<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 28, 1998
---------------
STANDARD PACIFIC CORP.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
Delaware 1-9353 33-0475989
- ------------------------------ -------------------- ----------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1565 West MacArthur Boulevard, Costa Mesa, California 92626
- ------------------------------------------------------- ---------------------
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (714) 668-4300
--------------
N/A
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
- ------
On August 31, 1998, Standard Pacific Corp. (the "Company") acquired
seven active subdivisions, including a backlog of over 300 presold
homes, certain finished lot positions and rights to acquire additional
properties, representing a portion of the Arizona single-family
homebuilding operations of Shea Homes, Inc. (f/k/a UDC Homes, Inc.).
With this acquisition, the Company has acquired or assumed rights to
acquire over 2,000 single family lots located in 13 communities in the
Phoenix Metropolitan area. The Company paid a total of approximately
$58 million for the assets of this ongoing operation. The acquisition
was funded by borrowings under the Company's revolving credit
agreement, under which Bank of America National Trust and Savings
Association acts as agent for the lenders named therein.
ITEM 5. OTHER EVENTS.
- ------
Attached hereto as Exhibit 99.1 is a copy of the Company's press
release dated August 28, 1998 announcing the Company's execution of a
definitive agreement to sell the Company's savings and loan
subsidiary, Standard Pacific Savings, F.A., to American General
Finance, Inc., a wholly owned subsidiary of American General
Corporation.
Attached hereto as Exhibit 99.2 is a copy of the Company's press
release dated September 1, 1998 announcing a cash tender offer by the
Company for all of its outstanding 10-1/2% Senior Notes, due 2000.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
- ------
(c) EXHIBITS.
The following exhibits are filed with this report on Form 8-K:
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- ------------------------------------------------------------------
<S> <C>
2.1 Asset Purchase Agreement, dated August 13, 1998, by and among UDC
Homes, Inc., UDC Homes Construction, Inc., Shea Homes Limited
Partnership, Standard Pacific of Arizona, Inc., Standard Pacific
Construction, Inc., and Standard Pacific Corp.
99.1 Press Release dated August 28, 1998.
99.2 Press Release dated September 1, 1998.
</TABLE>
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STANDARD PACIFIC CORP.,
a Delaware corporation
Date: August 31, 1998 By: /s/ Clay A. Halvorsen
-----------------------------------
Clay A. Halvorsen,
Vice President, General Counsel and
Secretary
3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
--------- ---------------------------------------------------------
<S> <C>
2.1 Asset Purchase Agreement, dated August 13, 1998, by and among
UDC Homes, Inc., UDC Homes Construction, Inc., Shea Homes
Limited Partnership, Standard Pacific of Arizona, Inc.,
Standard Pacific Construction, Inc., and Standard Pacific Corp.
99.1 Press Release dated August 28, 1998.
99.2 Press Release dated September 1, 1998.
</TABLE>
4
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This agreement (this "AGREEMENT"), dated August 13, 1998, is entered into
by
UDC HOMES, INC., a Delaware corporation ("UDC");
UDC HOMES CONSTRUCTION INC., an Arizona corporation ("UDC
CONSTRUCTION," and together with UDC, "SELLERS");
SHEA HOMES Limited Partnership, a California limited partnership
("SHEA," and together with Sellers the "SELLER PARTIES");
STANDARD PACIFIC OF ARIZONA, INC., a Delaware corporation ("SP
ARIZONA");
STANDARD PACIFIC CONSTRUCTION, INC., a Delaware corporation, ("SP
CONSTRUCTION," and together with SP Arizona, "BUYERS"); and
STANDARD PACIFIC CORP., a Delaware corporation ("SPC," and together
with Buyers, the "BUYER PARTIES"), in the following factual context:
UDC conducts a home-building business with several divisions in California
and Arizona. UDC has its corporate headquarters in Phoenix, Arizona and has two
divisions there, the Active Adult Division and the Arizona Family Division.
Sellers desire to sell and Buyers desire to buy certain of the assets,
including real property assets, of UDC's Arizona Family Division, which
constructs and sells homes at retail in the Phoenix, Arizona market. In
addition, Buyers have purchased from Shea Land Holdings, an Arizona limited
liability company, formerly known as DMB/AEW Land Holdings Two ("LH TWO"), and
Shea will cause LH Two to sell, certain real property assets in Phoenix which
were intended for the Arizona Family Division. The interests in residential
subdivisions, involving individual neighborhoods or product lines at particular
subdivisions being purchased by Buyers hereunder (including any properties
purchased or to be purchased by Buyers pursuant to any rights to acquire
property transferred hereunder) are sometimes referred to herein as the
"PROJECTS." Also included in the assets sold will be a lease, sublease or
license of certain portions of the headquarters facility and other intangible
assets. Together, the foregoing assets, the Hired Employees (as defined in
Section 8.1) and any related goodwill are sometimes referred to herein as the
"BUSINESS." Sellers will retain all other assets, including all of the Active
Adult Division and certain of the real property and assets of the Arizona Family
Division.
The Seller Parties desire to sell and cause LH Two to sell to Buyers, and
Buyers desire to purchase from the Seller Parties and LH Two, the Purchased
Properties (as herein defined). Capitalized terms are defined in Section 14.
<PAGE>
SECTION 1. PURCHASE OF PROPERTY.
1.1 SELLER PROPERTIES. At the Closing, Sellers shall sell to Buyers free
and clear of all Liens (other than Permitted Exceptions), and Buyers shall
purchase from Sellers, the following:
(a) SELLER FINISHED LOTS. The parcels of land owned by Sellers,
consisting of both Finished Lots and unfinished lots to be developed by
Buyers, and Sellers' interest in the contracts and options to acquire such
land, each as described in Schedule 1.1(a), and all improvements, related
easements, licenses, entitlements and rights (the "SELLER FINISHED LOTS").
(b) SELLER UNFINISHED LOTS. The parcels of land consisting of
unfinished lots owned by Sellers as described in Schedule 1.1(b), and all
improvements, related easements, licenses, entitlements and rights (the
"SELLER UNFINISHED LOTS"). The Seller Unfinished Lots will be developed by
Sellers into Finished Lots in accordance with Section 11.8.
(c) ON-SITE EQUIPMENT. The owned construction trailers, model home
furniture, fixtures and equipment, sales office furniture, fixtures and
equipment and other on-site equipment located on, at or about the Seller
Finished Lots.
(d) REAL PROPERTY LEASES. Sellers' interest in the written leases of
real property described in Schedule 1.1(d) (the "REAL PROPERTY LEASES").
(e) JOINT VENTURE. Sellers' interest in the Joint Venture (as defined
in Section 3.2) and any related agreements listed in Schedule 1.1(e) (the
"JOINT VENTURE AGREEMENTS"); provided, however, that this asset shall be
excluded from the Purchased Properties if the Joint Venture Agreements have
not been modified in a manner reasonably satisfactory to Buyers and Sellers
as provided in Section 3.2, and in all cases the assets transferred shall
be exclusive of the Termination Penalty.
(f) VEHICLE. The vehicles listed in Schedule 1.1(f) (the "LISTED
VEHICLE").
(g) HEADQUARTERS OFFICE AND OTHER EQUIPMENT. The (i) headquarters
office furniture, equipment (other than leased equipment) and supplies,
including office furniture, office equipment, telephones, pagers, personal
computers, office supplies, leasehold improvements, and cellular telephones
which were used primarily by the Hired Employees, (ii) the lobby furniture,
Series 3500 Plans (which are in progress and uncompleted) and hardware and
software for network and phone systems listed on Schedule 1.1(g) and (iii)
such additional items of furniture, equipment and supplies as agreed to by
the parties at Closing to reflect an equitable allocation of the assets.
(h) EQUIPMENT LEASES. The lessee's interest in the leases of personal
property listed in Schedule 1.1(h) (the "LISTED EQUIPMENT LEASES").
(i) SELLER FINISHED LOT CONSTRUCTION CONTRACTS. All Construction
Contracts relating to the Seller Finished Lots, whether executory or fully
performed,
2
<PAGE>
and including any Construction Contracts relating to the Closed Homes (the
"SELLER FINISHED LOT CONSTRUCTION CONTRACTS"). The acquisition of the
Seller Finished Lot Construction Contracts shall not give Buyer any
ownership rights in the House Plans described in Section 11.3(a).
(j) WARRANTY AND DEFECT CLAIMS AND RIGHTS. All claims and rights of
Sellers against any party to the Seller Finished Lot Construction Contracts
or Construction Contracts related to the Seller Unfinished Lots ("SELLER
UNFINISHED LOT CONSTRUCTION CONTRACTS") for defective workmanship or other
construction defect or under any warranty, including all rights of Sellers
as named additional insureds or otherwise under any insurance policies
maintained by any of the parties (other than Sellers) to the Seller
Finished Lot Construction Contracts and Seller Unfinished Lot Construction
Contracts, except to the extent relating to any liability of Sellers to
homebuyers or others not assumed by Buyers under Section 3.1(d).
(k) STUDIES. Sellers' interest in or rights to use engineering,
architectural, landscaping, drainage, grading and other plans (other than
the Home Plans), specifications and reports relating to the Seller Property
(the "SELLER STUDIES") to the extent assignable by Sellers to Buyers
without penalty or default; provided that any of the foregoing which are of
continuing use in Sellers' business will be transferred on a non-exclusive
basis and shared by the parties.
(l) HOMEBUYER CONTRACTS. Contracts between Sellers and homebuyers for
the sale of residences at the Projects, exclusive of all earnest money or
option deposits provided by homebuyers (the "HOMEBUYER CONTRACTS"), all of
which are listed on Schedule 1.1(l).
(m) OTHER CONTRACTS. Sellers' rights under the Contracts listed in
Schedule 1.1(m) (the "LISTED OTHER CONTRACTS").
(n) PROJECT NAMES AND PHONE NUMBERS. Sellers' rights to the
subdivision and project names (other than Dove Valley, Dobson Place, Neely
Commons and Cooper Commons which are licensed to Buyers under Section 11.3)
and project telephone numbers for each of the Projects. Schedule 1.1(n)
sets forth a list of all such project names and telephone numbers.
(o) CUSTOMER RECORDS, BUSINESS RECORDS. All customer lists and files,
trade contractor contacts, lists and files, all property files for real
property comprising the Business and all books, records, data, plans,
forecasts and studies relating to or arising out of the Business (other
than paid invoice and other records which the parties mutually agree would
be impracticable to deliver or copy and as to which Sellers need only
provide Buyers with reasonable access), but not arising out of Sellers'
business or projects unrelated to those comprising the Business (the
"BUSINESS RECORDS"); provided, that, upon the reasonable determination by
Sellers that certain Business Records contain information pertinent to both
the Business and the business of Sellers or LH Two, Sellers shall deliver
to Buyer copies of the original Business Records and shall retain the
originals.
3
<PAGE>
(p) PERMITS. All rights of Sellers in or related to Permits primarily
related to the Seller Finished Lots or otherwise used in the Business to
the extent such rights may be lawfully transferred to Buyer.
(q) CLAIMS, CREDITS. All claims against, and deposits, prepayments
and credits with, third Persons arising out of or related to the Projects
and reflected in the Schedule of Net Assets.
(r) RETAINED LOT CONSTRUCTION CONTRACTS. All Construction Contracts
relating to the Retained Lots, whether executory or fully performed (THE
"RETAINED LOT CONSTRUCTION CONTRACTS").
(s) RIGHTS TO ACQUIRE PROPERTY. The rights to acquire, and Sellers'
interest in any Contracts to acquire (whether existing at the date hereof
or at the Closing), title to the real property described in Schedule 1.1(s)
prior to, on or after the Closing Date, including, in the case of any
rights exercised prior to the Closing, the properties so acquired ("RIGHTS
TO ACQUIRE PROPERTY").
All of the property in Section 1.1(a) through 1.1(s) shall be collectively
referred to as the "SELLER PROPERTY."
1.2 LH TWO PROPERTY. At the Closing, Sellers shall cause LH Two to
sell to Buyers free and clear of all Liens (other than Permitted Exceptions),
and Buyers shall purchase from LH Two, the following:
(a) LH TWO UNFINISHED LOTS. The parcels of land consisting of
unfinished lots owned by LH Two as described in Schedule 1.2(a), and all
improvements, related easements, licenses entitlements and rights (the "LH
TWO UNFINISHED LOTS"). The LH Two Unfinished Lots will be developed by
Sellers into finished lots in accordance with Section 11.7.
(b) WARRANTY AND DEFECT CLAIMS AND RIGHTS. All claims and rights of
LH Two against any party to any Construction Contract relating to the LH
Two Unfinished Lots ("LH TWO CONSTRUCTION CONTRACTS") for defective
workmanship or other construction defect or under any warranty, including
all rights of LH Two as a named additional insured or otherwise under any
insurance policies maintained by any of the parties (other than LH Two) to
the LH Two Construction Contracts, except to the extent relating to any
liability of Sellers to homebuyers or others not assumed by Buyers under
Section 3.1(d).
(c) STUDIES. LH Two's interest in or right to use engineering,
architectural, landscaping, drainage, grading and other plans (other than
the House Plans), specifications and reports relating to the LH Two
Unfinished Lots (the "LH TWO STUDIES") to the extent assignable by LH Two
to Buyers without penalty or default; provided that any of the foregoing
which are of continuing use in the Sellers' business will be transferred on
a non-exclusive basis and shared by the parties.
(d) CUSTOMER RECORDS, BUSINESS RECORDS. All customer lists and files,
trade contractor contacts, lists and files, all property files for real
property comprising
4
<PAGE>
the LH Two Unfinished Lots and all books, records, data, plans, forecasts
and studies relating to or arising out of the LH Two Unfinished Lots (other
than paid invoice records as to which LH Two need only provide Buyers with
reasonable access), but not arising out of Sellers' business or projects
unrelated to those comprising the LH Two Unfinished Lots (the "LH TWO
BUSINESS RECORDS"); provided, that, upon the reasonable determination by
Sellers that certain Business Records contain information pertinent to both
the LH Two Unfinished Lots and the business of LH Two, Sellers shall
deliver to Buyer copies of the original LH Two Business Records and shall
retain the originals.
(e) CLAIMS, CREDITS. All claims against, and deposits, prepayments
and credits with, third Persons (not employees) arising out of or related
to the LH Two Unfinished Lots and reflected in the Schedule of Net Assets.
(f) SELECTED LH TWO CONSTRUCTION CONTRACTS. All LH Two Construction
Contracts related to the construction of homes on Finished Lots (as opposed
to the development of parcels into Finished Lots).
All of the property in Section 1.2(a) through 1.2(f) shall be collectively
referred to as the "LH TWO PROPERTY." Subject to the exclusion of the Excluded
Property, the Properties set forth in Sections 1.1 and 1.2 are called the
"PURCHASED PROPERTIES."
1.3 EXCLUDED PROPERTY. Anything in Sections 1.1 and 1.2 notwithstanding,
the Purchased Properties shall not include any of the following (the "EXCLUDED
PROPERTY"):
(a) TAX ITEMS. Any prepayment, refund, claim, offset or other right
of Seller related to or arising out of Taxes.
(b) BANK ACCOUNTS, CASH. Any balances in any bank account, or any
cash on hand.
(c) PERMIT CREDIT ACCOUNT. The $300,000 credit account maintained
with the City of Chandler, Arizona for the immediate issuance of building
and other permits.
(d) NONTRANSFERABLE PERMITS. Any Permit the transfer of which would
violate applicable law; provided, however, that any such Permit shall be
held by Sellers, to the extent practicable, for the use and benefit of
Buyers, and Sellers shall use commercially reasonable efforts to make the
benefit of such Permits, to the extent applicable to the Business,
available to Buyers, with the goal that Buyers will be in substantially the
same economic position as if such Permits had been transferred to Buyers at
the Closing; provided, further, that in the event of the foregoing
circumstances, Buyers shall use commercially reasonable efforts to promptly
obtain the applicable Permits in Buyers' own names.
(e) GOODWILL, TRADE NAME, TRADE SECRETS, TRADEMARKS, ETC. The
goodwill of the Arizona Family Division (other than the goodwill related to
the Business, which goodwill is being acquired by Buyers hereunder), the
name "UDC Homes" and all other trade names related to the Business or the
Projects (other than
5
<PAGE>
the subdivision and project names transferred pursuant to Section 1.1), all
title and interest in and to all trade secrets, all trademarks and service
marks including registration rights arising under common law, state law and
federal law, all existing telephone numbers (other than project telephone
numbers), telephone listings and post office boxes of Sellers, and, except
as specifically licensed in Section 11.3, all logos, designs and
promotional materials used or formerly used in the Business.
(f) COMPUTER SOFTWARE. The personal computers included in the office
equipment transferred to Buyers shall not include any rights to software.
Except as otherwise provided in Section 11.2, in the event that Buyers
desire to use any of the software products previously used by Sellers,
Buyers agree to contact the appropriate software vendors to obtain licenses
at Buyers' cost to use such software.
(g) TELEPHONE, PAGER & INTERNET SERVICES. The telephones, cellular
telephones, pagers, and personal computers constituting a part of the
Purchased Properties shall not include any telephone, cellular or internet
service. Buyers agree to acquire all necessary service in their own name.
(h) [INTENTIONALLY LEFT BLANK]
(i) AGREEMENT RIGHTS. All rights and claims of Sellers under this
Agreement and the Contracts to be entered into between any of the Seller
Parties and Buyer Parties pursuant this Agreement.
(j) RETAINED LOTS. Sellers shall retain 119 lots in the subdivision
known as Dobson Village within the master-planned community known as Dobson
Place which are identified on Schedule 1.3(j) (together with Parcel 1 which
has been sold to Engel, the "RETAINED LOTS"). The Retained Lots will be
developed by Buyers into Finished Lots in accordance with Section 11.8.
(k) WARRANTY DEFECT CLAIMS AND RIGHTS. All claims and rights of
Sellers against any party to any Retained Lot Construction Contract
relating to the Retained Lots for defective workmanship or other
construction defect or under any warranty, including any rights of Sellers
as a named additional insured or otherwise under any insurance policies
maintained by any of the parties (other than Sellers) to the Retained Lot
Construction Contracts, except to the extent relating to any liability of
Buyers to homebuyers or others assumed by Buyers under Section 3.1(d).
(l) RIGHTS OF FIRST REFUSAL. All rights of first refusal, rights of
first offer, rights of first negotiation and all similar rights of Sellers
in connection with any Purchased Property which are specifically listed on
Schedule 1.3(l).
(m) EXCLUDED DIVISIONS. The properties and business of UDC's Active
Adult Division and California Divisions.
(n) NONTRANSFERABLE STUDIES. Any plans (other than the House Plans
which shall be governed by the provisions of Section 11.3), specifications
and reports (which would otherwise be included in the definition of Seller
Studies in Section 1.1(k) or LH Two Studies as defined in Section 1.2(c))
the transfer of which
6
<PAGE>
would subject Sellers to penalty or default under any Contract (the
"NONTRANSFERABLE STUDIES"); provided, however, that any such
Nontransferable Study shall be held by Sellers, to the extent practicable,
for the use and benefit of Buyers, and Sellers shall use commercially
reasonable best efforts to obtain the consent of all applicable Persons to
permit such assignment and otherwise make the benefit of such
Nontransferable Studies, to the extent applicable to the Business,
available to Buyers.
SECTION 2. PURCHASE PRICE.
2.1 SELLER PURCHASE PRICE. In consideration of the sale of the Seller
Property, Buyers agree to pay Sellers, subject to adjustment pursuant to Section
2.4, the sum of:
(a) the Adjusted Book Value as of June 30, 1998 of the Seller Finished
Lots as set forth on the Schedule of Net Assets (as defined in Section
5.1(f)), plus all amounts expended by Sellers on the development or
construction or otherwise for the benefit of the Seller Finished Lots from
and after July 1, 1998 to the Closing Date (including, for the period from
July 1, 1998 through the Closing Date, (i) sales and marketing, interest,
tax and warranty expense, (ii) a 5.4% S,G&A overhead allocation based on
revenues, and (iii) a 2.25% allocation of indirect construction costs based
on revenues), minus all amounts paid or to be paid to Sellers from and
after July 1, 1998 in connection with the sale of any of the Seller
Finished Lots; plus
(b) Sellers' good faith estimate of the All-in Finished Lot Cost of
the Seller Unfinished Lots (plus interest from July 1, 1998 through the
Closing Date); plus
(c) $100,000 representing the agreed value for the Assets listed on
Schedule 1.1(g); plus
(d) The Adjusted Book Value as of June 30, 1998 of the claims and
credits referenced in Section 1.1(q) as set forth on the Schedule of Net
Assets; plus
(e) $203,333 representing that portion of the stay-on bonus
obligations of Sellers to Kathy Wade under the Stay-on Bonus Program paid
to date; plus
(f) all amounts advanced by Sellers or Shea (other than amounts
previously reimbursed) in connection with the acquisition by Sellers of the
Rights to Acquire Property, including any amounts advanced by Sellers or
Shea to purchase properties prior to the Closing pursuant to the terms of
the Rights to Acquire Property; plus
(g) $12,000,000 in cash; minus
(h) Buyers' good faith estimate of the Cost to Complete the Retained
Lots.
2.2 LH TWO PURCHASE PRICE. In consideration of the sale of the LH Two
Property, Buyers agree to pay LH Two the sum of:
7
<PAGE>
(a) that portion of the purchase price (including all closing costs,
commissions and other related out-of-pocket costs (including professional
fees of Salomon Smith Barney), but excluding attorneys and other
professional fees related to Shea's acquisition of LH Two) paid by Shea to
acquire LH Two that are reasonably allocable to the LH Two Unfinished Lots;
plus
(b) Sellers' good faith estimate of the All-in Finished Lot Cost of
the LH Two Unfinished Lots (exclusive of the amounts referenced in 2.2(a))
(plus interest from July 1, 1998 through the Closing Date); plus
(c) The Adjusted Book Value as June 30, 1998 of the claims and credits
referenced in Section 1.2(f) as set forth on the Schedule of Net Assets.
2.3 DEPOSIT, LIQUIDATED DAMAGES. Upon the execution of this Agreement,
Buyers shall deliver to Sellers a cash deposit in the amount $2,000,000 (the
"DEPOSIT"). The Deposit shall bear interest at the rate of 10% per annum until
the Closing. At the Closing, the Deposit plus any accrued interest thereon
shall be credited against the amounts described in Sections 2.1 and 2.2
(collectively, the "PURCHASE PRICE"). If this Agreement is terminated for
reasons other than a default by Buyers, the Deposit plus accrued interest shall
be returned to Buyers; provided, however, that if the Agreement is terminated
because of SPC's failure to obtain the consent of its senior lenders to its
revolving credit facility by no later than August 21,1998, then Sellers shall be
entitled to retain $500,000 of the Deposit and the remainder of the Deposit will
be promptly returned to Buyers. IF THE SALE IS NOT CONSUMMATED AS A RESULT OF A
DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYERS, THE DEPOSIT AND ACCRUED
INTEREST SHALL BE RETAINED BY SELLERS AS LIQUIDATED DAMAGES. THE PARTIES AGREE
THAT SELLERS' ACTUAL DAMAGES, IN THE EVENT OF A FAILURE OF BUYERS TO CLOSE THE
PURCHASE OF THE PURCHASED PROPERTIES, WOULD BE EXTREMELY DIFFICULT OR
IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS BELOW, THE
PARTIES ACKNOWLEDGE THAT THE DEPOSIT PLUS ACCRUED INTEREST HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLERS' DAMAGES AND
AS SELLERS' EXCLUSIVE REMEDY AGAINST BUYERS, AT LAW OR IN EQUITY, IN THE EVENT
THE SALE OF THE PURCHASED PROPERTIES IS NOT CONSUMMATED AS A RESULT OF A DEFAULT
UNDER THIS AGREEMENT ON THE PART OF BUYERS.
INITIALS: SELLERS ___________ BUYERS ______
2.4 TRUE UP OF PURCHASE PRICE.
(a) Within 45 days after the Closing Date, Sellers shall propose, in
reasonable detail and together with supporting documentation, adjustments
to the Purchase Price based upon the actual amounts expended by and paid to
Sellers in connection with the matters referenced in Section 2.1(a).
Buyers shall have 30 business days to object in writing, stating objections
to the proposed adjustments in reasonable detail, and if Buyers fail to
timely object, the determination shall be conclusive.
(b) As to the Seller Unfinished Lots and LH Two Unfinished Lots,
Sellers shall propose, in reasonable detail and together with supporting
documentation, adjustments to the Purchase Price based upon the actual All-
in Finished Lot Costs
8
<PAGE>
within 60 days of completion of the last Finished Lot in the applicable
Project. Buyers shall have 30 days to object in writing, stating objections
to the proposed adjustments in reasonable detail, and if Buyers fail to
timely object, the determination shall be conclusive.
(c) As to the Retained Lots, Buyers shall propose, in reasonable
detail together with supporting documentation, adjustments to the Purchase
Price based upon the actual Cost to Complete of the Retained Lots within 60
days of completion of the last Finished Lot in the Project. Sellers shall
have 30 days to object in writing, stating objections to the proposed
adjustments in reasonable detail, and if Sellers fail to timely object, the
determination shall be conclusive.
(d) The Sellers and Buyers shall each provide the other and the
other's accountants and attorneys with access to all work papers,
documents, receipts, invoices and other materials during regular business
hours as may be necessary or reasonably requested by such party in its
review of foregoing proposed adjustments. The adjustments to the Purchase
Price made pursuant to this Section 2.4 shall be referred to as the "TRUE
UP."
(e) All Closing Date True Up calculations shall be as of the close of
business on the Closing Date.
2.5 RESOLUTION OF TRUE UP DISPUTES. In the event either Buyers or Sellers
have delivered a timely written objection to a proposed True Up adjustment (or
the making of no adjustment) and the parties are unable to agree upon a
resolution, the questions shall be submitted to and arbitrated by an independent
certified public accounting firm of national standing (the "INDEPENDENT
ACCOUNTANT") mutually selected by the Sellers accountants and the Buyers
accountants, respectively. In making its determination, the Independent
Accountant shall be entitled to interview the parties and examine the work
papers and underlying financial records. The Independent Accountant shall act
promptly, and the Independent Accountant's decision shall be final and binding
upon the parties hereto and shall not be subject to appeal. The fees and
expenses of the Independent Accountant shall be paid equally by Sellers and
Buyers.
SECTION 3. ASSUMPTION OF LIABILITIES.
3.1 ASSUMED LIABILITIES. Subject to the terms and conditions of this
Agreement, at the Closing, Buyers shall deliver an instrument of assumption
pursuant to which they will assume the claims, liabilities and obligations (the
"ASSUMED LIABILITIES"):
(a) accrued on the Schedule of Net Assets or arising after the
Closing, in each case under the contracts or options to acquire the
property comprising a portion or all of the Seller Finished Lots, the Real
Property Leases, Seller's interest in the Joint Venture (but only if the
Joint Venture Agreements have been modified in a manner reasonably
satisfactory to Buyers and Sellers as provided in Section 3.2 and in all
cases exclusive of the Termination Penalty), the Equipment Leases, the
Seller Finished Lot Construction Contracts, the Homebuyer Contracts, the
Listed Other Contracts, the Rights to Acquire Property and the Transferred
LH Two Construction Contracts referenced in Section 1.2(g);
9
<PAGE>
(b) all remaining stay on bonus obligations of Sellers to Kathy Wade
under the Stay On Bonus Program (exclusive of any annual bonus referred to
therein), as reflected in the June 12, 1998 letter from Seller to Kathy
Wade;
(c) any obligation to pay a bonus to former employees of Sellers hired
by Buyers for the period they worked for Sellers through the Closing Date
(which amount shall be reflected as an adjustment in the Schedule of Net
Assets); provided, however, that in no event shall Buyers be deemed to
assume or continue the employment relationship between such employees and
Sellers; and
(d) for the Projects or lots listed on Schedule 3.1(d), (i) all
warranty obligations to governmental or quasi-governmental entities or
utility or other service providers, (ii) all agreements with homebuyers or
warranty claims, (iii) all liabilities to homebuyers and their successors
for defective design or construction, (iv) injuries to person or property
arising out of negligent design or construction, or (v) any other claims
under any legal theory related to the design or construction of the Project
from its inception.
3.2 UDC MORTGAGE JOINT VENTURE. UDC and Norwest Ventures, Inc.
("NORWEST") have established a joint venture pursuant to a joint venture
agreement dated December 4, 1996 (the "JOINT VENTURE"). Buyers will assume
UDC's interest in the Joint Venture and obligations accruing after the Closing
Date under the Joint Venture Agreements, provided that the Joint Venture
Agreements are modified in a manner reasonably satisfactory to Buyers to reflect
that the Joint Venture will be limited to Buyers', SPC's and their affiliates
Phoenix and Texas single family home-building operations (i.e., single family
homes sold in these markets) and that Buyers, SPC and their affiliates shall be
permitted to operate an in-house mortgage bank for their other divisions, and
provided further that Norwest consents to such modification and assignment and
assumption. Buyers' assumption of Joint Venture Agreement obligations accruing
after the Closing Date shall not include any termination penalties to which UDC
is subject (the "TERMINATION PENALTY"), which shall remain the sole
responsibility and obligation of UDC. Sellers and Shea also agree that the
Joint Venture's Closing Date backlog of mortgage loans will remain with the
Joint Venture following the Closing.
3.3 INSURANCE. In partial consideration of Buyers' assumption of the
warranty obligations and construction defect liabilities referenced in Section
3.1(d), Sellers and Shea shall use their commercially reasonable best efforts to
cause the Buyer Parties to be named as additional insureds (in form reasonably
acceptable to the Buyer Parties with applicable deductibles to be paid by the
Buyer Parties) at the Closing. In the event that Sellers' assignment of rights
as an additional insured under Sections 1.1(j) and 1.2(b) is invalid or
ineffective for any reason, Sellers and Shea shall use their commercially
reasonable best efforts to afford the benefits of such insurance rights to the
Buyer Parties with respect to the obligations assumed under Section 3.1(d).
10
<PAGE>
3.4 EXCLUDED LIABILITIES. Buyers are not assuming any claim, liability or
obligation (the "EXCLUDED LIABILITIES"):
(a) relating to any indebtedness of Sellers, whether for borrowed
money or the deferred purchase price of Property or services, or any
guarantee of borrowed money issued by Sellers;
(b) arising out of or relating to any Taxes arising out of the
operation of the Business through the Closing;
(c) the Termination Penalty under the Joint Venture Agreements; and
(d) any other claim, liability or obligation of Sellers, including
those arising out of the pre-Closing operations of the Business, not
specifically referred to in Section 3.1.
SECTION 4. CLOSING.
The consummation of the purchase and sale contemplated by this Agreement
(the "CLOSING") will be at 10:00 am Pacific Daylight Saving Time on August 31,
1998 at the offices of Gibson, Dunn & Crutcher LLP, 4 Park Plaza, Irvine,
California 92614, unless all of the conditions to the Closing set forth in
Section 9 have not been satisfied or waived by the party or parties entitled to
waive the same, in which event the Closing shall occur on the date three days
after all such conditions have been so satisfied or waived, or unless a
different time, date or place is agreed to in writing by the parties.
Hereinafter, such date is referred to as the "CLOSING DATE."
4.1 SELLER'S PRO FORMA PURCHASE PRICE. Schedule 4.1 sets forth Sellers'
good faith estimate and calculation (as of the date of this Agreement) of the
Purchase Price to be paid at Closing. Prior to the Closing, Sellers shall
perform updated estimates of the Purchase Price and shall discuss those
estimates with Buyers. Buyers shall perform updated estimates of the Cost to
Complete the Retained Lots and shall discuss those estimates with Sellers.
Following these discussions and not later than August 21, 1998, Sellers shall
provide Buyers with Sellers' final updated estimate and calculation of the
Purchase Price to be paid at the Closing, which, absent bad faith, shall be the
Purchase Price to be paid at the Closing, subject to the True Up.
4.2 SELLERS' DELIVERIES. At the Closing, Sellers will deliver to Buyers:
(a) duly completed, recordable deeds, duly executed assignment and
assumption agreements and duly completed bills of sale, each in form and
substance reasonably satisfactory to Buyers, transferring the Purchased
Properties to Buyers;
(b) a certificate of title for the Listed Vehicle;
(c) the closing certificate referred to in Section 9.1(c);
11
<PAGE>
(d) an opinion of McCutchen, Doyle, Brown & Enersen, LLP dated the
Closing Date, substantially in the form of Exhibit A hereto; and
(e) any other instruments of transfer and assignment of the Purchased
Properties that Buyers may reasonably request to vest in Buyers the
interests in the Purchased Properties being conveyed at the Closing in
accordance with the terms of this Agreement.
4.3 LH TWO'S DELIVERIES. At the Closing, Sellers will cause LH Two to
deliver to Buyers:
(a) duly completed, recordable deeds, duly executed assignment and
assumption agreements and duly completed bills of sale, each in form and
substance reasonably satisfactory to Buyers, transferring the LH Two
Properties to Buyers; and
(b) any other instruments of transfer and assignment of the
Purchased Properties that Buyers may reasonably request to vest in Buyers
the interests in the Purchased Properties being conveyed at the Closing in
accordance with the terms of this Agreement.
4.4 BUYERS' DELIVERIES. At the Closing, Buyers will deliver to Sellers:
(a) the Purchase Price;
(b) the closing certificate referred to in Section 9.2(c);
(c) duly executed assignment and assumption agreements; and
(d) an opinion of Gibson, Dunn & Crutcher LLP dated the Closing Date,
substantially in the form of Exhibit B hereto.
4.5 TITLE. As soon as practicable following the execution of this
Agreement but in no event later than August 14, 1998, Sellers shall cause First
American Title Insurance Company (the "TITLE COMPANY") to provide to Buyers a
current preliminary title report with respect to each Project, together with
legible copies of all Schedule B items shown thereon (collectively, the "TITLE
REPORTS"). Buyers shall have the period from the date hereof through the date
seven days following delivery of the last Title Report delivered to Buyers (the
"REVIEW PERIOD") to examine the Title Reports. Buyers shall give a written
notice to Sellers (the "TITLE NOTICE") before the end of the Review Period,
either stating that Buyers have approved the matters disclosed in the Title
Reports or identifying those matters in the Title Reports which Buyers find
objectionable (the "OBJECTIONABLE MATTERS"). If Buyers fail to give a timely
Title Notice, they shall be deemed to have given a Title Notice on the last day
of the Review Period stating that all matters set forth in the Title Reports are
Permitted Exceptions. Sellers may elect to attempt to cure or remove any
Objectionable Matter by giving Buyers notice of such election within two (2)
Business Days following the Title Notice, but shall be under no obligation to do
so (except with respect to liens securing the obligation to repay borrowed
money). If Sellers deliver a notice electing to cure or remove each
Objectionable Matter on or before the second Business Day following the Title
Notice
12
<PAGE>
(whether or not Sellers shall have made a timely election to attempt to
cure), then Sellers shall be deemed to have covenanted to Buyers to remove each
Objectionable Matter on or prior to the Closing Date. If Sellers fail to
deliver a notice electing to cure or remove each Objectionable Matter on or
before the second Business Day following the Title Notice, then Sellers shall be
deemed to have elected to refuse to cure such Objectionable Matters. In the
event Sellers elect not to cure such Objectionable Matters, or elect to cure
such Objectionable Matters and fail or refuse to cure said Objectionable
Matters, Buyers shall have the option, which must be exercised on the earlier to
occur of (i) five (5) days after Buyers receipt of Sellers response or deemed
response, or (ii) the Closing, (a) to waive Buyers objections and purchase the
Projects as otherwise contemplated in this Agreement, notwithstanding such
Objectionable Matters, in which event the Objectionable Matters shall be deemed
to be Permitted Exceptions; provided, however, that Sellers shall remain
obligated to remove all monetary encumbrances (including without limitation
liens securing the obligation to repay borrowed money) affecting any Project or
any portion thereof prior to Closing, and Sellers agree that no monetary
encumbrances (including without limitation liens securing the obligation to
repay borrowed money) shall be deemed to be Permitted Exceptions, or (b) to
terminate this Agreement by written notice to Sellers, whereupon any and all
rights and obligations of Buyers and Sellers hereunder shall terminate (other
than any such obligations which, by their express terms, survive any termination
of this Agreement) and Sellers shall immediately deliver to Buyers the Deposit,
together with interest thereon. As used herein, "PERMITTED EXCEPTIONS" shall
mean exceptions to title approved in writing by Buyers or deemed approved by
Buyers pursuant to this Section 4.5. At the Closing, the Title Company shall
deliver to Buyers an ALTA Extended Owners Policy of Title Insurance (Form B,
Revised 10/17/92), with a creditor's rights endorsement in the amount of the
Purchase Price, insuring fee simple title to the Property in Buyers, subject
only to a lien for real property taxes and assessments not yet delinquent and
the Permitted Exceptions. All title insurance premiums for standard coverage
shall be borne by Sellers and any additional title insurance premiums for
extended coverage shall be borne by Buyers.
4.6 SALES AND TRANSFER TAXES, PRORATIONS. Except as otherwise provided in
Section 4.7, all third-party escrow fees and title transfer closing costs shall
be split equally between Sellers and Buyers. All ad valorem real property taxes
and other similar taxes and assessments with respect to the LH Two Unfinished
Lots and Seller Unfinished Lots shall be prorated between Sellers and Buyers
based on the percentage of days in the applicable period before and after the
Closing Date. All ad valorem real property taxes and other similar taxes and
assessments with respect to any of the Seller Finished Lots shall be reflected
in the Adjusted Book Value of such properties on the Schedule of Net Assets and
no proration is required. Except as otherwise provided in Section 4.7, any
sales taxes or transfer taxes relating to the transactions contemplated by this
Agreement shall be paid by Buyers.
4.7 STATE TRANSACTION PRIVILEGE TAX/LOCAL SPECULATIVE BUILDER TAX.
Sellers acknowledge and agree that they shall be liable for and agree to pay the
state transaction privilege taxes due in connection with the construction of
improvements and residences within the Seller Finished Lots prior to the Closing
Date and with respect to the Seller Unfinished Lots and LH Two Unfinished Lots
as and when such are due. All state transaction privilege tax obligations paid
by Seller shall be included in the Adjusted Book Value on Schedule 4.1. Buyers
acknowledge and agree that they are acquiring the Seller
13
<PAGE>
Finished Lots, Seller Unfinished Lots and LH Two Unfinished Lots for resale to
homebuyers, and as such, SP Arizona is liable for and agrees to pay the
municipality in which any improved property is located any local speculative
builder taxes under the Model City Tax Code (Section 416(b)(4)(B)) or any
similar state tax upon the sale of such property to a retail purchaser.
Furthermore, SP Arizona shall execute, acknowledge and deliver to Sellers on the
Closing Date the written declaration in the form of Exhibit C attached hereto
(the "SPECULATIVE BUILDER RESALE DECLARATION").
4.8 ALLOCATION OF PURCHASE PRICE. Not later than 120 days after the
Closing, Buyers shall provide to Sellers copies of Internal Revenue Service Form
8594 and any required exhibits thereto with Buyers' proposed allocation of the
Purchase Price among the Purchased Properties. Such allocation shall be based
on the fair market value of each asset at Closing and otherwise in a manner
consistent with Section 1060 of the Internal Revenue Code (the "CODE") and the
regulations thereunder. Within 30 days after the receipt of such Form 8594,
Sellers shall propose to Buyers any changes to such Form 8594 or shall indicate
their concurrence therewith. The failure by Sellers to propose any changes
within such 30 days shall be deemed to be an indication of Sellers' concurrence
with such form as proposed by Buyers. Buyers and Sellers shall endeavor in good
faith to resolve any differences with respect to the items on Form 8594.
Notwithstanding the foregoing, if Buyers and Sellers are unable to resolve such
differences, Buyers and Sellers shall, subject to the requirements of any
applicable tax law or election, file all tax returns in a manner consistent with
such Form 8594 except with respect to any items that are the subject of such
differences.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Sellers represent and warrant to Buyers that, except as expressly stated in
the Schedule corresponding to the applicable subsection of this Section 5:
5.1 TRANSACTION REPRESENTATIONS AND WARRANTIES.
(a) ORGANIZATION; GOOD STANDING. Each of the Sellers and Shea is a
corporation or limited partnership duly organized or formed, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or formation and has all requisite corporate or partnership
power and authority to own, lease and operate its Properties and to conduct
its business (including the Business in the case of the Sellers) as
currently conducted. Each of the Sellers is qualified to do business in
all jurisdictions where such qualification is required, except where the
failure to so qualify will not have a material adverse effect on the
Purchased Properties or the Business.
(b) AUTHORITY. Each of the Sellers and Shea has all requisite power
and authority under applicable corporate or partnership law to execute and
deliver this Agreement and to perform the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate or partnership action on the part of the Sellers and Shea, and no
other approval on the part of the Sellers or Shea is necessary under
applicable corporate or partnership law for the execution, delivery and
performance of this Agreement. This Agreement
14
<PAGE>
constitutes a legal, valid and binding obligation of the Sellers and Shea,
enforceable against each of them in accordance with its terms.
(c) UDC JOINT VENTURE. UDC owns its interest in the Joint Venture
free and clear of any Liens. UDC has performed all obligations required to
be performed by it under the Joint Venture Agreements and is not in default
under any such agreement, and (other than the transactions contemplated by
this Agreement) no event has occurred which, with the lapse of time or the
giving of notice or both, would constitute a default by UDC or, to the
knowledge of Sellers, by any other party to such agreement.
(d) NO CONFLICTS. Except as listed in Schedule 5.1(d), the execution
and delivery of this Agreement by Sellers and Shea and the consummation of
the transactions contemplated hereby do not and will not: (a) require
Sellers or Shea to file any notice with or obtain any consent, approval,
authorization or exemption from any governmental agency or private Person
(other than consents required in the ordinary course of business in
connection with bonds, agreements regarding development, marketing fee
agreements, profit sharing agreements and similar agreements affecting the
development, use, maintenance, marketing and sale of the Projects and for
which: (i) the other party is a government entity; or (ii) the agreement
requiring consent is an equipment lease; or (iii) the agreement requiring
consent is project covenants, conditions and restrictions; or (iv) consent
to the transaction may not be unreasonably withheld or for which a
reasonability standard would be implied by law); (b) violate any applicable
Legal Requirement; or (c) constitute a default or breach under any Contract
to which Sellers or Shea is a party or by which Sellers or Shea or any of
the Purchased Properties are bound (other than as a result of failure to
obtain a consent referenced in the parenthetical included in clause (a)
above).
(e) EMPLOYEES, EMPLOYEE PLANS. No employees of Sellers are
represented by any union or other bargaining representative, and there has
been no union organizing activity at any location of Sellers within the
past three (3) years. Sellers have given their employees any necessary
notice under the Workers Adjustment, Retraining and Notification Act, as
amended. Except as provided in Sections 3.1(b) and (d), none of the
employee benefit plans of Sellers give rise to any benefits on account of
any employment by Buyers or create any obligations of Buyers, and no such
benefits or obligations exist or arise under applicable law. None of the
employees of Sellers participate in a multi-employer plan or a multiple
employer plan.
(f) SCHEDULE OF NET ASSETS.
(i) Included as part of Schedule 4.1 is an unaudited Schedule of
Net Assets of the Business as of June 30, 1998 (the "SCHEDULE OF NET
ASSETS") giving effect to and reflecting all of the Purchased
Properties, Assumed Liabilities and adjustments which are to be
acquired or assumed by Buyers at the Closing. The asset and liability
values set forth on the Schedule of Net Assets reflect the book value
of such assets and liabilities on UDC's books and records, such books
and records being prepared in
15
<PAGE>
accordance with generally accepted accounting principles ("GAAP") in a
manner consistent with past practice.
(ii) Since June 30, 1998 there has been no damage, destruction or
casualty loss, whether or not covered by insurance, which could
materially and adversely impact the business, assets, financial
condition, results of operations or prospects of the Business.
(g) ASSIGNED CONTRACTS. To the knowledge of Sellers, each of the
Rights to Acquire Property and Contracts being assigned to and assumed by
Buyer pursuant to Sections 1.1 and 1.2 of this Agreement (the "ASSIGNED
CONTRACTS") is in full force and effect and constitutes a legal, valid and
binding obligation of each person that is a party thereto. To the
knowledge of Sellers, there are no material breaches or defaults under any
Assigned Contract, and no event has occurred which with the passage of time
of the giving of notice or both would constitute a material breach or
default by any party thereto, except for breaches and defaults which would
not in the aggregate have a material adverse effect on the business,
assets, financial condition, results of operations or prospects of the
Business.
(h) COMPLETENESS. Neither this Agreement nor any Schedule hereto
provided to Buyers contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to
make the statements contained herein and therein not misleading in light of
the circumstances under which they were made. Neither Sellers nor Shea
knows of any facts which are not disclosed herein and which are reasonably
likely to cause a material adverse impact on the Business or on any of the
Purchased Properties.
5.2 PROPERTY REPRESENTATIONS AND WARRANTIES.
(a) PERMITS. Sellers hold all permits, licenses, variances,
exemptions, consents, certificates, orders and approvals from any United
States (federal, state or local) or foreign government or governmental,
regulatory or administrative authority, agency or commission ("GOVERNMENTAL
ENTITY") necessary for the operation of the Business as it is now being
conducted (collectively, the "SELLER PERMITS"), except where the failure to
hold such Seller Permits has not had and is not reasonably likely to have a
Business Material Adverse Effect. Sellers are in compliance with the terms
of the Seller Permits, except where the failure to so comply has not had
and is not reasonably likely to have a Business Material Adverse Effect.
(b) ABSENCE OF LITIGATION. Schedule 5.2(b) lists each (i) claim,
action, suit, proceeding, investigation or internal complaint or grievance
pending or, to the knowledge of Sellers, threatened against Sellers
relating to the Business or any of the Purchased Properties before any
court, arbitrator or administrative, governmental or regulatory authority
or body, domestic or foreign, and (ii) outstanding judgment, order, writ,
injunction or decree of any court, governmental agency or arbitration
tribunal, or settlement agreement in a proceeding to which either Seller or
any of the Purchased Properties was or is a party, none of which have had
or are reasonably
16
<PAGE>
likely to have a Business Material Adverse Effect or could reasonably be
expected to prevent or materially delay consummation of the transactions
contemplated hereby.
(c) REAL PROPERTY. Except as set forth on Schedule 5.2(c), Sellers
and LH Two have good and marketable (or indefeasible, in jurisdictions
where the term "marketable" is not customarily used) title in fee simple to
the real property constituting the Seller Property and LH Two Property,
respectively, free and clear of all Liens, except Liens for Taxes not yet
due and such Liens as do not materially interfere with the present use by
Sellers or materially affect the value or marketing of the property
affected thereby. Neither Seller has given, nor has it received, any
notice that a breach or an event of default exists, and to the knowledge of
Sellers, no condition or event has occurred that with the giving of notice,
the lapse of time, or both would constitute a breach or event of default,
by Sellers, or any other person with respect to any agreements, options,
arrangements, contracts, covenants, conditions, deeds, deeds of trust,
rights-of-way, easements, mortgages, restrictions, surveys, title insurance
policies and other documents granting to Sellers title to or an interest in
or otherwise affecting the real property that is material to the operation
of the Business, as presently conducted or intended to be conducted, except
for such breach or event of default that has not had and is not reasonably
likely to have a Business Material Adverse Effect. No condemnation,
eminent domain or similar proceeding exists, is pending or, to the
knowledge of Sellers, is threatened with respect to, or that could affect,
any real property owned or leased by Sellers or LH Two that has had or is
reasonably likely to have a Business Material Adverse Effect. There is no
judgment, injunction, order, decree, statute, ordinance, rule, regulation,
moratorium or other action by a Governmental Entity, or to the knowledge of
Sellers formally proposed by a Governmental Entity, that has or would have
the effect of restricting the conduct of the Business as currently
conducted or intended to be conducted, except for any such restriction that
has not had and is not reasonably likely to have a Business Material
Adverse Effect. No developer-related charges or assessments currently due
and payable to any public authority or any other person for public
improvements or otherwise made against any Seller Property or LH Two
Property are unpaid, except for any such charge or assessment that has not
had and is not reasonably likely to have a Business Material Adverse
Effect. The developed real property constituting a part of the Purchased
Properties has access to streets, and is serviced, in all material
respects, by all utilities and other services, as is necessary to construct
homes on such property, and such utilities and other services are adequate
for the current and intended use of such property. The undeveloped real
property constituting a part of the Purchased Properties has or is expected
to have access to streets, and such real property is or will be serviced,
in all material respects, by all utilities and other services, at the time
such access or service is required for such use. All leases pursuant to
which the Sellers leases from others material amounts of real or personal
property used in the Business are in good standing, valid and effective in
accordance with their respective terms and there is not under any of such
leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a material default),
except where the lack of such good standing, validity and effectiveness or
the existence of such defaults or events of default has not had and is not
reasonably likely to have a Business Material Adverse Effect.
17
<PAGE>
(d) ENVIRONMENTAL MATTERS. (i) Schedule 5.2(d) lists all
governmental or third party claims, investigations, litigations,
administrative proceedings or orders relating to any Hazardous Substances
pursuant to any Environmental Law (collectively, "ENVIRONMENTAL CLAIMS")
asserted against either Seller, or, to Sellers' knowledge, relating to any
of the real property constituting a part of the Purchased Properties, and
none of such claims, investigations, litigations, administrative
proceedings or orders have had or are reasonably likely to have a Business
Material Adverse Effect; (ii) to Sellers' knowledge, neither Seller has
caused or permitted any Hazardous Substance to be used, generated,
reclaimed, transported, released, treated, stored or disposed of in a
manner which is reasonably likely to form the basis for a material
Environmental Claim against Sellers relating to the Business or the
Purchased Properties; (iii) neither Seller has assumed by agreement any
liability of any person for cleanup, compliance or required capital
expenditures for any Environmental Claim; (iv) Sellers are in material
compliance with all applicable Environmental Laws relating to the Business
or the Purchased Properties; (v) no properties currently, or to the
knowledge of Sellers, previously owned or operated by Sellers and relating
to the Business are listed or formally proposed for listing on the National
Priorities List under the Comprehensive Environmental Response,
Compensation Act of 1980, as amended, or any comparable list under any
other Environmental Law; (vi) to the knowledge of Sellers, none of the
properties now owned or operated by Sellers and constituting a part of the
Purchased Properties contains any underground storage tanks, PCB
contamination, impoundment, landfill or friable asbestos containing
material; (vii) neither Seller has received any written notice, demand,
letter, claim or request for information alleging that either may be in
violation of or liable under any Environmental Law; and (viii) neither
Seller is a party to any orders, decrees, judgments, injunctions or
agreements with any Governmental Entity which impose obligations under any
Environmental Law with respect to the Business or any of the Purchased
Properties and neither of them is conducting any remediation of Hazardous
Substances at any location relating in any manner to the Business.
As used herein, "Environmental Law" means any federal state, local or
foreign law, regulation, rule, treaty, order, decree, permit,
authorization, or the common law relating to pollution or the protection of
the environment (including, without limitation, ambient and indoor air,
land surface, subsurface strata and ground water), natural resources such
as wetlands, wildlife, flora and fauna, public health and safety,
including, without limitation, those relating to the handling, use,
presence, treatment, storage or disposal, release or threatened release or
remediation of any Hazardous Substance; noise, odor, contamination or
injury or threat of injury to persons or property, and "Hazardous
Substance" means any pollutant, contaminant, material, constituent, waste,
chemical and substance that is subject to regulation by any Environmental
Law, including any crude oil or any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon.
(e) INSURANCE. Schedule 5.2(e) lists all liability and property
insurance policies of Sellers that insure or did insure at any time during
the current policy year or the preceding two policy years the Purchased
Properties or which relate or did relate at any time during the current
year or the preceding two policy years to the
18
<PAGE>
ownership use or operation of any of the Purchased Properties (including
the names and addresses of the insurers, the names of the persons to whom
such policies have been issued, the expiration dates thereof, whether the
policies are currently in effect, the annual premiums and payment terms
thereof, whether it is a "claims made" or an "occurrence" policy and a
brief description of the interest insured thereby), which policies are in
amounts customary in Sellers' industry to insure them against risks and
losses associated with the operation of the Business and Purchased
Properties. All premiums due and payable under all such policies have been
paid, and Sellers are otherwise in full compliance with the terms and
conditions of all such policies, except where the failure to have made
payment or to be in full compliance has not had and is not reasonably
likely to have a Business Material Adverse Effect. Since July 1996 (and, to
the knowledge of Sellers, prior thereto), the insurance information
provided to Buyers by Sellers accurately and completely reflects the claims
history of Sellers under the policies.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyers represent and warrant to Sellers that, except as expressly stated in
the Schedule corresponding to the applicable subsection of this Section 6:
6.1 ORGANIZATION, GOOD STANDING. Each of the Buyers and SPC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own, lease and operate its properties and assets and to conduct its business as
currently conducted.
6.2 AUTHORITY. Each of the Buyers and SPC has all requisite power and
authority under applicable corporate law to execute and deliver this Agreement
and to perform the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of
Buyers and SPC, and no other approval on the part of Buyers or SPC is necessary
under applicable corporate law for the execution, delivery and performance of
this Agreement. This Agreement constitutes a legal, valid and binding
obligation of Buyers and SPC, enforceable against each of them in accordance
with its terms.
6.3 NO CONFLICTS. Except as listed on Schedule 6.3, the execution and
delivery of this Agreement by Buyers and SPC and the consummation of the
transactions contemplated hereby do not and will not: (a) require Buyers to
file any notice with or obtain any consent, approval, authorization or exemption
from any Person, (b) violate any court order, judgment, law, rule or regulation
or (c) constitute a default or breach under any Contract to which Buyers or SPC
is a party or by which it or any of their Properties are bound.
19
<PAGE>
SECTION 7. COVENANTS PENDING THE CLOSING.
7.1 CONDUCT OF THE BUSINESS. Except as otherwise contemplated by this
Agreement or consented to by Buyers, which consent shall not be unreasonably
withheld or delayed, from the date hereof until the Closing:
(a) Sellers will conduct and carry on the Business in the ordinary and
regular course consistent with past practice.
(b) Sellers will use their reasonable efforts to preserve the
Purchased Properties (it being understood that Sellers will bear the risk
of any loss, damage or destruction until the Closing), the Business and
Sellers' relationships with employees, customers, suppliers and others
having business relationships with the Business.
(c) Sellers will not materially change, amend, terminate or otherwise
modify any Contract included in the Purchased Properties or enter into any
new Contract which would be included in the Purchased Properties (other
than any such action taken in the ordinary course of business with respect
to a Construction Contract).
(d) Sellers will pay and perform all of the debts, obligations and
liabilities incurred, in whole or primarily, in connection with the
Business as and when due and fulfill all Assigned Contracts in accordance
with the terms and provisions thereof.
7.2 ACCESS AND RIGHTS OF INSPECTION. Prior to the Closing, Sellers will
allow Buyers and their counsel, accountants, environmental consultants and other
representatives reasonable access, during normal business hours and so as not to
unreasonably interfere with the business operations of Sellers, to all
Properties, Contracts, books and records used in or relating to the Business.
Sellers will furnish Buyers copies of such documents and such information with
respect to the affairs of the Business as Buyers may reasonably request from
time to time before the Closing. Buyers and their counsel and accountants will
have the right to examine and review all aspects of the operation of the
Business and the Purchased Properties.
7.3 CONFIDENTIALITY. All data and information received by Buyers pursuant
to Section 7.2, as well as all information and data previously furnished to
Buyers in connection with this transaction, will be held in confidence by
Buyers, and Buyers will not directly or indirectly (a) reveal, report, publish,
disclose or transfer any of the confidential information obtained from Sellers,
including without limitation the names and addresses of Seller's customers, to
others (other than counsel, accountants and other representatives of Buyer
engaged in connection with this transaction, who will be subject to the
provisions of this Section 7.3) or (b) use such information for any purpose
other than in connection with this transaction, except with written permission
of Sellers. The obligations set forth in the foregoing sentence will expire
upon consummation of the purchase contemplated by this Agreement or, if this
Agreement is terminated, 12 months after the date of termination. In the event
of the termination of this Agreement, Buyers will promptly return to Sellers all
confidential information received from Sellers embodied in any written form.
The restrictions contained in this Section 7.3 will not apply to any information
(i) that is or
20
<PAGE>
becomes in the public domain by publication or otherwise through no action of
Buyers or any of their representatives (ii) that was known to Buyers prior to
the time of disclosure by Sellers, (iii) that is rightfully obtained by Buyers
from a third party that has the legal right to disclose such information or (iv)
that Buyers are required by any legal process or proceeding to disclose.
7.4 NO NEGOTIATION WITH THIRD PARTIES. Sellers agree that neither Sellers
and Shea nor any shareholder, agent or representative of Sellers or Shea will,
directly or indirectly, encourage, solicit or engage in any discussions or
negotiations of any kind whatsoever with, or provide any information whatsoever
to, any Person concerning the possible sale to such third party (or its
principals) of all or any part of the Business or the Purchased Properties
(whether by merger, sale of units of equity interest, sale of assets, or
otherwise). Sellers will promptly advise Buyers of any inquiries or
communications concerning any such transaction which Sellers may receive or of
which it may become aware, and promptly furnish copies of any such inquiries or
communications in written form.
7.5 CONSUMMATION OF CLOSING. The parties will use their respective
commercially reasonable best efforts to cause all of the conditions to Buyers'
and Sellers' obligations to consummate the Closing to be satisfied, and in any
case will not intentionally take any action, or intentionally bring about any
circumstance, which would prevent such a condition from being satisfied.
7.6 CONTINUATION OF CONSTRUCTION. Sellers shall diligently continue
construction at each applicable Project in substantial accordance with the plans
and specifications therefor and comply in all material respects with all
ordinances, regulations and governmental requirements in connection therewith.
7.7 LIENS. Sellers shall keep the Projects free and clear of all Liens
(which excludes preliminary lien notices given in the ordinary course of
business), including, but not limited to, mechanics' liens, in connection with
work performed and materials provided before the Closing, and if any such lien
is filed or levied, shall secure its release (or bond around such Lien) within
five (5) days following the request of Buyers in anticipation of an event
requiring clean title. Sellers shall not and shall cause LH Two not to cause or
allow any encumbrance, lien, deed of trust or similar financial lien to be
placed against any Project, whether or not recorded, without the prior consent
of Buyers.
SECTION 8. EMPLOYEE MATTERS.
8.1 OFFERS OF EMPLOYMENT BY BUYERS. Promptly following the Closing,
Buyers shall offer employment to the then former employees of Sellers listed on
Schedule 8.1 (the "HIRED EMPLOYEES") on such terms and conditions as Buyers
shall determine at their sole discretion. After the Closing Date for a period
of 18 months, neither Buyers nor any affiliate of Buyers (including SPC) shall
solicit any employee (other than the Hired Employees) of Sellers' Arizona Family
Division as of the date of this Agreement (the "RETAINED EMPLOYEES") to work for
Buyers or any affiliate of Buyers. After the Closing Date until December 31,
1998, neither Buyers nor any affiliate of Buyers (including SPC) shall employ
any Retained Employees.
21
<PAGE>
8.2 OFFERS OF EMPLOYMENT BY SELLERS. After the Closing Date for a period
of 18 months, neither Sellers nor any affiliate of Sellers (including Shea)
shall solicit any Hired Employee to work for Sellers or any affiliate of
Sellers. After the Closing Date until December 31, 1998, neither Sellers nor
any affiliate of Sellers (including Shea) shall employee any Hired Employee.
8.3 PAYMENT OF COMPENSATION AND BENEFITS, TERMINATION BY SELLER. Sellers
will terminate all Hired Employees as of the date of the Closing. Except as
provided in Sections 3.1(b) and (d), Sellers shall remain solely responsible for
and shall pay when due all compensation and benefits owing to the Hired
Employees with respect to their employment by Sellers prior to the Closing,
including, without limitation, all salary and overtime, vacation pay and other
applicable employee benefits.
8.4 EMPLOYEE BENEFIT PLANS. Without limitation on Section 8.3, Sellers
will retain all liabilities for all benefits accrued or earned, and all claims
incurred, under its employee benefit plans by its employees as of the date of
the Closing, in accordance with the terms of such plans and applicable law.
SECTION 9. CONDITIONS.
9.1 CONDITIONS TO BUYERS' OBLIGATIONS. The obligations of Buyers to be
performed at the Closing are subject to the satisfaction of all of the following
conditions at or before the Closing, except to the extent Buyers, in their sole
discretion, elect to waive a condition:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Sellers contained in Section 5 shall have been true in all
material respects as of the date of this Agreement and shall be true in all
material respects as of the Closing as though made as of the Closing.
(b) PERFORMANCE. Sellers shall have performed and complied in all
material respects with all covenants required by this Agreement to be
performed or complied with by Sellers at or before the Closing.
(c) CLOSING CERTIFICATE. Sellers shall have delivered to Buyers a
certificate, dated the date of the Closing, signed by an officer of each
Seller representing and warranting that the conditions specified in Section
9.1(a) and (b) have been satisfied.
(d) CONSENTS, ETC. Each party shall have obtained all consents,
approvals, authorizations and exemptions listed on Schedule 9.1(d).
(e) LITIGATION. No order restraining or preventing the transactions
contemplated by this Agreement shall be in effect, and no action, suit or
proceeding challenging the transactions contemplated by this Agreement
shall be pending before any court or government agency or be overtly
threatened by any government agency.
22
<PAGE>
(f) SATISFACTION WITH TITLE. Buyers shall not have terminated this
Agreement pursuant to Section 4.5.
(g) TITLE POLICY. Buyers shall have received from the Title Company
an unconditional commitment to issue to Buyers at Closing the Title Policy.
(h) SENIOR LENDER APPROVAL. SPC shall have received the consent of
the senior lenders to its revolving credit facility to the consummation of
the transactions contemplated by this Agreement.
(i) DELIVERIES. Sellers and LH Two shall have delivered or be
prepared to deliver at Closing the agreements and documents referenced in
Sections 4.2 and 4.3.
(j) HOUSE PLAN CONSENTS. Sellers shall have obtained all consents and
approvals required to permit Sellers to license to Buyers the House Plans
as provided in Section 11.3(a).
(k) ADDITIONAL INSURED. The Buyer Parties shall have been named as
additional insureds under Seller's insurance policies as provided in
Section 3.3.
9.2 CONDITIONS TO SELLERS' OBLIGATIONS. The obligations of Sellers to be
performed at the Closing are subject to the satisfaction of all of the following
conditions at or before the Closing, except to the extent Sellers, in their sole
discretion, elect to waive a condition:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyers contained in Section 6 shall have been true in all
material respects as of the date of this Agreement and shall be true in all
material respects as of the Closing as though made as of the Closing.
(b) PERFORMANCE. Buyers shall have performed and complied in all
material respects with all covenants required to be performed or complied
with by them on or prior to the Closing.
(c) CLOSING CERTIFICATE. Buyers shall have delivered to Sellers a
certificate, dated the date of the Closing, signed by an officer of each
Buyer stating that the conditions set forth in Sections 9.2(a) and (b) have
been satisfied.
(d) CONSENTS, ETC. Sellers shall have obtained all consents,
approvals, authorizations and exemptions listed on Schedule 9.2(d).
(e) NO INJUNCTION. No Order or injunction restraining or preventing
the transactions contemplated by this Agreement shall be in effect.
(f) DELIVERIES. Buyers shall have delivered or be prepared to deliver
at Closing the agreements and documents referenced in Section 4.4.
23
<PAGE>
SECTION 10. INDEMNIFICATION.
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) TRANSACTION REPRESENTATIONS AND WARRANTIES. The representations
and warranties (the "TRANSACTION REPRESENTATIONS") made by the parties in
this Agreement or any certificate delivered pursuant to this Agreement
(other than the representations and warranties set forth in Section 5.2 or
any certificate to the extent certifying as to the continued accuracy of
the representations and warranties set forth in Section 5.2) will survive
the Closing; provided, however, that any claim based upon a claimed breach
of the Transaction Representations must be made within eighteen months
following the Closing Date or it shall be waived, except to the extent a
party gives notice to the other parties of any breach thereof on or before
the date eighteen months following the Closing Date.
(b) PROPERTY REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Sellers set forth in Section 5.2 or any certificate to the
extent certifying as to the continued accuracy of the representations and
warranties set forth in Section 5.2 (the "PROPERTY REPRESENTATIONS") will
survive the Closing; provided, however, that any claim based upon a claimed
breach of such representations and warranties must be made no later than
January 4, 2000 or it shall be waived, except to the extent an indemnified
person gives notice to Sellers of any breach thereof on or before January
4, 2000.
10.2 SELLERS AND SHEA'S INDEMNIFICATION.
(a) INDEMNIFICATION. Sellers and Shea will jointly and severally
indemnify, defend and hold Buyers, SPC and their respective affiliates,
officers, directors, employees, agents, successors and assigns harmless
from and against, and reimburse on demand, any and all losses, liabilities,
damages, claims, demands, costs, obligations, deficiencies and expenses
(including interest, penalties and reasonable attorneys' fees and expenses)
(collectively, "LOSSES") to the extent, and only to the extent, they arise
out of, result from or relate to:
(i) any breach of any representation, warranty or covenant
made by Sellers or Shea in or pursuant to this Agreement;
(ii) any failure of the parties to comply with any applicable
bulk sale or bulk transfer law;
(iii) any failure by Sellers or Shea to acquire all
outstanding membership interests in LH Two;
(iv) any Taxes owing by Sellers or any shareholder of Sellers,
and any Taxes arising in connection with the Business other than Taxes
accruing after the Closing on account of Buyers' operation of the
Business or Buyers' ownership of the Purchased Properties;
24
<PAGE>
(v) any action of Sellers that causes liability under, or
associated with, the Worker Adjustment, Retraining and Notification
Act, as amended, to be assessed or otherwise be imputed to Buyers; and
(vi) any failure of Sellers to pay, perform or discharge any
of the Excluded Liabilities in accordance with the terms thereof.
(b) KNOWLEDGE LIMITATION. The foregoing notwithstanding, no Person
referenced in Section 10.2(a) shall be entitled to indemnification under
Section 10.2(a) with respect to Losses arising out of any matter of which
Buyers have actual knowledge. For the purpose of this limitation "actual
knowledge" shall mean the actual knowledge of Stephen J. Scarborough,
Michael C. Cortney, Andrew H. Parnes and Clay A. Halvorsen, without any
duty on the part of any such person to undertake any investigation and
without any personal liability to such person.
10.3 BUYERS' AND SPC'S INDEMNIFICATION.
(a) INDEMNIFICATION. Buyers and SPC will jointly and severally
indemnify, defend and hold Sellers, Shea and their respective affiliates,
officers, directors, employees, agents, successors and assigns harmless
from and against, and reimburse on demand, any and all Losses to the
extent, and only to the extent, they arise out of, result from or relate
to:
(i) any breach of any representation or warranty made by
Buyers or SPC in or pursuant to this Agreement;
(ii) the conduct of the Business by Buyers after the Closing;
(iii) any Taxes owing by Buyers accruing after the Closing on
account of Buyer's operation of the Business or Buyer's ownership of
the Business;
(iv) any claims for royalties from or breach by Buyers of
Sellers' software licenses following the Closing Date; and
(v) any claims relating to Buyers' use of Sellers' telephone,
cellular or internet service following the Closing Date.
(b) KNOWLEDGE LIMITATION. The foregoing notwithstanding, no Person
referenced in Section 10.3(a) shall be entitled to indemnification under
Section 10.3(a) with respect to Losses arising out of any matter of which
Sellers have actual knowledge.
10.4 LIMITATIONS ON INDEMNIFICATION.
(a) INDEMNIFICATION FOR TRANSACTION REPRESENTATIONS. The provisions
for indemnity with regard to a claimed breach of the Transaction
Representations shall be effective only when, and only for the amount by
which, Losses for which the Seller Parties or Buyer Parties, respectively,
are liable exceed $500,000.
25
<PAGE>
(b) INDEMNIFICATION FOR PROPERTY REPRESENTATIONS.
(i) The provision for indemnity under Section 10.2 with regard to
a claimed breach of the Property Representations shall be effective
only when the aggregate amount of all damages for Losses for which the
Seller Parties are liable under Section 10.2 (the "BUYER CLAIMS") plus
the aggregate amount of all damages for Losses (as defined in the SPA)
for which the Sellers (as defined in the SPA) are liable under Section
9.2 of the SPA (the "SELLER CLAIMS") exceeds $2,000,000, in which case
the Seller Parties shall be liable for all such amounts. For this
purpose Sellers' Claims shall not include any amounts for the same
subject matter as contained in Buyers' Claims.
(ii) The maximum aggregate amount of Losses for which the Seller
Parties will be obligated to indemnify the Buyer Parties pursuant to
Section 10.2 with regard to claimed breaches of Property
Representations shall equal the Property Indemnification Cap. The
"PROPERTY INDEMNIFICATION CAP" shall initially be $17,000,000, which
amount shall be reduced (x) on November 4, 1998, to $12,000,000, (y)
on March 4, 1999, to $8,000,000 and (z) to zero on January 4, 2000;
provided, that reductions shall be prevented or deferred by claims
made in the same manner as provided in the SPA Escrow Agreement;
provided, further, that in the event that the aggregate amount of all
Liquidated Buyer Claims plus the aggregate amount of all Liquidated
Seller Claims exceeds the Property Indemnification Cap, then the
Property Indemnification Cap shall be reduced to the number determined
by multiplying the Property Indemnification Cap by a fraction equal to
the aggregate amount of all Liquidated Buyer Claims as the numerator
divided by the aggregate amount of all Liquidated Buyer Claims plus
the aggregate amount of all Liquidated Seller Claims as the
denominator. "Liquidated Claims" shall mean claims of Buyers or
Sellers, as the case may be, which are timely made and which are based
upon an agreement of the parties that such claims are valid claims or
are liquidated as a result of arbitration or court award under this
Agreement or the SPA, as the case may be. For this purpose,
Liquidated Sellers' Claims shall not include any amounts for the same
subject matter as contained in Liquidated Buyers' Claims.
(c) EXCLUSIVE REMEDY. The indemnification obligations of Sections
10.2 and 10.3 shall be the exclusive remedy for any breach of, or failure
to perform, any representations, warranties, covenants or agreements set
forth in this Agreement.
10.5 THIRD PARTY CLAIMS. If a person is subject to any claim or demand
asserted by a third party for which indemnity may be sought under this Section
10 (the "INDEMNIFIED PERSON"), such person shall give the indemnifying parties
hereunder ("Indemnifying Person") written notice of the claim or demand (the
"CLAIM") within 10 days of the assertion of the Claim, and shall permit the
Indemnifying Person to have reasonable access to relevant information in its
position or control related to the Claim. The Indemnifying Person may assume
the defense of the Claim, including the employment of counsel reasonably
satisfactory to the Indemnified Person and responsibility for the payment of all
of such
26
<PAGE>
counsel's fees and expenses, if the Indemnifying Person acknowledges to
the Indemnified Person the Indemnified Person's right to indemnity pursuant
hereto in respect to the entirety of the Claim. Any delay or failure to notify
the Indemnifying Person shall relieve the Indemnifying Person of its obligations
hereunder only to the extent, if at all, that it is prejudiced by reason of such
delay or failure. In the event that the Indemnifying Person undertakes the
defense of the Claim, the Indemnifying Person will keep the Indemnified Person
advised as to all material developments in connection with the Claim, including,
but not limited to, promptly furnishing to the Indemnified Person copies of all
material documents filed or served in connection therewith. The Indemnified
Person shall have the right to employ separate counsel to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Indemnified Person unless both the Indemnified Person and the
Indemnifying Person are both named as parties and representation by the same
counsel is inappropriate due to actual conflicting interests between them,
provided, however, that under no circumstances shall the Indemnifying Person be
liable for the fees and expenses of more than one counsel. The Indemnifying
Person may, without the Indemnified Person's consent, settle or compromise any
Claim or consent to the entry of any judgment if such settlement, compromise or
judgment involves only the payment of money by the Indemnifying Person or
provides for unconditional release by the claimant or the plaintiff of the
Indemnified Person from all liability in respect of such Claim. In the event
that the Indemnifying Person, within 15 days after receiving written notice of
any Claim, fails to assume the defense thereof, the Indemnified Person shall
have the right to undertake the defense, compromise or settlement of such Claim
for the account of the Indemnifying Person. The Indemnified Person shall not
compromise or settle any such Claim without the consent of the Indemnifying
Person, which consent shall not be unreasonably withheld.
SECTION 11. ADDITIONAL COVENANTS.
11.1 HEADQUARTERS LEASE. sellers currently lease approximately 22,500
square feet at 6710 N. Scottsdale Road, Scottsdale Arizona for use as their
headquarters (the "EXISTING PREMISES"). Attached as Schedule 11.1 is a plat of
the approximate size and shape of the portion of the Existing Premises which
Buyers wish to occupy for the Business (the "NEW PREMISES").
(a) NEGOTIATION WITH LANDLORD. Sellers and Buyers shall negotiate
with the landlord and use all commercially reasonable efforts to obtain a
new lease to Buyers of the New Premises at a per square foot rental no
greater than the existing square foot rate (such new lease to include the
right of SP Arizona to display its name on the front of the premises in
signage comparable to UDC's existing signage) and for landlord to recapture
the balance of the Existing Premises (the "LEASE MODIFICATIONS"), both to
take effect not later than 120 days after Closing (the "TRANSITION PHASE").
Buyers shall pay the costs of the demising wall, other costs required to
legally separate the New Premises and the Existing Premises and all their
own tenant improvements. These modifications may take effect before the
end of the Transition Phase if Sellers are able to vacate the Existing
Premises earlier.
(b) TRANSITION PHASE WITH LANDLORD CONSENT. During the Transition
Phase, Sellers shall provide a license to Buyers to jointly occupy the
Existing Premises in exchange for payment to Sellers of a monthly license
fee equal to a
27
<PAGE>
fraction of all rent, utilities, common area charges, and HVAC charges
(such fraction equal to the square footage of the New Premises divided by
the square footage of the Existing Premises), and other operating costs
shall be paid directly by Buyer and Seller. This occupancy shall be non-
exclusive with other personnel of Sellers to assist in the transition and
separation of the ongoing operations of Sellers and Buyers. Initially, the
Hired Employees shall continue to use the office and/or desk space utilized
by them immediately prior to the Closing Date. Both parties shall cooperate
in good faith to relocate personnel and operations with the goal of Buyers
using only the New Premises and Sellers only the remaining portion of the
Existing Premises, and to achieve the greatest practical separation between
the ongoing operations of Sellers and Buyers. It is anticipated that there
will be sharing throughout the Transition Phase of the reception and design
center areas.
(c) SUBLEASE. In the event that landlord does not consent to the
lease modifications, UDC shall seek landlord's consent to sublease the New
Premises to Buyers on the same per square foot cost and for a pro rata
portion of all other costs and charges and otherwise in the terms of the
Lease for the remainder of the original lease term without UDC being
required to exercise any option to extend or renew. Buyers agree to make
reasonable modifications to the space plan to accommodate landlord's
requests. Buyers shall pay the costs of the demising wall, other costs
required to legally separate the New Premises from the Existing Premises
and all there own tenant improvements. The parties agree to negotiate in
good faith to enter into a definitive sublease agreement which includes
these terms.
11.2 TRANSITION OF INFORMATION SERVICES.
(a) SUPPORT SERVICES. During the Transition Phase, Sellers shall
provide to Buyers the hardware, data and system modifications and other
technical support described in Schedule 11.2 (the "SUPPORT SERVICES").
Sellers shall have no liability whatsoever for any loss or damage related
to the Support Services or any other services provided to or on behalf of
Buyers by Sellers during the Transition Phase, including without limitation
any loss or damage related to personnel, equipment failure or improper data
input. Sellers' only obligation under this Section 11.2 shall be to
cooperate with Buyers in good faith in substantial accordance with Schedule
11.2.
(b) COSTS. Buyers shall reimburse Sellers for all direct and
reasonable indirect costs incurred by Sellers in providing the Support
Services.
(c) SEPARATION OF COMPUTER SYSTEMS. The parties acknowledge and agree
that it is their mutual goal for the computer systems of the Business and
of the remaining business of UDC's Arizona Family Division to be processing
data, performing functions and operating fully independently at the time of
the Closing. Each of the parties agrees to use its commercially reasonable
best efforts to achieve this goal. In the event that this goal proves to
be unobtainable, however, then:
(i) If the SPC AS/400 can effectively process the loaded data and
perform critical functions, including the processing of accounts
payable, then
28
<PAGE>
SPC shall use its AS/400 during the period needed to convert the
Business' computer system to effective independent operation.
(ii) Second, in the event that SPC's AS/400 cannot be utilized as
described in the preceding paragraph by no later than the Closing
Date, then Sellers shall use their commercially reasonable best
efforts to provide Buyers with all data processing services (on
Seller's remaining computer system) required for Buyers to perform
their accounts payable function and the Business' critical computer
functions, until such time as the Business' computer system is
effectively processing information independently or SPC's AS/400 is
able to effectively perform their accounts payable function and the
Business' critical computer functions, but in no event later than
September 30, 1998. These services shall be performed on the
following terms:
A. Buyers' accounts payable and other personnel shall visit
Sellers' offices at Gainey Ranch during normal business
hours to perform all data input and processing. Buyers'
accounts payable and other personnel shall access only the
files needed to prepare for check runs or other critical
processing and no other files.
B. If Sellers' checks are used, Buyers shall reimburse Sellers
by wire transfer for the amount of the checks before the
checks are released to Buyers.
C. Sellers shall continue to convert the UDC systems to Shea
systems and Buyers shall be subject to the same changes in
operations that impact the former UDC operations.
D. Buyers shall reimburse Sellers for all direct and reasonable
indirect costs incurred in the processing of Buyers'
accounts payable and other processing.
11.3 LIMITED INTELLECTUAL PROPERTY LICENSE. Sellers grant the following
licenses to use certain of their intellectual property rights, without royalty,
without the right to sublicense and, in the case of the rights referenced in
Section 11.3(b) and (c), without warranty as to the extent or freedom from
infringement of the rights licensed.
(a) HOUSE PLANS. Sellers grant Buyers a limited license to use the
plans, specifications, drawings, engineering materials, materials list, and
other intellectual property information in connection with Seller's
proprietary housing designs (the "HOUSE PLANS") in accordance with Schedule
11.3, which sets forth a list of the licensed housing designs for each of
the Projects and each consent or approval of a third party required to
permit such license. This license shall expire upon construction, sale and
closing of the last home in the related Project. If the grant of the
foregoing license requires the consent or approval of any architect or
other third party, Sellers shall use their commercially reasonable best
efforts to obtain such consent or approval prior to the Closing and shall
notify Buyers in writing
29
<PAGE>
not less two days prior to the Closing if any such consents or approvals
are not obtained. Buyers agree to indemnify Sellers and any applicable
architects for all liabilities (other than infringement liability) relating
to Buyers' use of the House Plans and any alleged defect resulting
therefrom.
(b) ADVERTISING MATERIALS. Sellers grant Buyers a limited license to
use renderings, computer images, video images and textual descriptions of
each Project acquired by Buyers; provided, however, the advertising
materials shall not include any rights to use the UDC name, trademark,
logos, or any subsidiary names, trademarks or logos identified with UDC
(other than Project names). The advertising personnel and consultants of
Sellers and Buyers shall reasonably cooperate in the division of materials
consistent with this license to allow Buyers to produce advertising with
respect to the acquired Projects. To the extent that there is any
disagreement over which advertising materials are being licensed to Buyers
by Sellers under this Section 11.3(b) the determination of Sellers
personnel made in good faith shall be conclusive. This license shall
expire upon construction, sale and closing of the last home in the related
Project.
(c) PROJECT NAMES, CONTRACT FORMS AND GUIDES. Sellers grant Buyers a
nonexclusive limited license to use (i) the project names Dove Valley,
Dobson Place, Neely Commons and Cooper Commons, (ii) Sellers' form of
Homebuyers Sales Contract and any related agreements and documents, (iii)
Sellers form of Subcontract Agreement and any related agreements and
documents, (iv) Sellers Warranty Guide and (v) Sellers Homeowner Guide;
provided, however, that the foregoing license shall not include any rights
to use the UDC name, trademark, logos, or subsidiary names, trademarks or
logos identified with UDC (other than the listed Project Names). This
license shall expire upon construction, sale and closing of the last home
in the related Project.
11.4 INSPECTION OF BUSINESS RECORDS. After the Closing, Buyers and
Sellers will each allow the other and such other parties' counsel, accountants,
environmental consultants and other representatives reasonable access, during
normal business hours and so as not to unreasonably interfere with the business
operations of the person providing access, to the business records relating to
the pre-Closing operations of the Business and the Purchased Properties which
Buyers or Sellers, in written notice to the other, asserts a need to inspect for
legitimate business purposes.
11.5 REPLACEMENT OF INSTRUMENTS. Within five business days after the
Closing, Buyers shall replace all bonds, letters of credit or similar
instruments, if any, securing Sellers performance or payment in connection with
the Purchased Properties, and shall provide Sellers with evidence of such
replacement, in form and substance reasonably acceptable to Sellers. Schedule
11.5 sets forth a list of all such bonds, letters of credit or similar
instruments.
11.6 COOPERATION.
(a) NEELY COMMONS REZONING. Buyers will use commercially reasonable
efforts, at no cost to Buyers, to assist Sellers in securing the rezoning
of parcels in the Neely Commons Project to commercial use, and shall not
object to
30
<PAGE>
any rezoning application in connection with such rezoning. In the event
that the four lots excluded from the Seller Unfinished Lots in order to
assist in the rezoning of the Neely Commons parcels are not needed to
achieve such rezoning, Sellers will offer to sell such lots to Buyers after
the closing on the same economic terms as the lots included in the Seller
Unfinished Lots are being sold to Buyers hereunder.
(b) SHARED ASSETS. Sellers and Buyers acknowledge and agree that
following the Closing they will share an interest in certain of the
Sellers' Finished Lot Construction Contracts, LH Two Construction
Contracts, Seller Studies, LH Two Studies, the Permits referenced in
Sections 1.1(p) and 1.2(e) and certain other properties used in both the
Business and the remaining business of Sellers (typically where a study,
Permit or Contract relates to both a Project sold to Buyers hereunder and a
Project retained by Sellers). Sellers and Buyers agree to cooperate in
good faith with respect to the use of such shared assets and to act in a
commercially reasonable manner designed to afford the benefit of such
assets to both sets of parties in an equitable manner and to move forward
to obtain separate agreements or rights for each party.
11.7 DEVELOPMENT OF SELLER UNFINISHED LOTS AND LH TWO UNFINISHED LOTS.
Sellers shall, and Sellers shall cause LH Two to, complete the development of
the Seller Unfinished Lots and LH Two Unfinished Lots into Finished Lots in
accordance with the specifications set forth or referenced on Schedule 11.7, and
agree to use their best efforts to complete such development in accordance with
the time schedule set forth on Schedule 11.7 subject to the occurrence of a
Force Majeure. All costs of completing such development shall be borne by
Sellers and LH Two. The development of the Seller Unfinished Lots and LH Two
Unfinished Lots by Sellers and LH Two shall be performed and completed in
substantial compliance with the plans and specifications set forth or referenced
on Schedule 11.7, in compliance with all Legal Requirements, and in a good and
workmanlike manner, free from any defect or Lien.
11.8 DEVELOPMENT OF RETAINED LOTS. Buyers shall complete the development
of the Retained Lots into Finished Lots in accordance with the specifications
set forth or referenced on Schedule 11.8 and agree to use their best efforts to
complete such development in accordance with the time schedule set forth on
Schedule 11.7 subject to the occurrence of a Force Majeure. All costs of such
development shall be borne by Buyers. The development of the Retained Lots
shall be performed and completed in substantial accordance with the plans and
specifications set forth or referenced on Schedule 11.8, in compliance with all
Legal Requirements, and in a good and workmanlike manner, free from any defect
or Lien.
11.9 RIGHT OF FIRST REFUSAL.
(a) In the event that, within six months of the date of this Agreement
(the "REFUSAL PERIOD"), UDC desires to sell or otherwise transfer, or
receives and desires to accept a bona fide offer to purchase (except for
retail sales to homebuyers) any single family home lots within the Arizona
Family Division of UDC that are owned by UDC or are developed from real
estate owned by UDC on the date of this Agreement (the "OFFERED LOTS"),
then UDC shall give Buyers a written notice (the "OFFER NOTICE") of its
31
<PAGE>
intention to sell the Offered Lots, setting forth the lots to be sold, the
price and the terms upon which UDC proposes to sell the Offered Lots.
(b) Buyers shall have the right, but not the obligation, for a period
of three (3) days from the date of receipt of the Offer Notice to agree to
purchase the Offered Lots for the price and on the terms specified in the
Offer Notice by giving written notice to UDC of its agreement (the
"PURCHASE NOTICE"). UDC will provide Buyers with reasonable access to any
information in Sellers' possession or control relating to the Offered Lots.
The sale of Offered Lots to Buyers shall be closed within thirty (30) days
after the receipt by UDC of the Purchase Notice. If Buyers default after
giving a Purchase Notice, in addition to any other remedies of Sellers,
this Right of First Refusal shall terminate as to all properties.
(c) If Buyers do not deliver the Purchase Notice to UDC in the given
three-day period, then UDC shall have the right to sell the Offered Lots to
any Person; and shall not be required to re-offer the Offered Lots to
Buyers unless the net present value of all of the economic terms to Sellers
in the final transaction is less than the net present value of the economic
terms to Sellers in the transaction offered to Buyers. The net present
value shall be calculated on a monthly basis using a discount rate of 9%
per annum. All of the non-economic terms not stated in the Offer Notice
shall be those customary for a similar type of property transaction, with
any disagreement over the non-economic terms settled by arbitration in
accordance with Section 15 of this Agreement.
(d) It is also the parties understanding that Shea desires to sell
various properties in San Diego and Southern California. As it identifies
these properties, Shea will provide SPC with a list of potential properties
for acquisition by SPC and will afford SPC the opportunity to discuss such
potential acquisitions with Shea. In the event that SPC expands into
Colorado, Shea may be of help to SPC through the sale of some of The
Highlands Ranch Property which Shea acquired in the Mission Viejo
acquisition. While this paragraph sets forth the parties mutual
understanding and intent, nothing in this paragraph shall create any
obligation on the part of Shea to offer or sell any specific property to
SPC.
11.10 RIGHTS TO ACQUIRE PROPERTY. In addition to Buyers right to acquire
the Rights to Acquire Property pursuant to Section 1.1(s) at the Closing, at any
time prior to the Closing Buyers shall have the right, but not the obligation,
to acquire all or any portion of the Rights to Acquire Property by so notifying
Sellers and paying to Sellers an amount equal to all amounts advanced by Sellers
or Shea to acquire the Rights to Acquire Property being acquired. If any of the
Rights to Acquire Property are to expire by their terms prior to the Closing
absent exercise or additional payment or other action, Sellers will so notify
Buyers in a manner sufficient to allow Buyers to exercise such rights prior to
such expiration. Except as is provided in the following sentence, Sellers shall
have no obligation to exercise any of the Rights to Acquire Property or advance
funds prior to the Closing. In the event that any of the Rights to Acquire
Property cannot be assigned to Buyers, whether prior to or at the Closing,
Sellers shall exercise such rights and perform all obligations thereunder on
behalf of and at the sole cost of Buyers with the goal of providing Buyers all
rights thereunder.
32
<PAGE>
11.11 CLAIMS COOPERATION. Buyers agree to use their commercially
reasonable best efforts to cause their employees to cooperate with Sellers, at
no cost to Buyers or such employees, in the defense of the claim of Betty J.
Calcote against Sellers. Sellers agree to reimburse each of the Buyers and
their employees with respect to any out-of-pocket costs incurred in connection
with such cooperation at the request of Sellers.
33
<PAGE>
SECTION 12. TERMINATION AND ABANDONMENT.
12.1 Termination. This Agreement may be terminated at any time (unless
otherwise specified) prior to the Closing Date:
(a) by mutual consent of Buyers and Sellers;
(b) by Buyers after August 31, 1998, if there has been a material
violation or breach by Sellers of any material agreement, representation or
warranty contained in this Agreement, or if the satisfaction of any
condition to the obligations of Buyers hereunder becomes impossible, and
such violation, breach or condition has not been waived by Buyers;
(c) by Sellers after August 31, 1998, if there has been a material
violation or breach by Buyers of any material agreement, representation or
warranty contained in this Agreement, or if the satisfaction of any
condition to the obligations of Sellers hereunder becomes impossible, and
such violation, breach or condition has not been waived by Sellers;
(d) by Buyers, in accordance with the provisions of Section 4.5;
(e) by Buyers, if Sellers shall have failed to consummate their
acquisition of LH Two by August 14, 1998; or
(f) by either Buyers or Sellers if SPC has not obtained the consent
of its senior lenders to the consummation of the transactions contemplated
by this Agreement by no later than 6:00 p.m. on August 21, 1998; provided,
however, in the event of a termination pursuant to this Section 12.1(f),
Sellers shall be entitled to retain $500,000 of the deposit as provided in
Section 2.3.
(g) by either Buyers or Sellers if the Closing has not occurred by
September 15, 1998.
12.2 NO WAIVER. No termination pursuant to Section 12.1 shall be deemed
to constitute a release or waiver by any party of any claim against another
party hereto based on any breach by such party of its agreements,
representations and warranties contained herein.
SECTION 13. MISCELLANEOUS.
13.1 Attorneys' Fees. If any legal action, arbitration or other
proceeding is commenced to enforce or interpret any provision of, or otherwise
relating to, this Agreement, the losing party shall pay the prevailing party's
actual expenses incurred in the investigation of any claim leading to the
proceeding, preparation for and participation in the proceeding, any appeal or
other post judgment motion, and any action to enforce or collect the judgment
including contempt, garnishment, levy, discovery and bankruptcy. For this
purpose, "expenses" include, without limitation, court, arbitration or other
proceeding costs and experts' and attorneys' fees and their expenses. The
phrase "prevailing party" shall
34
<PAGE>
mean the party who is determined in the proceeding to have prevailed or who
prevails by dismissal, default or otherwise.
13.2 CONSTRUCTION OF AGREEMENT. The parties mutually acknowledge that
they and their attorneys have participated in the preparation and negotiation of
this Agreement. In cases of uncertainty, this Agreement shall be construed
without regard to which of the parties caused the uncertainty to exist.
13.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each counterpart shall be deemed to be an original document.
All executed counterparts together shall constitute one and the same document,
and any counterpart signature pages may be detached and assembled to form a
single original document.
13.4 FURTHER ASSURANCES. Each party, at any time before or after the
Closing, shall at its own expense execute, acknowledge and deliver any
additional deeds, assignments, conveyances and other assurances, documents and
instruments reasonably requested by the other party, and shall take any other
action consistent with the terms of this Agreement that may reasonably be
requested by such other party, for the purpose of confirming and effectuating
any of the transactions contemplated by this Agreement.
13.5 INTEGRATION. This Agreement sets forth the entire understanding of
the parties relating to the transactions it contemplates, and supersedes all
prior understandings relating to them, whether written or oral, including,
without limitation, that certain letter agreement dated March 24, 1998 between
SPC and Salomon Smith Barney on behalf of UDC.
13.6 NOTICES. All notices, consents, requests, demands or other
communications to or upon the respective parties shall be in writing and shall
be effective for all purposes upon receipt on any work day before 5:00 PM local
time and on the next Business Day if received after 5:00 PM or on other than a
Business Day, including without limitation, in the case of (i) personal
delivery, (ii) delivery by messenger, express or air courier or similar courier,
(iii) delivery by United States first class certified or registered mail,
postage prepaid, and (iv) transmittal by electronically confirmed telecopier or
facsimile, addressed as follows:
To Seller: SHEA HOMES LIMITED PARTNERSHIP
655 Brea Canyon Road
P.O. Box 487
Walnut, CA 91788-0487
Attn: Roy Humphreys, President
Telephone: (909) 598-1841
Telecopy: (909) 869-0897
35
<PAGE>
And a copy to: McCUTCHEN, DOYLE, BROWN & ENERSEN, LLP
3150 Porter Drive
Palo Alto, CA 94304-1212
Attention: Edward S. Merrill, Esq.
Telephone: 650-849-4876
Telecopy: 650-849-4800
To Buyer: STANDARD PACIFIC CORP.
1565 West MacArthur Blvd.
Costa Mesa, CA 92626
Attention: Andrew H. Parnes, Vice President-Finance
Telephone: (714) 668-4304
Telecopy: (714) 641-5570
With a copy to: GIBSON, DUNN & CRUTCHER LLP
2029 Century Park East, Suite 4000
Los Angeles, CA 90067
Attention: Robert K. Montgomery, Esq.
Telephone: (310) 552-8500
Telecopy: (310) 551-8741
In this agreement, "BUSINESS DAYS" means days other than Saturdays, Sundays, and
federal and state legal holidays. Either party may change its address by
written notice to the other in the manner set forth above. Receipt of
communications by United States first class or registered mail shall be
sufficiently evidenced by return receipt. Receipt of communication by facsimile
shall be sufficiently evidenced by a machine-generated confirmation of
transmission without notation of error. In the case of illegible or otherwise
unreadable facsimile transmissions, the receiving party shall promptly notify
the transmitting party of any transmission problem and the transmitting party
shall promptly resend any affected pages.
13.7 RELATIONSHIP. The relationship of the parties to this Agreement is
determined solely by the provisions of this Agreement. The parties do not
intend to create any agency, partnership, joint venture, trust or other
relationship with duties or incidents different from those of parties to an
arm's-length contract.
13.8 SEVERABILITY. The provisions of this Agreement are intended to be
severable and enforced to the maximum extent permitted by law. If for any
reason any provision of this Agreement shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then that provision shall
be ineffective only to the extent of the invalidity, illegality or
unenforceability and in that jurisdiction only, without in any manner affecting
the validity, legality or enforceability of the unaffected portion and the
remaining provisions in that jurisdiction or any provision of the Agreement in
any other jurisdiction. The unaffected portion and provisions of the Agreement
will be enforced to the maximum extent permitted by law.
13.9 ASSIGNABILITY. No party shall assign its rights or delegate its
duties under this Agreement without the prior written consent of the other
parties hereto.
36
<PAGE>
13.10 THIRD PARTIES. Except as provided in Sections 10.2 and 10.3,
nothing in this Agreement shall be construed to give any person other than the
express parties to this Agreement any benefits, rights or remedies.
13.11 TIME OF THE ESSENCE. Time is of the essence in the performance of
each party's respective obligations under this Agreement, and no notice of a
party's intent to require strict compliance with the deadlines set forth in this
Agreement is required.
13.12 TRANSACTION EXPENSES. Whether or not the transactions contemplated
by this Agreement are consummated, each party shall pay its own fees and
expenses incident to the negotiation, preparation, execution, authorization
(including any necessary meetings or actions) or delivery of this Agreement and
in consummating the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of its attorneys, accountants and
other advisors.
13.13 WAIVER, MODIFICATION AND AMENDMENT. No amendment of, supplement to
or waiver of any obligations under this Agreement will be enforceable or
admissible unless set forth in a writing signed by the party against which
enforcement or admission is sought. No delay or failure to require performance
of any provision of this Agreement shall constitute a waiver of that provision
as to that or any other instance. Any waiver granted shall apply solely to the
specific instance expressly stated.
13.14 FIRPTA COMPLIANCE. Sellers shall supply such documentation as is
reasonably required to establish that they are not subject to withholding
pursuant to the FIRPTA.
13.15 SELLERS' KNOWLEDGE. As used in this Agreement (other than with
respect to the Property Representations), "to Sellers' knowledge" or "of which
Sellers have actual knowledge" or similar terms with respect to Sellers
knowledge, shall mean to the actual knowledge of Garth Weiger, Kenda Gonzales,
Jim Grogan, Roy Humphreys, Bruce Varker, Karen Tice and Kelly House, without any
duty on the part of any such person to undertake any investigation and without
any personal liability to such person. With respect to the Property
Representations, "to Sellers knowledge" or "of which Sellers have actual
knowledge" or similar terms with respect to Sellers knowledge, shall mean (i)
the actual knowledge of Garth Wieger, Kenda Gonzales, Jim Grogan, Roy Humphreys,
Bruce Varker, Karen Tice, Kelly House and Jay Johnson at all times through the
Closing Date and (ii) the actual knowledge of Garth Wieger, Kenda Gonzales, Jim
Grogan, Dean Bloxom, Jay Johnson, Kathy Wade, John Werner, Bob McLaughlin, Jeff
Slavin, Rob Cross, Tim Little, Carl Mulac, Erik Lunde, Scott Woodward, Steve
Rowland, Gail Fischer, Robert Fontana, Rick Schroeder and Jim Ruzicka as of the
Closing Date of the SPA.
13.16 BROKERS FEES. Buyers and Sellers represent to each other that they
have dealt with no agent or broker in connection with the purchase and sale of
the Property contemplated by this Agreement, other than the engagement of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") by SPC. Buyers and
Sellers each agree to indemnify, defend and hold harmless the other party from
and against all liability, costs, damage or expenses (including without
limitation attorneys' fees and costs incurred in connection therewith) on
account of any brokerage commission or finder's fees (including
37
<PAGE>
any obligations of SPC to DLJ) which the indemnifying party has agreed to pay or
which is claimed to be due as a result of the actions of the indemnifying party.
The provisions of this Section 13.16 shall survive the Closing and any
termination of this Agreement.
13.17 BULK SALES. Buyer waives Sellers' compliance with the bulk
sales/bulk transfer of the Commercial Code, but this waiver will not limit
Buyers' rights under Section 10.2(b).
13.18. CHOICE OF LAW. This Agreement shall be governed by the laws of the
State of California.
SECTION 14. GLOSSARY.
The following terms have the meanings indicated below or in the location
specified:
ADJUSTED BOOK VALUE - the detailed asset value plus allocated construction
indirect costs, commission advances and claims and credits referenced in Section
1.1(q), state transaction privilege taxes, adjustments for finished lot value,
net of accrued liabilities to completed homes job costs, accrual for inventory
homes, warranty accrual, property taxes, accrued commissions, Buyer deposits and
bonus accruals carried upon the books of Sellers which are maintain in
accordance with generally accepted accounting principles, as adjusted in
accordance with Schedule 4.1.
AGREEMENT - introductory paragraphs.
ALL-IN FINISHED LOT COST - for a particular Project, the total cost of
completing all the Finished Lots in the Project, including but not limited to
land acquisition costs, costs of governmental entitlements, engineering and
design costs, construction and supervision costs whether infrastructure, local
or on-site, utility deposits, including power and telephone, but excluding any
costs of construction of homes. The total costs in completing Finished Lots in
a Project shall be allocated to the individual Finished Lots in the Project in
the same manner in which Sellers or Buyers, as the case may be, have
historically allocated costs among lots. If there is no historical method, it
shall be allocated on the basis of the relative square footage of the Finished
Lots.
ASSUMED LIABILITIES - Section 3.1.
BUSINESS - introductory paragraphs.
BUSINESS MATERIAL ADVERSE EFFECT - any change, effect or circumstance that
is materially adverse to the business, assets, financial condition or results of
operations of the Business, other than any such changes, effects or
circumstances affecting the home construction industry generally in Arizona.
BUSINESS RECORDS - Section 1.1(o).
BUYERS - introductory paragraphs.
CLOSING - Section 4.
38
<PAGE>
CLOSING DATE - Section 4.
CODE - Section 4.8
CONSTRUCTION CONTRACTS - any Contract for architectural or engineering
services, planning or design, environmental consulting, grading, development,
construction, the furnishing of materials, payment or performance bonds or
otherwise relating to the development of real property or the construction of
homes thereon.
CONTRACT - any agreement, contract, lease, license, promissory note,
conditional sales contract, indenture, mortgage, deed of trust, stipulation,
consent decree, consent order, settlement, accord, commitment, undertaking,
instrument or arrangement of any kind, whether or not in writing, and whether
with a private party or a governmental agency.
COST TO COMPLETE - All-in Finished Lot Cost less costs incurred to date,
including land acquisition cost and development cost.
DEPOSIT - Section 2.3.
EXCLUDED PROPERTY - Section 1.3.
EXISTING PREMISES - Section 11.1.
FINISHED LOT - a lot upon which a party has completed (evidenced by
acceptance letters from Federal, State and local government agencies or, if
acceptance letters are not available, certifications by engineers approved by
the other party) the following improvements in compliance with applicable laws
and regulations: (a) minimum front and sideyard setbacks, (b) minimum useable
rear yard depth, (c) all subdivision improvements applicable to a single-family
housing subdivision, including without limitation paving, concrete, curb,
gutter, sidewalks, drainage improvements, property pins, utility (including
telephone, cable television, electricity, gas, water and sanitary sewer, with
stubouts to each lot as appropriate), applicable retaining walls, perimeter and
open space fencing, common area landscaping and community signage and
monumentation, all constructed in a good and workmanlike manner, (d) compliance
with all Federal, State and local environmental laws, regulations and
requirements pertaining to the development and operation of the Project, (e)
grading and compaction of the building pads in accordance with appropriate soils
engineering specifications, and certification by a registered professional
engineer that grading and compaction of the building pads on all lots have been
completed in accordance with appropriate soils engineering specifications (known
as a 79.(G)), (f) compliance with the Army Corps of Engineers 404 permit
requirements, and (g) such other permits, requirements and improvements as may
be necessary to allow the other party to secure a building permit to construct
Buyers' planned residential housing improvements on the lots.
FORCE MAJEURE - Any strike, lockout, labor trouble, failure of power, law,
riot, insurrection, war, act of God, or similar cause wholly outside the control
of, and brought about by a force or persons or entities wholly unrelated to the
party delayed or unable to perform.
HIRED EMPLOYEE - Section 8.1.
39
<PAGE>
HOMEBUYER CONTRACT - Section 1.1(l).
Joint Venture - Section 3.2.
JOINT VENTURE AGREEMENTS Section 1.1(e).
LEASE MODIFICATIONS - Section 11.1.
LEGAL REQUIREMENT - any statute, law, ordinance, regulation, rule, Order,
duty under common law or requirement of any Permit.
LIENS - any and all mortgages, pledges, liens, security interests, claims,
encumbrances and restrictions of every kind and nature.
LH TWO - introductory paragraphs.
LH TWO BUSINESS RECORDS - Section 1.2(d).
LH TWO CONSTRUCTION CONTRACTS - Section 1.2(b).
LH TWO PROPERTY - Section 1.2.
LH TWO STUDIES - Section 1.2(c).
LH TWO UNFINISHED LOTS - Section 1.2(a).
LISTED EQUIPMENT LEASES - Section 1.1(h).
LISTED OTHER CONTRACTS - Section 1.1(m).
LISTED VEHICLE - Section 1.1(f).
LOSSES - Section 10.2(a).
NEW PREMISES - Section 11.1.
NORWEST - Section 3.2.
ORDER - any judgment, order, injunction, award, writ or other directive of
any court, governmental agency or arbitral body.
PERMIT - any permit, license, franchise, concession, authorization,
approval, registration, filing or similar act of or made with any governmental
agency.
PERSON - an individual, partnership, joint venture, corporation, limited
liability company, trust or unincorporated organization, or a governmental
agency.
PROJECTS - introductory paragraphs.
40
<PAGE>
PROPERTY - any interest in any kind of property, asset or right, whether
real, personal or mixed, tangible or intangible, and wherever located, including
without limitation money.
PURCHASE PRICE - Section 2.3.
PURCHASED PROPERTIES - Section 1.2.
REAL PROPERTY LEASES - Section 1.1(d).
RETAINED LOTS - Section 1.3(j)
RETAINED LOT CONSTRUCTION CONTRACTS - Section 1.1(r)
RIGHTS TO ACQUIRE PROPERTY - Section 1.1(s).
SCHEDULE OF NET ASSETS - Section 5.1(f)
SELLER - introductory paragraphs.
SELLER FINISHED LOTS - Section 1.1(a).
SELLER FINISHED LOT CONSTRUCTION CONTRACTS - Section 1.1(i)
SELLER PROPERTY - Section 1.1.
SELLER STUDIES - Section 1.1(k).
Seller Unfinished Lots - Section 1.1(b).
SELLER UNFINISHED LOT CONSTRUCTION CONTRACTS - Section 1.1(j)
SHEA - introductory paragraphs.
SPA - the Stock Purchase Agreement, dated as of July 9, 1998, by and among
Shea, UDC, AEW Partners, L.P. and DMB Residential, L.L.C.
SPECULATIVE BUILDER RESALE DECLARATION - Section 4.7
SUPPORT SERVICES - Section 11.2.
TAX - any federal, state, local or foreign tax, assessment, fee, interest,
penalty or other governmental charge of any kind.
TERMINATION PENALTY - Section 3.2.
TITLE COMPANY - Section 4.5.
TRANSITION PHASE - Section 11.1.
TRUE UP - Section 2.4(d).
41
<PAGE>
UDC - introductory paragraphs.
15. Arbitration. Except as provided in Section 2.5, actions to enforce or
interpret this Agreement shall be settled by binding arbitration in Los Angeles,
California before a single arbitrator. The arbitrator shall be a retired judge
and such arbitration's shall be conducted pursuant to the rules for commercial
case of JAMS/and dispute. The non-prevailing party (as determined by the
arbitrator) shall pay the arbitrator's fees and expenses and the prevailing
party's attorneys fees and expenses incurred in connection with the arbitration
and enforcement of any arbitration decision. The decision of the arbitrator
shall be final, unappealable and binding, and judgment on the award rendered by
the arbitrator maybe entered in any court having jurisdiction thereof. The
arbitrator shall be authorized to word any relief, whether legal or equitable,
including specific performance, except that the arbitrator shall not have the
power to award remedies that would not be available from a court in California
having jurisdiction of the matter.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THIS ARBITRATION OF DISPUTES PROVISION
DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY
TRIAL. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION,
YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THIS ARBITRATION PROVISION TO NEUTRAL
ARBITRATION.
___________________________ __________________________
Sellers Buyers
42
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement.
UDC: UDC HOMES, INC.
By _________________________________
Name:
Title:
By _________________________________
Name:
Title:
UDC CONSTRUCTION: UDC HOMES CONSTRUCTION, INC.
By _________________________________
Name:
Title:
By _________________________________
Name:
Title:
SHEA: SHEA HOMES LIMITED PARTNERSHIP
BY: J.F. SHEA CO., INC.
ITS GENERAL PARTNER
By
__________________________________
Name:
Title:
By _________________________________
Name:
Title:
43
<PAGE>
SP ARIZONA: STANDARD PACIFIC OF ARIZONA, INC.
By
__________________________________
Name:
Title:
By _________________________________
Name:
Title:
SP CONSTRUCTION: STANDARD PACIFIC CONSTRUCTION, INC.
By
_________________________________
Name:
Title:
By _________________________________
Name:
Title:
SPC: STANDARD PACIFIC CORP.
By _________________________________
Name:
Title:
By _________________________________
Name:
Title:
44
<PAGE>
SCHEDULES
Schedules
Schedule 1.1(a) Seller Finished Lots
Schedule 1.1(b) Seller Unfinished Lots
Schedule 1.1(d) Real Property Leases
Schedule 1.1(e) Joint Venture Agreements
Schedule 1.1(f) Listed Vehicle
Schedule 1.1(g) Office Equipment
Schedule 1.1(h) Listed Equipment Leases
Schedule 1.1(l) Homebuyer Contracts
Schedule 1.1(m) Listed Other Contracts
Schedule 1.1(n) Project Names and Phone Numbers
Schedule 1.1(s) Rights to Acquire Property
Schedule 1.2(a) LH Two Unfinished Lots
Schedule 1.3(j) Retained Lots
Schedule 1.3(l) Rights of First Refusal
Schedule 3.1(d) Closed Homes
Schedule 4.1 Pro Forma Purchase Price and Schedule of Net Assets
Schedule 5.1(d) Conflicts
Schedule 5.2(b) Litigation
Schedule 5.2(c) Real Property
Schedule 5.2(d) Environmental Matters
Schedule 5.2(e) Insurance
Schedule 6.3 Conflicts
Schedule 8.1 Hired Employees
Schedule 9.1(d) Consents Required for Closing
Schedule 9.2(d) Consents Required for Closing
Schedule 11.1 Existing Premises
Schedule 11.2 Support Services
Schedule 11.3 House Plans
Schedule 11.5 Bonds
Schedule 11.7 Development of Finished Lots
Schedule 11.8 Development of Retained Lots
EXHIBITS
Exhibit A Opinion of Sellers' Counsel
Exhibit B Opinion of Buyers' Counsel
Exhibit C Speculative Builder Resale Declaration
45
<PAGE>
NEWS RELEASE
[LOGO OF STANDARD PACIFIC CORP.] STANDARD PACIFIC CORP.
1565 West MacArthur Boulevard
Costa Mesa, California 92626
Contact: Andrew H. Parnes,
Vice President-Finance
(714) 668-4306
================================================================================
For Immediate Release
STANDARD PACIFIC CORP. ANNOUNCES EXECUTION OF A
DEFINITIVE AGREEMENT TO SELL STANDARD PACIFIC SAVINGS, F.A.
- -------------------------------------------------------------------------------
COSTA MESA, CALIFORNIA, August 28, 1998 -- Arthur E. Svendsen, Chairman of
the Board and Chief Executive Officer of Standard Pacific Corp. (NYSE: SPF),
announced today that the Company has entered into a definitive Stock Purchase
Agreement to sell the Company's federally chartered thrift subsidiary, Standard
Pacific Savings, F.A. ("Savings"), to American General Finance, Inc., a wholly
owned subsidiary of American General Corporation (NYSE: AGC). The Agreement
provides that the purchase price will be the tangible stockholder's equity of
Savings as of the closing date (estimated to exceed $8,000,000), plus $750,000.
Consummation of the transaction is tentatively scheduled to occur on or before
December 31, 1998, but is contingent upon approval of the transaction by the
Office of Thrift Supervision and certain other conditions.
Management currently estimates that the sale of Savings pursuant to the
Agreement, and the operating results of Savings for the period through the
closing date of the sale, will not result in a significant gain or loss to the
Company.
Standard Pacific operates primarily as a geographically diversified builder
of single family homes with operations throughout the major metropolitan markets
in California and Texas.
This news release contains forward-looking statements. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
actual results to differ materially.
(end of text)
<PAGE>
Page 1 of 2
BUS 08:06 STANDARD PACIFIC CORP. ANNOUNCES A CASH TENDER OFFER FOR ALL
of its outstanding 10 1/2% Senior Notes Due 2000
Business Editors
COSTA MESA, Calif.--(BUSINESS WIRE)--Sept. 1, 1998--Standard Pacific Corp.
(the "Company") (NYSE: SPF) announced today that it has commenced a cash tender
offer (the "Tender Offer") to purchase all of its outstanding 10 1/2% Senior
Notes due 2000 (the "Notes") from holders of such Notes (the "Holders") and a
reissued consent solicitation (the "Solicitation" and, together with the Tender
Offer, the "Offer") to eliminate certain restrictive covenants and other
provisions contained in the Indenture, dated as of April 1, 1992, as amended and
supplemented from time to time, and the related Officer's Certificate dated
March 5, 1993, pursuant to which the Notes were issued.
Pursuant to the terms of the Offer, the total consideration payable to
Holders who tender Notes and thereby deliver consents prior to 12:00 midnight,
New York City time, on the Consent Date (as defined below) is $1049.00 per
$1,000 principal amount of Notes tendered, plus accrued and unpaid interest up
to but not including the payment date, consisting of $10.00 per $1,000 principal
amount of Notes as consideration for granting the requested consent (the
"Consent Payment") with the remainder of the consideration for the tender of
Notes pursuant to the Tender Offer.
In order to receive the Consent Payment, Holders must properly tender
their Notes prior to 12:00 midnight, New York City time, on the Consent Date.
Holders who properly tender their Notes after the Consent Date will not receive
the Consent Payment. The terms of the Offer do not allow holders to deliver
consents without tendering Notes.
The Consent Date is 12:00 midnight New York City time on the date which is
the later of September 15, 1998 or the date on which the company receives the
requisite consents from Holders representing at least a majority in aggregate
principal amount of the Notes outstanding. The Tender offer will expire at
9:00 A.M., New York City time, on September 30, 1998, unless extended (the
"Expiration Date") and the Solicitation will expire on the earlier to occur of
the Expiration Date or the Consent Date.
The Company is seeking to modify the Indenture and the related Officer's
Certificate to eliminate certain restrictive covenants and certain other
provisions applicable to the Notes. Although there are several series of
securities currently outstanding under the Indenture, the proposed Amendments to
the Indenture and related Officer's Certificate will only affect the Company's
Notes (i.e. the Company's 10 1/2% Senior Notes due 2000).
The Offer is subject to the terms and conditions set forth in the Offer
to Purchase and Consent Solicitation Statement dated September 1, 1998 and the
accompanying Consent and Letter of Transmittal, which are being sent to all
Holders. Subject to the terms and conditions of
<PAGE>
Page 2 of 2
the Offer, the Company will make all payments promptly after the Expiration
Date.
The Company designs, constructs and sells high quality, single-family homes
targeted primarily to the move-up buyer. The Company is a leading builder in
California where it has operated for over 50 years and also has established
operations in Texas. The Company is geographically diversified in these markets
with operations in Orange, Riverside, San Bernardino, San Diego and Ventura
Counties in Southern California, in the San Francisco Bay area of northern
California and in Houston, Dallas and Austin, Texas. In addition, the Company
is commencing operations in Phoenix, Arizona, in connection with its recent
acquisition of seven active subdivisions and certain other assets from the
Arizona Family Division of UDC Homes, Inc. With this acquisition, the
Company will purchase or assume rights to acquire over 2,000 single-family lots
located in 13 communities in the Phoenix Metropolitan area.
Donaldson, Lufkin & Jenrette ("DLJ") is serving as the Dealer Manager
and MacKenzie Partners, Inc. is serving as the Information Agent in connection
with the Offer. Questions concerning the Offer should be directed to Jeff Dorst
of DLJ at (800) 334-1604 or (212) 892-2964. Requests for documents should be
directed to MacKenzie Partners, Inc., at (212) 929-5500 or (800) 322-2885.
CONTACT: DLJ
Jeff Dorst
800/334-1604 or 212/892-2964
or
MacKenzie Partners, Inc.
212/929-5500 or 800/322-2885
KEYWORD: CALIFORNIA
INDUSTRY KEYWORD: BUILDING/CONSTRUCTION REAL ESTATE
Today's News On The Net - Business Wire's full file on the Internet
with HyperLinks to your home page.
URL:http://www.Businesswire.com
