c) Adjusted Book Value. The term "Adjusted Book Value" shall mean
------------------- -------------------
the net book value of Panel Concepts, as set forth on the Closing Balance Sheet,
and adjusted as follows:
i) Cash, all obligations owing from Standard Pacific or any of its
Affiliates (as hereinafter defined) to Panel Concepts (which shall be
repaid or canceled pursuant to Section 5.8), all obligations, if any,
-----------
owing from Panel Concepts to Standard Pacific or any Affiliate of
Standard Pacific (which will be canceled pursuant to Section 5.8),
-----------
current and deferred tax accounts and Pre-closing Sale Property (as
defined in Section 1.6 and related shut-down reserves), shall not be
-----------
included (in the calculation or as assets or liabilities of Panel
Concepts at the time of Closing, and Panel Concepts will be entitled
to dividend or otherwise transfer such assets to itself or to any
third party designee for no consideration prior to the Closing).
ii) Any prepaid advertising or North Carolina taxes, tooling and
production equipment not usable in production of current or new
Products shall be valued at zero.
<PAGE>
iii) Usable inventory stocked in excess of 270 days of either past or
forecasted usage shall be valued at zero. Usable inventory stocked in
excess of 90 days of either past or forecasted usage shall be
discounted 33% of cost and usable inventory stocked in excess of 180
days of either past or forecasted usage shall be discounted an
additional 33% of cost. Inventory associated with the "Omnific Chair"
line of Products (the "Omnific Chair Inventory") shall be excluded
-----------------------
from the valuation of Panel Concepts' inventory.
iv) The liabilities for which HON would be indemnified by Standard Pacific
as set forth in Sections 8.1 and 10.2 shall be excluded.
------------ ----
v) Any allowance for doubtful Accounts Receivable would be excluded from
the valuation of Panel Concepts' Accounts Receivable.
(d) Purchase Price Adjustment.
-------------------------
i) If the Adjusted Book Value as of the Closing exceeds the Target Book
Value Amount, then HON shall pay Standard Pacific (A) 100% of the
Holdback Amount, plus (B) the amount by which the Adjusted Book Value
exceeds the Target Book Value Amount.
ii) If the Adjusted Book Value as of the Closing equals the Target Book
Value Amount, HON shall pay Standard Pacific 100% of the Holdback
Amount.
iii) If the Adjusted Book Value as of the Closing is less than the Target
Book Value Amount by an amount (the "X Shortfall Amount") equal to or
------------------
less than the Holdback Amount, (A) HON shall pay to Standard Pacific
an amount (the "Net Holdback Amount") equal to the Holdback Amount
-------------------
less the X Shortfall Amount, and (B) HON shall be entitled to retain
the X Shortfall Amount.
iv) If the Adjusted Book Value as of the Closing is less than the Target
Book Value Amount by an amount (the "Y Shortfall Amount") greater than
------------------
the Holdback Amount, (A) Standard Pacific shall pay to HON the Y
Shortfall Amount less the Holdback Amount, and (B) HON shall be
entitled to retain 100% of the Holdback Amount.
v) All amounts payable pursuant to this Section 1.4 shall be paid on the
-----------
first business day following the final determination of Adjusted Book
Value pursuant to Section 1.4(b) by wire transfer of immediately
-------------
available funds to such bank account designated by the recipient in
writing.
1.5 Adjustment for Uncollected Receivables. (a) If Standard Pacific
--------------------------------------
or any of its Affiliates receives any payment relating to any Accounts
Receivable outstanding on or after the Closing Date (other than Accounts
Receivable transferred to Standard Pacific pursuant to Section 1.5(d)), such
-------------
payment shall be the property of, and shall be immediately forwarded and
remitted to, Panel Concepts. Standard Pacific or such Affiliate will promptly
endorse and deliver to Panel Concepts any cash, checks or other documents
received by Standard Pacific on account of any such Accounts Receivable.
Standard Pacific or such Affiliate shall advise Panel Concepts (promptly
following Standard Pacific's becoming aware thereof) of any counterclaims or
set-offs that may arise subsequent to the Closing Date with respect to any
Accounts Receivable.
(b) After the Closing Date, HON shall and shall cause Panel Concepts
to use commercially reasonable efforts consistent with prior ordinary course
business practi ces of Panel Concepts, to collect all Accounts Receivable;
provided, however, that neither HON nor Panel Concepts shall be
- -------- -------
<PAGE>
obligated to continue to do business with any Person (as hereinafter defined) if
HON believes such continuation will not be in its best interests, and shall not
be obligated to initiate litigation or to turn any of such Accounts Receivable
over to a collection agency or attorney.
(c) HON shall deliver a true and correct list of the Accounts
Receivable aging within fifteen (15) business days following the end of each
month and the expiration of each period during which such Accounts Receivable
are deemed "uncollectible" in accordance with this Section 1.5. Accounts
-----------
Receivable shall be deemed "uncollectible" if remaining unpaid 120 days after
the Closing Date, except in the case of Accounts Receivable relating to Panel
Concepts' contract with the General Services Administration, which shall be
deemed uncollectible if remaining unpaid 180 days after the Closing Date.
(d) Within ten (10) business days after Standard Pacific's receipt of
each Accounts Receivable aging report setting forth the Accounts Receivable
deemed uncollectible pursuant to Section 1.5(c), Standard Pacific shall purchase
--------------
(without recourse to Panel Concepts) such uncollectible Accounts Receivable then
remaining unpaid for a purchase price equal to the face amount thereof. Upon
Standard Pacific c's repurchase of any unpaid Account Receivable pursuant to
this Section 1.5(d), (i) HON shall and shall cause Panel Concepts to promptly
-------------
deliver to Standard Pacific any tangible evidence of such Account R eceivable
then in the possession of HON or Panel Concepts or under their control, and (ii)
Standard Pacific shall be entitled to take any and all actions which it may deem
necessary or desirable in order to collect such unpaid Account Receivable. HON
shall and shall cause Panel Concepts to, from time to time after such
repurchase, execute and deliver to Standard Pacific such instruments and other
documents as Standard Pacific may reasonably request to assist Standard Pacific
in its collection effort. In the event that any payment received by HON or Panel
Concepts is remitted by a customer which is indebted under both Accounts
Receivable and an account receivable arising out of the sale of inventory in the
ordinary course of Business after the Closing Date (a "New Receivable") such
--------------
payments shall first be applied to the Accounts Receivable due from such
customer and the balance remaining after payment in full of all Accounts
Receivable due from such customer shall be applied to the New Receivable;
provided, however, that (i) with respect to any Account Receivable being
- -------- -------
contested or disputed by the payor thereof no portion of the amount in dispute
shall be deemed to have been collected by HON or Panel Concepts in respect of
the Account Receivable due from such customer (unless otherwise directed by the
customer) until all amounts owned by such customer to Panel Concepts for New
Receivables have been paid or such dispute has been resolved, whichever occurs
first (it being understood that undisputed amounts of Accounts Receivable shall
be applied in accordance with the priorities set forth above in this Section
-------
1.5(d)) and (ii) the foregoing priorities shall not apply to sums received by
- ------
HON or Panel Concepts which are specifically identified by the customer as being
tendered in payment of a New Receivable. HON agrees not to and to cause Panel
Concepts not to induce any customer to identify any payment as being in respect
of a New Receivable, except in the event Panel Concepts reasonably determines to
sell to said customer on a C.O.D. basis only. HON will and will cause Panel
Concepts to cooperate, at Standard Pacific's expense, with Standard Pacific in
collecting any Accounts Receivable which are purchased by Standard Pacific
pursuant to this Section 1.5(d).
--------------
(e) Any sums received by HON or Panel Concepts in respect of Accounts
Receivable after their purchase by Standard Pacific pursuant to Section 1.5(d)
--------------
hereof, shall be promptly transmitted by HON or Panel Concepts, as the case may
be, to Standard Pacific. HON hereby grants and shall cause Panel Concepts to
grant to Standard Pacific a power of attorney to endorse and cash any checks of
instruments made payable or endorsed to HON or Panel Concepts received by
Standard Pacific with respect to the Accounts Receivable which are purchased by
Standard Pacific pursuant to Section 1.5(d).
--------------
(f) The term "Accounts Receivable" shall mean all accounts
------------------
<PAGE>
receivable relating to sales made prior to Closing, including deferred
receivable, of Panel Concepts (including royalties receivable), any payments
received with respect thereto after the Closing Date, unpaid interest accrued on
any such accounts receivable and any security or collateral relating thereto.
1.6 Sale or Distribution of Certain Property. Prior to the Closing
----------------------------------------
Date and as a condition precedent to the Closing hereunder, Standard Pacific
shall cause Panel Concepts to transfer, for no consideration or such
consideration as Standard Pacific may determine in its sole discretion, certain
property identified on Schedule 1.6 ("Pre-closing Sale Property"), including
------------ -------------------------
Panel Concepts' interest in its plant and equipment located at Greensboro, North
Carolina ("NC Property"), the Omnific Chair Inventory and the "Omnific" trade
-----------
name and any related commercial symbols to a third party purchaser or to
Standard Pacific or an Affiliate of Standard Pacific (each a "Transferee").
----------
Panel Concepts shall distribute by dividend or otherwise any proceeds of such
transactions to Standard Pacific or its designee prior to the Closing. The
transactions described in this Section 1.6 are referred to in this Agreement
-----------
collectively as the "Pre-closing Transfer Transactions".
---------------------------------
1.7 Adjustment for Physical Inventory. On December 6 and 7, 1997, HON
---------------------------------
will perform and complete a physical inventory (the "Physical Inventory") of
------------------
Panel Concepts' inventory to determine Panel Concepts' inventory as of the
Closing Date; provided, that, if the Closing does not occur on December 1, 1997,
then the Physical Inventory shall be performed on such other day or days shortly
following the Closing as the parties shall mutually agree. Standard Pacific and
its employees, accountants and representatives shall, to the extent requested by
Standard Pacific, be permitted to attend and observe all aspects of the Physical
Inventory. In the event the Physical Inventory would result in an adjustment of
less than plus or minus 5% of the value of Panel Concepts' inventory as set
forth in the Closing Balance Sheet prepared by Standard Pacific pursuant to
Section 1.4(a), then no adjustment shall be made to the value of the inventory
- --------------
as set forth in such Closing Balance Sheet. In the event that the Physical
Inventory would result in an adjustment of more than plus or minus 5% in the
value of Panel Concepts' inventory as set forth in such Closing Balance sheet,
then, the value of the inventory on the Closing Balance Sheet shall be adjusted,
but only to the extent of the portion of the adjustment exceeding the 5%
threshold.
ARTICLE 2
CLOSING
-------
2.1 Time and Place. Except as otherwise mutually agreed upon by
--------------
Standard Pacific and HON, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Gibson, Dunn &
-------
Crutcher in Irvine, California at 10:00 a.m., on December 1, 1997, or at such
other time and place as the parties shall agree upon in writing (the "Closing
-------
Date"). The Closing shall be deemed effective at 12:01 a.m. Pacific Daylight
- ----
Time on the Closing Date.
2.2 Deliveries by Standard Pacific. At the Closing, Standard Pacific
------------------------------
shall deliver the following to HON:
(a) Certificates representing all of the Shares, together with duly
executed stock transfer powers endorsed in blank or accompanied by duly executed
instruments of transfer.
(b) A receipt duly executed by Standard Pacific acknowledging receipt
of the Closing Date Payment Amount.
(c) Copies of all documents related to the Pre-closing Transfer
<PAGE>
Transactions, including, without limitation, all transfer and assignment
agreements (collectively, the "Pre-closing Transfer Agreements").
-------------------------------
(d) Recent good standing certificate for Panel Concepts issued by the
Secretary of State of the State of Delaware.
(e) Recent good standing certificate for Panel Concepts issued by the
Secretary of State of the State of California.
(f) Copies of (A) the resolutions of the Board of Directors of
Standard Pacific authorizing and approving the transfer of Shares, (B) Panel
Concepts' Articles of Incorporation and (C) Panel Concepts' By-laws, each
certified by an officer of Standard Pacific and Panel Concepts to be true,
correct, complete and in full force and effect and unmodified as of the Closing
Date.
(g) The resignations of the members of the Board of Directors and
prior to the Closing, officers of Panel Concepts.
(h) A certificate signed by an authorized officer of Standard Pacific
and dated the Closing Date certifying that (i) each of the representations and
warranties made by Standard Pacific in this Agreement is true and correct as of
the Closing Date in all material respects and (ii) all of the terms, covenants
and conditions of this Agreement to be complied with and performed by Standard
Pacific on or before the Closing Date have been complied with and performed in
all material respects.
(i) Evidence of all consents, novations, approvals, authorizations,
requirements (including filing and registration requirements), waivers and
agreements ("Consents") from all Governmental Authorities (as hereinafter
--------
defined) and any Persons necessary to authorize, approve or permit the
execution, delivery and performance by Standard Pacific of this Agreement or the
consummation of the transactions contemplated hereby to the extent obtained by
Standard Pacific or Panel Concepts on or prior to the Closing Date pursuant to
Section 7.1(e).
- --------------
(j) A certificate signed by an authorized officer of Standard Pacific
under Section 1445(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations thereunder, in a form reasonably
----
acceptable to HON, setting forth Standard Pacific's taxpayer identification
number and stating that Standard Pacific is not a foreign person within the
meaning of Section 1445(f)(3) of the Code.
(k) Such other documents, instruments and certificates as HON may
reasonably request in connection with the transactions contemplated by this
Agreement.
2.3 Deliveries by HON. At the Closing, HON shall deliver the
-----------------
following to Standard Pacific:
(a) The Closing Date Payment Amount.
(b) A cross-receipt duly executed by HON acknowledging receipt of the
Shares.
(c) A copy of the resolutions of the Board of Directors of HON
authorizing and approving this Agreement and all other transactions and
agreements contemplated hereby, certified by the Secretary or an Assistant
Secretary of HON to be true, correct, complete and in full force and effect and
unmodified as of the Closing Date.
(d) A certificate signed by an authorized officer of HON and dated
the Closing Date certifying that (i) each of the representations and warranties
made by HON in this Agreement is true and correct as of the Closing
<PAGE>
Date in all material respects and (ii) all of the terms, covenants and
conditions of this Agreement to be complied with and performed by HON on or
before the Closing Date have been complied with and performed in all material
respects.
(e) Evidence of all Consents from all Governmental Authorities and
any Persons necessary to authorize, approve or permit the execution, delivery
and performance by HON of this Agreement or the consummation of the transactions
contemplated hereby to the extent obtained by HON on or prior to the Closing
Date pursuant to Section 7.2(e).
--------------
(f) Such other documents, instruments and certificates as Standard
Pacific may reasonably request for the transactions contemplated by this
Agreement.
2.4 Other Closing Documents. At the Closing, Standard Pacific, Panel
-----------------------
Concepts and HON shall execute and deliver a transition services agreement,
substantially in the form attached hereto as Schedule 2.4, concerning the
provision of employee benefits following the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF STANDARD PACIFIC
--------------------------------------------------
Standard Pacific makes the following representations and warranties to
HON:
3.1 Organization; Power and Authority. Each of Standard Pacific and
---------------------------------
Panel Concepts is a corporation duly organized, validly existing and in good
standing under the laws of its State of Incorporation and each has the requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted. Panel Concepts is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in the State of California and in each other jurisdiction in which
the ownership of its assets and properties or the conduct of its Business
requires such qualification, except where the failure so to qualify would not
have a material adverse effect on the Business or the assets, results of
operations or financial condition of Panel Concepts (a "Material Adverse
Effect").
3.2 Authorization, Execution and Validity of Agreement. Standard
--------------------------------------------------
Pacific has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Standard Pacific
of this Agreement and the consummation by Standard Pacific of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Standard Pacific, and no other corporate action on the part of Standard Pacific
is necessary to authorize this Agreement or for Standard Pacific to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Standard Pacific, and, assuming the due authorization,
execution and delivery by HON, constitutes a legal, valid and binding obligation
of Standard Pacific, enforceable against Standard Pacific in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
3.3 Subsidiaries, Affiliates, Joint Ventures and Investments. Panel
--------------------------------------------------------
Concepts has no direct or indirect ownership interest in, by way of stock
ownership or otherwise, any corporation, association or business enterprise.
Except as reflected in the Financial Statements (as hereinafter defined), Panel
Concepts does not have any investments in any other firms, persons or
corporations.
<PAGE>
3.4 Capitalization. The authorized capital stock of Panel Concepts
--------------
consists of 1000 shares of Common Stock, $0.01 par value, of which 10 are issued
and outstanding. All of the Shares have been duly authorized and validly issued
and are fully paid and non-assessable and free of any pre-emptive rights in
respect thereto. There are no authorized or outstanding (i) options, warrants,
subscriptions, calls, commitments, rights or other agreements of any character
to purchase or otherwise acquire from Panel Concepts shares of capital stock of
any class, (ii) securities of Panel Concepts that are convertible into, or
exchangeable or exercisable for, shares of any class of capital stock of Panel
Concepts, (iii) options, warrants or other rights to acquire from Panel Concepts
any such convertible, exchangeable or exercisable securities, or (iv) any other
contracts, commitments, agreements, understandings or arrangements of any kind
relating, directly or indirectly, to the issuance by Panel Concepts of any
shares of its capital stock. There are no voting trusts or other agreements or
understandings to which Panel Concepts or Standard Pacific is a party with
respect to the capital stock of Panel Concepts.
3.5 Title to Shares. Standard Pacific is the beneficial and record
---------------
owner of all of the Shares, free and clear of all Liens. At the Closing, HON
will acquire good and marketable title to the Shares, free and clear of all
Liens. Such Shares are not subject to any restrictions on transferability other
than those imposed by the Securities Act of 1933, as amended (the "1933 Act"),
and applicable state securities laws. Other than this Agreement, there are no
options, warrants, calls, commitments or rights of any character under which
Standard Pacific may be obligated to sell or transfer any of the Shares.
3.6 Organizational Records. The books of account, minute books, stock
----------------------
record books, and other records of Panel Concepts, all of which have been made
available to HON, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of Panel Concepts
contain accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders, the Boards of Directors, and committees of
the Boards of Directors of Panel Concepts, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of such books and records will be in the possession of Panel
Concepts.
3.7 Consents and Approvals; No Violation.
------------------------------------
(a) Except as set forth on Schedule 3.7, neither the execution,
------------
delivery and performance by Standard Pacific of this Agreement nor the
consummation of the transactions contemplated hereby including, without
limitation, the Pre-closing Transfer Transactions, will:
(i) conflict with or violate any statute, law, rule, regulation,
ordinance, order, judgment, award, writ, injunction or decree
(collectively, "Laws") of any federal, state or local government or
----
political subdivision thereof, governmental or regulatory agency,
authority, entity, commission, court or other instrumentality
("Governmental Authority"), except (a) to the extent that such conflict or
----------------------
violation would not have a Material Adverse Effect or (b) as would occur
solely as a result of the identity or the legal or regulatory status of HON
or any of its Affiliates.
(ii) violate the Certificate of Incorporation or By-laws of Standard
Pacific or the Certificate of Incorporation or By-laws of Panel Concepts,
(iii) require any Consent of, or the registration, declaration or
filing of any document or report with or notification to, any Governmental
Authority, except (a) where the failure to obtain such
<PAGE>
Consent could not reasonably be expected to have a Material Adverse Effect
and (b) as would be required solely as a result of the identity or the
legal or regulatory status of HON or any of its Affiliates.
(iv) violate or conflict with, result in a breach of or constitute
(with or without due notice or the passage of time or both) a default
under, or give rise to any right of termination, cancellation or
acceleration of the performance of or the loss of a benefit under, any
material Contract or material Permit (the terms Contract and Permit being
hereinafter defined), to which Panel Concepts, Standard Pacific or any of
its subsidiaries is a party to or to which Panel Concepts, Standard
Pacific, any of its subsidiaries or any of their assets are subject, or
(v) result in the creation of any Lien on any assets of Panel
Concepts.
3.8 Financial Information.
---------------------
(a) Financial Statements. Standard Pacific has previously furnished
--------------------
to HON copies of the unaudited September 30, 1997 balance sheet and income
statement of Panel Concepts and the audited consolidated balance sheet of Panel
Concepts as of and for the years ended December 31, 1996, 1995, and 1994, and
related consolidated statements of operations, consolidated statement of
shareholders' equity and consolidated statements of cash flows, for the fiscal
year then ended (together with notes thereto), certified by Arthur Andersen,
L.L.P., Panel Concepts' independent public accountants, and accompanied by their
reports thereon (collectively, the "Financial Statements"). The Financial
--------------------
Statements fairly present in all material respects the financial condition,
results of operations, and cash flows of Panel Concepts as of the dates and for
the periods presented therein in accordance with GAAP applied on a consistent
basis throughout the period indicated, except as otherwise noted therein or in
the related notes thereto or as set forth on Schedule 3.8(a) of the Disclosure
--------------
Schedule.
(b) Absence of Undisclosed Liabilities. Panel Concepts has no debts,
----------------------------------
liabilities or obligations, including any liabilities arising out of any illegal
or concealed conditions, whether absolute, accrued, contingent or otherwise, and
whether known or unknown, including, without limitation, liabilities for Taxes
(as hereinafter defined), except for those (i) set forth in or reserved against
on the Financial Statements, (ii) liabilities incurred in the ordinary course of
business since September 30, 1997, which are not in the aggregate material, and
which are consistent with the representations, warranties, covenants,
obligations and agreements contained in this Agreement, (iii) liabilities
disclosed on Schedule 3.8(b), and (iv) liabilities reflected in the Closing
---------------
Balance Sheet as finally determined.
3.9 Absence of Certain Changes. Except as disclosed on Schedule 3.9
-------------------------- ------------
and as contemplated by Sections 1.4(c)(i) and 1.6, since September 30, 1997 and
------------------ ---
on or before the date of this Agreement, none of the following actions has
occurred:
(a) any material change in the assets, financial position, results of
operations or business of Panel Concepts,
(b) any damage, destruction or casualty loss (whether or not covered
by insurance) to the owned or leased property or assets of Panel Concepts
involving an amount in excess of $50,000,
(c) any amendment or termination of any Contract, Lease or Permit of
Panel Concepts, other than in the ordinary course of business,
(d) any sale, lease, or other disposition of any properties or assets
of Panel Concepts, other than assets sold, leased or otherwise
<PAGE>
disposed of in the ordinary course of business,
(e) any increase in the compensation payable or benefits provided to
any of the employees of Panel Concepts (the "Employees"), except for annual
---------
increases in compensation of non-executive Employees consistent with past
practices none of which exceeded 4%, or
(f) any agreement or commitment to take any action described in this
Section 3.9.
-----------
3.10 Payables. Panel Concepts has experienced or suffered no undue
--------
delay in its payment of its liabilities and obligations to its trade creditors
(including suppliers) or trade debt.
3.11 Real Property.
-------------
(a) Schedule 3.11 contains a complete list and description of all of
-------------
the real property owned by Panel Concepts (the "Real Property") and all of the
-------------
leases (the "Leases") of real property (the "Leased Property") to which Panel
------ ---------------
Concepts is a party or is bound. True and correct copies of all such leases
have previously been delivered by Standard Pacific to HON. Except as set forth
on Schedule 3.11, the Real Property and the Leased Property represent all of the
-------------
real estate interests used, owned or occupied by Panel Concepts during the five-
year period prior to the date of this Agreement.
(b) Panel Concepts has good and marketable fee simple title to the
Real Property identified on Schedule 3.11 free and clear of all Liens, other
-------------
than (i) Liens for taxes not yet due, (ii) imperfections in title, if any, not
material in amount and which, individually or in aggregate, do not materially
interfere with the conduct of the Business, (iii) the matters set forth on
Schedule 3.11 hereto, and (iv) installments of special assessments not yet
- -------------
delinquent, recorded easements, covenants and other restrictions, and utility
easements, building restrictions, zoning restrictions and other easements and
restrictions existing generally with respect to properties of a similar
character. Panel Concepts has the right to occupy and use the Leased Property
described on, Schedule 3.11 in accordance with the terms of the applicable
------------
Leases. Except as disclosed on Schedule 3.11, to the best of Standard Pacific's
-------------
knowledge, no claim has been asserted against Panel Concepts adverse to Panel
Concepts' rights in such real estate interests.
(c) Each Lease is in full force and effect. Neither Panel Concepts
nor, to the best of Standard Pacific's knowledge, any other party thereto, is in
breach thereunder or in default thereunder (with or without lapse of time or the
giving of notice or both).
(d) The Real Property and the Leased Property, and the present use by
Panel Concepts of such real estate, does not violate any zoning, land use or
other Law, except for such violations as would not in the aggregate have a
Material Adverse Effect.
3.12 Personal Property. Except as set forth on Schedule 3.12, Panel
----------------- -------------
Concepts has good and marketable title to all personal property reflected on the
September 30, 1997 Balance Sheet and all personal property acquired by Panel
Concepts since the date thereof free and clear of all Liens, other than (a)
property that has been disposed of in the ordinary course of business, (b)
property disposed of pursuant to Sections 1.4(c)(i) or 1.6, (c) Liens for taxes
------------------ ---
not yet due, and (d) imperfections in title, if any, not material in amount and
which, individually or in the aggregate, do not materially interfere with the
conduct of the Business.
3.13 Condition of Assets. The buildings, plants, structures,
-------------------
equipment, and other assets of Panel Concepts are structurally sound, are in
good operating condition and repair, normal wear and tear excepted, and are
adequate for the uses to which they are being put, and none of such buildings,
<PAGE>
plants, structures, equipment or assets is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs.
3.14 Contracts.
---------
(a) Schedule 3.14 sets forth a list, as of the date hereof, of the
-------------
following contracts, agreements, commitments or arrangements or other legally
binding contractual rights or obligations (including court orders, injunctions
and settlement agreements) (collectively, "Contracts") to which Panel Concepts
---------
is a party or by which Panel Concepts or any of its assets is bound:
(i) any employment, severance, management, or consulting agreement,
or any other similar Contract involving compensation for employment or
consulting services rendered or to be rendered;
(ii) any distributorship, agency, manufacturer's representative or
similar Contract;
(iii) any collective bargaining agreement with any collective
bargaining group or labor union;
(iv) any credit agreement, loan agreement, indenture, note, bond,
mortgage, security agreement, loan commitment, conditional sale or title
retention agreement, equipment financing obligation or other evidence of
indebtedness, or other Contract relating to the borrowing of funds by Panel
Concepts;
(v) guarantee, indemnity or similar Contract which by its terms
Panel Concepts could (whether or not subject to such contingencies) be
required to make payments in excess of $10,000 with respect to or as a
result of liabilities, losses, costs or expenses paid or incurred by
another Person, other than that certain guaranty of Standard Pacific's
obligations under a credit agreement with Bank of America NT&SA, which
guaranty will be terminated simultaneously with the Closing;
(vi) any Contract with respect to letters of credit, surety or other
bonds or pursuant to which any of the assets of Panel Concepts is or is to
be subjected to a Lien;
(vii) any open sales order involving amounts in excess of $100,000
which is not terminable by Panel Concepts at will without payment or
penalty;
(viii) any purchase order or requirements contract involving amounts
in excess of $50,000 which is not terminable by Panel Concepts at will
without payment or penalty;
(ix) any equipment lease requiring annual expenditures involving
amounts in excess of $50,000 which is not terminable by Panel Concepts at
will without payment or penalty;
(x) any vehicle lease which is not terminable by Panel Concepts at
will without payment or penalty;
(xi) any Contract for the purchase or sale of any assets (other than
purchases or sales of inventory in the ordinary course of business
consistent with past practice) involving the payment or potential payment,
pursuant to the terms of any such Contract, by or to Panel Concepts of more
than $75,000;
(xii) any Contract limiting or restricting the ability of Panel
Concepts from entering into or engaging in any market or line of
<PAGE>
business or competing against any Person;
(xiii) any Contract creating a joint venture or partnership
arrangement;
(xiv) any Contract with Standard Pacific, any Affiliate of Standard
Pacific, or any officer, director or employee of Panel Concepts;
(xv) any Contract relating to the release, transportation or
disposal of Hazardous Materials (as hereinafter defined) or the clean-up,
abatement or other actions in connection with any Environmental Damages (as
hereinafter defined);
(xvi) any Contract relating to any domestic and foreign patent,
trade name, trademark, trade dress, trade secret, design registration,
inventors certificate, process, formula, know-how, engineering data,
software, hardware, technology, assumed name right, copyright or service
mark, and all registrat ions and applications therefor, and all extensions,
reissuances or reexaminations thereof, that are owned, licensed or used by
Panel Concepts (the "Intellectual Property"), other than licenses of off-
---------------------
the-shelf software and other licenses of rights which are not material to
the Business or financial condition of Panel Concepts;
(xvii) any Contract for capital expenditures or the acquisition or
construction of fixed assets;
(xviii) any Contract with any Governmental Authority; or
(xix) any Contract other than the Contracts listed above which
involves aggregate future payments by or to Panel Concepts in excess of
$75,000, or which is otherwise material to Panel Concepts.
(b) Standard Pacific has delivered to or made available to HON true
and correct copies of all of the Contracts and any amendments thereto. All of
the Contracts are valid, binding and enforceable obligations of Panel Concepts,
as the case may be, and are in full force and effect. There has been no breach
of any Contract by Panel Concepts or, to the best of Standard Pacific's
knowledge, any other Person that has not been waived or cured.
3.15 Litigation. Except as set forth on Schedule 3.15 or Sections 3.17
---------- ------------- -------------
or 3.18 herein, there is no claim, action, suit, litigation, investigation,
----
administrative proceeding, arbitration or other proceeding ("Legal Proceeding")
----------------
that is pending or, to the best of Standard Pacific's knowledge, threatened
against Panel Concepts. Set forth on the Schedule 3.15 is a description of (i)
-------------
all Legal Proceedings brought or, to the best of Standard Pacific's knowledge,
threatened against Panel Concepts or its Affiliates or predecessors-in-interest
during the five-year period preceding the date hereof, together with a
description of the outcome or present status thereof, and (ii) all judgments,
orders, decrees, writs or injunctions entered into by or against Panel Concepts.
3.16 Permits. Panel Concepts has obtained all licenses, permits,
-------
approvals, certifications, variances, waivers or consents issued by any
Governmental Authority (coll ectively, the "Permits") which are required to be
-------
obtained by it under all applicable Laws, including Environmental Laws (as
hereinafter defined). Panel Concepts is in full compliance with all material
terms and conditions of such Permits.
3.17 Environmental Matters.
---------------------
(a) Except as set forth in Schedule 3.17:
-------------
<PAGE>
(i) Panel Concepts is in full compliance with all limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in applicable Environmental
Laws;
(ii) neither Panel Concepts, nor any other previous owner, tenant,
occupant or user of the Real Property, the Leased Property or any other
real property owned leased or operated by Panel Concepts or its
predecessors in interest (collectively, the "Property") nor any other
--------
Person has engaged in or permitted any operations or activities upon, or
any use or occupancy of the Property, or any portion thereof, resulting in
the emission, release, discharge, dumping or disposal of any Hazardous
Materials on, under, in or about the Property, nor have any Hazardous
Materials migrated from the Property to, upon, about or beneath other
properties, nor have any Hazardous Materials migrated or threatened to
migrate from other properties to, upon, about or beneath the Property;
(iii) there are no past or present violations of Environmental Laws on
the Property or elsewhere, nor any event, condition, circumstance,
activity, practice, incident, action or plan which is reasonably likely to
interfere with or prevent continued compliance with or which gives rise to
any common law or statutory liability, or otherwise form the basis of any
claim, action, suit, or proceeding, against Panel Concepts based on or
resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge or
release into the environment, of any Hazardous Materials;
(iv) no underground improvements, including but not limited to
treatment or storage tanks, sumps or water, gas or oil wells, are or have
been located on the Property; and
(v) Panel Concepts has taken all actions necessary under applicable
Environmental Laws to register any Products or materials required to be
registered by Panel Concepts (or its agents) thereunder.
(b) For purposes of this Agreement, the following terms have the following
meanings:
(i) "Environmental Damages" means any and all liabilities which are
---------------------
incurred at any time as a result of the existence at or prior to Closing of
Hazardous Material upon, about, beneath the Property or migrating or
threatening to migrate to or from the Property, or the presence upon, about
or beneath any other property of Hazardous Materials generated by or
otherwise relating to the Business, or the violation prior to the Closing
of Environmental Laws, regardless of whether the existence of such
Hazardous Material or the violation of Environmental Laws arose prior to
the present ownership or operation of the Property or the Business, and
including without limitation:
(1) Damages for personal injury, or injury to property or natural
resources, foreseeable or unforeseeable, including, without
limitation, the cost of demolition and rebuilding of any
improvements on real property, and penalties;
(2) Fees incurred for the services of attorneys, consultants,
contractors, experts, laboratories and all other costs incurred
in connection with the investigation or remediation of Hazardous
Materials or violation of Environmental Laws including, but not
limited to, the preparation of any feasibility studies
<PAGE>
or reports or the performance of any cleanup, remediation,
removal, response, abatement, containment, closure, restoration
or monitoring work required by any Governmental Authority, or
reasonably necessary to make full economic use of the Property or
any other property in a manner consistent with its intended use
or otherwise expended in connection with such conditions, and
including without limitation any attorneys' fees, costs and
expenses incurred in enforcing this Agreement or collecting any
sums due hereunder;
(3) Liability to any third person or Governmental Authority to
indemnify such Person or agency for costs expended in connection
with the items referenced in Section 10.2; and
------------
(4) Diminution of the value of the Property and damages for the
restriction on the use of or adverse impact on the marketing of
rentable or usable space or of any amenity of the Property.
(ii) "Environmental Laws" means all applicable Laws, Permits and
similar items of all Governmental Authorities and all applicable judicial,
administrative, and regulatory judgments, decrees, orders, writs or injunctions
relating to the protection of human health or the environment, including,
without limitation:
(1) All requirements pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges,
releases, or threatened releases of Hazardous Materials;
(2) All requirements pertaining to the protection of the health and
safety of employees or the public; and
(3) All other limitations, restrictions, conditions, standards,
prohibitions, obligations, schedules and timetables contained
therein or in any notice or demand letter issued, entered,
promulgated or approved thereunder.
(iii) "Hazardous Material" means any substance:
------------------
(1) the presence of which requires investigation or remediation under
any federal, state or local statute, regulation, ordinance,
order, action, policy or common law; or
(2) which is itself or contains a "hazardous waste," "hazardous
substance," pollutant or contaminant under any federal,
applicable state or local statute, regulation, rule or ordinance
or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. (S)(S) 9601 et seq.) and/or the Resource
Conservation and Recovery Act (42 U.S.C. (S)(S) 6901 et seq.).
3.18 Regulatory Compliance. Except as disclosed on Schedule 3.18 or in
--------------------- -------------
Section 3.16 or 3.17 herein, Panel Concepts has complied with all Laws
- ------------ ----
(including, without limitation, zoning ordinances, Environmental Laws, building
codes, civil rights laws, wages, hours, collective bargaining, occupational
health and safety, antitrust, consumer protection, currency
<PAGE>
exchange, equal opportunity, pensions, securities, and trading-with-the-enemy)
applicable to it and to the conduct of its Business, except for such failures to
comply as would not in the aggregate have a Material Adverse Effect. Panel
Concepts is not in default under, and no event has occurred which, with the
lapse of time, giving of notice or action by a third party, could result in
default under, the terms of any judgment, decree, order, injunction or writ of
any Governmental Authority, whether at law or in equity, issued or entered
against Panel Concepts.
3.19 Customers and Suppliers. The attached Schedule 3.19 contains
----------------------- -------------
a list of (a) Panel Concepts's ten largest customers for the year ended December
31, 1996, and (b) Panel Concepts' top ten dollar volume vendors for the year
ended December 31, 1996. Panel Concepts has not been advised by any customer or
supplier representing purchases and sales of 5% or more of total sales for the
year ended December 31, 1996, that such customer or supplier was terminating its
relationship with Panel Concepts or would not continue to purchase Products or
services from Panel Concepts in the future because of any dissatisfaction with
Panel Concepts' performance, or for any other reason. Panel Concepts is not
aware of any adverse conditions affecting the supply of materials available to
Panel Concepts that would have a Material Adverse Effect.
3.20 Intellectual Property.
---------------------
(a) Schedule 3.20 attached hereto sets forth a complete and correct
-------------
list (with an indication of the record owner and identifying number) of all
domestic and foreign patents, design registrations, inventors certificates,
trademarks, service marks, trade names and copyrights for which registrations
have been obtained (and all applications for, or extensions or reissuances or
reexaminations, or provisional applications of, any of the foregoing) which are
owned by Panel Concepts (the "Registered Intellectual Property"). True, correct
--------------------------------
and complete copies of such patents, design registrations, inventors
certificates, trademarks, service marks, trade names and copyrights (and all
applications for, or extensions or reissuances or reexaminations, or provisional
applications of, any of the foregoing) identified on Schedule 3.20 have been
-------------
delivered to HON. Panel Concepts is the sole owner and, to the best of Standard
Pacific's knowledge, has the exclusive right to use, free and clear of any
Liens, all of the Registered Intellectual Property.
(b) There is no claim or demand of any Person pending or, to the
best of Standard Pacific's knowledge, threatened, or has been brought to the
attention of Standard Pacific or Panel Concepts, which challenges (i) the rights
of Panel Concepts in respect of any patents, trademarks, service marks, trade
names or copyrights (or applications for, or extensions or reissuances of, any
of the foregoing) which are owned, licensed or used by Panel Concepts, or (ii)
the rights of Panel Concepts in respect of any processes, formulas, confidential
information, trade secrets, know-how, engineering data, software, hardware
technology or other Intellectual Property which are owned, licensed or used by
Panel Concepts. No patent, trademark, service mark, trade name, copyright,
process, formulas, confidential information, trade secret, know-how, engineering
data, technology or other intellectual property which is owned or licensed by
Panel Concepts, to the best of Standard Pacific's knowledge, infringes or is
being infringed by others. To the best of Standard Pacific's knowledge, the
Business does not involve employment of any Person in a manner which violates
any non-competition or non-disclosure agreement which such Person entered into
in connection with any former employment. To the best of Standard Pacific's and
Panel Concepts' knowledge, there are no reasons to believe that any of the
patents, trademarks or copyrights (or application therefor) of Panel Concepts
are invalid or unenforceable, and all maintenance and/or amounts relating
thereto have been timely paid.
3.21 Employees. There are no strikes, slowdowns or work stoppages,
---------
pending, or, to the best of Standard Pacific's knowledge,
<PAGE>
threatened which involve any employees employed by Panel Concepts. All amounts
withheld, required to be withheld, paid or required to be paid prior to the
Closing Date in respect of all employees of Panel Concepts pursuant to
applicable Law including statutes relating to income and other Taxes,
unemployment insurance, employment standards, pay equity, health insurance,
employee health tax, workers' compensation and statutory pension plans have been
withheld, paid, discharged or otherwise settled by Panel Concepts. Panel
Concepts has not experienced any labor difficulties, including, without
limitation, strikes, slowdowns, or work stoppages, within the five-year period
preceding the date hereof. Panel Concepts is not a party to any collective
bargaining or union contract, and, to the best of Standard Pacific's knowledge,
there exists no current union organizational effort with respect to any of Panel
Concepts' employees.
3.22 Employee Benefits.
-----------------
(a) Except as set forth on the attached Schedule 3.22, Panel Concepts
-------------
neither is nor was a party to, maintains or has maintained, or contributes or
has contributed to, any (i) severance or employment agreement with any current
or former director, officer or Employee, (ii) severance program or policy, (iii)
plan or arrangement relating to its current or former directors, officers or
Employees which contains change in control provisions, or (iv) employee pension
or welfare pl ans, (as defined in the Employee Retirement Income Security Act of
1974, as amended, "ERISA"), any collective bargaining agreement, consulting
-----
agreement, or any bonus, pension, profit sharing, retirement, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, supplemental
unemployment, disability, death benefit, hospitalization, medical, workers
compensation or other plan, arrangement or understanding (collectively, the
"Employee Plans"), nor has Panel Concepts, or any of Panel Concepts' officers or
- ---------------
directors, taken any action directly or indirectly which obligates Panel
Concepts to institute or modify or change any such Employee Plan, any change in
any actuarial or other assumption used to calculate funding obligations with
respect to any of Panel Concepts' Employee Plans, or any change in the manner in
which contributions to any of Panel Concepts' Employee Plans are made or the
basis on which such contributions are determined.
(b) Schedule 3.22 lists all of the Employee Plans. True, complete and
-------------
correct copies of the Employee Plans and the summary plan descriptions, the most
recent annual reports on Internal Revenue Service Form 5500 and actuarial
reports, if applicable, and if not applicable, statement of trust assets, have
been made available and delivered to HON.
(c) With respect to the Employee Plans, and to any other employee benefit
plan, program, agreement or arrangement to which Panel Concepts or any other
trade or business, whether or not incorporated (an "ERISA Affiliate"), that
---------------
together with Panel Concepts would be deemed a "single employer" within the
meaning of Section 414(b), (c), (m) or (o) of the Code, has made, or was
required to make, contributions at any time prior to the date hereof, no event
has occurred, and there exists no condition or set of circumstances, in
connection with which Panel Concepts could be subject to any liability under
ERISA, the Code or any other applicable Law.
(d) Each Employee Plan has been administered in accordance with its terms,
and all of the Employee Plans have been operated, and are in compliance with the
applicable provisions of ERISA, the Code and all other applicable laws. Each
Employee Plan that is intended to be qualified under Section 401(a) or 401(k) of
the Code has received a favorable determination letter from the IRS covering the
Tax Reform Act of 1986, that it is so qualified and each trust established in
connection with any Employee Plan that is intended to be exempt from federal
income taxation under Section 501(a) of the Code has received a determination
letter from the IRS that such trust is so exempt, and no fact or event has
occurred since the date of any
<PAGE>
determination letter from the IRS which is reasonably likely to affect adversely
the qualified status of any such Employee Plan or the exempt status of any such
trust. There are no pending or threatened or anticipated claims under or with
respect to any Employee Plan by or on behalf of any current or former director,
officer or Employee, or dependent on beneficiary thereof, or otherwise (other
than routine claims for benefits). All contributions required to be made by
Panel Concepts under applicable Law or the terms of any Employee Plan or
collective bargaining agreement as of the Closing Date have been made as of such
date.
(e) No Employee Plan is (i) a "defined benefit" plan (as defined in
Section 3(35) of ERISA), (ii) a "multiemployer plan" within the meaning of
Section 3(37) of ERISA, (iii) a "multiple employer" or a "multiple employer
welfare arrangement" within the meaning of Section 514(b)(6) of ERISA, or (iv) a
"welfare benefit fund" as defined in Section 419(e) of the Code.
(f) No Employee Plan provides medical, life or other welfare benefits
(whether or not insured), with respect to current or former Employees after
retirement or other termination of service (other than coverage mandated by
applicable law). With respect to any contract or arrangement with an insurance
company providing funding under any Employee Plan, there is no material
liability for any retroactive rate adjustment. Panel Concepts has the right to
amend or terminate its participation with respect to each Employee Plan. Each
Employee Plan that is a "group health plan," as defined in Section 5000 of the
Code has been operated in compliance with Section 4980B of the Code and the
secondary payor requirements of Section 1862(b) of the Social Security Act.
Except as set forth on Schedule 3.22, no claim for medical benefits has been
-------------
incurred since February 1, 1997 under any Employee Plan with respect to any
current or former Employee (or the spouse or dependents of such Employees) in
excess of $50,000.
(g) No current or former Employee will be entitled to any payment,
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any Employee Plan as a result of the transactions contemplated by
this Agreement (either alone or in conjunction with any other event such as a
termination of employment) and no trustee under any "rabbi trust" or similar
arrangement in connection with any Employee Plan will be entitled to any payment
as a result of the transactions contemplated by this Agreement.
(h) None of Panel Concepts or any of its current or former directors,
officers, Employees or any other "fiduciary," as such term is defined in Section
3 of ERISA, has committed any material breach of fiduciary responsibility
imposed by ERISA or any other applicable law with respect to the Employee Plans
which would subject HON, Panel Concepts or any of their respective directors,
officers or Employees to any material liability under ERISA or any applicable
law.
(i) Panel Concepts has not incurred any lien under Section 401(a)(29)
or any material liability for any tax or civil penalty imposed by Sections 4971,
4975 or 4976 of the Code or Section 502 of ERISA and no condition or set of
circumstances exists that presents a risk to Panel Concepts of incurring any
such lien or liability.
(j) Panel Concepts (i) is in compliance in all material respects with
all applicable Laws respecting employment, employment practices, terms and
conditions of employment and wages and hours (including, but not limited to, the
Worker Adjustment Retraining Notification Act, the Age Discrimination in
Employment Act, as amended, the Civil Rights Act of 1964, as amended, the Equal
Pay Act, the Occupational Safety and Health Act, the Fair Labor Standards Act,
the Americans with Disability Act of 1990, the Family and Medical Leave Act of
1993, the Immigration and Nationality Act of 1952, as amended by the Immigration
Reform and Control Act of 1986 and the regulations promulgated thereunder, and
any other federal, state or local law regulating
<PAGE>
employment or protecting employee rights), in each case, with respect to current
and former Employees and independent contractors of Panel Concepts, (ii) has
withheld all material amounts required by applicable Laws or by agreement to be
withheld from the wages, salaries and other payments to such current and former
Employees and independent contractors, (iii) is not liable for any arrears of
wages or any taxes or any penalty for failure to comply with any of the
foregoing, and (iv) is not liable for any payment to any trust or other fund or
to any governmental entity with respect to unemployment compensation benefits,
workers compensation, social security or other benefits for current or former
Employees and independent contractors of Panel Concepts.
(k) Panel Concepts has, or will have by the Closing, taken all
actions necessary to bring and maintain all employees and employment records in
compliance with Section 274A of the Immigration and Nationality Act of 1952, as
amended by the Immigration Reform and Control Act of 1986 and the related
regulations promulgated thereunder.
3.23 Taxes. Except as set forth on the Schedule 3.23 attached hereto:
----- -------------
(a) Panel Concepts has duly and timely filed all Tax Returns
(including without limitation in respect of estimated Taxes) required to be
filed by it with the appropriate Governmental Authorities, or requests for
extensions to file such Tax Returns have been timely filed and granted and have
not expired. All such Tax Returns were at the time of filing and are as of the
date hereof correct and complete in all material respects. All Taxes owed by
Panel Concepts (whether or not shown on any Tax Return) have been paid within
the time and in the manner prescribed by law.
(b) No claim has ever been made by a Taxing authority in a
jurisdiction where Panel Concepts has never filed a Tax Return that Panel
Concepts is or may be subject to taxation by that jurisdiction. The attached
Schedule 3.23 sets forth each state, local and foreign jurisdiction in which
- -------------
Panel Concepts (i) filed an income or franchise Tax Return, whether on a
consolidated, combined or separate return basis, during the five year-period
ended December 31, 1996, and (ii) collected or remitted any sales and/or use
Taxes during the five-year period ended December 31, 1996.
(c) The Financial Statements reflect an adequate reserve in
accordance with GAAP for all Taxes payable by Panel Concepts for all Taxable
periods and portions thereof accrued through the respective dates of such
Financial Statements. All deficiencies for any Taxes that have been proposed,
asserted, or assessed against Panel Concepts have been fully paid, or are fully
reflected as a liability in such Financial Statements, or are being contested
and an adequate reserve therefor has been established and is fully reflected in
accordance with GAAP in such Financial Statements.
(d) Panel Concepts is not a party to any pending audit, examination,
action or proceeding for the assessment or collection of any Taxes, nor, to the
best of Standard Pacific's knowledge, is any such audit, examination, action or
proceeding threatened.
(e) There are no Liens for Taxes (other than for current Taxes not
yet due and payable) on the assets of Panel Concepts or the Shares.
(f) The federal, state, local, and foreign income Tax Returns of
Panel Concepts have been examined by and settled with the Internal Revenue
Service (the "IRS") and other applicable taxing authorities, or the statutes
of--- limitations for the assessment of Taxes with respect to the Taxable years
or other periods covered by such Tax Returns have expired. Panel Concepts is not
subject to any agreemen ts, waivers or other arrangements extending the statute
of limitations for the assessment, collection or levy of any Taxes for any
Taxable year or other period. Copies of all income Tax Returns of Panel Concepts
filed in respect of any Taxable year for which the assessment of
<PAGE>
Taxes is not barred by the statute of limitations or that has not been closed
after examination by the IRS or other applicable taxing authority have
heretofore been delivered to HON and all such Tax Returns are listed on the
attached Schedule 3.23.
-------------
(g) Copies of all Tax agreements (including, without limitation,
agreements providing for the allocation or sharing of or indemnification with
respect to Taxes) to which Panel Concepts is a party, including any novations,
transfers or assignments thereof, have heretofore been delivered to HON, and all
such agreements are listed on the attached Schedule 3.23.
-------------
(h) Panel Concepts has not filed a consent pursuant to, or agreed to
the application of, Section 341(f) of the Code.
(i) Panel Concepts has not made any payments, is not obligated to make
any payments, and is not a party to any agreement that could obligate it to make
any payments, the deductibility of which would be disallowed (in whole or in
part) under Section 280G of the Code.
(j) Standard Pacific is not a foreign person within the meaning of,
and no Tax is required to be withheld as a result of any the transactions
contemplated by this Agreement pursuant to, Section 1445 or any other provision
of the Code or of any other state, local or foreign laws.
(k) Panel Concepts has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal income Taxes within the meaning of Section 6662 of the Code.
(l) All Taxes that are required by law to be withheld or collected by
Panel Concepts have been duly withheld or collected and, to the extent required,
have been paid to the proper Governmental Authority or properly segregated or
deposited as required by applicable law.
(m) Panel Concepts (A) has not been a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was Standard Pacific), and (B) has no liability for the Taxes of
any other Person under Treas. Reg. (S) 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by Contract or
otherwise.
(n) Panel Concepts has not executed or entered into any closing
agreement pursuant to Section 7121 of the Code, or any predecessor provision
thereof, or any similar provision of state or local law. (o) None of the assets
owned by Panel Concepts is property that is required to be treated as owned by
any other Person pursuant to Section 168(f)(8) of the Internal Revenue Code of
1954, as amended, as in effect immediately prior to the enactment of the Tax
Reform Act of 1986, or is "tax-exempt use property" within the meaning of
Section 168(h) of the Code. (p) Panel Concepts has not taken any action in
anticipation of the Closing not expressly required by this Agreement, or not in
accordance with past practice, that would have the effect of deferring any
liability for Taxes of Panel Concepts to any Taxable period (or portion thereof)
ending after the Closing Date.
(q) Panel Concepts is not nor will be required to include any amount
in its gross income or exclude any amount of its deductions in any Taxable
period ending after the Closing Date by reason of a change in accounting method
or use of the installment method of accounting under Section 453 of the Code in
any Taxable period ending on or before the Closing Date.
<PAGE>
(r) No power of attorney has been granted by Panel Concepts with respect to
any matter relating to Taxes which is currently in force.
For purposes of this Agreement, (i) the term "Tax" (including, with
---
correlative meaning, the terms "Taxes" and "Taxable") means all federal, state,
----- -------
local, and foreign net income, gross income, profits, franchise, gross receipts,
payroll, sales, employment, use, occupation, license, value added, property, ad
valorem, withholding, excise, user, fuel, excess or windfall profits,
alternative or add-on minimum, custom duties, gains, transfer, documentary,
stamp, and other taxes, duties, fees, assessments or charges of any nature
whatsoever, together with all interest, penalties, fines and additions to tax or
additional amounts imposed with respect thereto, and (ii) the term "Tax Returns"
-----------
means any return, report, statement, election, information return or other
document (including schedules or any related or supporting information) filed or
required to be filed with any Governmental Authority in connection with the
determination, assessment or collection of any Tax or the administration of any
laws, regulations or administrative requirements relating to any Tax.
3.24 Brokers. No Person is or will become entitled to receive any
-------
brokerage or finder's fee, financial advisor fee or other similar payment for
the transactions contemplated by this Agreement by virtue of having been engaged
by or acted on behalf of Standard Pacific.
3.25 Product Warranties and Returns; Warranty Costs. Except as set
----------------------------------------------
forth on the attached Schedule 3.25, true, accurate and complete copies of which
-------------
have heretofore been made available to HON, Panel Concepts neither (i) makes nor
has previously made any product warranties in connection with the sale of its
Products, nor (ii) has any presently effective agreement, contract or
arrangement with respect to the return of Products or rebates, credits or
similar allowances with respect thereto. Panel Concepts has not received notice
of any claim that Panel Concepts is under any liability or obligation with
respect to product warranty or the return of Products or rebates, credits or
similar allowances with respect thereto, and for which an adequate reserve is
not set forth on the Financial Statements or the Closing Balance Sheet.
3.26 Insurance. The attached Schedule 3.26 lists each insurance
--------- -------------
policy (specifying the location, insured, insurer, beneficiary of the policy,
amount of coverage, type of insurance and policy number) presently maintained by
Panel Concepts, including any policies providing "occurrence-based" coverage for
prior periods. Except as indicated on the attached Schedule 3.26, no insurance
-------------
policy maintained by Panel Concepts requires the consent of any party other than
Standard Pacific or Panel Concepts prior to the cancellation or termination of
such policy. Except as set forth on attached Schedule 3.26, all of such
-------------
insurance policies are in full force and effect, and all premiums paid thereon,
no notice of cancellation or termination with respect to any such policy has
been received and Panel Concepts is not in default with respect to its
obligations under any of such insurance policies. The attached Schedule 3.26
-------------
identifies all risks which Panel Concepts has designated as being self-insured.
Panel Concepts has not been refused any insurance with respect to its assets or
operations, nor has its coverage been limited, by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance
during the last five years. Each such insurance policy will by its terms remain
in full force and effect until the Closing unless terminated in accordance with
such policy, and an equivalent substitution policy, without lapse of coverage,
is obtained by Panel Concepts.
3.27 Absence of Certain Commercial Practices. Neither Panel Concepts
nor, to the best of Standard Pacific's knowledge, any officer, director,
employee, trustee, or agent of Panel Concepts or any Person acting on behalf
of any of the foregoing, has given or agreed to give any (i) individual gift
or similar benefit of more than nominal value to any customer, supplier,
Governmental Authority (including governmental employees or
<PAGE>
officials) or any other Person who is or may be in a position to help, hinder or
assist Panel Concepts or the Person giving such gift or benefit in connection
with any actual or proposed transaction relating to Panel Concepts' Business,
which gifts or similar benefits would individually or in the aggregate subject
Panel Concepts or any officer, director, employee or agent of Panel Concepts to
any fine, penalty, cost or expense or to any criminal proceeding, (ii) receipts
from or payments to any governmental officials or employees, (iii) commercial
bribes or kick-backs, (iv) political contributions, or (v) any receipts or
disbursements in connection with any unlawful boycott.
3.28 Banking and Agency Arrangements.
-------------------------------
(a) The attached Schedule 3.28 sets forth a correct and complete list
-------------
of:
(i) each bank, savings and loan or similar financial institution in
which Panel Concepts has an account or safe deposit box or other custodial
arrangement within the previous three years and the location and numbers of
such accounts or safe deposit boxes maintained by Panel Concepts; and
(ii) the names of all Persons authorized to draw on each such account
or to have access to any such safe deposit box facility.
(b) Except as set forth on the attached Schedule 3.28, Panel Concepts
-------------
has not granted any general or special powers of attorney or any other agency
arrangement.
3.29 Affiliated Transactions; Certain Advances; Insider Interests.
------------------------------------------------------------
Except as set forth on the attached Schedule 3.29 or Schedule 3.14, to the best
------------- -------------
of Standard Pacific's knowledge, no officer, director, shareholder or Affiliate
of Panel Concepts or any individual in such officer's, director's, shareholder's
or Affiliate's immediate family is a party to any agreement, contract,
commitment or transaction with Panel Concepts or has any interest in any
properties, real or personal, tangible or intangible, or assets used by Panel
Concepts (including, without limitation, Intellectual Property). Except for
travel advances, and advances on accrued salary or bonus due or to become due in
the ordinary and normal course of business, there are no receivables of Panel
Concepts owing by any director, officer or employee of any of Panel Concepts or
owing by the corporations, partnerships, firms or organizations in which
directors, officers or employees of Panel Concepts have any substantial
interest.
3.30 Backlog. Panel Concepts has delivered to HON a statement of back-
-------
log dated as of a recent date, setting forth a true, complete and correct list
of the backlog of firm orders as of the date thereof in all material respects.
3.31 Pre-closing Transfer Transactions. The Pre-closing Transfer
---------------------------------
Agreements have been or prior to the Closing will have been duly executed and
delivered by each of the parties thereto, are or prior to the Closing will be in
full force and effect, and are or prior to the Closing will be the valid,
legally binding and enforceable obligations of each of the parties thereto.
Panel Concepts has provided HON with true, complete and correct copies of all of
the Pre-closing Transfer Agreements, including, without limitation, all transfer
or assignment agreements.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF HON
-------------------------------------
HON makes the following representations and warranties to Standard
<PAGE>
Pacific:
4.1 Organization; Power and Authority. HON is a corporation duly
---------------------------------
organized, validly existing and in good standing under the laws of the State of
Iowa. HON has all corporate power necessary to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby.
4.2 Authorization, Execution and Validity. The execution, delivery
-------------------------------------
and performance by HON of this Agreement and the consummation by HON of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action. This Agreement has been duly and validly executed and
delivered by HON, constitutes its legal, valid and binding obligation and is
enforceable against HON in accordance with its terms.
4.3 No Conflict; HON Consents. Neither the execution, delivery and
-------------------------
performance by HON of this Agreement, nor the consummation of the transactions
contemplated hereby, will (a) conflict with or violate any Law applicable to
HON, (b) violate the Articles of Incorporation and By-laws of HON, or (c)
require any consent of, or the registration, declaration or filing of the
document or report with or notification to, any Governmental Authority.
4.4 Brokers. No Person is or will become entitled to receive any
-------
brokerage or finder's fee, advisory fee or other similar payment for the
transactions contemplated by this Agreement by virtue of having been engaged by
or acted on behalf of HON.
4.5 Purchase for Investment. HON is acquiring the Shares for its own
-----------------------
account for investment and not for resale or distribution within the meaning of
Section 2(11) of the 1933 Act. HON will refrain from transferring or otherwise
disposing of any of the Shares, or any interest therein, in such manner as to
cause Standard Pacific to be in violation of the registration requirements of
the 1933 Act or applicable state securities or blue sky laws.
4.6 Investigation. In executing this Agreement, HON is relying on the
-------------
provisions set forth herein and not any other statements, representatives or
assurances of any kind made by Standard Pacific, Panel Concepts or their
respective representatives or any other person, including without limitation,
any forecasts, projections or budgets provided by such persons.
4.7 Financing. HON has available cash under presently existing and
---------
enforceable credit lines that is sufficient to consummate the transactions
contemplated hereby. No other financing is required to enable HON to consummate
the transactions contemplated hereby. To the extent such borrowings become
unavailable, HON will promptly arrange for alternate financing for the
transactions contemplated hereby, it being understood that any inability by HON
to obtain any necessary financing for the transactions contemplated hereby shall
not excuse HON's obligation to timely consummate the transactions contemplated
hereby.
4.8 Legal Proceedings. There are no Legal Proceedings pending or, to
-----------------
the best of HON's knowledge, threatened against, relating to or affecting HON or
any of its assets or properties which could reasonably be expected to result in
the issuance of any writ, judgment, decree, injunction or similar order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated hereby.
<PAGE>
ARTICLE 5
COVENANTS
---------
5.1 Pre-closing Access to Information; Physical Inventory.
-----------------------------------------------------
(a) From the date hereof through the Closing Date, upon
reasonable notice from HON, Standard Pacific will, and will cause Panel Concepts
and their respective directors, officers, employees, agents, consultants,
advisors, or other representatives, including legal counsel, accountants, and
financial advisors, to afford HON and its directors, officers, employees,
agents, consultants, advisors, or other representatives, including legal counsel
and accountants (collectively, "HON's Advisors") reasonable access during normal
--------------
business hours to the personnel, property, contracts, books and records, and
other documents and data of Panel Concepts, and to furnish HON and HON's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as HON may reasonably request.
(b) HON acknowledges that certain of the information which has
been and may be made available to it by Standard Pacific is proprietary and
includes confidential information and such information is and shall be subject
to the terms of the Confidentiality Agreement dated December 2, 1996, between
Standard Pacific and HON which shall continue in full force and effect
notwithstanding the execution of this Agreement.
5.2 Conduct of Business.
-------------------
(a) From the date hereof through the Closing Date, Standard Pacific
shall cause Panel Concepts to use all commercially reasonable efforts to:
(i) preserve its relationships with suppliers, customers, employees,
creditors and Governmental Authorities,
(ii) maintain its existing insurance coverage,
(iii) perform its obligations under the its Contracts and Permits,
(iv) comply with all applicable Laws, and
(v) otherwise carry on its business in the ordinary course and
consistent with past practice except as otherwise contemplated in this
Agreement.
(b) Without the prior written consent of HON (which consent shall
not be unreasonably withheld) Standard Pacific will cause Panel Concepts not to:
(i) amend its Certificate of Incorporation and By-laws;
(ii) except as contemplated by this Agreement, including Sections
--------
1.4(c)(i) and 1.6, declare, set aside or pay any dividend or make any
- -------- ---
distribution on or with respect to shares of its capital stock or redeem,
repurchase or otherwise acquire any shares of its capital stock;
(iii) except as contemplated by this Agreement, including Sections
1.4(c)(i) and 1.6, make any cash payments to Standard Pacific or any Affiliate
- --------- ---
of Standard Pacific or any subsidiary of Standard Pacific other than pursuant
to, and in accordance with the terms of, a Contract listed or past practice
described on Schedule 3.14;
-------------
(iv) issue, grant, sell, assign or pledge any shares of, or
<PAGE>
rights of any kind to acquire any shares of, its capital stock of any class
(whether through the issuance or granting of convertible securities,
options, warrants, commitments, subscriptions, rights to purchase or
otherwise);
(v) enter into any merger, consolidation, recapitalization or
other business combination or reorganization;
(vi) create, incur, assume or prepay any indebtedness for borrowed
money;
(vii) except as contemplated by this Agreement, including Sections
--------
1.4(c)(i) and 1.6, and the sale of aluminum inventory for scrap, sell,
-----------------
assign, transfer or permit the creation of any Lien on any portion of the
assets of Panel Concepts, other than in the ordinary course of business
consistent with past practice;
(viii) enter into any Contract outside the ordinary course of
business;
(ix) amend or terminate any material Contract or Permit;
(x) increase the rate of compensation for any employee of Panel
Concepts or effect any general increase in compensation for employees,
except for individual normal increases in compensation of non-executive
Employees consistent with past practice, which shall not exceed 4%;
(xi) enter into, adopt or, except as may be required by Law, amend
or terminate any Employee Plan, or pay any benefit not required by any
Employee Plan on the date of this Agreement;
(xii) make commitments for any capital project, other than
commitments contained in Panel Concepts' capital budget for the fiscal year
ending December 31, 1997 and commitments in the ordinary course of business
not exceeding in the aggregate $50,000;
(xiii) make any material change in any method of accounting or
accounting practice;
(xiv) make any loans, advances or capital contributions to, or
investments in, any Person, other than in the ordinary course of business
consistent with past practice;
(xv) adopt, enact, authorize, ratify, approve, cause or suffer to
exist any material amendment, modification, implementation or termination
of any collective bargaining agreement (other than any such amendment,
modification, implementation or termination required under applicable Law
or under the terms of any Employee Plan or collective bargaining
agreement); or
(xvi) agree to take any of the actions described in Sections
5.2(b)(i) through 5.2(b)(xv).
--------- ----------
5.3 Insurance. Between the date of this Agreement and the Closing
---------
Date, Standard Pacific shall or shall cause Panel Concepts to use its best
efforts to maintain in full force and effect all of the presently existing
insurance policies that cover Panel Concepts. HON understands and acknowledges
that Panel Concepts is insured under Standard Pacific's general liability,
property, auto, boiler and machinery and workers' compensation policies and that
such insurance shall cease to cover Panel Concepts as of the Closing.
5.4 Consents and Approvals. As promptly as practicable after the
date of this Agreement, each of the parties shall use all commercially
<PAGE>
reasonable efforts to obtain as promptly as practicable all Consents required to
be obtained by it in connection with the consummation of the transactions
contemplated by this Agreement, including the obtaining by Standard Pacific of
the Consents described on Schedule 3.7; provided, however, that nothing
----------- -------- --------
contained in this Agreement shall require Standard Pacific, Panel Concepts or
HON to pay any fee or other amount to obtain any such Consent, other than filing
and similar fees required by any Governmental Authority.
5.5 Legal Proceedings; Injunctions. (a) Standard Pacific, HON and
------------------------------
Panel Concepts shall use all commercially reasonable efforts to cooperate with
each other in connection with any claim, action, suit, proceeding, inquiry or
investigation with any other Person which relates to the execution and delivery
of this Agreement or the consummation of the transactions contemplated
hereunder.
(b) Without limiting the generality or effect of any other provision
hereof, if any United States, state or foreign court having jurisdiction over
any party issues or otherwise promulgates any Order prior to the Closing which
prohibits the consummation of the transactions contemplated hereby, the parties
will use their best efforts to have such Order dissolved or otherwise eliminated
as promptly as possible and, prior to or after the Closing, to pursue the
underlying litigation diligently and in good faith; provided, however, that in
-------- -------
no event will such efforts require either party as a condition to or as a result
of dissolving or elimination such Order to pay damages, other than any
incidental costs of such litigation, or to accept any hold-separate order, agree
to any divestiture or any limitation on the conduct by HON, Panel Concepts, or
Standard Pacific of their respective businesses or other action which would have
an adverse effect on the value to HON or Standard Pacific of the transactions
contemplated by this Agreement.
5.6 Acquisition Proposals. Until such time, if any, as this Agreement
----------------------
is terminated pursuant to Article 9, Standard Pacific will not, and will cause
Panel Concepts and each of their directors, officers, employees, agents,
consultants, advisors, or other representatives, including legal counsel,
accountants, and financial advisors, not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than HON) relating to
any transaction involving the sale of the business or substantially all of the
assets of Panel Concepts, or any of the capital stock of Panel Concepts, or any
merger, consolidation, business combination, or similar transaction involving
Panel Concepts.
5.7 Notice. During the period from the date hereof to the Closing,
------
Standard Pacific shall promptly notify HON of the institution or settlement of
any litigation, action, suit, investigation, claim or proceeding involving Panel
Concepts and of any developments therein.
5.8 Intercompany Indebtedness. Prior to the Closing, (i) all
obligations owing
from Standard Pacific or any of its Affiliates to Panel Concepts will be
canceled without further payment or repaid by Standard Pacific with the amount
of such repayment thereafter being distributed to Standard Pacific in the form
of dividend and (ii) all obligations owing from Panel Concepts to Standard
Pacific or any Affiliate of Standard Pacific will be canceled.
5.9 Best Efforts; Cooperation. Upon the terms and subject to the
-------------------------------
conditions herein provided, each party agrees to use all commercially reasonable
efforts to take or cause to be taken all action, to do or cause to be done, and
to assist and cooperate with the other party thereto in doing, all things
necessary, proper or advisable under the applicable Laws, to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
<PAGE>
5.10 Contact with Customers and Suppliers. Prior to the Closing,
------------------------------------
HON and its representatives shall be provided with reasonable access to the
customers and suppliers of Panel Concepts in connection with the transactions
contemplated hereby subject to the prior written consent of Panel Concepts or
Standard Pacific, such consent not to be unreasonably withheld.
5.11 Plant Closing Obligations. Prior to the Closing Date, neither
-------------------------
Standard Pacific nor Panel Concepts shall take any action which could be
construed as a "plant closing" or "mass layoff," or which would result in any
Panel Concepts employee retained or employed suffering or deeming to have
suffered any "employment loss," as those terms are defined in the Worker
Adjustment Retraining and Notification Act, as amended, and the rules and
regulations thereunder.
5.12 Payment of Bonuses at Closing. Simultaneously with the Closing,
-----------------------------
HON will cause Panel Concepts to pay all accrued employee bonuses, including any
accumulated bonus pool. Any accumulated bonus pool will be paid out in the
manner determined in the sole and absolute discretion of Standard Pacific, and
at the Closing Standard Pacific will deliver to HON and Panel Concepts a
schedule setting forth the manner in which any such accumulated bonus pool is to
be paid.
ARTICLE 6
POST CLOSING COVENANTS
----------------------
6.1 Limitation on Competition.
-------------------------
(a) Period and Conduct. As further consideration for the purchase
------------------
and sale of Panel Concepts and the transactions contemplated by this Agreement,
during the period commencing on the Closing Date, and ending on the date which
is three years thereafter, Standard Pacific and its Affiliates shall not:
(i) directly or indirectly compete with HON or Panel Concepts
in the manufacture, production, design, engineering, importation,
purchase, marketing, sale, distribution, research or development of
any Products ("Product Activity");
----------------
(ii) solicit, or accept orders or business of any kind relating
to the manufacture, production, design, engineering, importation,
purchase, marketing, sale, distribution, research or development of
any Products from any customer or active prospect of HON or Panel
Concepts; or
(iii) solicit any employee of HON or Panel Concepts or former
employee of Panel Concepts hired by HON to terminate his or her
employment with HON or Panel Concepts.
(b) Territory. Standard Pacific and its Affiliates shall refrain
---------
from engaging in the activities described in this Section 6.1 during the period
-----------
specified in Section 6.1(a) hereof in any of the United States of America,
--------------
Puerto Rico, the Virgin Islands, Canada and all other countries in the world.
(c) Definition. Standard Pacific or any of its Affiliates shall be
----------
deemed to be competing with HON or Panel Concepts if Standard Pacific or any of
its Affiliates is engaged or participates in any activity or activities
described in subsection (a) of this Section 6.1, directly or indirectly, whether
-----------
for its own account or for that of any other Person and whether as a
shareholder, partner or investor controlling any such Person or as principal,
agent, representative, proprietor, or partner, or in any other similar capacity.
<PAGE>
(d) Remedies. Inasmuch as a breach, or failure to comply with,
--------
Section 6.1 of this Agreement will cause serious and substantial damage to HON,
- -----------
if Standard Pacific or any of its Affiliates should in any way breach, or fail
to comply with, the terms of this Section 6.1, HON shall be entitled to an
-----------
injunction restraining Standard Pacific and such Affiliates from any such breach
or failure. All remedies expressly provided for herein are cumulative of any and
all other remedies now existing at law or in equity. HON shall, in addition to
the remedies herein provided, be entitled to avail itself of all such other
remedies as may now or hereafter exist at law or in equity for compensation, and
for the specific enforcement of the covenants contained herein. Resort to any
remedy provided for hereunder or provided for by law shall not preclude or bar
the concurrent or subsequent employment of any other appropriate remedy or
remedies, or preclude the recovery by HON of monetary damages and compensation,
including attorney's fees and costs.
(e) Severability. Each subsection of this Section 6.1 constitutes a
------------ -----------
separate and distinct provision hereof. In the event that any provision of this
Section 6.1 shall finally be judicially determined to be invalid, ineffective or
- -----------
unenforceable, such determination shall apply only in the jurisdiction in which
such adjudication is made and every other provision of this Section 6.1 shall
-----------
remain in full force and effect. The invalid, ineffective or unenforceable
provision shall, without further action by the parties, be automatically amended
to effect the original purpose and intent of the invalid, ineffective or
unenforceable provision; provided, however, that such amendment shall apply only
-----------------
with respect to the operation of such provision in the particular jurisdiction
in which such adjudication is made.
6.2 Books and Records. For a period of 10 years after the Closing,
-----------------
each party shall retain and provide the other party with reasonable access
during normal business hours to its books and records and the books and records
of Panel Concepts (other than books and records protected by the attorney-client
privilege) to the extent that they relate to the condition or operation of Panel
Concepts and are requested by such party to prepare its Tax Returns, to respond
to Third Party Claims (as hereinafter defined), or for any other legitimate
purpose specified in writing. Each party shall have the right, at its own
expense, to make copies of any such books and records.
6.3 Confidentiality. After the Closing, Standard Pacific and its
---------------
Affiliates, directors, officers, employees, representatives, consultants and
advisors shall hold in confidence and not use any confidential information which
remains after the Closing in the possession of Standard Pacific or its
Affiliates concerning Panel Concepts. Neither Standard Pacific nor its
Affiliates shall, after the Closing, release or disclose any such information to
any Person other than HON and their authorized representatives. Notwithstanding
the foregoing, the confidentiality obligations of this Section 6.3 shall not
-----------
apply to information:
(i) which Standard Pacific or its Affiliates are compelled to
disclose by judicial or administrative process, or, in the opinion of
counsel, by other mandatory requirements of Law;
(ii) which can be shown to have been generally available to the
public other than as a result of a breach of this Section 6.3; or
-----------
(iii) which can be shown to have been provided to Standard Pacific or
its Affiliates by a third party who obtained such information other than
from Panel Concepts or HON or other than as a result of a breach of this
Section 6.3.
-----------
6.4 Employee Matters.
----------------
(a) Except for any persons identified on Schedule 6.4, HON agrees
------------
that the persons who are employed by Panel Concepts as of the Closing
<PAGE>
Date shall remain employees of Panel Concepts following the Closing Date (each
such employee, "Affected Employee"); provided, however, the foregoing shall in
----------------- -------- -------
no way limit or restrict the rights of HON to terminate the employment of any
Affected Employee, or to amend or terminate, or to cause the amendment or
termination of, the terms and conditions of employment of any Affected Employee
at any time after the Closing Date.
(b) HON will cause Panel Concepts to give Affected Employees full
credit for purposes of eligibility, vesting and determination of the level of
benefits under any employee benefit plans or arrangements maintained by Panel
Concepts for such Affected Employees' service with Panel Concepts to the same
extent recognized by Panel Concepts immediately prior to the Closing Date.
(c) HON will, or will cause Panel Concepts to, (i) waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plans that such employees may be eligible to
participate in after the Closing Date, other than limitations or waiting periods
that are already in effect with respect to such employees and that have not been
satisfied as of the Closing Date under any welfare plan maintained for the
Affected Employees immediately prior to the Closing Date, and (ii) provide each
Affected Employee with credit for any co-payments and deductibles paid prior to
the Closing Date in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after the Closing Date.
(d) Standard Pacific shall be responsible for satisfying any
liabilities and paying any claims incurred prior to the Closing Date under any
welfare benefit plan, policy or arrangement (including, without limitation,
medical, hospital, dental, vision, accidental death and dismemberment, life,
disability and other similar benefits) which, prior to the Closing Date, was
maintained by Standard Pacific and provided welfare benefits to any Employee
(including eligible spouses and dependents), subject to the applicable terms and
conditions of such plans, policies and arrangements. HON shall be responsible
for satisfying any liabilities and paying any claims incurred on or after the
Closing Date of Affected Employees under and subject to the applicable terms and
conditions of plans, programs and arrangements maintained by HON or Panel
Concepts, as amended from time to time. Effective as of the Closing Date, Panel
Concepts shall cease to be a participating employer under any employee benefit
plan, program or arrangement maintained by Standard Pacific, except to the
extent provided in the Transition Services Agreement, substantially in the form
attached hereto as Schedule 2.4. For purposes of this Section, a claim shall be
------------
deemed to be incurred on the date on which occurs the event which is the
immediate cause of such claim; provided, however, that (i) all claims relating
to medical, hospital, dental or similar benefits shall be deemed to have been
incurred when the service or supply is provided, and (ii) claims for disability
benefits shall be deemed to have been incurred on the date that an authorized
medical authority under the applicable plan certifies the existence of such
disability (regardless of when such disability was incurred).
6.5 Trade Names. Following Closing, neither Standard Pacific nor
-----------
any of its Affiliates will in any way use any of the trade or corporate names,
trademarks or servicemarks "Panel Concepts," "TopLine," "BottomLine," or "TL2"
or any trade or corporate names, trademarks or servicemarks which are
confusingly similar to the words "Panel Concepts," TopLine," "BottomLine" or
"TL2". To the extent that such names appear on (a) any plant, building or
equipment, or (b) any stationery, business form, packaging, container, sign or
other property (real or personal) transferred to Standard Pacific or any of its
Affiliates or to any Transferee in the Pre-closing Transfer Transactions,
Standard Pacific shall obliterate or shall cause such Affiliates or designees to
obliterate such names from all such property and cease, in any event, using such
names no later than 30 days after the Closing Date.
<PAGE>
6.6 Product Warranty. The cost of warranty claims made following
----------------
the Closing Date for Products manufactured or shipped by Panel Concepts prior to
the Closing Date (such costs to be deemed to consist of the direct cost of
repairing or replacing, whichever is less, such Products) ("Warranty Claims")
shall be counted against Standard Pacific's Threshold Amount (as defined in
Section 10.4). When the aggregate amount of the Warranty Claims plus all
Indemnifiable Losses (as defined in Section 10.1) indemnified against under
Sections 10.2(a), (c), (d) and (e) exceed Standard Pacific's Threshold Amount,
then Standard Pacific shall promptly reimburse HON for the amount of such
claims, or any portion thereof, in excess of Standard Pacific's Threshold
Amount.
6.7 Further Assurances. Each party shall from time to time after
------------------
the Closing Date, upon the request of the other party and without further
consideration, execute, acknowledge and deliver in proper form any further
instruments, and take such further actions as such party may reasonably require
to carry out effectively the intent of this Agreement.
6.8 Cooperation in Third-Party Litigation. After the Closing, HON
-------------------------------------
shall and shall cause Panel Concepts to provide such cooperation as Standard
Pacific or its counsel may reasonably request in connection with: (i) pending or
threatened proceedings set forth in Schedule 6.8; (ii) any proceedings relating
------------
to the Business which are hereafter pending or threatened and to which Standard
Pacific or its Affiliates (other than Panel Concepts) is a party; and (iii) any
proceedings for which HON is entitled to indemnification from Standard Pacific
under Section 10.2 hereof. Such cooperation shall include, but not be limited
------------
to: (a) making available at the reasonable request of Standard Pacific or its
counsel, and permitting Standard Pacific and its counsel to make and retain
copies of, any and all documents in the possession of or otherwise available to
either of Panel Concepts or HON; (b) making available upon the reasonable
request of Standard Pacific or its counsel employees and other persons within
the control of or available to Panel Concepts or HON to consult with and assist
Standard Pacific and its counsel regarding any such proceedings and to prepare
for and testify truthfully in connection with any such proceedings, including
depositions, trials and arbitration proceedings; and (c) making available at the
reasonable request of Standard Pacific or its counsel such other resources as
may be within the control of or available to Panel Concepts or HON. Standard
Pacific shall reimburse HON and Panel Concepts for any out-of-pocket expenses
incurred by them at the request of Standard Pacific pursuant to this Section
-------
6.8.
- ---
6.9 Omnific Chair Inventory. For a period of 120 days following the
-----------------------
Closing Date, Panel Concepts will, for the benefit of Standard Pacific (i)
continue to store the Omnific Chair Inventory in the location or locations where
presently stored by Panel Concepts, (ii) continue to sell the Omnific Chair
Inventory to its dealers and customers in a manner consistent with past practice
and (iii) continue to perform warranty repairs with respect to the Omnific Chair
Inventory in a manner consistent with past practice. Promptly upon Panel
Concepts' receipt of any proceeds from the sale of Omnific Chair Inventory, HON
will cause Panel Concepts to forward such amounts to Standard Pacific. Standard
Pacific agrees to reimburse HON and Panel Concepts for their direct costs of
performing warranty repairs on the Omnific Chair Inventory as provided in this
Section 6.9.
- -----------
ARTICLE 7
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
7.1 Conditions Precedent to HON's Obligations. The obligation of
-----------------------------------------
HON to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction of the following conditions, any of which, other
than Sections 7.1(b) and 7.1(e), may be waived by HON:
-------- ------ ------
<PAGE>
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties made by Standard Pacific in this Agreement shall be true and
correct in all material respects as of the Closing Date, except for
representations and warranties made as of a specified date which shall be true
and correct as of the specified date.
(b) Litigation. No Order shall be in effect forbidding or enjoining
----------
the consummation of the transactions contemplated hereby and no Legal Proceeding
brought by a third party shall be pending or threatened that is reasonably
likely to result in any such Order.
(c) Covenants. Standard Pacific shall have performed and complied in
---------
all material respects with all covenants and agreements required by this
Agreement to be performed by Standard Pacific prior to or at the Closing.
(d) Deliveries. Standard Pacific shall have delivered to HON the
----------
documents required by Section 2.2.
-----------
(e) Consents. Standard Pacific and Panel Concepts shall have
--------
obtained all Consents from all Governmental Authorities and other Persons that
they need to consummate the transactions contemplated by this Agreement, except
that neither Standard Pacific nor Panel Concepts shall be required to obtain the
Consent to the assignment of any contract, agreement or Permit listed on
Schedule 7.1(e) and no such Consent shall be a condition to the consummation of
- ---------------
the transactions contemplated by this Agreement.
(f) No Material Adverse Change. Since the date hereof, there shall
--------------------------
have occurred no material adverse change, or discovery of a condition or
occurrence of any event which might result in any such change, in the condition
(financial or otherwise), assets or properties of Panel Concepts.
7.2 Conditions Precedent to Standard Pacific's Obligations. The
------------------------------------------------------
obligation of Standard Pacific to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of the following conditions,
any of which, other than Section 7.2(b), may be waived by Standard Pacific:
--------------
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties made by HON in this Agreement shall be true and correct in all
material respects as of the Closing Date, except for representations and
warranties made as of a specified date which shall be true and correct as of the
specified date.
(b) Litigation. No Order shall be in effect forbidding or enjoining
----------
the consummation of the transactions contemplated hereby and no Legal Proceeding
brought by a third party shall be pending or threatened which, if adversely
determined, would result in any such Order.
(c) Covenants. HON shall have performed and complied in all material
---------
respects with all covenants and agreements required by this Agreement to be
performed by HON prior to or at the Closing.
(d) Deliveries. HON shall have delivered to Standard Pacific the
----------
payment and documents required by Section 2.3.
-----------
(e) Consents. HON shall have obtained all Consents from all
--------
Governmental Authorities and other Persons that it needs to consummate the
transactions contemplated by this Agreement.
<PAGE>
ARTICLE 8
CERTAIN TAX MATTERS
-------------------
8.1 Tax Indemnification. (a) Standard Pacific shall indemnify HON
-------------------
and its Affiliates (including Panel Concepts) and hold them harmless from and
against: (i) any and all liability for Taxes (including without limitation any
obligation to contribute to the payment of a Tax determined on a consolidated,
combined, or unitary basis with respect to a group of corporations that includes
or included Panel Concepts) of Panel Concepts for all Taxable periods ending on
or before the Closing Date (the "Pre-closing Tax Period") and for the portion of
----------------------
any Taxes (including without limitation any obligation to contribute to the
payment of a Tax determined on a consolidated, combined, or unitary basis with
respect to a group of corporations that includes or included Panel Concepts) of
Panel Concepts for any Straddle Period (as hereinafter defined) that is
allocated (pursuant to Section 8.1(c)) to the Pre-closing Tax Period, including
--------------
without limitation any and all liability for Taxes arising out of or relating to
the transactions contemplated by Section 1.6 (such liabilities collectively,
-----------
"Pre-closing Tax Liabilities"); (ii) any and all liability (as a result of
- ----------------------------
Treasury Regulation (S) 1.1502-6(a) or otherwise) for Taxes of Standard Pacific
or any other Person (other than Panel Concepts) which is or has ever been
affiliated with Panel Concepts, or with whom Panel Concepts otherwise joins or
has ever joined (or is or has ever been required to join) in filing any
consolidated, combined or unitary Tax Return prior to the Closing, (iii) any and
all liability for Conveyance Taxes; (iv) any and all liability for Taxes arising
out of a breach or inaccuracy of any representation or warranty contained in
Section 3.23(h), (i), (j), (m), (o), (p) and (q); (v) any and all liability for
reasonable legal, accounting and appraisal fees and expenses with respect to any
item described in clauses (i), (ii), (iii) or (iv) above; provided, however,
-------- -------
that the amount of Standard Pacific's indemnity obligation for Taxes pursuant to
this Section 8.1(a) shall be reduced to the extent that the aggregate reserves
--------------
for Taxes (excluding deferred income Taxes) reflected on the Closing Balance
Sheet exceeds the aggregate liability for Taxes for the periods covered by such
reserves. Notwithstanding the foregoing, Standard Pacific shall not be required
to indemnify or hold harmless HON or its Affiliates from or against any
liability for Taxes attributable to a breach by HON of its obligations under
this Agreement.
(b) HON shall indemnify Standard Pacific and its Affiliates and hold
them harmless from and against (i) any liability for Taxes of Panel Concepts for
any Taxable period ending after the Closing Date (except with respect to a
Straddle Period, in which case HON's indemnity will cover only Taxes (other than
Conveyance Taxes) that are not Pre-closing Tax Liabilities, and (ii) any
liability for Taxes, arising under Treas. Reg. (S) 1.1502-6 (or any similar
provision of state, local or foreign law), of HON or any member (other than
Panel Concepts) of the affiliated group that includes HON. Notwithstanding the
foregoing, HON shall not be required to indemnify or hold harmless Standard
Pacific or its Affiliates from or against any liability for Taxes attributable
to a breach by Standard Pacific of its obligations under this Agreement.
(c) In the case of any Taxable period that includes but does not end
on the Closing Date (a "Straddle Period"), Taxes of Panel Concepts for the
---------------
Straddle Period (i) shall be computed as if Panel Concepts had not been included
in a consolidated, combined or unitary Tax Return with Standard Pacific or any
other corporation, but rather, as if Panel Concepts had filed a separate Tax
Return on a stand-alone basis, and otherwise consistent with past practice and
(ii) shall be allocated to the Pre-closing Tax Period using an interim-closing-
of-the-books method assuming that such Taxable period ended at the close of the
Closing Date, except that (X) exemptions, allowances or deductions that are
calculated on an annual basis (such as the deduction for depreciation) shall be
apportioned on a per-diem basis and (Y) real property, personal property,
intangibles and other similar
<PAGE>
Taxes shall be allocated in accordance with the principles of Section 164(d) of
the Code.
8.2 Procedures Relating to Tax Indemnification. (a) If a claim for
------------------------------------------
Taxes, including, without limitation, notice of a pending or threatened audit,
shall be made by any Taxing authority in writing (a "Tax Claim"), which, if
---------
successful, might result in an indemnity payment pursuant to Section 8.1, the
-----------
party seeking indemnification (the "Indemnified Tax Party") shall notify the
---------------------
other party (the "Indemnifying Tax Party") in writing of the Tax Claim within
----------------------
thirty business days of receipt of such Tax Claim. If notice of a Tax Claim (a
"Tax Notice") is not given to the Indemnifying Party within such thirty-day
----------
period or in detail sufficient to apprise the Indemnifying Tax Party of the
nature of the Tax Claim, the Indemnifying Tax Party shall not be liable to the
Indemnified Tax Party to the extent that the Indemnifying Tax Party's position
would be actually and materially prejudiced as a result thereof.
(b) (i) Standard Pacific shall have the sole right to represent
the interests of Panel Concepts in the defense of any claim for Taxes
relating to Taxable periods ending on or before the Closing Date, and to
employ counsel of its choice at its expense. Notwithstanding the foregoing,
Standard Pacific shall not be entitled to settle, either administratively
or after the commencement of litigation, any claim for Taxes that would
adversely affect the liability for Taxes of HON or Panel Concepts for any
Taxable period ending after the Closing Date (including, but not limited
to, the imposition of income Tax deficiencies, the reduction of asset basis
or cost adjustments, the lengthening of any amortization or depreciation
periods, the denial of amortization or depreciation deductions or the
reduction of loss or credit carryforwards) without the prior written
consent of HON. Such consent shall not be unreasonably withheld, and shall
not be necessary to the extent that Standard Pacific has indemnified HON
against the effects of any such settlement.
(ii) HON shall have the sole right to represent the interests of
Panel Concepts in the defense of any claim for Taxes relating to Taxable
periods ending after the Closing Date. Notwithstanding the foregoing,
Standard Pacific shall be entitled to participate at its expense in the
defense of any claim for Taxes for a Taxable year or period ending after
the Closing Date that may be subject to indemnification by Standard Pacific
pursuant to Section 8.1(a) and, with the written consent of HON, and at
--------------
Standard Pacific's sole expense, may assume the entire defense of such Tax
claim, subject to the second and third sentences of Section 8.2(b)(i).
-----------------
Neither HON nor Panel Concepts may agree to settle any Tax claim for the
portion of the Taxable year or period ending on the Closing Date that may
be the subject of indemnification by Standard Pacific under Section 8.1(a)
--------------
without the prior written consent of Standard Pacific, which consent shall
not be unreasonably withheld.
(c) After the Closing Date, Standard Pacific and HON shall:
(i) assist (and cause their respective Affiliates to assist)
the other party in preparing any Tax Returns that such other party is
responsible for preparing and filing in accordance with this Article 8;
---------
(ii) cooperate fully in preparing for any audits of, or disputes
with Taxing authorities regarding, any Tax Returns of Panel Concepts;
(iii) make available to the other and to any Taxing authority as
reasonably requested all information, records and documents relating to
Taxes of Panel Concepts;
<PAGE>
(iv) provide timely notice to the other in writing of any
pending or threatened Tax audits or assessments of Panel Concepts for
Taxable periods for which the other may have a liability under this Article
-------
8; and
-
(v) furnish the other with copies of all correspondence
received from any Taxing authority in connection with any Tax audit or
information request with respect to any such Taxable period.
(d) Within 60 days following the Closing Date, Standard Pacific shall
deliver or cause to be delivered to HON copies of all Tax Returns of Panel
Concepts for any Taxable year or other period commencing on or after December 4,
1991 and all schedules, work papers and other documents (including without
limitation appraisals and other background information) which are in the
possession of Standard Pacific and which relate to such Tax Returns.
8.3 Tax Dispute Resolution Mechanism. Wherever in this Article 8 it
-------------------------------- ---------
is provided that a dispute shall be resolved pursuant to the "Tax Dispute
Resolution Mechanism," such dispute shall be resolved as follows: The parties
shall submit the dispute to a jointly selected nationally recognized accounting
firm (the "Settlement Accountants") for resolution, which resolution shall be
----------------------
final, conclusive and binding on the parties. Notwithstanding anything in this
Agreement to the contrary, the fees and expenses of the Settlement Accountants
in resolving a dispute shall be borne equally by Standard Pacific and HON, other
than fees and expenses relating to a dispute as to the amount of Taxes owed by
either of the parties with respect to a Tax Return for a Straddle Period, in
which case such fees and expenses shall be paid by HON and Standard Pacific in
proportion to each party's respective liability for Taxes as determined by the
Settlement Accountants.
8.4 Survival of Tax Provisions. The obligations of the parties set
--------------------------
forth in this Article 8 shall be unconditional and absolute and shall remain in
---------
effect until the date 90 days after the expiration of the relevant statute of
limitations (and any waiver or extension thereof) applicable to the Taxes at
issue.
8.5 Conveyance Taxes. Notwithstanding any other provision of this
----------------
Agreement to the contrary, Standard Pacific shall be liable for, and shall
timely pay, any and all gains, transfer, sales, use, bulk sales, recording,
registration, documentary, stamp, and other Taxes that may result from, or be
incurred in connection with, the Transactions contemplated by this Agreement
("Conveyance Taxes"). Standard Pacific shall, at its own expense, properly
----------------
complete, sign, and timely file any and all required Tax Returns with respect to
such Taxes and, if required by applicable Law, HON will join in the execution of
any such Tax Returns.
8.6 Return Filings, Refunds and Credits. (a) Standard Pacific shall
-----------------------------------
prepare or cause to be prepared and file or cause to be filed on a timely basis
all Tax Returns with respect to Panel Concepts for Taxable periods ending on or
prior to the Closing Date. HON shall not file any Tax Returns with respect to
Panel Concepts for Taxable periods ending on or prior to the Closing Date
without the prior written consent of Standard Pacific.
(b) HON shall prepare or cause to be prepared and shall file or cause
to be filed on a timely basis all other Tax Returns with respect to Panel
Concepts. In connection therewith, Standard Pacific shall be responsible for and
shall pay any Taxes for which Standard Pacific has agreed to indemnify HON
pursuant to Section 8.1(a). Before filing any Tax Return with respect to any
--------------
Straddle Period, HON shall provide Standard Pacific with a copy of such Tax
Return at least thirty days prior to the last date for timely filing such Tax
Return (giving effect to any valid extensions thereof), accompanied by a
statement calculating in reasonable detail Standard Pacific's indemnification
obligation pursuant to Section 8.1(a). If for any reason
--------------
<PAGE>
Standard Pacific does not agree with HON's calculation of its indemnification
obligation, Standard Pacific shall notify HON of its disagreement within ten
days of receiving a copy of the Tax Return and HON's calculation, and such
dispute shall be resolved pursuant to the Tax Dispute Resolution Mechanism. If
Standard Pacific agrees with HON's calculation of its indemnification
obligation, Standard Pacific shall pay to HON the amount of Standard Pacific's
indemnification obligation at least five business days prior to the last date
for timely filing such Tax Return (including any valid extensions thereof).
(c) Standard Pacific, Panel Concepts and HON shall reasonably
cooperate, and shall cause their respective Affiliates, officers, employees,
agents, auditors and representatives reasonably to cooperate, in preparing and
filing all Tax Returns (including amended Tax Returns and claims for refund),
including maintaining and making available to each other all records necessary
in connection with Taxes and in resolving all disputes and audits relating to
Taxes with respect to all Taxable periods.
(d) Any refunds or credits of Taxes of Panel Concepts plus any
interest received with respect thereto from an applicable Taxing authority for
any Taxable period ending on or before the Closing Date (including, without
limitation, refunds or credits arising by reason of amended Tax Returns filed
after the Closing Date) shall, except as otherwise provided in Section 8.10, be
------------
for the account of Standard Pacific and shall be paid by HON to Standard Pacific
within 30 days after HON receives such refund or after the relevant Tax Return
is filed in which the credit is applied against HON's, Panel Concepts' or any of
their Affiliates' or any of their successors' liability for Taxes. Any refunds
or credits of Taxes of Panel Concepts plus any interest received with respect
thereto from an applicable Taxing authority for any Taxable period beginning
after the Closing Date shall be for the account of HON. Any refunds or credits
of Taxes of Panel Concepts for any Straddle Period shall be apportioned between
Standard Pacific and HON in the same manner as the liability for such Taxes is
apportioned pursuant to Section 8.1(c).
--------------
(e) At Standard Pacific's request and at its sole cost and expense,
HON shall cause Panel Concepts and any of its successors to file for and obtain
any refunds or credits to which Standard Pacific is entitled under this Section
-------
8.6. In connection therewith, (i) Standard Pacific shall control the prosecution
- ---
of any such refund claim, at the sole cost and expense of Standard Pacific, and,
where deemed appropriate by Standard Pacific, shall cause Panel Concepts and any
of its successors to authorize by appropriate powers of attorney such persons as
Standard Pacific shall designate to represent Panel Concepts or any of its
successors with respect to such refund claim, and (ii) HON shall cause Panel
Concepts and any of its successors to forward to Standard Pacific any such
refund within 30 days after the refund is received (or reimburse Standard
Pacific for any such credit within 30 days after the relevant Tax Return is
filed in which the credit is actually applied against HON's, Panel Concepts' or
any of their Affiliates or any of their successors' liability for Taxes).
8.7 Exclusivity. Article 8 shall govern exclusively the procedures
----------- ---------
for all indemnification claims with respect to Taxes.
8.8 Tax Sharing Agreements. Any and all existing agreements or
----------------------
practices relating to the allocation or sharing of Taxes (the "Tax Sharing
-----------
Agreements") between Panel Concepts and any member of an affiliated group,
- ----------
within the meaning of Section 1504(a) of the Code, of which Panel Concepts is or
was a member (the "Panel Concepts Affiliated Group") shall be terminated as of
-------------------------------
the Closing Date without payment by or other obligation of Panel Concepts. After
the Closing Date, neither Panel Concepts nor any member of the Panel Concepts
Affiliated Group shall have any further rights or obligations under any such Tax
Sharing Agreement.
8.9 Adjustment to Purchase Price. Any payment by HON or
----------------------------
<PAGE>
Standard Pacific under this Article 8 will be an adjustment to the Purchase
---------
Price unless a determination (as defined in Section 1313(a) of the Code) with
respect to the indemnified party causes any such payment not to constitute an
adjustment to the Purchase Price for United States federal income Tax purposes.
8.10 Carryforwards of Losses. HON shall be free to cause Panel
-----------------------
Concepts to elect, where permitted by applicable law, to carry forward any net
operating loss, net capital loss, charitable contribution or other item arising
after the Closing Date, including, without limitation, any such loss or other
item that would, absent such election, be carried back to a Taxable period
ending on or before the Closing Date. Notwithstanding anything to the contrary
in Section 8.6, HON shall be entitled to any refund of income Taxes paid before
-----------
the Closing Date, to the extent that such refund is attributable to carryback of
losses or deductions of Panel Concepts that accrue after the Closing Date.
8.11 Section 338(h)(10) Election. Upon the request of HON, Standard
---------------------------
Pacific shall take, on a timely basis, whatever action is necessary or
appropriate to join with HON in making an election under Section 338(h)(10) of
the Code, and comparable provisions of state or local income or franchise Tax
laws, with respect to the purchase and sale of Shares provided for herein. If
HON decides to make a Section 338(h)(10) election, HON shall prepare and file
Internal Revenue Service Form 8023-A and such other forms or schedules as may be
necessary or appropriate to make such election and shall submit them to Standard
Pacific for review and execution not later than 60 days prior to the due date
for filing, and HON shall perform all such other acts as are necessary to make
or perfect such election. Standard Pacific agrees that it will cooperate with
HON and any appraiser retained by HON in obtaining an appraisal of the value of
the assets of Panel Concepts. The allocation of the Modified Adjusted Deemed
Sales Price, as defined in Treasury Regulation (S) 1.338(h)(10)-1(f), among the
assets of Panel Concepts shall be reasonable and shall be in accordance with
Section 338(h)(10) and the Treasury Regulations promulgated thereunder. Each of
Standard Pacific and HON shall bear its own cost of any election made by it
under Section 338(h)(10) of the Code.
ARTICLE 9
TERMINATION PRIOR TO CLOSING DATE
---------------------------------
9.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Closing:
(a) by the mutual written consent of HON and Standard Pacific;
(b) by HON, (i) if there has been a violation or breach by Standard
Pacific of any covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligations of HON at the Closing and such violation or breach has not been
waived by HON or, in the case of a covenant breach, cured by Standard
Pacific within ten days after written notice thereof from HON;
(c) by the Standard Pacific, if there has been a violation or breach
by HON of any covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligations of Standard Pacific at the Closing and such violation or breach
has not been waived by Standard Pacific or, with respect to a covenant
breach, cured by HON within ten days after written notice thereof by
Standard Pacific (provided that the failure to deliver the Purchase Price
at the Closing as required hereunder shall not be subject to cure hereunder
unless otherwise agreed to in writing by Standard
<PAGE>
Pacific); or
(d) by either HON or Standard Pacific if the sale of the Shares has
not been consummated by December 15, 1997 (the "Termination Date");
----------------
provided that neither HON nor Standard Pacific shall be entitled to
terminate this Agreement pursuant to this Section 9.1(d) if such party's
--------------
breach of this Agreement has prevented the consummation of the transactions
contemplated hereby.
9.2 Effect of Termination. If this Agreement terminates pursuant to
---------------------
Section 9.1, neither HON nor Standard Pacific shall have any liability or
- -----------
obligation to the other party hereunder, other than the obligations set forth in
Section 11.7 and any liability arising from any breach of this Agreement prior
- ------------
to the time of termination.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS
---------------------------
AND WARRANTIES; INDEMNIFICATION
-------------------------------
10.1 Survival of Representations and Warranties. The representations
------------------------------------------
and warranties of Standard Pacific and HON made in Articles 3 and 4 hereof shall
----------------
survive the Closing for a period of two years after the Closing Date; provided,
--------
however, that the representations and warranties contained in Sections 3.4 and
- ------- ----------------
3.5 shall survive indefinitely, and the representations and warranties contained
- ---
in Sections 3.22 and 3.23 shall survive until the date that is 90 days after the
----------------------
expiration of the relevant statute of limitations (and any waiver or extension
thereof) applicable to the matter at issue. Upon the expiration of a
representation or warranty pursuant to this Section 10.1, unless written notice
------------
of a claim based on such representation or warranty shall have been delivered to
the Indemnitor pursuant to Section 10.4 prior to the expiration of such
------------
representation or warranty, such representation or warranty shall be deemed to
be of no further force or effect, as if never made, and no action may be brought
based on the same, whether for breach of contract, tort or under any other legal
theory. The term "Indemnifiable Losses" means any and all loss, liability,
--------------------
damage, deficiency, cost or expense (including without limitation reasonable
attorneys' fees, costs and expenses), including, without limitation,
Environmental Damages incurred by a Claiming Party (as hereinafter defined),
including without limitation any of the foregoing relating to, resulting from or
arising out of any action, suit, administrative proceeding, investigation, audit
or other proceeding brought by any Person or Governmental Authority and any
settlement or compromise thereof, but excluding consequential damages except to
the extent required to be paid to a Third Party in connection with a Third Party
Claim (as hereinafter defined). Each party agrees that it will not seek punitive
damages as to any matter under, relating to or rising out of the transactions
contemplated hereby.
10.2 Indemnification by Standard Pacific. Subject to the provisions
-----------------------------------
of this Article 10, from and after the Closing, Standard Pacific shall indemnify
----------
and hold harmless HON, Panel Concepts and their Affiliates, and their respective
directors, officers, employees, agents and representatives (each a "HON
---
Indemnified Party"), from and against any and all Indemnifiable Losses that may
- -----------------
be incurred by any HON Indemnified Party relating to, resulting from or arising
out of:
(a) the breach of or any inaccuracy in any of the representations
and warranties of Standard Pacific contained in this Agreement (other than
any representation and warranty contained in Section 3.23, which shall be
------------
dealt with to the extent that it relates to Taxes in the manner provided
for in Article 8), provided, however, that, for purposes of this clause
--------- --------- -------
(a), as to any matter for which a specific reserve was accrued on the
Closing Balance Sheet, Indemnifiable Losses
<PAGE>
shall only include those Indemnifiable Losses that are in excess of such
reserve;
(b) the breach or nonperformance of any covenant or agreement of
Standard Pacific contained in this Agreement (other than any covenant or
agreement contained in Article 8 of this Agreement, which shall be dealt
---------
with in the manner provided for in Article 8);
---------
(c) operation of the Business of Panel Concepts (or any of its
predecessors-in-interest) prior to the Closing Date, or the ownership,
possession, use, operation, manufacture, sale or other disposition prior to
the Closing Date of any Products, assets, properties, rights or interests
associated, at any time prior to the Closing Date, with Panel Concepts'
business, including without limitation, any Indemnifiable Loss relating to
product warranty claims, product liability claims, employee claims and
unpaid employee benefits, claims relating to intellectual property rights,
and liabilities relating to the Pre-Closing Sale Property, provided,
--------
however, that, for purposes of this clause (c), as to any matter for which
-------
a specific reserve was accrued on the Closing Balance Sheet, Indemnifiable
Losses shall only include those Indemnifiable Losses that are in excess of
such reserve;
(d) any Environmental Damages or any violation of any Environmental
Law relating to, resulting from, or arising out of the operation of the
Business or any of Panel Concepts' current or former facilities or
operations (whether owned or leased) prior to the Closing Date (whether
known or unknown on the Closing Date);
(e) any violation of the Worker Adjustment and Retraining
Notification Act or otherwise arising under said Act and resulting from the
actions of Standard Pacific or Panel Concepts before the Closing; and
(f) the claims listed on Schedules 3.15 and 6.8, provided, however,
--------- -------
that, for purposes of this clause (f), as to any matter for which a
specific reserve was accrued on the Closing Balance Sheet, Indemnifiable
Losses shall only include those Indemnifiable Losses that are in excess of
such reserve.
10.3 Indemnification by HON. Subject to the provisions of this
----------------------
Article 10, from and after the Closing, HON shall indemnify and hold harmless
- ----------
Standard Pacific, its Affiliates and each of their directors, officers,
employees, agents and representatives (each a "Standard Pacific Indemnified
----------------------------
Party"), from and against any and all Indemnifiable Losses relating to,
- -----
resulting from or arising out of:
(a) the breach of or any inaccuracy in any of the representations
and warranties of HON contained in this Agreement; or
(b) the breach or non-performance of any covenant or agreement of
HON contained in this Agreement (other than any covenant or agreement
contained in Article 8 of this Agreement, which shall be dealt with in the
---------
manner provided for in Article 8); or
---------
(c) any violation of the Worker Adjustment and Retraining
Notification Act or otherwise arising under said Act and resulting from the
actions of HON or Panel Concepts following the Closing.
<PAGE>
10.4 Limits on Indemnification. (a) Notwithstanding any provision
-------------------------
to the contrary contained in this Agreement, Standard Pacific's indemnification
obligation in favor of HON Indemnified Parties contained in Sections 10.2(a),
-----------------
(c), (d) and (e) shall not be effective until the aggregate dollar amount of all
- -------- ---
Indemnifiable Losses indemnified against under such Sections plus the Warranty
Claims under Section 6.6 exceeds $400,000 (the "Standard Pacific's Threshold
----------- ----------------------------
Amount"), in which event HON Indemnified Parties may only claim indemnification
- ------
for the amounts of such claims or, any portion thereof, in excess of Standard
Pacific's Threshold Amount; provided, however, that for purposes of determining
-------- -------
whether the amount of the Indemnifiable Losses under Sections 10.2(a), (c), (d)
--------------------------
and (e) plus the Warranty Claims under Section 6.6 exceed $400,000 there shall
--- -----------
be included in such amount all Indemnifiable Losses which would be recoverable
under Sections 10.2(a), (c), (d) and (e) but for the materiality standards set
-------------------------- ---
forth in any Section contained in Article 3 hereof.
---------
(b) Notwithstanding any provision to the contrary contained in this
Agreement, Standard Pacific's indemnification obligation in favor of HON
Indemnified Parties contained in Sections 10.2(a), (c) and (e) shall not exceed
--------------------- ---
100% of the Purchase Price (the "Standard Pacific's Cap Amount").
-----------------------------
(c) Notwithstanding any provision to the contrary contained in this
Agreement, Standard Pacific's indemnification obligation in favor of HON
Indemnified Parties contained in Sections 10.2(c) and (e) shall survive for five
---------------- ---
years after the Closing Date, at which time such indemnification obligation
shall be of no further force or effect and no action may be brought under such
indemnification obligation.
(d) Notwithstanding any provision to the contrary contained in this
Agreement, HON's indemnification obligation in favor of Standard Pacific
Indemnified Parties contained in Sections 10.3(a) and (c): (i) shall not be
---------------- ---
effective until the aggregate dollar amount of all Indemnifiable Losses
indemnified against under such Sections exceeds $400,000 (the "HON's Threshold
---------------
Amount"), in which event Standard Pacific Indemnified Parties may only claim
- ------
indemnification for the amounts of such claims or any portion thereof, in excess
of HON's Threshold Amount and (ii) shall not exceed 100% of the Purchase Price
(the "HON's Cap Amount").
----------------
(e) The amount of any Indemnifiable Loss suffered by a HON
Indemnified Party or a Standard Pacific Indemnified Party shall be reduced by
any third party insurance or other indemnification benefits which such party or
its representative receives in respect of or as a result of such Indemnifiable
Loss. If any Indemnifiable Loss for which indemnification is provided hereunder
is subsequently reduced by any third party insurance payment or other
indemnification recovery from a third party, the amount of the reduction shall
be remitted to the HON Indemnified Party or the Standard Pacific Indemnified
Party as appropriate.
10.5 Indemnification Procedures.
--------------------------
(a) Notice. If any Legal Proceeding shall be threatened or
------
instituted or any claim or demand shall be asserted against any HON Indemnified
Party or Standard Pacific Indemnified Party in respect of which indemnification
may be sought under the provisions of this Agreement, the party seeking
indemnification (the "Claiming Party") shall promptly cause written notice of
--------------
the assertion of any such claim, demand or proceeding of which it has actual
knowledge to be forwarded to the party from whom it is claiming indemnification
(the "Indemnitor"), together with a copy of such claim, process or other legal
----------
pleading. Such notice shall contain a reference to the provisions herein or of
such other agreement, instrument or certificate delivered pursuant hereto, in
respect of which such claim is being made, and shall specify, in reasonable
detail, the estimated amount of such Indemnifiable Loss if reasonably
determinable at such time. The Claiming Party's failure to give the Indemnitor
prompt notice shall not affect the
<PAGE>
right of Claiming Party to receive indemnification from the Indemnitor except to
the extent that the Claiming Party's failure has materially prejudiced the
Indemnitor's ability to defend the claim, demand or proceeding.
(b) Third Party Claims. (i) If the Claiming Party seeks
------------------
indemnification from the Indemnitor as a result of a claim or demand being made
by a third party (a "Third Party Claim"), the Indemnitor shall have the right to
-----------------
assume the control of the defense and settlement of such Third Party Claim,
including, at its own expense, employment by it of counsel of its own choosing
so long as the Indemnitor has acknowledged in writing its obligations to
indemnify the Claiming Party. If the Indemnitor elects to assume the defense of
any Third Party Claim, the Indemnitor shall not be liable to the Claiming Party
for any fees of other counsel or any other expenses in each case subsequently
incurred by such Claiming Party in connection with the defense thereof, except
as provided below. If the Indemnitor elects not to exercise its rights to assume
the settlement or defense of the Third Party Claim, the Claiming Party may, but
shall have no obligation to, defend against such Third Party Claim or legal
proceeding in such manner as it may deem appropriate at the expense of the
Indemnitor; provided, however, that the Claiming Party shall not settle or
compromise such claim without the Indemnitor's Consent. If the Indemnitor
assumes such defense, the Claiming Party will have the right to participate in
the defense thereof and to employ counsel, separate from the counsel employed by
the Indemnitor at its own expense, provided, however, that if the Claiming Party
--------- -------
is, in the reasonable judgment of its counsel, entitled to assert a defense
which conflicts with a defense of the Indemnitor or which the Indemnitor is not
entitled to assert for any reason, the Indemnitor shall be liable for the fees
and expenses of counsel employed by the Claiming Party for such limited purpose.
The Indemnitor will be liable for the fees and expenses of counsel employed by
the Claiming Party for any period (following notice of the claim from the
Claiming Party pursuant to Section 10.5(b)) during which the Indemnitor has not
---------------
assumed the defense of a Third Party Claim whether or not the Indemnitor
ultimately chooses to defend any such Third Party Claim. In connection with any
Third Party Claim, the defense of which has been assumed by the Indemnitor
hereby, the Indemnitor agrees to keep the Indemnitee reasonably informed of the
status thereof at all stages including providing to the Indemnitee copies of all
pleadings and other material papers and correspondence in connection with such
Third Party Claim.
(ii) Notwithstanding the preceding paragraph, Standard Pacific
shall assume immediately prior to the Closing Date the control of the defense of
all Legal Proceedings listed on Schedule 3.15 of the Disclosure Schedule, at its
-------------
own expense and with counsel of its own choosing.
(c) Investigation or Remediation of Company Property. With respect
------------------------------------------------
to any environmental investigation or remediation matter at the real property
currently owned or operated by Panel Concepts as of the Closing Date (the
"Company Property") for which Standard Pacific is indemnifying the HON
Indemnified Parties, the HON Indemnified Parties shall have the right to control
such investigation and/or remediation; provided, however, that the HON
Indemnified Parties shall not be entitled to any indemnification under Section
-------
10.2 for any investigation or remediation activities unless Standard Pacific
- ----
shall have been notified of, and approved, such activities, such approval not to
be unreasonably withheld or delayed. Standard Pacific's indemnity obligation
under Section 10.2 does not cover the costs of any investigation or remediation
------------
that exceeds the minimum level of investigation or remediation required for the
current use of the Company Property by any regulatory agency asserting
jurisdiction, as long as such remediation does not result in a material
interference with HON's manufacturing operations on the Company Property, in
which case Standard Pacific's indemnification obligation shall include costs of
remediating Company Property using the most cost effective alternative permitted
by the regulatory agency that does not result in such an interference. Standard
Pacific shall have the right, at its sole expense, to observe and discuss with
the HON Indemnified Parties any such activities with
<PAGE>
respect to the Company Property, including, without limitation, participation,
at Standard Pacific's sole expense, in any meetings with regulatory authorities
with respect to the investigation or remediation. The HON Indemnified Parties
shall promptly provide copies to Standard Pacific of all notices,
correspondence, draft reports and final reports related to such matter. With
respect to any environmental investigation or remediation matter at real
property previously owned or operated by Panel Concepts or its predecessors in
interest for which Standard Pacific is indemnifying the HON Indemnified Parties,
Standard Pacific shall have the right to control such investigation and/or
remediation.
10.6 Indemnification for Taxes. Notwithstanding anything in this
-------------------------
Article 10 to the contrary, any Indemnifiable Losses or Third Party Claims based
- ----------
on, attributable to or resulting from any misrepresentation or the breach or
inaccuracy of any representation or warranty made by Standard Pacific in Section
-------
3.23, or the failure to comply with any covenant or agreement on the part of the
- ----
parties hereto contained in Article 8 will be governed exclusively by Article 8.
--------- ---------
Claims for indemnification arising under or with respect to Section 3.23 or
------------
Article 8 may not be made unless notice of such claims has been given prior to
- ---------
the date that is 90 days after the expiration of the relevant statute of
limitations (and any waiver or extension thereof) applicable to the Taxes at
issue.
10.7 Adjustment to Purchase Price. Any payments made pursuant to
----------------------------
Sections 10.2 and 10.3 will be treated by HON and Standard Pacific as an
- ------------- ----
adjustment to the Purchase Price unless a determination (as defined in Section
1313(a) of the Code) with respect to the indemnified party causes any such
payment not to constitute an adjustment to the Purchase Price for United States
federal income tax purposes.
10.8 Subrogation. If the Indemnitor makes any payment under this
-----------
Article 10 in respect of any Indemnifiable Losses, the Indemnitor shall be
- ----------
subrogated, to the extent of such payment, to the rights of the Claiming Party
against any insurer or third party with respect to such Losses; provided,
--------
however, that the Indemnitor shall not have any rights of subrogation with
- -------
respect to the other party hereto or any of its Affiliates or any of its or its
Affiliates' officers, directors, agents or employees.
10.9 Remedies Exclusive. The remedies provided in this Article 10
------------------ ----------
shall be the exclusive remedy for monetary damages (whether at law or in
equity). Without limiting the foregoing, neither Standard Pacific nor any of its
officers, employees, agents, stockholders, Affiliates, consultants, investment
bankers, legal advisers or representatives shall have any liability or
obligation to HON in respect of any statement, representation, warranty or
assurance of any kind made by Standard Pacific, its representatives or any other
person, including but not limited to, any statements made during any
presentation by any employee or representative of Standard Pacific or Panel
Concepts, except as otherwise provided in this Article 10.
----------
ARTICLE 11
MISCELLANEOUS
-------------
11.1 Severability. If any provision of this Agreement shall be held
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement will not be affected or impaired
thereby, and the parties shall endeavor to carry out the intent of such
provision to the maximum extent permitted.
11.2 Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the parties; provided, however, that this Agreement may not be
-------- -------
assigned by any party without the express written consent of the other party.
<PAGE>
11.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall for all purposes be deemed to be an original
and all of which when taken together shall constitute the same instrument.
11.4 Headings. The headings of the Sections are inserted for
--------
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction hereof.
11.5 Waiver. Any of the terms or conditions of this Agreement may be
------
waived in writing at any time by the party which is entitled to the benefits
thereof. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of such provision at any time in the future or a
waiver of any other provision hereof.
11.6 No Third-party Beneficiaries. Nothing in this Agreement shall
----------------------------
create any third-party beneficiary rights in any Person other than the
Beneficiaries.
11.7 Expenses. Except as otherwise expressly provided for herein or
--------
in any agreement entered into on the date hereof, Standard Pacific and HON shall
each pay all costs and expenses incurred by it or on its behalf in connection
with this Agreement and the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountants and legal counsel.
11.8 Notices. Any notice, request, instruction, consent or other
-------
document to be given hereunder by either party hereto to the other party shall
be in writing and delivered personally, by telecopy or sent by registered or
certified mail, postage prepaid, as follows:
If to HON:
David Stuebe
HON Industries, Inc.
414 East Third Street
P.O. Box 1009
Muscatine, Iowa 52761-7109
Fax Number: (319) 264-7655
With a copy to:
Elizabeth C. Kitslaar
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 60601-1692
Fax Number: (312) 782-8585
<PAGE>
If to Standard Pacific:
Arthur E. Svendsen
Standard Pacific Corp.
1565 West MacArthur Blvd.
Costa Mesa, CA 92626
With a copy to:
Clay A. Halvorsen
Gibson Dunn & Crutcher, LLP
2029 Century Park East, Suite 4000
Los Angeles, CA 90067
Fax Number: (310) 551-8741
or at such other address for a party as shall be specified in writing by that
party. Any notice which is delivered personally or by telecopy to the addresses
provided herein shall be deemed to have been duly given to the party to whom it
is directed upon actual receipt by such party. Any notice which is addressed
and mailed in the manner herein provided shall be deemed given to the Person to
which it is addressed when received.
11.9 Governing Law; Interpretation. This Agreement shall be construed
-----------------------------
in accordance with and governed by the laws of the State of California
applicable to agreements made and to be performed wholly within the State of
California without regard to conflicts of laws provisions thereof. Unless
specifically stated, otherwise, references to Articles, Sections and Schedules
refer to Articles, Sections and Schedules in this Agreement.
11.10 Exclusive Jurisdiction and Consent to Service of Process.
--------------------------------------------------------
Standard Pacific and HON each agree that any Legal Proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby shall be
instituted in a federal court located in the City of Santa Ana, State of
California which shall be the exclusive venue of said legal proceedings.
Standard Pacific and HON each waives any objection which such party may now or
hereafter have to the laying of venue of any such Legal Proceeding, and
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding. Any and all service of process and any other notice in any
such Legal Proceeding shall be effective against such party when transmitted in
accordance with Section 11.8. Nothing contained herein shall be deemed to affect
------------
the right of any party to serve process in any manner permitted by Law.
11.11 Entire Agreement; Amendment. This Agreement including all
---------------------------
Schedules and the other written agreements, if any, entered into on the date
hereof constitute the sole understanding of the parties with respect to the
matters contemplated hereby and thereby and supersede and render null and void
all prior agreements and understandings between the parties with respect to such
matters. No amendment, modification or alteration of the terms or provisions of
this Agreement, including all Schedules, shall be binding unless the same shall
be in writing and duly executed by the party against whom such would apply.
11.12 Definitions. For purposes hereof, the following terms, when
-----------
used herein with initial capital letters shall have the respective meanings set
forth herein:
"Affiliates" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Person" means an individual, a partnership, a corporation, a
<PAGE>
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a Governmental Authority or
any department, agency or political subdivision thereof.
11.13 Representations and Warranties. The disclosure of any
------------------------------
information on any Schedule to this Agreement shall be deemed to constitute the
disclosure of such information on all other Schedules to this Agreement
applicable to such information.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
STANDARD PACIFIC CORP.
By: _____________________________
Title: __________________________
HON INDUSTRIES INC.
By: _____________________________
Title: _____________________________________________________________
<PAGE>
EXHIBIT 22.1
SUBSIDIARIES OF REGISTRANT
1. Saddleback Inns of America, a California corporation.
2. Standard Pacific Savings, F.A., a Federally chartered stock savings and
loan association.
3. Standard Pacific Financing, Inc., a California corporation.
4. SPS Affiliates, Inc., a subsidiary of Standard Pacific Savings, F.A. and a
California corporation.
5. Standard Pacific Financing, L.P., a Delaware limited partnership in which
the registrant owns a 99% interest in all profits, losses, credits and
distributions.
6. Standard Pacific of Texas, Inc., a Delaware corporation.
7. StanPac Corp., a Delaware corporation.
8. Standard Pacific of Fullerton, Inc., a Nevada corporation.
9. Standard Pacific of Orange County, Inc., a Nevada corporation.
10. Family Lending Services, Inc., a subsidiary of Standard Pacific Savings,
F.A. and a Delaware corporation.
11. Eagle Ridge Development Company LLC, a California limited liability
company in which the registrant has a 50% ownership interest.
12. Parkridge Partners, a California general partnership in which the
registrant has a 50% ownership interest.
13. Pacific Ridge Partners, a California general partnership in which the
registrant has a 50% ownership interest.
14. StanPac Development Company, LLC, a Delaware limited liability company in
which the registrant has a 50% ownership interest.
15. Drees-Standard Pacific No. I, L.C., a Texas limited liability company in
which the registrant has a 50% ownership interest.
Neither the subsidiaries nor the partnerships in which the registrant has an
interest have done business under names other than their own, wih the
exception of the following:
1. Standard Pacific of Orange County, a division of Standard Pacific Corp.
2. Standard Pacific of San Diego, a division of Standard Pacific Corp.
3. Standard Pacific of Ventura, a division of Standard Pacific Corp.
4. Standard Pacific of Northern California, a division of Standard Pacific
Corp.
5. Standard Pacific of Dallas, a division of Standard Pacific of Texas, Inc.
6. Standard Pacific of Houston, a division of Standard Pacific of Texas, Inc.
7. Standard of Texas, a division of Standard Pacific of Texas, Inc.
8. Standard Pacific Homes.
9. Standard Pacific.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Standard Pacific Corp.:
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated January 23, 1998, included in this Form 10-K into
Standard Pacific Corp.'s previously filed Form S-8 Registration Statement File
No. 33-44954 and Form S-8 Registration Statement File No. 333-34073.
ARTHUR ANDERSEN LLP
Orange County, California
January 23, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 8,381 5,252
<SECURITIES> 0 5,329
<RECEIVABLES> 23,781 12,389
<ALLOWANCES> 0 0
<INVENTORY> 451,848 372,645
<CURRENT-ASSETS> (0)<F1> (0)<F1>
<PP&E> 6,085 5,061
<DEPRECIATION> 3,570 3,320
<TOTAL-ASSETS> 547,665 449,114
<CURRENT-LIABILITIES> (0)<F1> (0)<F1>
<BONDS> 178,131 100,000
0 0
0 0
<COMMON> 296 296
<OTHER-SE> 283,482 260,093
<TOTAL-LIABILITY-AND-EQUITY> 547,665 449,114
<SALES> 584,571 399,863
<TOTAL-REVENUES> 584,571 399,863
<CGS> 490,876 348,066
<TOTAL-COSTS> 543,262 385,417
<OTHER-EXPENSES> (931) (936)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,981 7,142
<INCOME-PRETAX> 41,046 12,948
<INCOME-TAX> 17,070 5,197
<INCOME-CONTINUING> 23,976 7,751
<DISCONTINUED> 3,350 642
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 27,326 8,393
<EPS-PRIMARY> 0.93 0.28
<EPS-DILUTED> 0.92 0.28
<FN>
<F1>Amounts for current assets and current liabilities are not shown, since the
balance sheet presented is unclassified.
</FN>
</TABLE>
