<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1998
REGISTRATION NO. 333-48019
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO THE
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
STANDARD PACIFIC CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
DELAWARE 1531 33-0475989
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
1565 WEST MACARTHUR BOULEVARD
COSTA MESA, CALIFORNIA 92626
(714) 668-4300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
ARTHUR E. SVENDSEN
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
STANDARD PACIFIC CORP.
1565 WEST MACARTHUR BOULEVARD
COSTA MESA, CALIFORNIA 92626
(714) 668-4300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
WITH COPIES TO:
CLAY A. HALVORSEN, ESQ. ROBERT K. MONTGOMERY, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY GIBSON, DUNN & CRUTCHER LLP
STANDARD PACIFIC CORP. 2029 CENTURY PARK EAST
1565 WEST MACARTHUR BOULEVARD LOS ANGELES, CA 90067
COSTA MESA, CA 92626
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 23, 1998
PROSPECTUS
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Standard Pacific Corp.
Offer For All Outstanding
8% Senior Notes Due 2008
In Exchange For
8% Series A Senior Notes Due 2008
This Exchange Offer will expire at 5:00 p.m.,
New York City time, on May 27, 1998, unless extended
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Standard Pacific Corp., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange up to $100 million aggregate
principal amount of its new 8% Series A Senior Notes Due 2008 (the "New
Notes"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount of its outstanding
8% Senior Notes Due 2008 (the "Old Notes"), which have not been so registered.
The terms of the New Notes are identical in all material respects to the Old
Notes, except for the absence of certain transfer restrictions relating to the
Old Notes. The New Notes will evidence the same indebtedness as the Old Notes,
and will be issued pursuant to, and entitled to the benefits of, the same
Indenture (as defined) that governs the Old Notes.
[LOGO OF STANDARD PACIFIC CORP.]
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on May 27, 1998
unless extended (the "Expiration Date"). The Exchange Offer is not conditioned
upon any principal amount of the Old Notes being tendered for exchange pursuant
to the Exchange Offer. The Exchange Offer is subject to certain other customary
conditions. See "The Exchange Offer--Certain Conditions to the Exchange Offer."
The Company will not receive any proceeds from the Exchange Offer.
The New Notes will mature on February 15, 2008. Interest on the New Notes
will be payable semi-annually on February 15 and August 15 of each year,
commencing August 15, 1998. The New Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after February 15, 2003 at the
redemption prices set forth herein plus accrued and unpaid interest, if any, to
the date of redemption. The New Notes will be, and the Old Notes currently are,
senior unsecured obligations ranking pari passu with the Company's other
existing and future senior unsecured indebtedness.
In the event of a Change of Control (as defined), the Company is required to
offer to repurchase all of the New Notes at a price equal to 101 percent of the
aggregate principal amount thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. In addition, the Company will, under certain
circumstances, be obligated to make an offer to purchase a portion of the New
Notes, and pay accrued and unpaid interest, if any, to the date of purchase, in
the event of the Company's failure to maintain a minimum Consolidated Net Worth
(as defined) or in the event of certain asset sales. See "Description of the
New Notes--Certain Covenants."
(Continued on the following page)
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SEE "RISK FACTORS" WHICH BEGINS ON PAGE 14 OF THIS PROSPECTUS FOR A
DESCRIPTION OF CERTAIN RISKS THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN
CONNECTION WITH THIS EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is April , 1998.
<PAGE>
As of December 31, 1997, the aggregate amount of senior indebtedness of the
Company, after giving effect to the application of net proceeds from the sale
of the Old Notes, would have been approximately $178.1 million (excluding
indebtedness relating to discontinued operations, secured indebtedness, trade
payables and the sale of the Old Notes). The New Notes are effectively
subordinated to all existing and future indebtedness, including trade
payables, of the Company's subsidiaries, which indebtedness totaled
approximately $15.6 million at December 31, 1997 (excluding indebtedness
relating to discontinued operations). Although the Indenture contains
limitations on the incurrence of Indebtedness (as defined), the Company and
its subsidiaries could incur significant additional Indebtedness, including
pari passu senior indebtedness. See "Capitalization" and "Description of the
New Notes--Certain Covenants."
The holder of each Old Note accepted for exchange will receive a New Note
having a principal amount equal to that of the surrendered Old Note. The New
Notes will bear interest from the most recent date to which interest has been
paid on the Old Notes or, if no interest has been paid on the Old Notes, from
February 15, 1998. Old Notes accepted for exchange will not receive any
payment in respect of accrued interest on such Old Notes.
The Old Notes were issued and sold on February 10, 1998 in a transaction
exempt from the registration requirements of the Securities Act and may not be
reoffered or resold in the United States unless so registered or pursuant to
an applicable exemption under the Securities Act. The New Notes are being
offered hereunder in order to satisfy certain obligations of the Company
contained in the Registration Rights Agreement (as defined).
Based on certain interpretive letters issued by the staff of the Securities
and Exchange Commission (the "Commission") to third parties, the Company
believes that a holder of Old Notes (other than (i) a broker-dealer who
purchased such Old Notes directly from the Company to resell pursuant to Rule
144A or any other available exemption under the Securities Act or (ii) a
person who is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act) who exchanges Old Notes for New Notes in the ordinary
course of business and who is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes, will be allowed to resell
the New Notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the New Notes a prospectus
that satisfies the requirements of the Securities Act. See "The Exchange
Offer--Purpose of the Exchange Offer" and "--Resales of the New Notes."
However, a broker-dealer who holds Old Notes that were acquired for its own
account as a result of market-making or other trading activities may be deemed
to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of the New Notes. For a period of 180 days from
the Expiration Date, the Company will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." If any other holder is deemed to be
an "underwriter" within the meaning of the Securities Act or acquires New
Notes in the Exchange Offer for the purpose of distributing or participating
in a distribution of the New Notes, such holder must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, unless an exemption from
registration is otherwise available.
The Company will pay all the expenses incident to the Exchange Offer. In the
event the Company terminates the Exchange Offer and does not accept for
exchange any Old Notes, the Company will promptly return the Old Notes to the
holders thereof. See "The Exchange Offer."
There has been no public market for the Old Notes and no active public
market for the New Notes is currently anticipated. The Company currently does
not intend to apply for the listing of the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. The Initial Purchasers (as defined) have advised the Company that each
of the Initial Purchasers currently intends to make a market in the New Notes;
however, none of the Initial Purchasers is obligated to do so and any market
making may be discontinued by the Initial Purchasers at any time without
notice. Accordingly, no assurance can be given as to the liquidity or the
trading market for the New Notes.
2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the New
Notes offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the New Notes offered hereby, reference is made to
the Registration Statement. Statements made in this Prospectus concerning the
provisions of certain documents are not necessarily complete. With respect to
each such document, reference is made to the copy of such document filed as an
exhibit to the Registration Statement for a more complete description thereof,
and each such statement shall be deemed qualified in its entirety by such
reference.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. The
Registration Statement and such reports and other information can be inspected
and copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional offices of the Commission: New York Regional office, Seven
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
office, Citicorp Center, 500 West Madison Street, 14th Floor, Chicago,
Illinois 60601. Copies of such material can be obtained from the Public
Reference Section of the Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains an
Internet Web Site at www.sec.gov that contains reports and other information.
In addition, the reports, proxy statements and other information filed by the
Company may be inspected at the offices of the New York Stock Exchange (the
"NYSE") upon which the Common Stock of the Company is traded.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission pursuant to the
Exchange Act and are incorporated herein by reference and made a part of this
Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
date 180 days after the termination of the Exchange Offer contemplated hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated by reference or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for all purposes
of this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON WRITTEN OR
ORAL REQUEST, WITHOUT CHARGE, FROM CLAY A. HALVORSEN, SECRETARY, STANDARD
PACIFIC CORP., 1565 WEST MACARTHUR BOULEVARD, COSTA MESA, CALIFORNIA 92626,
(TELEPHONE NO. (714) 668-4300). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY THE DATE FIVE BUSINESS DAYS PRIOR TO
THE EXPIRATION DATE.
3
<PAGE>
SUMMARY
This summary is qualified in its entirety by the detailed information and
financial statements appearing elsewhere in this Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus.
THE COMPANY
Standard Pacific Corp. (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 30
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. For the year ended December 31, 1997, the
Company had revenues and EBITDA (as defined) of $584.6 million and $67.5
million, respectively.
The Company believes it is well-positioned to continue benefiting from the
recovery in the California housing market as a result of its strong land
position and local market knowledge. California is the third largest housing
market in the United States and is the largest, and one of the most
diversified, states in terms of economic activity. Employment growth
historically has been an indicator for the economy and housing demand. For the
years ended 1996 and 1997, California non-farm employment increased 2.8 percent
in each year, compared with 2.1 percent and 2.7 percent increases in the United
States during the same periods. Single-family building permits issued in
California in the fourth quarter of 1997 are estimated to have totaled
approximately 22,000, a 33 percent increase from the approximately 16,500
permits issued in the same period in 1996.
The improving California economy has resulted in increased demand for the
Company's homes. During 1997, the Company's deliveries of homes increased 20
percent to 1,946 units and its revenues increased 46 percent to $584.6 million.
In addition, at December 31, 1997, the Company's backlog was 566 units, or
$191.7 million, compared to 485 units, or $168.7 million, at December 31, 1996.
The Company believes that its long history of building high quality homes in
California and Texas and its conservative operating strategy have enabled the
Company to successfully weather cyclical downturns and position the Company to
continue to capitalize on the improving California market. The main elements of
the Company's strategy include:
Focus on Broad Move-Up Market. The Company concentrates on the construction
of single-family homes for use as primary residences by move-up buyers. The
Company believes that the market for primary residences is more resistant to
economic downturns than the market for second or vacation homes. The average
selling price of the Company's homes over the year ended December 31, 1997 was
approximately $307,000. Currently, the Company expects to concentrate its
efforts on acquiring land that is suitable for the construction and sale of
homes generally in the price range of $150,000 to $400,000, which represents a
broad market segment in the Company's market areas. The Company also constructs
and sells homes in the $400,000 to $800,000 price range in certain of its
California markets.
Reputation for High Quality, Single-Family Homes. The Company believes that
it has an established reputation for providing high quality homes. The Company
prides itself on its ability to design unique and attractive homes and provide
its customers with a wide selection of options. The Company believes that its
long history of providing high quality homes has resulted in many repeat buyers
and word-of-mouth sales. The Company also uses extensive marketing to sell its
homes, and its homes are generally sold by its own staff of sales personnel
through the use of model homes which are usually maintained at each project
site. The Company also makes extensive use of advertisements in local
newspapers, illustrated brochures, billboards and on-site displays.
4
<PAGE>
Conservative Operating Strategy. The Company customarily acquires unimproved
land zoned for residential use which appears suitable for the construction of
50 to 300 homes in increments of 10 to 30 homes. The Company generally
purchases land only when it projects commencement of construction within a
relatively short time period. The number of homes built in the first increment
of a project is based upon internal market studies. The timing and size of
subsequent increments depend to a large extent upon sales rates experienced in
the earlier increments. By developing projects in increments, the Company has
been able to respond to local market conditions and control the number of its
completed and unsold homes. Additionally, an increasing percentage of the
Company's lots are controlled through joint ventures. The Company uses joint
ventures for certain land development projects that have long lead times or are
of significant size requiring substantial capital investments.
Strong Land Position. The Company has been operating in California for over
30 years and has established an excellent reputation with land owners. The
Company believes that its long standing relationships with land owners and
developers in California give the Company a competitive edge in securing
quality land positions at competitive prices. In order to ensure an adequate
supply of land for future homebuilding activities, the Company generally
attempts to maintain an inventory of building sites sufficient for construction
of homes over a period of approximately three to five years. The Company
believes that its 9,016 owned or controlled building sites at December 31,
1997, in addition to any land sites for which the Company may enter into
negotiations, will be sufficient for its operations over this period.
Geographic Diversification. The Company has focused its California
homebuilding activities in Orange, Riverside, San Bernardino, San Diego and
Ventura Counties in southern California, and in the San Francisco Bay area of
northern California. Additionally, the Company has projects in the Houston,
Dallas and Austin markets in Texas. The Company's policy of diversifying among
different geographic areas has enabled it to reduce the impact of adverse local
economic conditions. Additionally, the Company believes that it has significant
opportunities to expand in its existing markets and to enter new geographic
markets.
Control of Overhead and Operating Expenses. Throughout its history, the
Company has sought to minimize overhead expenses in order to be more flexible
in responding to the cyclical nature of its business. The Company strives to
control its overhead costs by centralizing certain of its administrative
functions and by limiting the number of middle level management positions.
Experienced Management and Decentralized Operations. The Company's senior
corporate and division operating managers average over 20 years of experience
in the homebuilding business. Each division is run by a local manager. One of
the essential criteria in the selection of a divisional manager is the
individual's in-depth familiarity with the geographic areas within which the
division operates. The decisions regarding selection of parcels of land for
purchase and development are made in conjunction with the officers of the
Company, and thereafter, each manager conducts the operations of the division
relatively autonomously as a separate profit center.
----------------
The Company's principal executive offices are located at 1565 West MacArthur
Boulevard, Costa Mesa, California 92626, and its telephone number is (714) 668-
4300.
5
<PAGE>
RECENT DEVELOPMENTS
Disposition of Panel Concepts. In December 1997, the Company completed the
sale of Panel Concepts, Inc. ("Panel Concepts"), the Company's former office
furniture systems subsidiary, to HON Industries, Inc., a national furniture
manufacturer, for a cash sales price of approximately $9.5 million, after
distribution of certain non-operating assets to the Company totaling
approximately $9 million. Panel Concepts has been accounted for as a
discontinued operation and the results of its operations have been segregated
in the Company's consolidated financial statements included elsewhere in this
Prospectus. The disposition of Panel Concepts represents an important step in
the Company's long-term strategy of focusing on its core homebuilding business.
Disposition of Standard Pacific Savings. In May 1997, the Company's Board of
Directors adopted a plan of disposition for the Company's savings and loan
subsidiary, Standard Pacific Savings, F.A. ("Savings"). Pursuant to the plan,
the Company sold substantially all of Savings' mortgage loan portfolio in June
1997. The Company also entered into a definitive agreement to sell the
remainder of Savings' business, including Savings' charter. The definitive
agreement was subject to a number of conditions, including approval of the
transaction by the Office of Thrift Supervision ("OTS"). As a result of the
failure of the OTS to approve the transaction prior to the definitive
agreement's termination date, the definitive agreement terminated on January
31, 1998. The Company plans to continue pursuing a disposition strategy with
respect to Savings and, therefore, Savings has been accounted for as a
discontinued operation and the results of its operations have been segregated
in the Company's consolidated financial statements included elsewhere in this
Prospectus. Savings has not offered mortgage financing to the Company's home
buyers since July 1994, and the sale of Savings is not expected to have any
impact on sales of the Company's homes. Management currently estimates that
both the disposition of Savings under the plan and the operating results of
Savings for the period through the disposition will not result in a significant
gain or loss to the Company.
Acquisition of Duc Development Company. On September 30, 1997, the Company
acquired Duc Development Company ("Duc"), a privately held northern California
homebuilder, for cash consideration of approximately $16 million which includes
$5 million of contingent consideration which is to be paid upon the Company
obtaining entitlement improvements on a certain parcel of land. In addition,
the Company acquired certain other real estate assets related to Duc's
operations for approximately $55 million in cash, funded from the Company's
Revolving Credit Facility (as defined), and the assumption of $8 million of
debt. The Duc acquisition added over 1,400 single family lots and 12 new
projects to the Company's operations, increasing the Company's lot position to
over 3,000 home sites strategically located in the San Francisco Bay area real
estate market. The acquisition also created an additional bay area division
office and expanded the Company's operations into two new counties, San Benito
and Monterey. Deliveries from the acquisition are expected to have a positive
impact on deliveries by the northern California division beginning in the
latter half of 1998.
Proposed Acquisition of The Olson Company. The Company is engaged in
discussions to acquire The Olson Company, a leading southern California urban
in-fill homebuilder. The proposed acquisition offers the Company the
opportunity to develop a leading presence in a complementary and growing
homebuilding market segment. If completed, it is expected that the acquisition
would be accounted for as a pooling of interests. This transaction is subject
to customary conditions, including execution of a definitive acquisition
agreement and satisfactory completion of the Company's due diligence
examination. No assurances can be given that the transaction will be
consummated.
Family Lending Services, Inc. The Company recently formed Family Lending
Services, Inc. ("Family Lending Services"), which will operate as a mortgage
banking subsidiary of the Company, offering mortgage financing to the Company's
home buyers and others. Family Lending Services is in the process of obtaining
required regulatory approvals and mortgage warehouse financing and is currently
expected to begin offering mortgage financing to home buyers in the second
quarter of 1998.
6
<PAGE>
THE OLD NOTES OFFERING
Old Notes..................... The Old Notes were sold by the Company (the
"Old Notes Offering") on February 10, 1998 (the
"Original Issue Date") to SBC Warburg Dillon
Read Inc., BancAmerica Robertson Stephens and
Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchasers") pursuant
to a Purchase Agreement dated February 5, 1998
(the "Purchase Agreement"). The Initial
Purchasers subsequently reoffered the Old Notes
to qualified institutional buyers in reliance
on Rule 144A under the Securities Act and
outside the United States to foreign purchasers
in reliance on Regulation S under the
Securities Act.
Registration Rights Agree-
ment.......................... Pursuant to the Purchase Agreement, the Company
and the Initial Purchasers entered into a
Registration Rights Agreement dated as of
February 10, 1998 (the "Registration Rights
Agreement"), which grants the holders of the
Old Notes certain exchange and registration
rights. The Exchange Offer is intended to
satisfy such exchange rights, which terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Notes Offered................. Up to $100 million aggregate principal amount
of 8% Series A Senior Notes due 2008 (the "New
Notes").
The Exchange Offer............ The New Notes are being offered in exchange for
a like principal amount of the Company's Old
Notes. Old Notes may be exchanged only in
integral multiples of $1,000. The issuance of
the New Notes is intended to satisfy the
obligations of the Company under the terms of
the Registration Rights Agreement.
Expiration Date............... 5:00 p.m., New York City time, on May 27, 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended.
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Accrued Interest on the New
Notes and the Old Notes....... The New Notes will bear interest from the most
recent date to which interest has been paid on
the Old Notes or, if no interest has been paid
on the Old Notes, from February 10, 1998. Old
Notes accepted for exchange will not receive
any payment in respect of accrued interest on
such Old Notes. Old Notes not tendered or not
accepted for exchange will continue to accrue
interest after the date of consummation of the
Exchange Offer.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
conditions, which may be waived by the Company.
See "The Exchange Offer--Certain Conditions to
the Exchange Offer."
7
<PAGE>
Procedures for Tendering Old
Notes......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
the Old Notes and any other required
documentation to the Exchange Agent (as
defined) at the address set forth herein. By
executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, the New Notes acquired
pursuant to the Exchange Offer are being
obtained in the ordinary course of business of
the person receiving such New Notes, whether or
not such person is the holder, that neither the
holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such New
Notes and that neither the holder nor any such
other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the
Company. See "The Exchange Offer--Purpose of
the Exchange Offer" and "--Procedures for
Tendering Old Notes."
Special Procedures for Bene-
ficial Owners................. Any beneficial owner whose Old Notes are
beneficially registered in the name of a
broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender
should contact such registered holder promptly
and instruct such registered holder to tender
on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering its Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time.
Guaranteed Delivery Proce-
dures......................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply
with the procedures for book-entry transfer)
prior to the Expiration Date must tender their
Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
Untendered Old Notes; Conse-
quences of Failure to Ex-
change ....................... Following the consummation of the Exchange
Offer, holders of Old Notes who do not tender
their Old Notes will not have any further
exchange rights and such Old Notes will
continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the
market for such Old Notes could be adversely
affected.
The Old Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Company, (ii) pursuant
to
8
<PAGE>
Rule 144A or Rule 144 under the Securities Act
or pursuant to another exemption under the
Securities Act, (iii) outside the United States
to a foreign person pursuant to the
requirements of Rule 904 under the Securities
Act or (iv) pursuant to an effective
registration statement under the Securities
Act. See "The Exchange Offer--Consequences of
Failure to Exchange."
Acceptance of Old Notes and
Delivery of New Notes....... The Company will accept for exchange any and
all Old Notes which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer
will be delivered promptly after the Expiration
Date. See "The Exchange Offer--Terms of the
Exchange Offer; Period for Tendering Old
Notes."
Certain Federal Income Tax
Considerations.............. The Exchange of Old Notes for New Notes
pursuant to the Exchange Offer should not be a
taxable event for federal income tax purposes.
See "Certain United States Federal Income Tax
Considerations."
Federal and State
Regulatory Requirements..... Other than compliance with state securities or
"blue sky" laws, there are no federal or state
regulatory requirements that must be met prior
to consummation of the Exchange Offer.
Rights of Dissenting
Holders..................... Holders of Old Notes do not have any appraisal
or dissenting rights under the Delaware General
Corporation Law in connection with the Exchange
Offer. See "The Exchange Offer."
Use of Proceeds............. There will be no cash proceeds to the Company
from exchanges made pursuant to the Exchange
Offer.
Exchange Agent.............. United States Trust Company of New York (the
"Exchange Agent").
CONSEQUENCES OF EXCHANGING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, holders of the Old Notes (other
than (i) a broker-dealer who purchased such Old Notes directly from the Company
to resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) any holder who is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) who exchange their Old Notes
for New Notes pursuant to the Exchange Offer generally may offer such New Notes
for resale, resell such New Notes and otherwise transfer such New Notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided such New Notes are acquired in the ordinary course of
the holder's business and such holder has no arrangement with any person to
participate in a distribution of such New Notes. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes that were
acquired for its own account as a result of market-making or other trading
activities must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." In addition, to
comply with the securities laws of certain jurisdictions, if applicable, the
New Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdiction or an exemption from registration or
qualification is available and the conditions thereto have been met. The
Company has agreed, pursuant to the Registration Rights Agreement and subject
to certain specified limitations therein, to
9
<PAGE>
register or qualify the New Notes for offer or sale under the securities or
blue sky laws of such jurisdictions as any holder of the Old Notes reasonably
requests in writing. If a holder of Old Notes does not exchange such Old Notes
for New Notes pursuant to the Exchange Offer, such Old Notes will continue to
be subject to the restrictions on transfer contained in the legend thereon. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. See "The
Exchange Offer--Purpose of the Exchange Offer" and "--Resales of the New
Notes."
TERMS OF THE NEW NOTES
General....................... The form and terms of the New Notes are the
same as the form and terms of the Old Notes
except that (i) the New Notes will have been
registered under the Securities Act and,
therefore, will not bear legends restricting
their transfer and (ii) the holders of New
Notes will not be entitled to certain rights of
holders of Old Notes under the Registration
Rights Agreement, including the provisions
providing for the payment of liquidated damages
to holders of the Old Notes in certain
circumstances relating to the timing of the
Exchange Offer, which rights will terminate
when the Exchange Offer is consummated. See
"The Exchange Offer--Purpose of the Exchange
Offer." The New Notes will evidence the same
debt as the Old Notes (which they replace) and
will be entitled to the benefits of the
Indenture. See "Description of the New Notes."
Interest Payment Dates........ February 15 and August 15 of each year,
commencing on August 15, 1998.
Maturity Date................. February 15, 2008.
Optional Redemption........... The New Notes are redeemable at the option of
the Company, in whole or in part, at any time
on or after February 15, 2003 at the redemption
prices set forth herein plus accrued and unpaid
interest, if any, to the date of redemption.
See "Description of the New Notes--Optional
Redemption."
Offer to Purchase............. In the event of a Change of Control, the
Company is required to offer to repurchase all
of the New Notes at a price equal to
101 percent of the aggregate principal amount
thereof, plus accrued and unpaid interest, if
any, to the date of repurchase. See
"Description of the New Notes--Change of
Control." In addition, the Company will, under
certain circumstances, be obligated to make an
offer to purchase a portion of the New Notes in
the event of the Company's failure to maintain
a minimum Consolidated Net Worth or in the
event of certain asset sales. See "Description
of the New Notes--Certain Covenants--
Maintenance of Consolidated Net Worth" and "--
Limitation on Asset Sales."
Ranking....................... The New Notes are senior unsecured obligations
of the Company and will rank pari passu with
the Company's other existing and future senior
unsecured indebtedness. As of December 31,
1997, the aggregate amount of senior
indebtedness of the Company,
10
<PAGE>
after giving effect to the application of the
net proceeds from the Old Notes Offering, would
have been approximately $178.1 million
(excluding indebtedness relating to
discontinued operations, secured indebtedness,
trade payables and the Old Notes Offering). The
New Notes are effectively subordinated to all
existing and future indebtedness, including
trade payables, of the Company's subsidiaries,
which indebtedness totaled approximately $15.6
million at December 31, 1997 (excluding
indebtedness relating to discontinued
operations). See "Capitalization" and
"Description of the New Notes--Certain
Covenants."
Certain Covenants............. The Indenture pursuant to which the New Notes
will be issued imposes certain limitations on
the ability of the Company and its Restricted
Subsidiaries (as defined) to, among other
things, (i) incur additional indebtedness, (ii)
create liens, (iii) make Restricted Payments
(as defined), (iv) sell assets, (v) engage in
transactions with Affiliates (as defined) and
(vi) permit certain restrictions on
distributions from Restricted Subsidiaries. See
"Description of the New Notes--Certain
Covenants."
Absence of a Public Market
for the New Notes ............ There has been no public market for the Old
Notes and no active public market for the New
Notes is currently anticipated. The Company
currently does not intend to apply for the
listing of the New Notes on any securities
exchange or to seek approval for quotation
through any automated quotation system. The
Initial Purchasers have advised the Company
that each of the Initial Purchasers currently
intends to make a market in the New Notes;
however, none of the Initial Purchasers is
obligated to do so and any market making may be
discontinued by the Initial Purchasers at any
time without notice. Accordingly, no assurance
can be given as to the liquidity or the trading
market for the New Notes.
Risk Factors.................. See "Risk Factors" for a discussion of certain
factors that should be considered by holders of
the Old Notes.
11
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA
The Summary Financial and Other Data set forth below have been derived from
the Company's consolidated financial statements and notes thereto included
elsewhere in this Prospectus. The financial data for the years ended December
31, 1997, 1996, and 1995 were derived from the audited consolidated financial
statements of the Company. The Summary Financial and Other Data are qualified
in their entirety by, and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS,
EXCEPT AVERAGE SELLING
PRICES)
<S> <C> <C> <C>
INCOME STATEMENT DATA
Revenues....................................... $584,571 $399,863 $346,263
Cost of sales(1)............................... 490,876 348,066 307,794
Non-cash charge for impairment of long-lived
assets(2)..................................... -- -- 46,491
-------- -------- --------
Gross margin.................................. 93,695 51,797 (8,022)
-------- -------- --------
Selling, general and administrative ex-
penses(1)..................................... 52,141 37,351 34,873
Income from unconsolidated joint ventures...... 3,787 4,708 6,953
Interest expense............................... 4,981 7,142 1,860
Amortization of excess of cost over net assets
acquired...................................... 245 -- --
Other income................................... 931 936 555
-------- -------- --------
Income (loss) from continuing operations
before income taxes.......................... 41,046 12,948 (37,247)
(Provision) benefit for income taxes.......... (17,070) (5,197) 14,890
-------- -------- --------
Income (loss) from continuing operations(3).... 23,976 7,751 (22,357)
Income (loss) from discontinued operations, net
of income taxes(3)............................ 48 642 (5,006)
Gain on disposal of discontinued operation, net
of income taxes(3)............................ 3,302 -- --
-------- -------- --------
Net income (loss).............................. $ 27,326 $ 8,393 $(27,363)
======== ======== ========
SELECTED OPERATING DATA
New homes delivered:
California..................................... 1,477 1,131 942
Texas.......................................... 402 338 299
Joint ventures (California).................... 67 154 195
-------- -------- --------
Total.......................................... 1,946 1,623 1,436
======== ======== ========
Net new orders:
California..................................... 1,599 1,458 1,145
Texas.......................................... 428 340 335
-------- -------- --------
Total.......................................... 2,027 1,798 1,480
======== ======== ========
Backlog at year end (in units).................. 566 485 312
Backlog at year end (in dollars)................ $191,682 $168,674 $ 77,945
Active selling communities at year end.......... 51 53 49
Average selling price:
California deliveries (excluding joint ven-
tures)........................................ $337,649 $292,007 $308,383
Texas deliveries............................... $195,631 $185,622 $180,058
Combined (excluding joint ventures)............ $307,265 $267,529 $277,465
Combined (including joint ventures)............ $309,239 $261,681 $271,936
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
OTHER DATA ------- ------- -------
<S> <C> <C> <C>
Gross margin percentage(4).......................... 16.0% 13.0% 11.1%
EBITDA(5)........................................... $67,498 $40,807 $38,020
EBITDA margin percentage............................ 11.5% 10.2% 11.0%
Interest incurred(6)................................ $17,026 $16,687 $19,200
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------
1997 1996 1995
BALANCE SHEET DATA -------- -------- --------
<S> <C> <C> <C>
Real estate inventories............................ $451,848 $372,645 $367,676
Total assets(3).................................... 547,665 449,114 444,603
Total debt(3)...................................... 214,305 161,767 163,354
Stockholders' equity............................... 283,778 260,389 257,926
</TABLE>
- --------
(1) Effective January 1, 1997, the Company changed its presentation of selling
costs in its consolidated statements of operations whereby selling costs
are now combined with general and administrative expenses. This
presentation is consistent with industry practice. Previously, the Company
included these costs as a component of cost of sales. The Company
reclassified the prior period amounts to conform with the 1997
presentation.
(2) Reflects the adoption by the Company, effective December 31, 1995, of the
provisions of Financial Accounting Standards No. 121 ("FAS 121"). Prior to
December 31, 1995, each real estate project was carried at the lower of its
costs or its estimated net realizable value. FAS 121 changed the method of
valuing long-lived assets, including real estate inventories, whereby long-
lived assets that are expected to be held and used in operations are to be
carried at the lower of cost, or, if impaired, the fair value of the asset,
rather than net realizable value.
(3) In May 1997, the Company's Board of Directors adopted a plan for the
disposition of the Company's savings and loan subsidiary. In December 1997,
the Company completed the sale of Panel Concepts. Accordingly, the Company
has accounted for the savings and loan subsidiary and office furniture
systems subsidiary as discontinued operations. See Note 12 to the Company's
consolidated financial statements included elsewhere in this Prospectus and
"--Recent Developments" above.
(4) The 1995 gross margin percentage excludes the $46.5 million non-cash charge
for the adoption of FAS 121.
(5) EBITDA means earnings (loss) before taxes and discontinued operations and
before (i) interest expensed, (ii) amortization of capitalized interest
included in cost of sales, (iii) income from unconsolidated joint ventures,
(iv) depreciation and amortization and (v) impairment charges of $46.5
million for 1995 related to real estate inventories, and includes income
distributions from unconsolidated joint ventures. EBITDA is a widely
accepted financial indicator of a company's availability to service debt.
However, EBITDA should not be considered as an alternative to operating
income or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of the Company's operating performance or as a
measure of liquidity.
(6) Interest incurred represents interest expensed and interest capitalized for
the applicable periods and excludes interest attributable to discontinued
operations.
13
<PAGE>
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
This Prospectus contains "forward looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which represent the Company's
expectations or beliefs concerning future events, including, but not limited
to, the following: statements regarding the price range of future homes
constructed by the Company; statements regarding the inventory turn ratio and
carrying costs on newer projects; statements regarding the future home
deliveries and income from the Company's unconsolidated joint ventures;
statements regarding the impact of the Duc acquisition or the proposed
acquisition of The Olson Company; statements regarding a favorable mortgage
interest rate environment and an improving California economic climate;
statements regarding recovery in the San Diego housing market; statements
regarding the backlog of homes; statements regarding the adequacy of the
Company's inventory of building sites; statements regarding the availability
of building sites for purchase from joint ventures; statements regarding the
time typically required to complete the construction phase of an increment of
a project; statements regarding the sufficiency of the Company's cash provided
by internally generated funds and outside borrowings; statements regarding
future net new orders; statements regarding new model home complexes to be
opened by the Company during 1998; statements regarding the gain or loss to be
recognized by the Company from the planned disposition of Savings and the
operating results of Savings for the period through disposition; statements
regarding the future operations of Family Lending Services; statements
regarding expected Year 2000 compliance and the anticipated impact of the Year
2000 issue on the Company's business operations and financial performance;
statements regarding the intended use of proceeds of the Company's offering of
its 8% Senior Notes; and statements regarding the expected impact of the
adoption of accounting statements on the Company's consolidated financial
statements. The Company cautions that these statements are further qualified
by important factors that could cause actual results to differ materially from
those in the forward looking statements, including, without limitation, the
following: change in the demand for new homes attributable to the cyclical and
competitive nature of the homebuilding business; changes in general economic
conditions; uncertainty in or changes in the continued availability of
suitable undeveloped land at reasonable prices; adverse local market
conditions; existing and changing governmental regulations, including
regulations concerning environmental matters, the permitting process for home
construction, savings and loan institutions and mortgage banking; increases in
prevailing interest rates; the level of real estate taxes and energy costs;
the cost and availability of materials and labor; the availability of
construction financing and home mortgage financing attractive to the
purchasers of homes; and inclement weather and other natural disasters.
Results actually achieved thus may differ materially from expected results
included in these and any other forward looking statements contained herein.
RISK FACTORS
Prospective investors should carefully consider the specific factors set
forth below as well as the other information included in this Prospectus
before tendering Old Notes in exchange for the New Notes offered hereby.
LAND ACQUISITION AND INVENTORY RISKS
The development, construction and sale of homes are subject to various risks
including, among other things, the continued availability of suitable
undeveloped land at reasonable prices and adverse local market conditions
resulting from changes in economic conditions or competitive over-building. In
the early 1990's and as a result of the national and California recessions
which began in 1990, the Company recorded aggregate writedowns of
approximately $8.8 million on several of the Company's California projects to
value the remaining homes in these projects at estimated net realizable values
in order to provide for reserves to cover potential price concessions. At
December 31, 1995, and as a result of continued adverse trends experienced in
some of the Company's markets, particularly in San Diego, coupled with the
adoption of FAS 121, the Company recorded a $46.5 million noncash pretax
charge against operations. FAS 121 required a change in the method of valuing
long-lived assets, including assets such as the Company's real estate
holdings. See Note 2 of the Notes to the Company's consolidated financial
statements included elsewhere in this Prospectus.
14
<PAGE>
Although the Company believes that it has acquired a sufficient number of
lots to provide for its home construction activities for the near term, no
assurances can be given that the Company will be able to sell the homes it
produces on a profitable basis.
ECONOMIC CONDITIONS AND INTEREST RATES
The Company's business is highly cyclical and is affected by national, world
and local economic conditions and events and the effect such conditions and
events have on the markets it serves in California and Texas and in particular
by the level of mortgage interest rates and consumer confidence in those
regions. The Company cannot predict whether interest rates will be at levels
attractive to prospective homebuyers. If interest rates increase, and in
particular mortgage interest rates, the Company's operating results could be
adversely impacted. The recent downturn and continued uncertainty in Asian
financial markets, including the devaluation of various Asian currencies,
could have an adverse impact on the California and Texas economies and the
demand for homes in those states.
DEPENDENCE ON CALIFORNIA MARKET
The Company presently conducts most of its business in California. There
have been periods of time in California where economic growth has slowed and
the average sales price of homes in certain areas in California in which the
Company does business have declined. There can be no assurance that home sales
prices will not decline in the future.
In past years, several cities and counties in California in which the
Company has delivered a significant number of homes have approved the
inclusion of "slow growth" initiatives and other election ballot measures
which could impact the affordability and availability of homes and land within
those localities. Although some of these initiatives have been defeated, the
Company believes that if, in the future, similar initiatives are introduced
and approved, future residential construction by the Company could be
negatively impacted.
LEVERAGE; POTENTIAL ADVERSE EFFECT OF INDEBTEDNESS ON FUTURE OPERATIONS
As of December 31, 1997, after giving effect to the Old Notes Offering and
the application of the proceeds therefrom, the outstanding consolidated
indebtedness of the Company would have been $283.4 million (excluding
discontinued operations) and the Company would have had stockholders' equity
of $283.8 million. In addition, subject to the restrictions in the Indenture,
the Company may incur additional indebtedness in the future, some of which may
be secured. The Old Notes and New Notes are effectively subordinated to all
existing and future indebtedness, including trade payables, of the Company's
subsidiaries, which indebtedness totaled approximately $15.6 million at
December 31, 1997, without regard to approximately $18.8 million of
indebtedness (exclusive of Savings' deposit liabilities) relating to
discontinued operations. The Company's ability to make required debt service
payments in the future will be dependent upon the Company's operating results,
which are subject to financial, economic and other factors affecting the
Company that are beyond its control. No assurance can be given that the
Company will be able to make required debt service payments. If the Company is
at any time unable to generate sufficient cash flow from operations to service
its debt, it may be required to seek refinancing for all or a portion of that
debt or to obtain additional financing. There can be no assurance that any
such refinancing would be possible or that any additional financing could be
obtained on terms that are favorable or acceptable to the Company.
The Company's unsecured revolving credit facility (the "Revolving Credit
Facility") and senior debt instruments contain financial covenants with which
the Company currently is in compliance. Significant losses could result in the
violation of one or more of these covenants which could result in the
unavailability of the liquidity provided by the Revolving Credit Facility.
CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all of the outstanding New Notes at 101 percent of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
15
<PAGE>
repurchase. There can be no assurance that the Company will have sufficient
funds available or will be permitted by its other debt agreements to
repurchase the New Notes upon the occurrence of a Change of Control. In
addition, a Change of Control may require the Company to offer to repurchase
other outstanding indebtedness and may cause a default under the Company's
Revolving Credit Facility. The inability to repurchase all of the tendered New
Notes would constitute an Event of Default (as defined) under the Indenture.
The Change in Control purchase feature of the New Notes may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. See "Description of the New Notes--
Change of Control."
COMPETITION
The homebuilding industry is highly competitive, with homebuilders competing
for customers, desirable properties, financing, raw materials and skilled
labor. In each of the areas in which it operates, the Company competes in
terms of location, design, quality, price and available mortgage financing
with numerous other residential construction firms, including large national
and regional firms, some of which have greater financial resources than the
Company. In addition, the Company competes with resales of existing
residential housing by individuals, financial institutions and others. The
Company also competes with rental properties in certain markets.
REGULATORY AND ENVIRONMENTAL MATTERS
The housing industry is subject to environmental, building, worker health
and safety, zoning and real estate regulations by various Federal, state and
local authorities. The environmental laws that apply to a given homebuilding
site depend upon the site's location, its environmental condition and the
present and former uses of the site, as well as adjoining properties.
Environmental laws and conditions may result in delays, may cause the Company
to incur substantial compliance and other costs, and can prohibit or severely
restrict homebuilding activity in certain environmentally sensitive regions or
areas. In addition, certain new developments, particularly in southern
California, are subject to various assessments for schools, parks, streets and
highways and other public improvements, the costs of which can be substantial.
By raising the price of the Company's homes to its customers, an increase in
such assessments could have a negative impact on the Company's sales.
In developing a project, the Company must obtain the approval of numerous
governmental authorities regulating such matters as permitted land uses and
levels of density, the installation of utility services, such as water and
waste disposal, and the dedication of acreage for open space, parks, schools
and other community purposes. Furthermore, changes in prevailing local
circumstances or applicable law may require additional approvals or
modifications of approvals previously obtained, including environmental,
zoning and other entitlement issues and may cause delays in the development
process. Prior to acquiring a parcel of land, the Company may utilize deposit
arrangements which allow the Company ample time to perform proper diligence
and investigate and resolve necessary issues.
RISK OF MATERIAL AND LABOR SHORTAGES
The Company is not presently experiencing any serious material or labor
shortages; however, the residential construction industry in the past has,
from time to time, experienced serious material and labor shortages, including
shortages in insulation, drywall, certain carpentry work and cement and
fluctuating lumber prices and supply. Delays in construction of homes and
higher costs due to these shortages could have an adverse effect upon the
Company's operations.
NATURAL RISKS
Climatic conditions, such as unusually heavy or prolonged rain, including
"El Nino" conditions, or other natural disasters such as earthquakes or fires,
may affect operations in certain areas. In addition, the state of California
has periodically experienced drought conditions resulting in water
conservation measures and in some cases rationing by local municipalities in
which the Company does business. Restrictions by governmental agencies on
future construction activity as a result of limited water supplies could have
an adverse effect upon the Company's operations.
16
<PAGE>
LACK OF PUBLIC MARKET FOR NEW NOTES; LIMITED LIQUIDITY
There is currently no established market for the New Notes and there can be
no assurance as to the liquidity of markets that may develop for the New
Notes, the ability of holders of the New Notes to sell their New Notes or the
price at which such holders would be able to sell their New Notes. If such
markets were to exist, the New Notes could trade at prices that may be higher
or lower than the initial market values thereof depending on many factors,
including prevailing interest rates and the markets for similar securities.
The Old Notes are eligible for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market. The Company does not
intend to apply for listing of the New Notes on any securities exchange or for
quotation through any automated quotation system. The Initial Purchasers have
advised the Company that they currently intend to make a market in the Old
Notes, and, if issued, the New Notes. However, none of the Initial Purchasers
is obligated to do so, and any market-making with respect to the Old Notes or
the New Notes may be discontinued at any time without notice. In addition,
such market-making activity may be limited during the pendency of the Exchange
Offer. The Exchange Offer will not be conditioned upon any minimum or maximum
aggregate principal amount of Old Notes being tendered for exchange. No
assurance can be given as to the liquidity of the trading market for the New
Notes, or, in the case of non-tendering holders of Old Notes, the trading
market for the Old Notes following the Exchange Offer. See "Plan of
Distribution."
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is designed to provide holders of Old Notes with an
opportunity to acquire New Notes which, unlike the Old Notes, will be freely
tradable at all times, subject to any restrictions on transfer imposed by
state "blue sky" laws and provided that the holder is not an affiliate of the
Company within the meaning of the Securities Act and represents that the New
Notes are being acquired in the ordinary course of such holder's business and
the holder is not engaged in, and does not intend to engage in a distribution
of the New Notes. The outstanding Old Notes in the aggregate principal amount
of $100 million were originally issued and sold on February 10, 1998 (the
"Original Issue Date"). The original sale to the Initial Purchasers was not
registered under the Securities Act in reliance upon the exemption provided by
Section 4(2) of the Securities Act and the concurrent resale of the Old Notes
to investors was not registered under the Securities Act in reliance upon the
exemption provided by Rule 144A promulgated under the Securities Act and
outside the United States to foreign purchasers in reliance on Regulation S
under the Securities Act. The Old Notes may not be reoffered, resold or
transferred other than pursuant to a registration statement filed pursuant to
the Securities Act or unless an exemption from the registration requirements
of the Securities Act is available. Pursuant to Rule 144, Old Notes may
generally be resold (a) commencing one year after the Original Issue Date, in
an amount up to, for any three-month period, the greater of 1% of the Old
Notes then outstanding or the average weekly trading volume of the Old Notes
during the four calendar weeks immediately preceding the filing of the
required notice of sale with the Commission and (b) commencing two years after
the Original Issue Date, in any amount and otherwise without restriction by a
holder who is not, and has not been for the preceding 90 days, an affiliate of
the Company. The Old Notes are eligible for trading in the PORTAL market, and
may be resold to certain qualified institutional buyers pursuant to Rule 144A.
Certain other exemptions may also be available under other provisions of the
federal securities laws for the resale of the Old Notes.
The staff of the Commission has issued certain interpretive letters that
concluded, in circumstances similar to those contemplated by the Exchange
Offer, that new debt securities issued in a registered exchange for
outstanding debt securities, which new securities are intended to be
substantially identical to the securities for which they are exchanged, may be
offered for resale, resold and otherwise transferred by a holder thereof
(other than (i) a broker-dealer who purchases such securities from the issuer
to resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person who is an affiliate of the issuer within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provision of the Securities Act, provided
that the new securities are acquired in the ordinary course of such holder's
business and such holder has no arrangement with any person to participate in
the distribution of the
17
<PAGE>
new securities. However, a broker-dealer who holds outstanding debt securities
that were acquired for its own account as a result of market-making or other
trading activities may be deemed to be an "underwriter" within the meaning of
the Securities Act, and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the new
securities received by the broker-dealer in any such exchange. See "--Resales
of the New Notes." The Company has not requested or obtained an interpretive
letter from the Commission staff with respect to this Exchange Offer, and the
Company and the holders are not entitled to rely on interpretive advice
provided by the staff to other persons, which advice was based on the facts
and conditions represented in such letters. However, the Exchange Offer is
being conducted in a manner intended to be consistent with the facts and
conditions represented in such letters. If any holder has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such holder (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. In addition, each broker-dealer
that receives New Notes for its own account in exchange for the Old Notes,
where such Old Notes were acquired by such broker-dealers as a result market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." By delivering the Letter of Transmittal, a holder
tendering Old Notes for exchange will represent and warrant to the Company
that the holder is acquiring the New Notes in the ordinary course of its
business and that the holder is not engaged in, and does not intend to engage
in, a distribution of the New Notes. Any holder using the Exchange Offer to
participate in a distribution of the New Notes to be acquired in the Exchange
Offer must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction.
Holders who do not exchange their Old Notes pursuant to this Exchange Offer
will continue to hold Old Notes that are subject to restrictions on transfer.
It is expected that the New Notes will be freely transferable by the holders
thereof, subject to the limitations described in the immediately preceding
paragraph and in "--Resales of the New Notes." Sales of New Notes acquired in
the Exchange Offer by holders who are "affiliates" of the Company within the
meaning of the Securities Act will be subject to certain limitation on resale
under Rule 144 of the Securities Act. Such persons will only be entitled to
sell New Notes in compliance with the volume limitations set forth in Rule
144, and sales of New Notes by affiliates will be subject to certain Rule 144
requirements as to the manner of sale, notice and the availability of current
public information regarding the Company. The foregoing is a summary only of
Rule 144 as it may apply to affiliates of the Company. Any such persons must
consult their own legal counsel for advice as to any restrictions that might
apply to the resale of their New Notes.
The New Notes otherwise will be substantially identical in all material
respects (including interest rate, maturity, security and restrictive
covenants) to the Old Notes for which they may be exchanged pursuant to this
Exchange Offer.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will issue $1,000 principal amount of New Notes
for each $1,000 principal amount of its outstanding Old Notes that are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. Old Notes tendered in the Exchange Offer must be in
denominations of $1,000 or any integral multiple thereof. As used herein, the
term "Expiration Date" means 5:00 p.m., New York City time, on May 27, 1998;
provided, however, that if the Company, in its sole discretion, has extended
the period of time during which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer
is extended.
As of the date of this Prospectus, $100 million aggregate principal amount
of Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about April 27, 1998, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain customary
conditions as set forth below under "--Certain Conditions to the Exchange
Offer."
18
<PAGE>
The Notes will bear interest from and including the Original Issue Date.
Accordingly, holders who receive New Notes in exchange for Old Notes will
forego accrued but unpaid interest on their exchanged Old Notes for the period
from and including the Original Issue Date to the date of exchange, but will
be entitled to such interest under the New Notes. Holders of Old Notes do not
have any appraisal or dissenters' rights under the Delaware General
Corporation Law in connection with the Exchange Offer.
The Company expressly reserves the right, at any time and from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby to delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders of the Old Notes as described
below. During any such extension, all Old Notes previously tendered will
remain subject to the Exchange Offer and may be accepted for exchange by the
Company. Any Old Notes not accepted for exchange for any reason will be
returned without expense to the tendering holders thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions to the Exchange
Offer specified below under "--Certain Conditions to the Exchange Offer." The
Company will give oral or written notice of any extension, amendment, non-
acceptance or termination to the holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued by means of
a press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
EXPIRATION DATE; EXTENSIONS; TERMINATION
The Exchange Offer will expire at 5:00 p.m., New York City time, on May 27,
1998 subject to extension by the Company by notice to the Exchange Agent as
herein provided. The Company reserves the right to extend the Exchange Offer
at its discretion, in which event the term "Expiration Date" shall mean the
time and date on which the Exchange Offer as so extended shall expire. The
Company shall notify the Exchange Agent and the holders of Old Notes of any
extension by oral or written notice prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
The Company reserves the right to extend or terminate the Exchange Offer and
not accept for exchange any Old Notes if any of the events set forth below
under "--Certain Conditions to the Exchange Offer" occur and are not waived by
the Company, by giving oral or written notice of such delay or termination to
the Exchange Agent. See "--Certain Conditions to the Exchange Offer." The
rights reserved by the Company in this paragraph are in addition to the
Company's rights set forth below under the caption "--Certain Conditions to
the Exchange Offer."
PROCEDURES FOR TENDERING OLD NOTES
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. The tender to the Company of Old Notes by a holder thereof as
set forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit either (i) a properly completed and duly executed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to the Exchange Agent at one of the addresses set forth below
under "Exchange Agent," or (ii) if such Old Notes are tendered pursuant to the
procedures for book-entry transfer set forth below, a holder tendering Old
Notes may transmit an Agent's Message (as defined) to the Exchange Agent in
lieu of the Letter of Transmittal, in either case on or prior to the
Expiration Date. In addition, either (i) certificates for such Old Notes must
be received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if such procedure is
19
<PAGE>
available, into the Exchange Agent's account at The Depository Trust Company
("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedure for
book-entry transfer described below, along with the Letter of Transmittal or
an Agent's Message, as the case may be, must be received by the Exchange Agent
prior to the Expiration Date, or (iii) the holder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message"
means a message, transmitted to the Book-Entry Transfer Facility and received
by the Exchange Agent and forming a part of the Book-Entry Confirmation, which
states that the Book-Entry Transfer Facility has received an express
acknowledgment from the tendering Participant (defined herein) that such
Participant has received and agrees to be bound by the Letter of Transmittal
and that the Company may enforce the Letter of Transmittal against such
Participant.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL OR AGENT'S
MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Any beneficial owner of Old Notes whose Old Notes are registered in the name
of a broker, dealer, commercial bank, trust company, or other nominee and who
wishes to tender such Old Notes in the Exchange Offer should contact the
registered holder promptly and instruct such registered holder to tender on
such beneficial owner's behalf. If such beneficial owner wishes to tender on
its own behalf, such owner must, prior to completing and executing the Letter
of Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of such Old Notes in such
beneficial owner's name or obtain a properly completely bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal Rights"), as the case may be, must be guaranteed (see
"--Guaranteed Delivery Procedures") unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of those Old
Notes who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or, a notice of withdrawal, as the case
may be, are required to be guaranteed, such guaranties must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Old Notes surrendered for exchange must be endorsed by or be
accompanied by a written instrument or instruments of transfer or exchange in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder exactly as the name or names of the
registered holder or holders appear on the Old Notes with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes not properly tendered or the acceptance of which might,
in the judgment of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Old Notes either before
or after the Expiration Date (including the right to waive the ineligibility
of any holder who seeks to tender Old Notes in the Exchange Offer). The
interpretation by the Company of the terms and conditions of the Exchange
Offer as to any particular Old Notes either before or after the Expiration
Date (including the Letter of Transmittal and the instructions thereto) shall
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such reasonable period of time as the Company shall determine.
None of the Company, the Exchange Agent or any
20
<PAGE>
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall
any of them incur any liability for failure to give such notification.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Company, submit with the Letter of Transmittal proper evidence
satisfactory to the Company of their authority to so act.
By tendering Old Notes for exchange, each holder will represent to the
Company that, among other things, the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to engage or participate in a distribution of
the New Notes. If any holder or any such other person is an "affiliate", as
defined under Rule 405 of the Securities Act, of the Company or is engaged in
or intends to engage in, or has an arrangement or understanding with any
person to participate in, a distribution of such New Notes to be acquired
pursuant to the Exchange Offer, such holder or any such other person (i) may
not rely on the applicable interpretation of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives New Notes for its own account in exchange for Old Notes,
where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal or a facsimile thereof,
with any required signature guarantees, or an Agent's Message in lieu of a
Letter of Transmittal, and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the addresses set forth
below under "--Exchange Agent" on or prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot
be-completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) on or prior to 5:00 p.m., New York
City time, on the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of the Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within three NYSE trading days after the date of execution of the Notice
of Guaranteed Delivery, a duly executed Letter of Transmittal, the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with
21
<PAGE>
the Exchange Agent, and (iii) the Letter of Transmittal, the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and any other documents required by
the Letter of Transmittal are deposited by the Eligible Institution with the
Exchange Agent within three NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, and subject to
its obligations pursuant to the Registration Rights Agreement, the Company
shall not be required to accept for exchange, or to issue New Notes in
exchange for, any Old Notes, and may terminate or amend the Exchange Offer,
if, at any time before the acceptance of such New Notes for exchange, a
material change occurs that is likely to affect the Exchange Offer, including
but not limited to the following:
(a) there shall be instituted or threatened any action or proceeding by
or before any court or governmental agency challenging the Exchange Offer
or otherwise directly or indirectly relating to the Offer or otherwise
materially impairing the ability of the Company to proceed with the
Exchange Offer;
(b) there shall occur any development in any pending action or proceeding
that, in the sole judgment of the Company, would or might (i) have an
adverse effect on the ability of the Company to proceed with the Exchange
Offer, (ii) prohibit, restrict or delay consummation of the Exchange Offer,
or (iii) impair the contemplated benefits of the Exchange Offer;
(c) any statute, rule or regulation shall have been proposed or enacted,
or any action shall have been taken by any governmental authority which, in
the sole judgment of the Company, would or might (i) have an adverse effect
on the ability of the Company to proceed with the Exchange Offer, (ii)
prohibit, restrict or delay consummation of the Exchange Offer, or (iii)
impair the contemplated benefits of the Exchange Offer; or
(d) there exists, in the sole judgment of the Company, any actual or
threatened legal impediment (including a default or prospective default
under an agreement indenture or other instrument or obligation to which the
Company is a party or by which it is bound) to the consummation of the
transactions contemplated by the Exchange Offer.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company in whole or in part at any time and from time to time
in its sole discretion. Moreover, regardless of whether any of such conditions
has occurred, the Company may amend the Exchange Offer in any manner which, in
its good faith judgment, is advantageous to the holders. The failure by the
Company at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order is threatened by the Commission or in effect
with respect to the Registration Statement of which this Prospectus is a part
or with respect to the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
The Exchange Offer is not conditioned on any minimum principal amount of Old
Notes being tendered for exchange.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of
the Old Notes. See "--Certain Conditions to the Exchange Offer" above. For
purposes of the Exchange Offer, the Company will be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
22
<PAGE>
For each Old Note accepted for exchange, the holder of such Old Note will
receive as set forth below under "Description of the New Notes--Book-Entry,
Delivery and Form" a New Note having a principal amount equal to that of the
surrendered Old Note. Registered holders of New Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive interest accruing from the most recent date to
which interest has been paid on the Old Notes or, if no interest has been paid
on the Old Notes, from February 10, 1998. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the
Exchange Offer. Accordingly, holders whose Old Notes are accepted for exchange
will not receive any payment in respect of accrued interest on such Old Notes
otherwise payable on any interest payment date for which the record date
occurs on or after consummation of the Exchange Offer. Old Notes not tendered
or not accepted for exchange will continue to accrue interest after the date
of consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal and all other required documents or, in the case of a
Book-Entry Confirmation, an Agent's Message in lieu thereof. If any tendered
Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Old Notes are submitted for a greater
principal amount than the holder desires to exchange, such unaccepted or non-
exchanged Old Notes will be returned without expense to the tendering holder
thereof (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry procedures described below, such non-exchanged Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth below under "--Exchange Agent." Any such notice of
withdrawal must specify the name of the person having tendered the Old Notes
to be withdrawn, identify the Old Notes to be withdrawn (including the
principal amount of such Old Notes), and (where certificates for Old Notes
have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange
Agent, then prior to the release of such certificates the withdrawing holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal, with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution in which
case such guarantee will not be required. If Old Notes have been tendered
pursuant to the procedure for book-entry transfer described above, any notice
of withdrawal must specify the name and number of the account at the Book-
Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination will be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for
any reason will be returned to the holder thereof without cost to such holder
(or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for
the Old Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Procedures
for Tendering Old Notes" above at any time on or prior to the Expiration Date.
23
<PAGE>
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and Notices of Guaranteed Delivery
should be directed to the Exchange Agent addressed as follows:
United States Trust Company of New York, Exchange Agent
By Registered or Certified Mail:
United States Trust Company of New York
P. O. Box 844
Attn: Corporate Trust Services
Cooper Station
New York, New York 10276-0844
<TABLE>
<S> <C>
By Hand up to 4:30 PM: By Overnight Courier or, on the Expiration Date,
by Hand after 4:30 PM:
United States Trust Company of New York United States Trust Company of New York
111 Broadway 770 Broadway, 13th Floor
Lower Level New York, New York 10003
Attn: Corporate Trust Services Attn: Corporate Trust Services
New York, New York 10006
</TABLE>
By Facsimile:
United States Trust Company of New York
Fax: (212) 780-0592
Confirm by Telephone: (800) 548-6565
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make an payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The
Company, however, will pay reasonable and customary fees and reasonable out-
of-pocket expenses to the Exchange Agent in connection therewith. The Company
will also pay the cash expenses to be incurred in connection with the Exchange
Offer, including registration, accounting, legal, printing, and related fees
and expenses.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes
not tendered or not accepted in the Exchange Offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer taxes thereon.
RESALES OF THE NEW NOTES
With respect to resales of New Notes based on certain interpretive letters
issued by the staff of the Commission to third parties, the Company believes
that a holder of New Notes (other than (i) a broker-dealer who purchased such
Old Notes directly from the Company to resell pursuant to Rule 144A or any
other available
24
<PAGE>
exemption under the Securities Act or (ii) a person who is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act) who exchanged
Old Notes for New Notes in the ordinary course of business and who is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes, will be allowed to resell the New Notes to the public without further
registration under the Securities Act and without delivering to the purchasers
of the New Notes a prospectus that satisfies the requirements of the
Securities Act. However, a broker-dealer who holds Old Notes that were
acquired for its own account as a result of market making or other trading
activities may be deemed to be an "underwriter" within the meaning of the
Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act. For a period of 180 days from the
Expiration Date, the Company will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale. If any other holder is deemed to be an "underwriter" within the
meaning of the Securities Act or acquires New Notes in the Exchange Offer for
the purpose of distributing or participating in a distribution of the New
Notes, such holder must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction, unless an exemption from registration is otherwise available.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized. The
Company's expenses of the Exchange Offer will be capitalized for accounting
purposes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions
in the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act. In general, the Old Notes may not be offered or sold, unless
registered under the Securities Act. The Company does not currently anticipate
that it will register Old Notes under the Securities Act. See "Summary--
Consequences of Exchanging Old Notes Pursuant to the Exchange Offer."
25
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1997 and as adjusted to give effect to the issuance of
the Old Notes and the application of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash--Continuing operations(1)............................. $ 8,381 $ 75,518
======== ========
Debt:
Unsecured notes payable.................................. $ 19,000 $ --
Trust deed notes payable................................. 17,174 5,990
10 1/2% Senior Notes due 2000(1)......................... 78,800 78,800
8 1/2% Senior Notes due 2007, net........................ 99,331 99,331
8% Senior Notes due 2008, net............................ -- 99,321
-------- --------
Total debt............................................. 214,305 283,442
-------- --------
Stockholders' equity:
Preferred Stock, $.01 par value; 10,000,000 shares
authorized; none issued................................. -- --
Common Stock, $.01 par value; 100,000,000 shares
authorized; 29,637,281 shares issued and outstanding(2). 296 296
Paid-in capital.......................................... 283,525 283,525
Accumulated deficit...................................... (43) (43)
-------- --------
Total stockholders' equity............................. 283,778 283,778
-------- --------
Total capitalization................................. $498,083 $567,220
======== ========
</TABLE>
- --------
(1) Does not reflect the use of $20 million of cash from the net proceeds of
the Old Notes Offering which was be used to fund a sinking fund payment
due March 1, 1998 for the 10 1/2% Senior Notes due 2000.
(2) Excludes 1,283,490 shares of Common Stock reserved at March 1, 1998 for
issuance upon exercise of outstanding options under the Company's 1991
Employee Stock Option Plan and the 1997 Stock Incentive Plan.
26
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of the Company are
derived from information contained in the Company's consolidated financial
statements. The financial data for each of the five years in the period ended
December 31, 1997 were derived from the audited consolidated financial
statements of the Company. The selected consolidated financial data presented
below are qualified in their entirety by, and should be read in conjunction
with, the Company's consolidated financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995(1) 1994 1993
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 584,571 $ 399,863 $ 346,263 $ 374,783 $ 249,884
========== ========== ========== ========== ==========
Income (loss) from
continuing operations
before income taxes and
cumulative effect of
change in accounting
for income taxes....... $ 41,046 $ 12,948 $ (37,247) $ 11,200 $ (1,617)
(Provision) benefit for
income taxes........... (17,070) (5,197) 14,890 (4,595) 710
---------- ---------- ---------- ---------- ----------
Income (loss) from
continuing operations
before cumulative
effect of change in
accounting for income
taxes.................. 23,976 7,751 (22,357) 6,605 (907)
Income (loss) from dis-
continued operations,
net of income taxes.... 48 642 (5,006) (718) 2,726
Gain on disposal of dis-
continued operation,
net of income taxes.... 3,302 -- -- -- --
Cumulative effect of
change in accounting
for income taxes....... -- -- -- -- 858
---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ 27,326 $ 8,393 $ (27,363) $ 5,887 $ 2,677
========== ========== ========== ========== ==========
Basic Income (Loss) Per
Share:
Income (loss) per share
from continuing opera-
tions.................. $ 0.82 $ 0.26 $ (0.73) $ 0.21 $ (0.03)
Income (loss) per share
from discontinued oper-
ations,
net of income taxes.... 0.00 0.02 (0.17) (0.02) 0.09
Gain on disposal of dis-
continued operation,
net of income taxes.... 0.11 -- -- -- --
Cumulative effect of
change in accounting
for income taxes....... -- -- -- -- 0.03
---------- ---------- ---------- ---------- ----------
Net income (loss) per
share.................. $ 0.93 $ 0.28 $ (0.90) $ 0.19 $ 0.09
========== ========== ========== ========== ==========
Diluted Income (Loss)
Per Share:
Income (loss) per share
from continuing opera-
tions.................. $ 0.81 $ 0.26 $ (0.73) $ 0.22 $ (0.03)
Income (loss) per share
from discontinued
operations, net of
income taxes........... 0.00 0.02 (0.17) (0.03) 0.09
Gain on disposal of dis-
continued operation,
net of income taxes.... 0.11 -- -- -- --
Cumulative effect of
change in accounting
for income taxes....... -- -- -- -- 0.03
---------- ---------- ---------- ---------- ----------
Net income (loss) per
share.................. $ 0.92 $ 0.28 $ (0.90) $ 0.19 $ 0.09
========== ========== ========== ========== ==========
Stockholders' equity per
share.................. $ 9.58 $ 8.79 $ 8.58 $ 9.56 $ 9.49
Cash dividends paid per
share.................. $ 0.14 $ 0.12 $ 0.12 $ 0.12 $ 0.12
Weighted average common
shares outstanding-
basic.................. 29,504,477 30,000,492 30,488,676 30,616,991 30,585,442
Weighted average common
and diluted shares out-
standing-diluted....... 29,807,702 30,011,595 30,488,676 30,674,349 30,633,471
Total assets............ $ 547,665 $ 449,114 $ 444,603 $ 531,768 $ 542,696
Long-term debt: continu-
ing operations......... $ 214,305 $ 80,000 $ 129,062 $ 134,360 $ 147,273
Stockholders' equity.... $ 283,778 $ 260,389 $ 257,926 $ 292,743 $ 290,395
Ratio of earnings to
fixed charges(2)....... 3.90x 2.41x 1.96x 2.04x 1.03x
</TABLE>
- --------
(1) The 1995 pretax loss from continuing operations of $37.2 million reflects
the adoption of Financial Accounting Standards No. 121 ("FAS 121") which
resulted in a $46.5 million non-cash pretax charge to operations. See Note
2 to the Company's consolidated financial statements included elsewhere in
this Prospectus.
(2) For purposes of calculating this ratio, fixed charges consist of interest
cost (interest expense plus capitalized interest), one-third of estimated
rent expense as representative of the interest portion of rentals and
amortization of debt expense, and earnings consist of earnings (loss)
before income taxes and discontinued operations and before (i) interest
expensed, (ii) amortization of capitalized interest in cost of sales,
(iii) income from unconsolidated joint ventures, (iv) depreciation and
amortization, (v) nonrecurring noncash charges of approximately $46.5
million and $3.1 million in 1995 and 1993, respectively, (vi) one-third of
estimated rent expense as representative of the interest portion of
rentals and amortization of debt expense, and includes income
distributions from unconsolidated joint ventures.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
"Selected Consolidated Financial Data" and the Company's consolidated
financial statements and the related notes included elsewhere in this
Prospectus.
RESULTS OF OPERATIONS
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues...................................... $584,571 $399,863 $346,263
Cost of sales................................. 490,876 348,066 307,794
Noncash charge for impairment of long-lived
assets....................................... -- -- 46,491
-------- -------- --------
Gross margin................................ 93,695 51,797 (8,022)
-------- -------- --------
Gross margin percentage..................... 16.0% 13.0% 11.1%(1)
-------- -------- --------
Selling, general and administrative expenses.. 52,141 37,351 34,873
Income from unconsolidated joint ventures..... 3,787 4,708 6,953
Interest expense.............................. 4,981 7,142 1,860
Amortization of excess of cost over net assets
acquired..................................... 245 -- --
Other income.................................. 931 936 555
-------- -------- --------
Income (loss) from continuing operations
before income taxes........................ $ 41,046 $ 12,948 $(37,247)
======== ======== ========
- --------
</TABLE>
(1) The 1995 homebuilding gross margin percentage excludes the $46.5 million
noncash charge for the adoption of FAS 121.
OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS,
EXCEPT
AVERAGE SELLING PRICES)
<S> <C> <C> <C>
New homes delivered:
California......................................... 1,477 1,131 942
Texas.............................................. 402 338 299
Joint ventures (California)........................ 67 154 195
-------- -------- --------
Total.............................................. 1,946 1,623 1,436
======== ======== ========
Net new orders:
California......................................... 1,599 1,458 1,145
Texas.............................................. 428 340 335
-------- -------- --------
Total.............................................. 2,027 1,798 1,480
======== ======== ========
Backlog at year end (in units)....................... 566 485 312
Backlog at year end (in dollars)..................... $191,682 $168,674 $ 77,945
Active selling communities at year end............... 51 53 49
Average selling price:
California deliveries (excluding joint ventures)... $337,649 $292,007 $308,383
Texas deliveries................................... $195,631 $185,622 $180,058
Combined (excluding joint ventures)................ $307,265 $267,529 $277,465
Combined (including joint ventures)................ $309,239 $261,681 $271,936
</TABLE>
28
<PAGE>
Fiscal Year 1997 Compared to Fiscal Year 1996
Net income from continuing operations for the year ended December 31, 1997
increased 209 percent from the previous year to $24.0 million, or $0.81 per
diluted share, compared to $7.8 million, or $0.26 per diluted share, in 1996.
The strong increase in earnings resulted from a record number of new home
deliveries, an increase in the average selling price of homes and continued
gross margin improvement from the Company's California homebuilding
operations.
The Company delivered 1,946 new homes in 1997 (including 67 homes delivered
by the Company's unconsolidated joint ventures), a new fiscal year high, at an
average selling price of $309,239 compared to 1,623 new homes (including 154
homes delivered by the Company's unconsolidated joint ventures) at an average
selling price of $261,681 during 1996.
Homebuilding revenues (excluding the Company's unconsolidated joint
ventures) also reached a new high of $584.6 million in 1997, an increase of
46.2 percent from the prior year. The increase in revenues from the prior year
of approximately $184.7 million resulted primarily from an increase of $109.7
million attributable to a 27.9 percent increase in new home deliveries, a
$74.7 million increase due to a 14.9 percent higher average selling price,
with the balance of the increase attributable to land sales. The Company's
Northern California division experienced an increase in deliveries over last
year of 71.6 percent to 628 homes, while deliveries from the southern
California operations were in line with the strong level of deliveries
generated in 1996. The increase in the average selling price in 1997 resulted
primarily from a greater distribution of homes delivered in the $400,000 to
$800,000 price range in California.
Cost of sales increased by $142.8 million from the previous year, or 41.0
percent, of which $95.1 million was due to an increase in the number of new
homes delivered while $48.2 million was attributable to an increase in the
average cost of new homes delivered. The increase in cost of sales was
partially offset by a reduction in costs associated with land sales. The
increase in the average cost of new homes delivered in 1997 was primarily due
to the changing product mix towards higher-priced homes.
The gross margin percentage for 1997 increased to 16.0 percent from 13.0
percent in 1996. This increase was primarily due to the healthy California
housing market.
Selling, general and administrative expenses decreased as a percentage of
revenues from 9.3 percent in 1996 to 8.9 percent in 1997. This decrease is
attributable to the fixed level of certain general and administrative
expenses, as well as a reduction in selling costs as a percent of revenues due
to the improving housing market in California.
Income from unconsolidated joint ventures declined from approximately $4.7
million in 1996 to $3.8 million in 1997 as a result of fewer unit deliveries
as compared to the previous year. Although joint venture unit deliveries were
down from the prior year, both gross margins and average selling prices for
the ventures increased respectively from 1996 levels.
Interest incurred for 1997 was $17.0 million of which $12.0 million was
capitalized to real estate inventories and approximately $5.0 million was
expensed compared to $16.7 million incurred in 1996 of which $9.5 million was
capitalized and $7.1 million expensed. The increase in the amount of interest
capitalized in 1997 was due primarily to more projects under development
throughout 1997 as compared to the year earlier period.
Amortization of excess of cost over net assets acquired relates to the
acquisition on September 30, 1997 of Duc Development Company, a privately held
northern California homebuilder. The excess of cost over net assets acquired
is being amortized over a seven-year period.
The Company generated a record net new order total of 2,027 homes for 1997,
a 12.7 percent increase from the previous year. The Company's northern
California orders increased 28.1 percent to 607 homes while the Texas
operations combined for a 25.9 percent improvement in net new orders over the
prior year. This strong
29
<PAGE>
order trend translated into a backlog of presold homes of 566, a 16.7 percent
increase over the 1996 year-end total, and the highest level in eight years.
Net orders in 1997 for the Company's southern California operations were in
line with the strong level generated in 1996.
As a result of higher than expected deliveries and orders in the fourth
quarter of 1997, which had the effect of reducing the Company's inventory of
homes available for sale entering 1998, and the anticipated timing of the
Company's new project openings, the Company expects that net new orders for
the first quarter of 1998 will be less than the record level of net new orders
for the first quarter of 1997. However, the Company anticipates opening 35 to
40 new model home complexes during 1998, with many of these openings occurring
in the second and third quarters. Consequently, the Company anticipates that
its order volume for the year will be weighted more towards the middle and
second half of the year.
Net income for 1997, including discontinued operations, was $27.3 million,
or $0.92 per diluted share, compared to $8.4 million, or $0.28 per diluted
share in 1996. The discontinued operations reflect the Company's savings and
loan subsidiary and the Company's former office furniture subsidiary, which
was sold in December for a net gain of approximately $3.3 million, or $0.11
per diluted share. See "--Discontinued Operations" for further discussion of
the discontinued operating segments of the Company.
Fiscal Year 1996 Compared to Fiscal Year 1995
Net income from continuing operations for the year ended December 31, 1996
increased to $7.8 million, or $0.26 per diluted share, compared to a loss of
($22.4) million, or ($0.73) per diluted share, in 1995. The increase in
earnings resulted from an increase in new home deliveries and an improvement
in gross margins. In addition, 1995 reflects a pretax noncash charge of
approximately $46.5 million for the adoption of FAS 121 (See Note 2 to the
Company's consolidated financial statements included elsewhere in this
Prospectus).
During the year ended December 31, 1996, the Company delivered 1,623 new
homes (including 154 homes delivered by the Company's unconsolidated joint
ventures) at an average selling price of $261,681 compared to 1,436 new homes
(including 195 homes delivered by the Company's unconsolidated joint venture)
at an average selling price of $271,936 during 1995.
Homebuilding revenues increased by 15.5 percent from 1995, while cost of
sales (before the impairment charge in 1995) increased by 13.1 percent. The
increase in revenues from 1995 of approximately $53.6 million resulted
primarily from an increase of $63.3 million attributable to 228 more homes
delivered and a $4.9 million increase in revenues attributable to land sales,
which were partially offset by a decrease of $14.6 million due to a 3.6
percent lower average selling price of new homes delivered. The increase in
unit deliveries was primarily attributable to a 45.8 percent increase in
deliveries from the Northern California division to 366 homes, an 18.7 percent
increase in deliveries from the Ventura division to 184 homes and a 13.0
percent increase in Texas deliveries to 338 homes. The increase in deliveries
was attributed to, among other things, improved market conditions in the
geographic markets the Company serves, particularly in California, as well as
lower mortgage interest rates during most of 1996 as compared to fiscal 1995.
The average selling price of the Company's homes is impacted by product mix,
geographic mix and changing prices on homes sold. The decrease in the average
selling price from 1995 to 1996 was due primarily to a reduction in deliveries
of higher priced homes from the Company's Orange County division.
The $40.3 million increase in cost of sales (before the impairment charge in
1995) included $56.2 million attributable to an increased number of new home
deliveries and a $5.8 million increase in cost of sales attributable to
undeveloped lots sold, which were partially offset by a decrease of $21.7
million due to a decline in the average cost of new homes delivered. The
reduction in the average cost of new homes delivered was primarily due to the
changing product mix discussed above.
The gross margin percentage for 1996 was 13.0 percent compared to 11.1
percent (before the impairment charge) in 1995. The increase in the gross
margin percentage was primarily due to improved market conditions
30
<PAGE>
in the California markets, higher absorption rates, as well as proportionately
more deliveries from newer projects in 1996 as compared to 1995. The newer
projects generally carry higher margins than older projects, which include
land acquired in prior years at higher prices.
Selling, general and administrative expenses decreased as a percentage of
revenues from 10.1 percent in 1995 to 9.3 percent in 1996. This decline can be
attributed to increased revenues of 15.5 percent from the prior year period.
Income from the unconsolidated joint ventures decreased from approximately
$7.0 million in 1995 to $4.7 million in 1996 as a result of fewer unit
deliveries as well as more deliveries of lower priced product from one of the
joint ventures. This joint venture delivered 151 new homes in 1996 compared to
195 new homes in 1995. The Company delivered three homes from a new joint
venture during the fourth quarter of 1996.
Interest incurred for 1996 was $16.7 million of which $9.5 million was
capitalized to real estate inventories and $7.1 million was expensed compared
to $19.2 million incurred in 1995 of which $17.3 million was capitalized and
$1.9 million expensed.
CARRYING COSTS, REAL ESTATE INVENTORIES AND COST OF SALES
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Carrying costs in inventory and the percent-
age of total real estate inventory:
Interest.................................. $13.7 3.0% $25.1 6.7% $32.5 8.8%
Property taxes............................ 8.6 1.9 8.0 2.1 8.8 2.4
----- --- ----- --- ----- ----
$22.3 4.9% $33.1 8.8% $41.3 11.2%
===== === ===== === ===== ====
Total real estate inventories............... $452 $373 $368
Cost of sales for the year then ended (be-
fore FAS 121
adjustment for 1995) ...................... 491 348 308
Ratio of cost of sales to ending inventory
(Inventory turn ratio)..................... 1.09 .93 .84
</TABLE>
The increase in the 1997 inventory turn ratio is due to a 41 percent
increase in cost of sales while real estate inventories increased only 21
percent. This positive trend is primarily due to a 28 percent increase in unit
deliveries resulting from strong housing market conditions in California.
Additionally, during 1997 the Company delivered homes from certain of its
older projects which have been in the Company's inventory balances for several
years. These projects generally had higher land and interest costs than more
recent acquisitions. The newer projects generally develop and deliver more
quickly than the older projects which results in a higher inventory turn ratio
and a lower amount of carrying costs in ending inventory.
Capitalized interest in real estate inventory at December 31, 1997 decreased
approximately $11.4 million from December 31, 1996, a reduction of
approximately 45 percent. This decrease can be attributed to (i) the sale of
homes from older projects which generally include higher carry costs than
newer projects and (ii) improving market conditions which have resulted in
shorter holding periods and a higher inventory turnover rate.
31
<PAGE>
UTILIZATION OF DEBT AND EQUITY IN FUNDING REAL ESTATE INVENTORIES
Sources of financing for the Company's real estates inventories were as
follows for the three years ended December 31, 1997:
<TABLE>
<CAPTION>
AT DECEMBER
31,
----------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Purchase money deeds of trust................................. 4% 1% 4%
Unsecured debt................................................ 44 42 40
Equity........................................................ 52 57 56
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
DISCONTINUED OPERATIONS
Disposition of Panel Concepts. In December 1997, the Company completed the
sale of Panel Concepts to HON Industries, Inc., a national furniture
manufacturer, for a cash sales price of approximately $9.5 million, after
distribution of certain non-operating assets to the Company totaling
approximately $9 million. Panel Concepts has been accounted for as a
discontinued operation and the results of its operations have been segregated
in the Company's consolidated financial statements included elsewhere in this
Prospectus.
Disposition of Standard Pacific Savings. In May 1997, the Company's Board of
Directors adopted a plan of disposition for Savings. Pursuant to the plan, the
Company sold substantially all of Savings' mortgage loan portfolio in June
1997. The Company also entered into a definitive agreement to sell the
remainder of Savings' business, including Savings' charter. The definitive
agreement was subject to a number of conditions, including approval of the
transaction by the OTS. As a result of the failure of the OTS to approve the
transaction prior to the definitive agreement's termination date, the
definitive agreement terminated on January 31, 1998. The Company plans to
continue pursuing a disposition strategy with respect to Savings and,
therefore, Savings has been accounted for as a discontinued operation and the
results of its operations have been segregated in the Company's consolidated
financial statements included elsewhere in this Prospectus. Savings has not
offered mortgage financing to the Company's home buyers since July 1994, and
the sale of Savings is not expected to have any impact on sales of the
Company's homes. Management currently estimates that both the disposition of
Savings under the plan and the operating results of Savings for the period
through the disposition will not result in a significant gain or loss to the
Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of cash have been for operating expenses, land
acquisitions, construction expenditures, market expansion, principal and
interest payments on debt and dividends to shareholders. Cash requirements
were provided from internally generated funds and outside borrowings,
including a bank revolving credit facility and note offerings. Management
believes that these sources of cash are sufficient to finance its current
working capital requirements and other needs.
In August 1997, the Company and its bank group amended the Company's
unsecured Revolving Credit Facility to, among other things, increase the
commitment to $275 million, increase the term of the facility from three years
to four years and reduce the cost of borrowings and other fees. The facility
has a current maturity date of July 31, 2001. This agreement contains
covenants, including certain financial covenants. This agreement also contains
provisions which may, in certain circumstances, limit the amount the Company
may borrow under the Revolving Credit Facility. At December 31, 1997, the
Company had borrowings of $19.0 million outstanding under this facility.
The Company made its first $20 million sinking fund payment on the 10 1/2%
Senior Notes on March 1, 1997. As of December 31, 1997, there was $78.8
million outstanding of the 10 1/2% Senior Notes. A second $20 million sinking
fund payment was made by the Company on March 1, 1998, reducing the balance
outstanding on such notes to $58.8 million.
32
<PAGE>
To finance land purchases, the Company may utilize, among its other sources,
purchase money mortgage financing of which approximately $17.2 million was
outstanding for this purpose at December 31, 1997, an increase of $12.7
million from December 31, 1996.
Additionally, the Company has utilized joint venture structures over the
past few years whereby these joint ventures have obtained secured construction
financing. This type of structure minimizes the use of funds from the
Company's Revolving Credit Facility. The Company plans to continue using this
type of arrangement to finance the development of properties as opportunities
arise.
The Company paid approximately $4.1 million in dividends to its stockholders
for the year ended December 31, 1997. Payments of dividends on the Company's
common stock is within the discretion of the Company's Board of Directors and
is dependent upon various factors, including the earnings, cash flow, capital
requirements and operating and financial condition of the Company. Certain of
the Company's senior credit and debt agreements impose restrictions on the
amount of dividends the Company may pay. On January 27, 1998, the Board of
Directors declared a quarterly cash dividend of $.04 per share of common
stock. This dividend was paid on February 27, 1998 to shareholders of record
on February 13, 1998.
During the year ended December 31, 1997, the Company issued 292,100 shares
of common stock pursuant to the exercise of stock options for aggregate
proceeds of $1.7 million.
Pursuant to the previously announced stock repurchase program, the Company
repurchased 284,800 shares of its common stock for approximately $2.1 million
during 1997. Since inception of the program, the Company has repurchased an
aggregate of 1,285,750 shares of its common stock for approximately $8.3
million as of December 31, 1997, leaving a balance of approximately $11.7
million available to be repurchased.
In June 1997, the Company issued $100 million of 8 1/2% Senior Notes due in
2007 (the "8 1/2% Senior Notes"). The notes were issued at a discount to yield
approximately 8.6 percent. The 8 1/2% Senior Notes are subject to certain
restrictive financial covenants, which, among other things, impose certain
limitations on the ability of the Company to (i) incur additional
indebtedness, (ii) create liens, (iii) make restricted payments, as defined,
and (iv) sell assets. These notes are callable at the Company's option
commencing June 15, 2002 at a premium of 104.25 percent of par value, with the
call price reducing ratably to par on June 15, 2005. Net proceeds to the
Company after offering expenses were approximately $96.9 million. The Company
used the net proceeds to repay indebtedness outstanding under the Company's
Revolving Credit Facility.
In February 1998, the Company issued $100 million of the Old Notes. The Old
Notes were issued at a discount to yield approximately 8.1 percent. These
notes are senior unsecured obligations of the Company and rank pari passu with
the Company's other existing unsecured indebtedness. In addition, the Old
Notes contain restrictive covenants similar to those in the 8 1/2% Senior
Notes which, among other things, impose certain limitations on the ability of
the Company to (i) incur additional indebtedness, (ii) create liens, (iii)
make restricted payments, as defined, and (iv) sell assets. The Old Notes are
redeemable at the option of the Company, in whole or in part, commencing
February 15, 2003 at 104.00 percent of par, with the call price reducing
ratably to par on February 15, 2006. Net proceeds to the Company after
offering expenses were approximately $97.3 million. Approximately $54.3
million of the net proceeds were used to repay the indebtedness outstanding
under the Revolving Credit Facility on the date of closing (February 10,
1998), with the balance of the net proceeds used or to be used (i) to fund a
$20 million sinking fund payment due on March 1, 1998 on the Company's 10 1/2%
Senior Notes, (ii) to repay an approximately $11.2 million trust deed note and
(iii) for general corporate purposes.
The Company has no material commitments or off balance sheet financing
arrangements that would tend to affect future liquidity.
33
<PAGE>
YEAR 2000 COMPLIANCE
The Company has assessed the vulnerability of its computer systems to the
"Year 2000 issue" and the cost of addressing Year 2000 compliance.
Modifications and replacements of computer systems, primarily the replacement
of computer software, to attain Year 2000 compliance have begun, and the
Company expects to attain Year 2000 compliance and institute appropriate
testing of its modifications and replacements before the Year 2000 date
change. Presently, the Company does not believe that Year 2000 compliance will
result in material investments by the Company, nor does the Company anticipate
the Year 2000 issue will have material adverse effects on the business
operations or financial performance of the Company. There can be no assurance,
however, that the Year 2000 issue will not adversely affect the Company and
its business.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130 "Reporting Comprehensive Income" ("FAS 130") and Statement
No. 131 "Disclosures about Segments of an Enterprise and Related Information"
("FAS 131"). Both FAS 130 and 131 are required to be adopted by the Company
for the year ended December 31, 1998. The Company believes the adoption of
these statements will not have a material impact on its consolidated financial
statements.
34
<PAGE>
BUSINESS
The Company operates primarily as a geographically diversified builder of
single-family homes for use as primary residences with operations throughout
the major metropolitan markets in California and Texas. For the year ended
December 31, 1997, approximately 79 percent and 21 percent of the Company's
home deliveries (including unconsolidated joint ventures) were in California
and Texas, respectively.
Standard Pacific Corp. was incorporated in the State of Delaware in 1991.
Through its predecessors, Standard Pacific Corp. commenced its homebuilding
operations in 1966 with a single tract of land in Orange County, California.
STRATEGY
The Company believes that its long history of building high quality homes in
California and Texas and its conservative operating strategy have enabled the
Company to successfully weather cyclical downturns and position the Company to
capitalize on the improving California market. The main elements of the
Company's strategy include:
Focus on Broad Move-Up Market. The Company concentrates on the construction
of single-family homes for use as primary residences by move-up buyers. The
Company believes that the market for primary residences is more resistant to
economic downturns than the market for second or vacation homes. The average
selling price of the Company's homes for the year ended December 31, 1997 was
approximately $307,000. Currently, the Company expects to concentrate its
efforts on acquiring land that is suitable for the construction and sale of
homes generally in the price range of $150,000 to $400,000, which represents a
broad market segment in the Company's market areas. The Company also
constructs and sells homes in the $400,000 to $800,000 price range in certain
of its California markets.
Reputation for High Quality, Single-Family Homes. The Company believes that
it has an established reputation for providing high quality homes. The Company
prides itself on its ability to design unique and attractive homes and provide
its customer with a wide selection of options. The Company believes that its
long history of providing high quality homes has resulted in many repeat
buyers and word-of-mouth sales. The Company also uses extensive marketing to
sell its homes, and its homes are generally sold by its own staff of sales
personnel through the use of model homes which are usually maintained at each
project site. The Company also makes extensive use of advertisements in local
newspapers, illustrated brochures, billboards and on-site displays.
Conservative Operating Strategy. The Company customarily acquires unimproved
or improved land zoned for residential use which appears suitable for the
construction of 50 to 300 homes in increments of 10 to 30 homes. The Company
generally purchases land only when it projects commencement of construction
within a relatively short time period. The number of homes built in the first
increment of a project is based upon internal market studies. The timing and
size of subsequent increments depend to a large extent upon sales rates
experienced in the earlier increments. By developing projects in increments,
the Company has been able to respond to local market conditions and control
the number of its completed and unsold homes. Additionally, an increasing
percentage of the Company's lots are controlled through joint ventures. The
Company uses joint ventures for certain land development projects that have
long lead times or are of significant size requiring substantial capital
investments.
Strong Land Position. The Company has been operating in California for over
30 years and has established an excellent reputation with land owners. The
Company believes that its long standing relationships with land owners and
developers in California give the Company a competitive edge in securing
quality land positions at competitive prices. In order to ensure an adequate
supply of land for future homebuilding activities, the Company generally
attempts to maintain an inventory of building sites sufficient for
construction of homes over a period of approximately three to five years. The
Company believes that its 9,016 owned or controlled building sites at December
31, 1997, in addition to any land sites for which the Company may enter into
negotiations, will be sufficient for its operations over this period.
35
<PAGE>
Geographic Diversification. The Company has focused its California
homebuilding activities in Orange, Riverside, San Bernardino, San Diego and
Ventura Counties in southern California, and in the San Francisco Bay area of
northern California. Additionally, the Company has projects in the Houston,
Dallas and Austin markets in Texas. The Company's policy of diversifying among
different geographic areas has enabled it to reduce the impact of adverse
local economic conditions. Additionally, the Company believes that it has
significant opportunities to expand in its existing markets and to enter new
geographic markets.
Control of Overhead and Operating Expenses. Throughout its history, the
Company has sought to minimize overhead expenses in order to be more flexible
in responding to the cyclical nature of its business. The Company strives to
control its overhead costs by centralizing certain of its administrative
functions and by limiting the number of middle level management positions.
Experienced Management and Decentralized Operations. The Company's senior
corporate and division operating managers average over 20 years of experience
in the homebuilding business. Each division is run by a local manager. One of
the essential criteria in the selection of a divisional manager is the
individual's in-depth familiarity with the geographic areas within which the
division operates. The decisions regarding selection of parcels of land for
purchase and development are made in conjunction with the officers of the
Company, and thereafter, each manager conducts the operations of the division
relatively autonomously as a separate profit center.
OPERATIONS
The Company currently conducts activities in California and Texas through a
total of six geographic divisions, with 99 projects under development or held
for future development at December 31, 1997.
The table below sets forth certain information for each division and for the
Company as a whole for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED AS OF
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
------------------ -------------------------------------------------
TOTAL NUMBER
NUMBER OF BUILDING HOMES
AVERAGE OF PROJECTS PROJECTS SITES UNDER
HOME HELD FOR IN SALES OWNED OR CONSTRUC- PRESOLD
HOMES SELLING DEVELOPMENT STAGE CONTROLLED TION HOMES
DELIVERED PRICE (2) (3) (4) (5) (6)
--------- -------- ----------- -------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Orange County........... 456 $385,596 21 9 2,212 150 83
San Diego County........ 137 304,081 9 4 874 120 93
Ventura County.......... 256 255,395 8 5 513 136 94
San Francisco Bay area.. 628 345,531 30 10 2,880 172 151
Houston................. 168 142,159 8 7 472 53 52
Dallas/Austin........... 234 234,021 17 13 1,298 55 66
----- -------- --- --- ----- --- ---
Total Consolidated...... 1,879 307,265 93 48 8,249 686 539
Unconsolidated Joint
Ventures--California... 67 364,585 6 3 767 22 27
----- -------- --- --- ----- --- ---
Totals for and as of the
year ended December 31,
1997................... 1,946 $309,239 99 51 9,016 708 566
===== ======== === === ===== === ===
Totals for and as of the
year ended December 31,
1996................... 1,623 $261,681 77 53 6,527 599 485
===== ======== === === ===== === ===
</TABLE>
- --------
(1) Includes as of December 31, 1997, 102 model homes and 116 completed and
unsold homes, and as of December 31, 1996, 135 model homes and 206
completed and unsold homes.
(2) The total number of projects held for development as of the end of each
period shown includes projects with homes in the sales stage, under
construction and projects in various stages of planning.
36
<PAGE>
(3) The number of projects in the sales stage includes projects where the
sales office has opened and/or the Company has begun to enter into sales
contracts for the sale of its homes.
(4) Includes homes reflected in Homes Under Construction and Presold Homes.
(5) Includes certain homes reflected in Presold Homes.
(6) See "--Marketing and Sales" for information concerning cancellation rates
and contractual arrangements under which homes are presold.
Each division is run by a local manager. One of the essential criteria in
the selection of a divisional manager is the person's in-depth familiarity
with the geographic areas within which the division operates. The decisions
regarding selection of parcels of land for purchase and development are made
in conjunction with the officers of the Company, and thereafter, each manager
conducts the operations of the division relatively autonomously as a separate
profit center.
Substantially all of the Company's homes sold are single-family detached
dwellings, although during the past few years approximately 5 percent to 10
percent have been townhouses or condominiums generally attached in varying
configurations of two, three, four and six dwelling units.
The Company's homes are designed to suit the particular area of the country
in which they are located and are available in a variety of models, exterior
styles and materials depending upon local preferences. Homes built by the
Company are targeted for occupancy as primary residences. While the homes
built by the Company typically range in size from approximately 1,800 to 2,800
square feet and typically include three or four bedrooms, two or three baths,
a living room, kitchen, dining room, family room and a two or three-car
garage, the Company also has built single-family attached and detached homes
ranging from 1,100 to 5,500 square feet. For the years ended December 31,
1997, 1996 and 1995, the average selling prices of the Company's homes,
including sales of the unconsolidated joint ventures, were $309,239, $261,681,
and $271,936, respectively.
LAND ACQUISITION, DEVELOPMENT AND CONSTRUCTION
In considering the purchase of land for the development of a project, the
Company reviews such factors as proximity to existing developed areas;
population growth patterns; availability of existing community services such
as water, gas, electricity and sewers; school districts; employment growth
rates; the expected absorption rate for new housing; environmental condition
of the land; transportation availability and the estimated costs of
development. Generally, if all requisite governmental agency approvals are not
in place, the Company enters into a conditional agreement to purchase a parcel
of land, making only a nominal deposit on the property. The general policy of
the Company is to complete a purchase of land only when it can reasonably
project commencement of construction within a relatively short period of time.
Closing of the land purchase is, therefore, generally made contingent upon
satisfaction of conditions relating to the property and to the Company's being
able to obtain all requisite approvals from governmental agencies within a
certain period of time. The Company customarily acquires unimproved or
improved land zoned for residential use which appears suitable for the
construction of 50 to 300 homes, which construction is accomplished in smaller
sized increments. The number of homes built in the first increment of a
project is based upon the Company's internal market studies. The timing and
size of subsequent increments depends on the sales rates of earlier
increments. The Company's development work on a project includes obtaining any
necessary zoning, environmental and other regulatory approvals, and
constructing, as necessary, roads, sewer and drainage systems, recreational
facilities and other improvements.
The Company typically uses both its equity (internally generated funds) and
unsecured financing in the form of bank debt and other unsecured debt to fund
land acquisitions. The Company also uses purchase money trust deeds to finance
the acquisition of land. Generally, with the exception of joint ventures,
specific project financing is not used.
The Company has entered into joint venture arrangements to develop certain
parcels of land. During 1993, the Company's Orange County division entered
into a joint venture agreement to develop and deliver 469 homes.
37
<PAGE>
For the years ended December 31, 1997, 1996, 1995 and 1994, the Company
delivered 15, 151, 195 and 108 homes, respectively, through this
unconsolidated joint venture. In 1995, the Company's Orange County division
entered into a joint venture arrangement to develop 209 lots in the city of
Orange, California. The Company will purchase 209 lots for construction and
sale of homes. Additionally, in 1996 the Company's Orange County division
entered into another joint venture to develop and deliver approximately 800
homes in Fullerton and Brea, California. During 1997 and 1996, the Company
delivered 52 and three new homes, respectively, from this unconsolidated joint
venture. In the first half of 1997, the Company's northern California division
entered into a joint venture to develop approximately 700 lots in Gilroy,
California. Fifty percent of these lots will be sold to the Company for the
construction and sale of homes. The Company has made an investment of
approximately $9.4 million in the joint venture.
During 1997, the Company entered into a joint venture with affiliates of
Catellus Development Corporation and Starwood Capital Group L.L.C. to acquire
and develop a 3,470-acre masterplanned community located in south Orange
County (the "Talega Joint Venture"). The Talega Joint Venture plans to develop
and deliver in phases finished lots for up to approximately 4,500 attached and
detached homes, as well as a championship golf course, certain community
amenities and commercial and industrial components. As a one-third participant
in this long-term project, the Company is obligated to invest up to $20.0
million in the project and will receive certain rights of first offer
entitling the Company to purchase up to 1,000 finished lots from the joint
venture for construction and sale of homes by the Company. As of December 31,
1997, the Company had made investments of approximately $10.9 million in this
joint venture.
The Company essentially functions as a general contractor with its
supervisory employees coordinating all work on the project. The services of
independent architectural, design, engineering and other consulting firms are
engaged to assist in project planning, and subcontractors are employed to
perform all of the physical development and construction work on the project.
The Company does not have long-term contractual commitments with any of its
subcontractors, consultants or suppliers of materials. However, because of its
market presence and long-term relationships, the Company has generally been
able to obtain sufficient materials and commitments from subcontractors and
consultants during times of market shortages. These types of agreements are
generally entered into on an increment-by-increment basis at a fixed price
after competitive bidding. The Company believes that the low fixed labor
expense resulting from conducting its operations in this manner has been
instrumental in enabling it to retain the necessary flexibility to react to
increases or decreases in demand for housing.
Although the construction time for the Company's homes varies from project
to project depending on the time of year, local labor situations, certain
governmental approval processes, availability of materials and supplies and
other factors, the Company can typically complete the construction phase of an
increment within one of its projects in approximately four to six months.
MARKETING AND SALES
The Company's homes are generally sold by its own staff of sales personnel.
Furnished and landscaped model homes are usually maintained at each project
site. Homebuyers are afforded the opportunity to select, at additional costs,
various optional amenities such as prewiring options, upgraded flooring,
cabinets and countertops, varied interior and exterior color schemes,
additional appliances and some room configurations. The Company makes
extensive use of advertisements in local newspapers, illustrated brochures,
billboards and on-site displays.
The Company's homes are typically sold during construction using sales
contracts which are usually accompanied by a cash deposit, although some of
the Company's homes are sold after completion of construction. In some cases,
purchasers are permitted to cancel these contracts if they are unable to sell
their existing homes or fail to qualify for financing and under certain other
circumstances. During each of the years ended December 31, 1997, 1996 and
1995, the Company experienced cancellation rates of 22 percent, 24 percent
38
<PAGE>
and 25 percent, respectively. Although cancellations can delay the delivery of
the Company's homes, they have not, during the last few years, had a material
negative impact on sales, operations or liquidity because of the Company's
policy of closely monitoring the progress of prospective buyers in obtaining
financing and monitoring and adjusting its start plan to better match the
level of demand for its homes. Sales are recorded after construction is
completed, required down payments are received and title passes. At December
31, 1997, 1996 and 1995, the Company had an inventory of completed and unsold
homes of 116, 206 and 239, respectively.
FINANCING
Home purchase financing from local lending institutions generally averages
80 percent or more of the purchase price of the homes. During periods of high
mortgage rates or difficult economic times, the Company may assist its
homebuyers by "buying-down" the interest rates on mortgage loans or
subsidizing all or a part of the homebuyers' up front financing fees. The
amounts of such "buy-downs" or subsidies is dependent upon prevailing market
conditions and interest rate levels. During the past few years the amount of
such "buy-downs" has not been significant due to the generally low level of
mortgage interest rates.
The Company recently formed Family Lending Services, which will operate as a
mortgage banking subsidiary of the Company, offering mortgage financing to the
Company's home buyers and others. Family Lending Services is in the process of
obtaining required regulatory approvals and mortgage warehouse financing and
is currently expected to begin offering mortgage financing to home buyers in
the second quarter of 1998.
COMPETITION
The homebuilding industry is highly competitive, with homebuilders competing
for customers, desirable properties, financing, raw materials and skilled
labor. In each of the areas in which it operates, the Company competes in
terms of location, design, quality, price and available mortgage financing
with numerous other residential construction firms, including large national
and regional firms, some of which have greater financial resources than the
Company. In addition, the Company competes with resales of existing
residential housing by individuals, financial institutions and others. The
Company also competes with rental properties in certain markets.
EMPLOYEES
At December 31, 1997, the Company had approximately 427 employees (excluding
employees of discontinued operations).
During the past five years, the Company has not directly experienced a work
stoppage in its operations caused by labor disputes. Construction of homes in
projects developed by the Company has, from time to time, been delayed due to
strikes by certain construction unions against subcontractors retained by the
Company or strikes against suppliers of materials used in the construction of
homes. Such delays have not had a significant adverse effect on the Company's
operations. The Company believes that its relations with its employees and
subcontractors are satisfactory.
PROPERTIES
In addition to real estate held for development and sale, which is either
owned or under option to be purchased by the Company, the Company leases
approximately 4.8 acres of land in Costa Mesa, California under leases
expiring in 2002 on which the Company's executive office, the offices of the
Orange County housing division and a manufacturing facility (which is
subleased to an unrelated party) are located. The Company's other real estate
housing divisions occupy various facilities under leases which expire from
1998 through 2002.
The administrative office and branch location for Savings is located in
Newport Beach, California. A total of 5,072 square feet is leased under a
lease which expires in 2004. In addition, Family Lending Services occupies
approximately 9,300 square feet of a facility in Newport Beach, California
under a lease that expires in February 2005.
39
<PAGE>
As of December 31, 1997, the Company was subleasing approximately 59,000
square feet of manufacturing facilities to unrelated parties under leases
expiring beginning in May 1998.
The Company believes that all of its properties are well suited for the
purposes for which they are used.
LEGAL PROCEEDINGS
Various claims and actions, considered normal to the Company's business,
have been asserted and are pending against the Company and its subsidiaries.
The Company believes that such claims and actions should not have a material
adverse effect upon the financial position of the Company.
40
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
REVOLVING CREDIT FACILITY
In December 1996, the Company completed a syndication of its Revolving
Credit Facility whereby the total unsecured commitment was increased to $200
million and additional lenders were added to the facility. In connection with
the syndication the Company combined its separate bank credit facilities into
a single larger facility which created additional borrowing capacity of
approximately $50 million. The facility had a maturity date of July 31, 1999.
This agreement contains covenants, including certain financial covenants. This
agreement also contains provisions which may, in certain circumstances, limit
the amount the Company may borrow under the credit facility.
In August 1997, the Company and its bank group amended the Revolving Credit
Facility to, among other things, increase the commitment to $275 million,
extend the term of the facility from July 31, 1999 to July 31, 2001 and reduce
the interest rate of borrowing and other fees.
10 1/2% SENIOR NOTES DUE 2000
In March 1993, the Company issued $100 million principal amount of its 10
1/2% Senior Notes due March 1, 2000. Interest is due and payable on March 1
and September 1 of each year. The 10 1/2% Senior Notes are not redeemable at
the option of the Company prior to maturity. The Company is required to make
annual mandatory sinking fund payments sufficient to retire 20 percent of the
original aggregate principal amount of the 10 1/2% Senior Notes ($20 million
per year) commencing on March 1, 1997, at a redemption price of 100 percent of
the principal amount, with the balance of the 10 1/2% Senior Notes ($40
million) retired on March 1, 2000.
The 10 1/2% Senior Notes are senior unsecured obligations of the Company.
The Company will be obligated to make an offer to purchase a portion of the
Notes in the event of the Company's failure to maintain a minimum consolidated
net worth, as defined, and under certain other circumstances. In addition, the
10 1/2% Senior Notes contain other restrictive covenants which, among other
things, impose certain limitations on the ability of the Company to (i) incur
additional indebtedness, (ii) create liens, (iii) make restricted payments, as
defined, and (iv) sell assets.
8 1/2% SENIOR NOTES DUE 2007
In June 1997, the Company issued $100 million of 8 1/2% Senior Notes due
June 15, 2007. Interest is due and payable on June 15 and December 15 of each
year. The 8 1/2% Senior Notes are redeemable at the Company's option
commencing June 15, 2002 at a premium of 104.25% of par value, with the call
price reducing ratably to par on June 15, 2005.
The 8 1/2% Senior Notes are senior unsecured obligations of the Company. The
Company will be obligated to make an offer to purchase a portion of the Notes
in the event of the Company's failure to maintain a minimum consolidated net
worth, as defined, and under certain other circumstances. In addition, the 8
1/2% Senior Notes contain other restrictive financial covenants, which among
other things, impose certain limitations on the ability of the Company to (i)
incur additional indebtedness, (ii) create liens, (iii) make restricted
payments, as defined, and (iv) sell assets.
41
<PAGE>
DESCRIPTION OF THE NEW NOTES
The New Notes offered hereby, like the Old Notes, are to be issued under an
Indenture, dated as of April 1, 1992 (the "Indenture"), between the Company
and United States Trust Company of New York, as trustee (the "Trustee"), filed
as an exhibit to the Company's Current Report on Form 8-K, dated February 24,
1993. The terms of the New Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act, and
holders of the Old Notes and New Notes are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The terms of the New Notes are
substantially identical to the Old Notes in all material respects (including
interest rate and maturity), except that (i) the New Notes will be registered
under the Securities Act, and therefore will not bear any legends restricting
the transfer thereof, and (ii) the Registration Rights Agreement covenants
regarding registration and the related Liquidated Damages (as defined in the
Registration Rights Agreement) (other than those that have accrued and were
not paid) with respect to Registration Defaults (as defined in the
Registration Rights Agreement) will have been deemed satisfied. The following
summary of the material provisions of the Indenture does not purport to be
complete, and where reference is made to particular provisions of the
Indenture, such provisions are incorporated by reference as part of such
summary, which is qualified in its entirety by such reference. Certain terms
used herein are defined under "Certain Definitions" below.
The description of the New Notes contained herein assumes that all Old Notes
are exchanged for New Notes in the Exchange Offer.
GENERAL
The New Notes will mature on February 15, 2008, will be senior unsecured
obligations of the Company and will rank pari passu with the Company's other
existing and future senior unsecured indebtedness. The New Notes will be
limited to $175 million in aggregate principal amount, $100 million of which
will be issued in the Exchange Offer and the remainder of which will remain
available for future issuance.
Since the operations of the Company are currently conducted in part through
subsidiaries, the cash flow and the consequent ability to service debt of the
Company, including the New Notes, are dependent, in part, upon the earnings of
its subsidiaries and the distribution of those earnings to the Company,
whether by dividends, loans or otherwise. The payment of dividends and the
making of loans and advances to the Company by its subsidiaries may be subject
to statutory or contractual restrictions, are contingent upon the earnings of
those subsidiaries and are subject to various business considerations. Any
right of the Company to receive assets of any of its subsidiaries upon their
liquidation or reorganization (and the consequent right of the holders of the
New Notes to participate in those assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except
to the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company.
Each New Note will bear interest at the rate per annum shown on the cover
page of this Prospectus from the most recent date to which interest has been
paid on the Old Notes or, if no interest has been paid on the Old Notes, from
February 15, 1998. Interest on the Notes will be payable on each February 15
and August 15 (each an "Interest Payment Date"), commencing August 15, 1998,
to holders of record at the close of business on the February 1 and August 1
immediately preceding such interest payment date. Interest on the New Notes
will be computed on the basis of a 360-day year consisting of twelve 30-day
months.
The New Notes are not savings accounts or deposits and are not insured by
the Federal Deposit Insurance Corporation.
OPTIONAL REDEMPTION
The New Notes will not be redeemable at the option of the Company prior to
February 15, 2003. Thereafter, the New Notes will be redeemable, at the
Company's option, in whole or in part, at any time or from time to time, upon
not less than 30 nor more than 60 days' prior notice mailed by first-class
mail to each
42
<PAGE>
holder's registered address, at the following redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid interest, if any, to
the redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on February 15 of the years set
forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003........................................................... 104.00%
2004........................................................... 102.67%
2005........................................................... 101.33%
2006 and thereafter............................................ 100.00%
</TABLE>
If less than all of the New Notes are to be redeemed, the Trustee will
select the New Notes to be redeemed on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder shall have the right
to require that the Company repurchase all or a portion of such holder's New
Notes at a purchase price in cash equal to 101 percent of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of repurchase
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), in accordance
with the provisions of the next paragraph.
Within 30 days following any Change of Control, the Company shall mail a
notice to each holder with a copy to the Trustee stating: (i) that a Change of
Control has occurred and that such holder has the right to require the Company
to purchase such holder's New Notes at a purchase price in cash equal to 101
percent of the principal amount outstanding at the repurchase date plus
accrued and unpaid interest, if any, to the date of repurchase (subject to the
right of holders of record on the relevant record date to receive interest on
the relevant interest payment date); (ii) the circumstances and relevant facts
and relevant financial information regarding such Change of Control; (iii) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (iv) the instructions determined by
the Company, consistent with the covenant described hereunder, that a holder
must follow in order to have its New Notes repurchased.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of New Notes pursuant to the covenant
described hereunder. To the extent that the provisions of any securities laws
or regulations conflict with the provisions of the covenant described
hereunder, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
covenant described hereunder by virtue thereof.
Future Indebtedness of the Company may contain prohibitions of certain
events which would constitute a Change of Control or require such Indebtedness
to be repurchased upon a Change of Control. Moreover, the exercise by the
holders of their right to require the Company to repurchase the New Notes
could cause a default under such Indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on the
Company. Finally, the Company's ability to pay cash to the holders upon a
repurchase may be limited by the Company's then existing financial resources.
There can be no assurance that sufficient funds will be available when
necessary to make any repurchases required in connection with a Change of
Control. The Company's failure to purchase the New Notes in connection with a
Change in Control would result in a default under the Indenture which could,
in turn, constitute a default under other Indebtedness.
43
<PAGE>
CERTAIN COVENANTS
Maintenance of Consolidated Net Worth
The Indenture provides that if the Consolidated Net Worth of the Company and
its Restricted Subsidiaries at the end of any two consecutive fiscal quarters
is less than $200 million, then the Company will offer to acquire (the
"Offer") on the last day of the fiscal quarter next following such second
fiscal quarter or, if such second fiscal quarter ends on the last day of the
Company's fiscal year, 135 days after the end of such second fiscal quarter
(the "Purchase Date"), 10 percent of the aggregate principal amount of the New
Notes originally issued (or, if less than 10 percent of the principal amount
of the New Notes originally issued are then outstanding, then all of the New
Notes outstanding at that time) at a purchase price equal to 100 percent of
the aggregate principal amount thereof together with accrued and unpaid
interest, if any, to the Purchase Date. In no event shall the failure to meet
the minimum Consolidated Net Worth stated above at the end of any fiscal
quarter be counted toward more than one Offer.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of New Notes pursuant to the covenant
described above. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described above, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described above by virtue thereof. If an Offer to acquire New Notes is
oversubscribed, the Company shall acquire New Notes on a pro rata basis or by
lot or in such other manner as the Trustee shall deem fair and appropriate.
Limitation on Additional Indebtedness
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, Incur any Indebtedness unless, after giving effect
thereto, either (i) the ratio of Indebtedness of the Company and the
Restricted Subsidiaries (excluding, for purposes of this calculation only, (A)
purchase money mortgages that are Non-Recourse Indebtedness, and (B)
Indebtedness Incurred under letters of credit, escrow agreements and surety
bonds obtained in the ordinary course of business), to Consolidated Tangible
Net Worth of the Company is less than 2.25 to 1; or (ii) the Consolidated
Coverage Ratio exceeds 2.0 to 1.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may Incur: (i) Indebtedness under one or more Bank Credit Facilities in an
amount not in excess of $275 million; (ii) purchase money mortgages that are
Non-Recourse Indebtedness; (iii) obligations Incurred under letters of credit,
escrow agreements and surety bonds in the ordinary course of business;
(iv) Indebtedness Incurred under a Warehouse Facility, provided that the
amount of such Indebtedness (excluding funding drafts issued thereunder)
outstanding at any time pursuant to this clause (iv) may not exceed 98 percent
of the value of the Mortgages pledged to secure Indebtedness thereunder; and
(v) Indebtedness Incurred solely for the purpose of refinancing or repaying
any existing Indebtedness so long as (A) the principal amount of such new
Indebtedness does not exceed the principal amount of the existing Indebtedness
refinanced or repaid (plus the premiums or other payments required to be paid
in connection with such refinancing or repayment and the expenses incurred in
connection therewith), (B) the maturity of such new Indebtedness is not
earlier than that of the existing Indebtedness to be refinanced or repaid, (C)
such new Indebtedness, determined as of the date of Incurrence, has an Average
Life at least equal to the remaining Average Life of the Indebtedness to be
refinanced or repaid, (D) the new Indebtedness is pari passu with or
subordinate to the Indebtedness being refinanced or repaid, and (E) the
existing and new Indebtedness are obligations of the same entity.
The Company and its Subsidiaries will retain the ability to incur
significant additional borrowings irrespective of the limitations set forth
above.
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Limitations on Liens
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, issue, assume, guarantee or suffer to exist any
Indebtedness secured by any mortgage, pledge, lien or other encumbrance of any
nature (herein collectively referred to as a "lien" or "liens") upon any
property of the Company or any Restricted Subsidiary, or on any shares of
stock of any Restricted Subsidiary, without in any such case effectively
providing that the New Notes (together with, if the Company shall so
determine, any other Indebtedness of the Company or such Restricted Subsidiary
ranking pari passu with the New Notes) shall be secured equally and ratably
with such Indebtedness, except that the foregoing restrictions shall not apply
to: (i) liens existing on December 31, 1997; (ii) pledges, guarantees and
deposits under workers' compensation laws, unemployment insurance laws or
similar legislation, good faith deposits under bids, tenders or contracts,
deposits to secure public or statutory obligations or appeal or similar bonds,
and liens created by special assessment districts used to finance
infrastructure improvements; (iii) liens existing on property or assets of any
entity on the date on which it becomes a Restricted Subsidiary, which secured
Indebtedness is not Incurred in contemplation of such entity becoming a
Restricted Subsidiary; (iv) liens on or leases of model home units; (v) liens
on property, inventory and receivables of Panel Concepts to provide working
capital (exclusive of cash and cash equivalents) for Panel Concepts in the
ordinary course of business; (vi) Capitalized Lease Obligations entered into
in the ordinary course of business in amounts not in excess of $10 million in
the aggregate; (vii) the replacement of any of the items set forth in clauses
(i) through (vi) above, provided that (A) the principal amount of the
Indebtedness secured by liens shall not be increased, (B) such Indebtedness,
determined as of the date of Incurrence, has an Average Life at least equal to
the remaining Average Life of the Indebtedness to be refinanced, (C) the
maturity of such Indebtedness is not earlier than that of the Indebtedness to
be refinanced, and (D) the liens shall be limited to the property or part
thereof which secured the lien so replaced or property substituted therefor as
a result of the destruction, condemnation or damage of such property; (viii)
liens on property acquired, constructed or improved by the Company or any
Restricted Subsidiary, which liens are either existing at the time of such
acquisition or at the time of completion of construction or improvement or
created within 120 days after such acquisition, completion or improvement, to
secure Indebtedness Incurred or assumed to finance all or part of such
property, including any increase in the principal amount of such Indebtedness
and any extension of the repayment schedule and maturity of such Indebtedness
Incurred or entered into in the ordinary course of business; (ix) liens or
priorities incurred in the ordinary course of business, such as laborers',
employees', carriers', mechanics', vendors' and landlords' liens or
priorities; (x) liens for certain taxes and certain survey and title
exceptions; (xi) liens arising out of judgments or awards against the Company
or any Restricted Subsidiary with respect to which the Company or such
Restricted Subsidiary is in good faith prosecuting an appeal or proceeding for
review and with respect to which it has secured a stay of execution pending
such appeal or proceeding for review; (xii) liens on property owned by any
Homebuilding Joint Venture; (xiii) liens securing a Warehouse Facility,
provided that such liens shall not extend to any assets other than the
mortgages, promissory notes and other collateral that secures mortgage loans
made by the Company or any of its Restricted Subsidiaries; and (xiv) liens
which would otherwise be subject to the foregoing restrictions which, when the
Indebtedness relating to those liens is added to all other then outstanding
Indebtedness of the Company and the Restricted Subsidiaries secured by liens
and not listed in clauses (i) through (xiii) above, does not exceed
$50 million.
Limitation on Restricted Payments
The Indenture provides that the Company will not, nor will it permit any
Restricted Subsidiary to, directly or indirectly, (i) declare or pay any
dividend on, or make any distribution in respect of, or purchase, redeem or
otherwise acquire or retire for value, any Capital Stock of the Company other
than through the issuance solely of the Company's own Capital Stock (other
than Disqualified Stock), or rights thereto; (ii) make any principal payment
on, or redeem, repurchase, defease or otherwise acquire or retire for value
prior to scheduled principal payments or maturity, Indebtedness of the Company
or any Restricted Subsidiary which is expressly subordinated in right of
payment to the New Notes (other than Indebtedness Incurred after the issuance
of the New Notes provided that such repayment, redemption, repurchase,
defeasance or other retirement is made substantially concurrent with the
receipt of proceeds from the Incurrence of Indebtedness that by its terms is
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both subordinated in right of payment to the New Notes and matures, by sinking
fund or otherwise, after February 15, 2008); or (iii) make any Restricted
Investment (such payments or any other actions described in (i), (ii) and
(iii), being referred to herein collectively as, "Restricted Payments") unless
(A) at the time of, and after giving effect to, the proposed Restricted
Payment, no Event of Default (and no event that, after notice or lapse of
time, or both, would become an Event of Default) shall have occurred and be
continuing, (B) the Company is able to Incur an additional $1.00 of
Indebtedness pursuant to the first paragraph of the covenant described under
"--Limitation on Additional Indebtedness" and (C) at the time of, and after
giving effect thereto, the sum of the aggregate amount expended (or with
respect to guaranties or similar arrangements the amount then guaranteed) for
all such Restricted Payments (the amount expended for such purposes, if other
than in cash, to be determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a resolution of such Board
of Directors filed with the Trustee) subsequent to June 30, 1997 shall not
exceed the sum of (1) 50 percent of the aggregate Consolidated Net Income (or,
in case such aggregate Consolidated Net Income shall be a deficit, minus 100
percent of such deficit) of the Company accrued on a cumulative basis
subsequent to June 30, 1997; (2) the aggregate net proceeds, including the
fair market value of property other than cash (as determined by the Board of
Directors of the Company, whose determination shall be conclusive and
evidenced by a resolution of such Board of Directors filed with the Trustee),
received by the Company from the issuance or sale, after the Original Issue
Date, of Capital Stock (other than Disqualified Stock) of the Company,
including Capital Stock (other than Disqualified Stock) of the Company issued
subsequent to the Original Issue Date upon the conversion of Indebtedness of
the Company initially issued for cash; (3) 100 percent of dividends or
distributions (the fair value of which, if other than cash, to be determined
by the Board of Directors, in good faith) paid to the Company (or any
Restricted Subsidiary) by an Unrestricted Subsidiary, Homebuilding Joint
Venture or any other person in which the Company (or any Restricted
Subsidiary), directly or indirectly, has an ownership interest but less than a
100 percent ownership interest to the extent that such dividends or
distributions do not exceed the amount of loans, advances or capital
contributions made to any such entity or person subsequent to the Original
Issue Date and included in the calculation or Restricted Payments; and (4) $40
million.
The foregoing shall not prevent (i) the payment of any dividend within 60
days after the date of declaration thereof, if at said date of declaration the
making of such payment would have complied with the provisions of this
limitation on dividends; provided, however, that such dividend shall be
included in future calculations of Restricted Payments; (ii) the retirement of
any shares of the Company's Capital Stock by exchange for, or out of proceeds
of the substantially concurrent sale of, other shares of its Capital Stock
(other than Disqualified Stock); provided, however, that the aggregate net
proceeds from such sale shall be excluded from the calculation of the amounts
under clause (C)(2) of the immediately preceding paragraph; (iii) the
redemption, repayment, repurchase, defeasance or other retirement of
Indebtedness with proceeds received from the substantially concurrent sale of
shares of the Company's Capital Stock (other than Disqualified Stock);
provided, however, that the aggregate net proceeds from such sale shall be
excluded from the calculation of the amounts under clause (C)(2) of the
immediately preceding paragraph; or (iv) any investment or investments in
Savings by the Company or any of its Restricted Subsidiaries for the purpose
of causing Savings to comply with any regulatory agreements existing on the
Original Issue Date or with any applicable law, rule, regulation, official
interpretation of law, rule or regulation or official directive which governs
the capital maintenance, net worth or similar regulatory requirements
applicable to Savings.
Limitation on Asset Sales
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, make an Asset Disposition, other than for fair
market value and in the ordinary course of business, with an aggregate net
book value as of the end of the immediately preceding fiscal quarter greater
than 10 percent of the Company's total consolidated assets as of that date
unless (i) the consideration received by the Company (or a Restricted
Subsidiary, as the case may be) for such disposition consists of at least 70
percent cash; provided, however, that for purposes of this provision (i), the
amount of any liabilities assumed by the transferee and any notes or other
obligations received by the Company or a Restricted Subsidiary which are
immediately converted into cash shall
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be deemed to be cash; and (ii) the Company shall within one year after the
date of such sale or sales, apply the net proceeds from such sale or sales in
excess of an amount equal to 10 percent of the Company's total consolidated
assets to (A) a purchase of or an Investment in Additional Assets (other than
cash or cash equivalents), (B) repayment of indebtedness of the Company which
is pari passu with the New Notes, and/or (C) make an offer to acquire all or
part of the New Notes at a purchase price equal to the principal amount
thereof plus accrued and unpaid interest thereon to the purchase date.
Any such offer to acquire New Notes will be mailed not less than 30 days nor
more than 60 days prior to the proposed date of purchase to each holder at its
last registered address. The Company shall comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase of Notes
pursuant to the covenant described above. To the extent that the provisions of
any securities laws or regulations conflict with the provisions of the
covenant described above, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the covenant described above by virtue thereof. If an offer
hereunder is oversubscribed, the Company shall acquire New Notes on a pro rata
basis or by lot or in such other manner as the Trustee shall deem fair and
appropriate.
Transactions with Affiliates
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into or permit to exist any transaction or series of related
transactions (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof
(i) are no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained at the time of such transaction in arm's-length
dealings with a person who is not such an Affiliate; and (ii) if such
Affiliate Transaction (or series of related Affiliate Transactions) involve
aggregate payments in an amount in excess of $10 million in any one year, (A)
are set forth in writing, (B) comply with clause (i) above and (C) have been
approved by a majority of the disinterested members of the Board of Directors.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described
under "--Limitation on Restricted Payments" above; (ii) any issuance of
securities, or other payments, awards or grants in cash, securities or
otherwise, pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans in the ordinary course of business and
approved by the Board of Directors or a committee thereof; (iii) the grant of
stock options or similar rights to employees and directors of the Company in
the ordinary course of business and pursuant to plans approved by the Board of
Directors or a committee thereof; (iv) loans or advances to employees in the
ordinary course of business of the Company or its Restricted Subsidiaries; (v)
fees, compensation or employee benefit arrangements paid to and indemnity
provided for the benefit of directors, officers or employees of the Company or
any Subsidiary in the ordinary course of business; or (vi) any Affiliate
Transaction between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries.
Limitation on Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any
consensual encumbrance or consensual restriction on the ability of any
Restricted Subsidiary (i) to pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (ii) to make any loans or advances to the
Company or (iii) transfer any of its property or assets to the Company,
except: (A) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Original Issue Date; (B) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary which was
entered into on or prior to the date on which such Restricted Subsidiary was
acquired by the Company (other than as consideration in, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which
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such Restricted Subsidiary became a Restricted Subsidiary or was acquired by
the Company) and outstanding on such date; (C) any encumbrance or restriction
pursuant to an agreement effecting a Refinancing of Indebtedness Incurred
pursuant to an agreement referred to in clause (A) or (B) of this covenant (or
effecting a Refinancing of such Refinancing Indebtedness pursuant to this
clause (C)) or contained in any amendment to an agreement referred to in
clause (A) or (B) of this covenant or this clause (C); provided, however, that
the encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such refinancing agreement or amendment are no more
restrictive in any material respect than the encumbrances and restrictions
with respect to such Restricted Subsidiary contained in such agreements; (D)
any such encumbrance or restriction consisting of customary contractual non-
assignment provisions to the extent such provisions restrict the transfer of
rights, duties or obligations under such contract; (E) in the case of clause
(iii) above, restrictions contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such security
agreements or mortgages; (F) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition; and (G)
any restriction imposed by applicable law.
Restricted and Unrestricted Subsidiaries
The Company will not permit any Restricted Subsidiary to be designated as an
Unrestricted Subsidiary unless the Company and its Restricted Subsidiaries
would thereafter be permitted to (i) Incur at least $1.00 of Indebtedness
pursuant to the first paragraph of the covenant described under "--Limitation
on Additional Indebtedness" above and (ii) make a Restricted Payment of at
least $1.00 pursuant to the first paragraph of the covenant described under
"--Limitation on Restricted Payments" above.
The Company will not permit any Unrestricted Subsidiary to be designated as
a Restricted Subsidiary unless such Subsidiary has outstanding no Indebtedness
except such Indebtedness as the Company could permit it to become liable for
immediately after becoming a Restricted Subsidiary under the provisions of the
covenant described under "--Limitation on Additional Indebtedness" above.
The Company will not permit Standard Pacific of Texas, Inc. to be designated
as an Unrestricted Subsidiary or permit the assets of the Company or any
Subsidiary employed in homebuilding operations to be transferred to an
Unrestricted Subsidiary, except in amounts permitted under the limitation on
Restricted Payments.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Indenture provides that the Company may not consolidate with, merge into
or transfer all or substantially all of its assets to another person unless
(i) such person (if other than the Company) is a corporation organized under
the laws of the United States or any state thereof or the District of Columbia
and expressly assumes all the obligations of the Company under the Indenture
and the Notes; (ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; (iii) the
Consolidated Net Worth of the obligor of the New Notes immediately after such
transaction (exclusive of any adjustments to Consolidated Net Worth relating
to transaction costs and accounting adjustments resulting from such
transaction) is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; and (iv) the surviving corporation
would be able to Incur at least an additional $1.00 of Indebtedness pursuant
to the first paragraph of the covenant described under "--Certain Covenants--
Limitation on Additional Indebtedness" above.
EVENTS OF DEFAULT
The Indenture provides that, if an Event of Default specified therein shall
have occurred and be continuing, with respect to the New Notes, the Trustee or
the holders of not less than 25% in aggregate principal amount of the New
Notes may declare the principal amount of the Notes to be immediately due and
payable. Under certain circumstances, the holders of a majority in aggregate
principal amount of the New Notes may rescind such a declaration.
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Under the Indenture, an Event of Default is defined as, with respect to the
New Notes, any of the following: (i) default in payment of the principal of
any New Note; (ii) default in payment of any interest on any New Note when
due, continuing for 30 days; (iii) failure by the Company to comply with its
other agreements in the New Notes or the Indenture for the benefit of the
holders of the New Notes upon the receipt by the Company of notice of such
Default by the Trustee or the holders of at least 25% in aggregate principal
amount of the New Notes and the Company's failure to cure such Default within
45 days after receipt by the Company of such notice; (iv) certain events of
bankruptcy or insolvency; (v) default under any mortgage, indenture (including
the Indenture) or instrument under which is issued or which secures or
evidences Indebtedness of the Company or any Restricted Subsidiary (other than
Non-Recourse Indebtedness) which default constitutes a failure to pay
principal of such Indebtedness in an amount of $20 million or more when due
and payable (other than as a result of acceleration) or results in
Indebtedness (other than Non-Recourse Indebtedness) in the aggregate of
$20 million or more becoming or being declared due and payable before it would
otherwise become due and payable; and (vi) entry of a final judgment for the
payment of money against the Company or any Restricted Subsidiary in an amount
of $5 million or more which remains undischarged or unstayed for a period of
60 days after the date on which the right to appeal such judgment has expired
or becomes subject to an enforcement proceeding.
The Trustee shall give notice to holders of the New Notes of any continuing
Default known to the Trustee within 90 days after the occurrence thereof;
provided, that the Trustee may withhold such notice, as to any Default other
than a payment Default, if it determines in good faith that withholding the
notice is in the interests of the holders.
The holders of a majority in principal amount of the New Notes may direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the New Notes, provided that such directions shall not
be in conflict with any law or the Indenture and subject to certain other
limitations. Before proceeding to exercise any right or power under the
Indenture at the direction of such holders, the Trustee shall be entitled to
receive from such holders reasonable security or indemnity satisfactory to it
against the costs, expenses and liabilities which might be incurred by it in
complying with any such direction. No holder of New Notes will have any right
to pursue any remedy with respect to the Indenture or the New Notes, unless
(i) such holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the New Notes; (ii) the holders of
at least 25% in aggregate principal amount of the New Notes shall have made a
written request to the Trustee to pursue such remedy; (iii) such holder or
holders have offered to the Trustee reasonable indemnity satisfactory to the
Trustee; (iv) the holders of a majority in aggregate principal amount of the
New Notes have not given the Trustee a direction inconsistent with such
request within 60 days after receipt of such request; and (v) the Trustee
shall have failed to comply with the request within such 60-day period.
Notwithstanding the foregoing, the right of any holder of any New Note to
receive payment of the principal of and interest in respect of such New Note
on the Stated Maturity expressed in such New Note or to institute suit for the
enforcement of any such payments shall not be impaired or adversely affected
without such holder's consent. The holders of at least a majority in aggregate
principal amount of the New Notes may waive an existing Default with respect
to the New Notes and its consequences, other than (i) any Default in any
payment of the principal of or interest on any New Note or (ii) any Default in
respect of certain covenant or provisions in the Indenture which may not be
modified without the consent of the holder of each New Note as described in
"Modification and Waiver," below.
MODIFICATION AND WAIVER
The Company and the Trustee may execute a supplemental indenture without the
consent of the holders of the New Notes (i) to add to the covenants,
agreements and obligations of the Company for the benefit of the holders of
all the New Notes or to surrender any right or power conferred in the
Indenture upon the Company; (ii) to evidence the succession of another
corporation to the Company and the assumption by it of the obligations of the
Company under the Indenture and the New Notes; (iii) to establish the form or
terms of the New Notes as
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permitted by Sections 2.01 and 2.03(a) of the Indenture; (iv) to provide for
the acceptance of appointment under the Indenture of a successor Trustee with
respect to the New Notes and to add to or change any provisions of the
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts by more than one Trustee; (v) to cure any
ambiguity, defect or inconsistency; (vi) to secure the New Notes; or (ix) to
make any other change that does not adversely affect the rights of any holder.
With the consent of the holders of not less than a majority in aggregate
principal amount of the New Notes, the Company and the Trustee may also
execute a supplemental indenture to add provisions to, or change in any manner
or eliminate any provisions of, the Indenture with respect to the New Notes or
modify in any manner the rights of the holders of the New Notes, provided that
no such supplemental indenture will, without the consent of the holder of each
such New Note affected thereby (i) change the stated maturity of the principal
of, or any installment of principal or interest on, any New Note or any
premium payable upon redemption thereof; (ii) reduce the principal amount of,
or the rate of interest on, any New Note; (iii) change the place or currency
of payment of principal or interest, if any, on any New Note; (iv) impair the
right to institute suit for the enforcement of any payment on or with respect
to any New Note; (v) reduce the above-stated percentage of holders of the New
Notes necessary to modify or amend the Indenture; or (vi) modify the foregoing
requirements or reduce the percentage in principal amount of New Notes
necessary to waive any covenant or past default. Holders of not less than a
majority in principal amount of the New Notes may waive certain past Defaults
and may waive compliance by the Company with certain of the restrictive
covenants described above with respect to the New Notes.
DISCHARGE
The Company may satisfy and discharge obligations under the Indenture with
respect to the New Notes by delivering to the Trustee for cancellation all
outstanding New Notes or depositing with the Trustee, after such outstanding
New Notes have become due and payable, cash sufficient to pay at Stated
Maturity all of the outstanding New Notes and paying all other sums payable
under the Indenture with respect to the New Notes.
THE TRUSTEE
The Trustee is United States Trust Company of New York. The Trustee will be
permitted to engage in certain transactions with the Company and its
subsidiaries; provided, however, if the trustee acquires any conflicting
interest, it must eliminate such conflict or resign.
REPORTS TO HOLDERS OF THE NEW NOTES
So long as the Company is subject to the periodic reporting requirements of
the Exchange Act, it will continue to furnish the information required thereby
to the Commission. The Indenture provides that even if the Company is entitled
under the Exchange Act not to furnish such information to the Commission or to
the holders of the New Notes, it will nonetheless continue to furnish
information under Section 13 or 15(d) of the Exchange Act to the Commission
and the Trustee as if it were subject to such periodic reporting requirements.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the Indenture.
Reference is made to the Indenture for the full definition of all such terms,
as well as any other capitalized terms used herein for which no definition is
provided.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; or (ii) the Capital
Stock of a person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; provided, however, that any such Restricted Subsidiary is
primarily engaged in a Related Business. For purposes of this definition,
"Related
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Business" means any business related, ancillary or complimentary (as defined
in good faith by the Board of Directors) to the business of the Company and
the Restricted Subsidiaries on the Original Issue Date.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct or cause the direction of the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by the Company or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of
this definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares and, to the
extent required by local ownership laws in foreign countries, shares owned by
foreign shareholders); (ii) all or substantially all the assets of any
division, business segment or comparable line of business of the Company or
any Restricted Subsidiary; or (iii) any other assets of the Company or any
Restricted Subsidiary having a fair market value (as determined in good faith
by the Board of Directors) in excess of $250,000 disposed of in a single
transaction or series of related transactions outside of the ordinary course
of business of the Company or such Restricted Subsidiary (other than, in the
case of (i), (ii) and (iii) above, a disposition by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from the date of determination to the dates of each
successive scheduled principal payment (assuming the exercise by the obligor
of such Indebtedness of all unconditional (other than as to the giving of
notice) extension options of each such scheduled payment date) of such
Indebtedness multiplied by the amount of such principal payment by (ii) the
sum of all such principal payments.
"Bank Credit Facility" means the Revolving Credit Facility and any bank
credit agreement or credit facility entered into in the future by the Company
or any Restricted Subsidiary, as any of the same may be amended, waived,
modified, refinanced or replaced from time to time.
"Capitalized Lease Obligations" means any obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
generally accepted accounting principles.
"Capital Stock" of any person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), is or becomes the beneficial owner (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes
of this clause such person or group shall be deemed to have "beneficial
ownership" of all shares that any such person or group has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50 percent of the
total voting power of the Voting Stock of the Company;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by
a majority vote of the directors of the Company then still in office who
were either directors at the beginning of such period or
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whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors then in
office; or
(iii) the merger or consolidation of the Company with or into another
person or the merger of another person with or into the Company, or the
sale of all or substantially all the assets of the Company to another
person, other than any such sale to one or more Restricted Subsidiaries,
and in the case of any such merger or consolidation, the securities of the
Company that are outstanding immediately prior to such transaction and
which represent 100 percent of the aggregate voting power of the Voting
Stock of the Company are changed into or exchanged for cash, securities or
property, unless pursuant to such transaction such securities are changed
into or exchanged for, in addition to any other consideration, securities
of the surviving corporation, or a parent corporation that owns all of the
Capital Stock of such surviving corporation, that represent immediately
after such transaction, at least a majority of the aggregate voting power
of the Voting Stock of the surviving corporation or such parent
corporation, as the case may be.
"Consolidated Coverage Ratio" with respect to the Company as of any date of
determination means the ratio of the Company's EBITDA to its Consolidated
Interest Incurred for the four fiscal quarters ending immediately prior to the
date of determination. Notwithstanding clause (ii) of the definition of
Consolidated Net Income, if the Indebtedness which is being Incurred is
Incurred in connection with an acquisition by the Company or a Restricted
Subsidiary, the Consolidated Coverage Ratio shall be determined after giving
effect to both the Consolidated Interest Incurred related to the Incurrence of
such Indebtedness and the EBITDA as if the acquisition had occurred at the
beginning of the four fiscal quarter period (x) of the person becoming a
Restricted Subsidiary or (y) in the case of an acquisition of assets that
constitute substantially all of an operating unit or business, relating to the
assets being acquired by the Company or a Restricted Subsidiary.
"Consolidated Interest Expense" of the Company means, for any period, the
aggregate amount of interest which, in accordance with generally accepted
accounting principles as in effect on the Original Issue Date, would be
included on an income statement for the Company and its Restricted
Subsidiaries on a consolidated basis, whether expensed directly, or included
as a component of cost of goods sold, or allocated to joint ventures or
otherwise (including, but not limited to, imputed interest included on
Capitalized Lease Obligations, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with Hedging Obligations, amortization of
other financing fees and expenses, the interest portion of any deferred
payment obligation, amortization of discount or premium, if any, and all other
non-cash interest expense), excluding interest expense related to mortgage
banking operations, plus the product of (i) cash dividends paid on any
Preferred Stock of the Company, times (ii) a fraction, the numerator of which
is one and the denominator of which is one minus the then current effective
aggregate federal, state and local tax rate of the Company, expressed as a
decimal.
"Consolidated Interest Incurred" of the Company means, for any period, (i)
the aggregate amount of interest which, in accordance with generally accepted
accounting principles as in effect on the Original Issue Date, would be
included on an income statement for the Company and its Restricted
Subsidiaries on a consolidated basis, whether expensed directly, or included
as a component of cost of goods sold, or allocated to joint ventures or
otherwise (including, but not limited to, imputed interest included on
Capitalized Lease Obligations, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with Hedging Obligations, amortization of
discount or premium, if any, and all other non-cash interest expense),
excluding interest expense related to mortgage banking operations, plus or
minus, without duplication; (ii) the difference between capitalized interest
for such period and the interest component of cost of goods sold for such
period; plus (iii) the product of (A) cash dividends paid on any Preferred
Stock of the Company, times (B) a fraction, the numerator of which is one and
the denominator of which is one minus the then current effective aggregate
federal, state and local tax rate of the Company, expressed as a decimal.
"Consolidated Net Income" for any period, means the aggregate of the Net
Income of the Company and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with generally
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accepted accounting principles as in effect on the Original Issue Date,
provided that (i) the Net Income of any person in which the Company or any
Restricted Subsidiary has, a joint interest with a third party (other than an
Unrestricted Subsidiary) shall be included only to the extent of the lesser of
(A) the amount of dividends or distributions actually paid to the Company or a
Restricted Subsidiary or (B) the Company's direct or indirect proportionate
interest in the Net Income of such person, provided that, so long as the
Company or a Restricted Subsidiary has an unqualified legal right to require
the payment of a dividend or distribution, Net Income shall be determined
solely pursuant to clause (B); (ii) the Net Income of any person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded; and (iii) the Net Income of any Unrestricted
Subsidiary shall be included only to the extent of the amount of dividends or
distributions (the fair value of which, if other than in cash, to be
determined by the Board of Directors, in good faith) by such Subsidiary to the
Company or to any of its consolidated Restricted Subsidiaries; and (iv) the
Net Income of any Unrestricted Subsidiary, any Homebuilding Joint Venture or
any other person in which the Company or any Restricted Subsidiary has a joint
interest with a third party that is not existing on December 31, 1997 shall be
included only to the extent that the aggregate amount of dividends or
distributions (the fair value of which, if other than cash, to be determined
by the Board of Directors, in good faith) by such Subsidiary or Homebuilding
Joint Venture to the Company or to any of its consolidated Restricted
Subsidiaries exceeds the aggregate amount of unpaid loans or advances and
unreturned capital contributions made by the Company or any Restricted
Subsidiary in or to such Subsidiary or Homebuilding Joint Venture.
"Consolidated Net Worth" of the Company means consolidated stockholders'
equity less any increase in stockholders' equity of each of the Unrestricted
Subsidiaries subsequent to December 31, 1997 attributable to the Company or
any of its Restricted Subsidiaries, as determined in accordance with generally
accepted accounting principles as in effect on the Original Issue Date.
"Consolidated Tangible Net Worth" with respect to the Company means the
consolidated stockholders' equity of the Company, as determined in accordance
with generally accepted accounting principles as in effect on the date of the
issuance of the New Notes, less (i) that portion of any increase of each of
the Unrestricted Subsidiaries' stockholders' equity subsequent to December 31,
1997 attributable to the Company or any of its Restricted Subsidiaries, as
determined in accordance with generally accepted accounting principles as in
effect on the Original Issue Date; and (ii) the Intangible Assets of the
Company and the Restricted Subsidiaries. "Intangible Assets" means the amount
(to the extent reflected in determining consolidated stockholders' equity) of
(A) all write-ups (other than write-ups of tangible assets of a going concern
business made within twelve months after the acquisition of such business) in
the book value of any asset owned by the Company or any Restricted Subsidiary,
and (B) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any person, any Capital Stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise; (ii) is convertible or exchangeable, at the option of
the holder thereof, for Indebtedness or Disqualified Stock; or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to February 15, 2009. Notwithstanding the foregoing,
"Disqualified Stock" shall not include Capital Stock which is redeemable
solely pursuant to a change in control provision that does not (A) cause such
Capital Stock to become redeemable in circumstances which would not constitute
a Change of Control and (B) require the Company to pay the redemption price
therefor prior to the repurchase date specified under "--Change of Control"
above.
"EBITDA" of the Company for any period means the sum of Consolidated Net
Income plus Consolidated Interest Expense plus, without duplication, the
following to the extent deducted in calculating such Consolidated Net Income:
(i) income tax expense, (ii) depreciation expense, (iii) amortization expense
and (iv) all other non-cash items reducing Consolidated Net Income (other than
items that will require cash payments in the future and
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for which an accrual or reserve is, or is required by generally accepted
accounting principals as in effect on the date of issuance of the Notes to be,
made), less all non-cash items increasing Consolidated Net Income, in each
case for such period. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and amortization of, a
Subsidiary of the Company shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such Subsidiary was included in calculating Consolidated Net Income.
"Hedging Obligations" of any person means the net obligations of such person
pursuant to any Interest Rate Agreement or any foreign exchange contract,
currency swap agreement or other similar agreement to which such person is a
party or a beneficiary.
"Homebuilding Joint Venture" means (i) any Unrestricted Subsidiary and (ii)
any person in which the Company or any of its Subsidiaries has an ownership
interest but less than a 100 percent ownership interest that, in each case,
was formed for and is engaged in homebuilding operations.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a person
existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by
such Subsidiary at the time it becomes a Subsidiary; provided further,
however, that in the case of a discount security, neither the accrual of
interest nor the accretion of original issue discount shall be considered an
Incurrence of Indebtedness. The term "Incurrence" when used as a noun shall
have a correlative meaning.
"Indebtedness" means on any date of determination (without duplication), (i)
the principal of and premium (if any) in respect of (A) indebtedness of such
person for money borrowed and (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such person is
responsible or liable; (ii) all Capitalized Lease Obligations of such person;
(iii) all obligations of such person issued or assumed as the deferred
purchase price of property or services, all conditional sale obligations of
such person and all obligations of such person under any title retention
agreement (but excluding accounts payable and accrued expenses arising in the
ordinary course of business and which are not more than 90 days past due and
not in dispute) which would appear as a liability on a balance sheet of a
person prepared on a consolidated basis in accordance with generally accepted
accounting principles, which purchase price or obligation is due more than six
months after the date of placing such property in service or taking delivery
and title thereto or the completion of such services (provided that, in the
case of obligations of an acquired person assumed in connection with an
acquisition of such person, such obligations would constitute Indebtedness of
such person); (iv) all obligations of such person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the tenth Business Day following
receipt by such person of a demand for reimbursement following payment on the
letter of credit); (v) the amount of all obligations of such person with
respect to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary of such person, any Preferred Stock
(but excluding, in each case, any accrued dividends); (vi) all obligations of
the type referred to in clauses (i) through (v) of other persons and all
dividends of other persons for the payment of which, in either case, such
person is responsible or liable, directly or indirectly, as obligor, guarantor
or otherwise, including by means of any guarantee; (vii) all obligations of
the type referred to in clauses (i) through (vi) of other persons secured by
any lien on any property or asset of such person (whether or not such
obligation is assumed by such person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the amount
of the obligation so secured; and (viii) to the extent not otherwise included
in this definition, Hedging Obligations of such Person. The amount of
Indebtedness of any person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency, other than a contingency
solely within the control of such person, giving rise to the obligation, of
any contingent obligations as described above at such date; provided, however,
that the amount outstanding at
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any time of any Indebtedness issued with original issue discount shall be
deemed to be the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such indebtedness at
such time as determined in conformity with generally accepted accounting
principles.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed to
protect the Company or any Restricted Subsidiary against fluctuations in
interest rates.
"Investment" in any person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such person) or other
extensions of credit (including by way of guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such person.
"Mortgage" means a first priority mortgage or first priority deed of trust
on improved real property.
"Net Income" of any person means the net income (loss) of such person,
determined in accordance with generally accepted accounting principles as in
effect on the Original Issue Date; excluding, however, from the determination
of Net Income all gains (to the extent that they exceed all losses) realized
upon the sale or other disposition (including, without limitation,
dispositions pursuant to sale leaseback transactions) of any real property or
equipment of such person, which is not sold or otherwise disposed of in the
ordinary course of business, or of any capital stock of such person or its
subsidiaries owned by such person.
"Non-Recourse Indebtedness" means Indebtedness or other obligations secured
by a lien on property to the extent that the liability for such Indebtedness
or other obligations is limited to the security of the property without
liability on the part of the Company or any Subsidiary (other than the
Subsidiary which holds title to such property) for any deficiency.
"Person" means an individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
partnership, trust, unincorporated organization, or government or any agency
or political subdivision thereof.
"Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Refinance" means, in respect of Indebtedness, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinancing"
shall have a correlative meaning.
"Restricted Investment" means any loan, advance, capital contribution or
transfer (including by way of guaranty or other similar arrangement) in or to
any Unrestricted Subsidiary, Homebuilding Joint Venture or any person in which
the Company, directly or indirectly, has an ownership interest but less than
100 percent ownership interest; provided, however, that loans, advances,
capital contributions or transfers (including by way of guaranty or other
similar arrangement) to a Homebuilding Joint Venture shall be counted as a
Restricted Investment only to the extent that the aggregate at any one time
outstanding of all such amounts expended (or with respect to guaranties or
similar arrangements the amounts then guaranteed) exceed, subsequent to
December 31, 1996, $20 million for any one Homebuilding Joint Venture or $80
million in the aggregate for all Homebuilding Joint Ventures. Restricted
Investment shall include the fair market value of the net assets of any
Restricted Subsidiary that at any time is designated an Unrestricted
Subsidiary. Any property transferred to an Unrestricted Subsidiary, and the
net assets of a Restricted Subsidiary that is designated an Unrestricted
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Subsidiary, shall be valued at fair market value at the time of such transfer,
in each case as determined by the Board of Directors of the Company in good
faith. The net assets of Panel Concepts shall not be counted as a Restricted
Investment if (i) a sale of all or a portion of the Capital Stock of Panel
Concepts causes Panel Concepts to become an Unrestricted Subsidiary; (ii) at
the time of such sale, the net book value of the assets of Panel Concepts
represent less than 10 percent of the consolidated assets of the Company and
its Restricted Subsidiaries; and (iii) the net proceeds of any such sale and
any subsequent sale of the Capital Stock of Panel Concepts to any person other
than the Company or any Restricted Subsidiary are paid or distributed to the
Company or any Restricted Subsidiary.
"Restricted Subsidiary" means any Wholly Owned Subsidiary that has not been
designated an Unrestricted Subsidiary.
"Subsidiary" means a corporation, a majority of the capital stock with
voting power to elect directors of which is directly or indirectly owned by
the Company and its Subsidiaries, or any person in which the Company and its
Subsidiaries has at least a majority ownership interest.
"Unrestricted Subsidiary" means (i) any Subsidiary in which the Company,
directly or indirectly, has less than a 100 percent ownership interest, (ii)
any Wholly Owned Subsidiary which, in accordance with the provisions of the
Indenture, has been designated in a resolution adopted by the Board of
Directors of the Company as an Unrestricted Subsidiary, in each case unless
and until such Subsidiary shall, in accordance with the provisions of the
Indenture, be designated by a resolution of the Company as a Restricted
Subsidiary; and (iii) any Wholly Owned Subsidiary a majority of the voting
stock of which shall at the time be owned directly or indirectly by one or
more Unrestricted Subsidiaries. At the date of issuance of the New Notes, the
Company will have designated Family Lending Services, Savings, Standard
Pacific Financing Inc. and Standard Pacific Financing L.P. as Unrestricted
Subsidiaries.
"Voting Stock", with respect to any person, means securities of any class of
Capital Stock of such person entitling the holders thereof (whether at all
times or only so long as no senior class of stock has voting power by reason
of any contingency) to vote in the election of members of the board of
directors of such person.
"Warehouse Facility" means a Bank Credit Facility to finance the making of
Mortgage loans originated by the Company or any of its Subsidiaries.
"Wholly Owned Subsidiary" means a Subsidiary, all of the capital stock
(whether or not voting, but exclusive of directors' qualifying shares) of
which is owned by the Company or a Wholly Owned Subsidiary.
BOOK-ENTRY, DELIVERY AND FORM
The New Notes initially will be represented by one or more New Notes in
registered global form (the "New Global Notes"). The New Global Notes will be
deposited with the Trustee as custodian for DTC and registered in the name of
Cede & Co., as nominee of DTC (such nominee being referred to herein as the
"Global Note Holder"). DTC will maintain the New Notes in denominations of
$1,000 and integral multiples thereof through its book-entry facilities.
DTC has advised the Company that it is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act that was created to hold securities for its
participating organizations (collectively, the "Participants" or "DTC's
Participants") and to facilitate the clearance and settlement of transactions
in such securities between Participants through electronic book-entry changes
in accounts of its Participants. DTC's Participants include securities brokers
and dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to DTC's system
is also available to other entities such as banks, securities
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brokers, dealers and trust companies (collectively, the "Indirect
Participants" or "DTC's Indirect Participants") that clear through or maintain
a custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through DTC's Participants or DTC's Indirect Participants.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the New Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchasers with portions of the principal amount of
the New Global Notes and (ii) ownership of beneficial interests in the New
Global Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
interests of DTC's Participants), DTC's Participants and DTC's Indirect
Participants.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in the New Global Notes will be limited to such
extent.
Investors in the New Global Notes may hold their interests therein directly
through DTC, if they are Participants in such system, or through Indirect
Participants.
So long as the Global Note Holder is the registered owner of the New Global
Notes, the Global Note Holder will be considered the sole holder of
outstanding New Notes under the Indenture. Except as provided below, owners of
beneficial interests in the New Global Notes will not be entitled to have New
Notes registered in their names and will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial interests in the New Global Notes by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to such
beneficial ownership interests.
Payments in respect of the principal of, premium, if any, and interest on
any New Global Notes registered in the name of a Global Note Holder on the
applicable record date will be payable by the Trustee to or at the direction
of such Global Note Holder in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names any New Notes, including the New Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, none of
the Company or the Trustee has or will have any responsibility or liability
for the payment of such amounts to owners of beneficial interests in the New
Global Notes (including principal, premium, if any, and interest). The Company
believes, however, that it is currently the policy of DTC to immediately
credit the accounts of the relevant Participants with such payments, in
amounts proportionate to their respective beneficial interests in the relevant
security as shown on the records of the Depositary. Payments by DTC's
Participants and DTC's Indirect Participants to the owners of beneficial
interests in the New Global Notes will be governed by standing instructions
and customary practice and will be the responsibility of DTC's Participants or
DTC's Indirect Participants.
A New Global Note may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC. A New Global Note is
exchangeable for New Notes in definitive form only if: (i) the Company
notifies the Trustee in writing that DTC is no longer willing or able to act
as a depositary and the Company is unable to locate a qualified successor
within 90 days or (ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of New Notes in definitive form
under the Indenture. In either instance, upon surrender by the relevant Global
Note Holder of its New Global Note, New Notes in definitive form will be
issued to each person that such Global Note Holder and DTC identifies as being
the beneficial owner of the related New Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or DTC in identifying the owners of beneficial interests in
the New Global Notes and the Company and the Trustee may
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conclusively rely on, and will be protected in relying on, instructions from
the Global Note Holder or DTC for all purposes.
The Indenture will require that payments in respect of the New Notes
represented by the New Global Note (including principal, premium, if any, and
interest) be made in same-day funds. The Old Notes are eligible to trade in
the PORTAL market. Following commencement of the Exchange Offer but prior to
its consummation, the Old Notes may continue to be traded in the PORTAL
market. Following consummation of the Exchange Offer, the New Notes will not
be eligible for trading on PORTAL.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities. The Company has agreed that,
starting on the Expiration Date and ending on the close of business on the
180th day following the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send a reasonable number of additional copies of this Prospectus and
any amendment or supplement to this Prospectus to any broker-dealer that
requests such documents. Additional copies of this Prospectus, the Letter of
Transmittal and other related documents may be obtained upon request to the
Exchange Agent at (800) 548-6565. The Company has agreed to pay all expenses
incident to the Exchange Offer (which shall not include any expenses of any
holder in connection with resale of the New Notes) and will indemnify the
holders of the Notes participating in the Exchange Offer (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal income
tax consequences generally applicable to holders of the New Notes. The federal
income tax considerations set forth below are based upon currently existing
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury Regulations ("Treasury Regulations"), judicial authority,
and current administrative rulings and pronouncements of the Internal Revenue
Service (the "IRS"). There can be no assurance that the IRS will not take a
contrary view, and no ruling from the IRS has been, or will be, sought on the
issues discussed herein. Legislative, judicial, or administrative changes or
interpretations may be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may or
may not be retroactive and could affect the tax consequences discussed below.
This discussion applies only to a person who is (i) an individual citizen or
resident of the United States for U.S. federal income tax purposes, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an
estate the income of which is subject to United States federal income tax
regardless of source, (iv) a trust whose administration is subject to the
primary supervision of a United States court and which has one or more United
States persons who have the authority to control all substantial decisions of
the trust, or (v) any other person whose income or gain in respect of the New
Notes is effectively connected with the conduct of a United States trade or
business (or, if applicable, attributable to a permanent establishment
situated in the United States) (a "Holder").
The summary is not a complete analysis or description of all potential
federal tax considerations that may be relevant to, or of the actual tax
effect that any of the matters described herein will have on, particular
Holders, and does not address foreign, state, local or other tax consequences.
This summary does not address the federal income tax consequences to (a)
special classes of taxpayers (such as S corporations, mutual funds, insurance
companies, financial institutions, small business investment companies,
foreign companies, nonresident alien individuals, regulated investment
companies, real estate investment trusts, dealers in securities or currencies,
broker-dealers and tax-exempt organizations) who are subject to special
treatment under the federal income tax laws, (b) Holders that hold New Notes
as part of a position in a "straddle," or as part of a "hedging,"
"conversion," or other integrated investment transaction for federal income
tax purposes, (c) Holders that do not hold the New Notes as capital assets
within the meaning of section 1221 of the Code or (d) Holders whose functional
currency is not the U.S. dollar. Furthermore, estate and gift tax consequences
are not discussed herein.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF THE OLD NOTES IS
STRONGLY URGED TO CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO HIS OR
HER PARTICULAR TAX SITUATION AND AS TO ANY FEDERAL, FOREIGN, STATE, LOCAL OR
OTHER TAX CONSIDERATIONS (INCLUDING ANY POSSIBLE CHANGES IN TAX LAW) AFFECTING
THE PURCHASE, HOLDING AND DISPOSITION OF THE NEW NOTES.
EXCHANGE OFFER
The exchange of Old Notes for the New Notes pursuant to the Exchange Offer
should not be a taxable event for U.S. federal income tax purposes. As a
result, there should be no U.S. federal income tax consequences to Holders
exchanging the Old Notes for the New Notes pursuant to the Exchange Offer, and
a Holder should have the same tax basis and holding period in the New Notes as
the Old Notes.
INTEREST
Generally, interest paid on the New Notes will be taxable to a Holder as
ordinary income at the time it accrues or is received in accordance with such
Holder's method of accounting for U.S. federal income tax purposes. Interest
income arising from the New Notes will not be reduced by any taxes withheld
under the backup withholding rules or otherwise. See "--Backup Withholding."
59
<PAGE>
MARKET DISCOUNT
If a New Note is acquired at a "market discount," some or all of any gain
realized upon a subsequent sale, other disposition, or full or partial
principal payment, of such New Note may be treated as ordinary income, as
described below. For this purpose, "market discount" is the excess (if any) of
the principal amount of a New Note over the purchase price thereof, subject to
a statutory de minimis exception. Unless a Holder has elected to include the
market discount in income as it accrues, gain, if any, realized on any
subsequent disposition (other than in connection with certain nonrecognition
transactions) or full or partial principal payment of such New Note will be
treated as ordinary income to the extent of the market discount that is
treated as having accrued during the period such Holder held such New Note.
The amount of market discount treated as having accrued will be determined
either (i) on a straight-line basis by multiplying the market discount times a
fraction, the numerator of which is the number of days the New Note was held
by the Holder and the denominator of which it is the total number of days
after the date such Holder acquired the New Note up to and including the date
of its maturity or (ii) if the Holder so elects, on a constant interest rate
method. A Holder may make that election with respect to any New Note but, once
made, such election is irrevocable.
A Holder of a New Note acquired at a market discount may elect to include
market discount in income currently, through the use of either the straight-
line inclusion method or the elective constant interest method in lieu of
recharacterizing gain upon disposition as ordinary income to the extent of
accrued market discount at the time of disposition. Once made, this election
will apply to all notes and other obligations acquired by the electing Holder
at a market discount during the taxable year for which the election is made,
and all subsequent taxable years, unless the IRS consents to a revocation of
the election. If an election is made to include market discount in income
currently, the basis of the New Note in the hands of the Holder will be
increased by the amount of the market discount that is included in income.
Unless a Holder who acquires a New Note at a market discount elects to
include market discount in income as it accrues such Holder may be required to
defer deductions for a portion of the interest paid on indebtedness incurred
to purchase or carry such New Note in an amount not exceeding the deferred
market discount income, until such income is realized.
BOND PREMIUM
If a Holder purchases a New Note and immediately after the purchase the
adjusted basis of the New Note exceeds the sum of all amounts payable on the
instrument after the purchase date (other than payments of stated interest),
the New Note will be treated as having been acquired with "bond premium."
Pursuant to recently finalized Treasury Regulations, a Holder may elect to
amortize such premium as an offset to interest income (and not as a separate
deduction item) using the constant yield method, but only as such Holder takes
stated interest on the New Note into account under its regular method of tax
accounting. In the case of debt instruments, such as the New Notes, that
provide for alternative payment schedules upon the occurrence of certain
contingencies, bond premium is calculated by assuming that (i) a holder will
exercise or not exercise options in a manner that minimizes the holder's yield
and (ii) the issuer will generally exercise options in a manner that minimizes
the holder's yield, except that the issuer will exercise a call option if the
exercise of such option would maximize the holder's yield. In each case, bond
premium is generally recalculated if a contingency occurs or does not occur
contrary to the assumption. If a Holder purchases a New Note for a premium and
does not elect to amortize such premium, the Holder will be required to report
the full amount of stated interest on the New Notes as ordinary income, even
though the Holder may be required to recognize a capital loss (which may not
be available to offset ordinary income) on a sale or other disposition of the
New Notes.
The final regulations generally apply to debt instruments acquired on or
after March 2, 1998. However, if a Holder makes an election to amortize
premium on a New Note for a taxable year which includes March 2, 1998 (or any
subsequent taxable year), such election and the final regulations will apply
to all taxable debt instruments
60
<PAGE>
held by the Holder at the beginning of the taxable year in which the election
is made, and to all taxable debt instruments acquired thereafter by such
Holder. Such election may be revoked only with the consent of the IRS. Holders
that pay a premium for the New Notes should consult their tax advisors
regarding the election to amortize premium and the method to be employed.
DISPOSITION OF THE NEW NOTES
Upon the sale, exchange or retirement of a New Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on
the sale, exchange or retirement (except to the extent attributable to accrued
interest that has not been included in income) and such Holder's adjusted tax
basis in the New Note. A Holder's adjusted tax basis in a New Note will
generally equal the Holder's purchase price for such New Note, increased by
any market discount previously included in income by the Holder and decreased
by the portion of the basis of the New Note allocable to principal payments
previously received by the Holder and amortizable bond premium, if any,
deducted over the term of the New Note. Gain or loss realized on the sale,
exchange or retirement of a New Note generally will be capital gain or loss.
Recently enacted legislation includes substantial changes to the federal
taxation of capital gains recognized by individuals, including a 20% maximum
tax rate for certain gains from the sale of capital assets held for more than
18 months. The deduction of capital losses is subject to certain limitations.
Prospective investors should consult their tax advisors regarding the
treatment of capital gains and losses.
The Company does not intend to treat the possibility of an optional
redemption or repurchase of the New Notes as giving rise to any accrual of
original issue discount or recognition of ordinary income upon redemption,
sale or exchange of a New Note. Holders may wish to consider that Treasury
Regulations regarding the treatment of certain contingencies were recently
issued and may wish to consult their tax advisers in this regard.
BACKUP WITHHOLDING
Under section 3406 of the Code and applicable Treasury Regulations, a Holder
may be subject to backup withholding at the rate of 31 percent with respect to
"reportable payments," which include interest paid on or the proceeds of a
sale, exchange or redemption of the New Notes. They payor will be required to
deduct and withhold the prescribed amounts if (i) the payee fails to furnish a
Taxpayer Identification Number ("TIN") to the payor, or otherwise fails to
establish an exemption from backup withholding, in the manner required, (ii)
the IRS notifies the payor that the TIN furnished by the payee is incorrect,
(iii) there has been a "notified payee underreporting" described in section
3406(c) of the Code or (iv) there has been a failure of the payee to certify
under penalty of perjury that the payee is not subject to withholding under
section 3406(a)(1)(C) of the Code. As a result, if any one of the events
listed above occurs, the payor will be required to withhold an amount equal to
31 percent from any interest payment made with respect to the New Notes or any
payment of proceeds of a redemption of the New Notes to a noncorporate Holder.
Amounts paid as backup withholding do not constitute an additional tax and
will be credited against the Holder's federal income tax liability, so long as
the required information is provided to the IRS. The Company generally will
report to the Holders and to the IRS the amount of any "reportable payments"
for each calendar year and the amount of tax withheld, if any, with respect to
payment on the New Notes.
THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND
DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL INCOME TAXATION THAT MAY
BE RELEVANT TO A PARTICULAR HOLDER OF NEW NOTES IN LIGHT OF HIS OR HER
PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. HOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS AS TO ANY TAX CONSEQUENCES TO THEM FROM THE PURCHASE,
OWNERSHIP, AND DISPOSITION OF NOTES INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS.
61
<PAGE>
LEGAL MATTERS
The legality of the New Notes will be passed upon for the Company by Gibson,
Dunn & Crutcher LLP, Los Angeles, California. Robert K. Montgomery, a partner
of Gibson, Dunn & Crutcher LLP, and certain members of his immediate family
own approximately 50,000 shares of Common Stock of the Company.
INDEPENDENT AUDITORS
The audited financial statements included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants as indicated in
their report with respect thereto, appearing elsewhere herein.
62
<PAGE>
INDEX TO FINANCIAL STATEMENTS
STANDARD PACIFIC CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Statements of Operations for the years ended December 31,
1997, 1996 and 1995...................................................... F-3
Consolidated Balance Sheets at December 31, 1997 and 1996................. F-4
Consolidated Statements of Stockholders' Equity for each of the three
years in the period ended December 31, 1997.............................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995...................................................... F-6
Notes to Consolidated Financial Statements for the years ended December
31, 1997, 1996 and 1995.................................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Standard Pacific Corp.:
We have audited the accompanying consolidated balance sheets of STANDARD
PACIFIC CORP. (a Delaware corporation) and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Standard Pacific Corp. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Orange County, California
January 23, 1998
F-2
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues................................... $ 584,571 $ 399,863 $ 346,263
Cost of sales.............................. 490,876 348,066 307,794
Noncash charge for impairment of long-lived
assets.................................... -- -- 46,491
---------- ---------- ----------
Gross margin............................. 93,695 51,797 (8,022)
---------- ---------- ----------
Selling, general and administrative ex-
penses.................................... 52,141 37,351 34,873
Income from unconsolidated joint ventures.. 3,787 4,708 6,953
Interest expense........................... 4,981 7,142 1,860
Amortization of excess of cost over net as-
sets acquired............................. 245 -- --
Other income............................... 931 936 555
---------- ---------- ----------
Income (loss) from continuing operations
before income taxes....................... 41,046 12,948 (37,247)
(Provision) benefit for income taxes....... (17,070) (5,197) 14,890
---------- ---------- ----------
Income (loss) from continuing operations... 23,976 7,751 (22,357)
Income (loss) from discontinued operations,
net of income taxes of $(1,034), $(408)
and $3,636, respectively.................. 48 642 (5,006)
Gain on disposal of discontinued operation,
net of income taxes of $(51), $0 and $0,
respectively.............................. 3,302 -- --
---------- ---------- ----------
Net Income (Loss).......................... $ 27,326 $ 8,393 $ (27,363)
========== ========== ==========
Basic Net Income (Loss) Per Share:
Income (loss) per share from continuing
operations.............................. $ 0.82 $ 0.26 $ (0.73)
Income (loss) per share from discontinued
operations, net of income taxes......... 0.00 0.02 (0.17)
Gain on disposal of discontinued
operation, net of income taxes.......... 0.11 -- --
---------- ---------- ----------
Net Income (Loss) Per Share.............. $ 0.93 $ 0.28 $ (0.90)
========== ========== ==========
Weighted average common shares
outstanding............................. 29,504,477 30,000,492 30,488,676
========== ========== ==========
Diluted Net Income (Loss) Per Share:
Income (loss) per share from continuing
operations.............................. $ 0.81 $ 0.26 $ (0.73)
Income (loss) per share from discontinued
operations, net of income taxes......... 0.00 0.02 (0.17)
Gain on disposal of discontinued
operation, net of income taxes.......... 0.11 -- --
---------- ---------- ----------
Net Income (Loss) Per Share.............. $ 0.92 $ 0.28 $ (0.90)
========== ========== ==========
Weighted average common and diluted
shares outstanding...................... 29,807,702 30,011,595 30,488,676
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Cash and equivalents..................................... $ 8,381 $ 5,252
Investment securities held to maturity................... -- 5,329
Mortgage notes receivable and accrued interest........... 12,095 3,741
Other notes and accounts receivable, net................. 11,686 8,648
Inventories:
Real estate in process of development and completed
model homes........................................... 448,951 363,718
Real estate held for sale.............................. 2,897 8,927
Property and equipment, net of accumulated depreciation
and amortization of $3,570 and $3,320, respectively..... 2,515 1,741
Investments in and advances to unconsolidated joint
ventures................................................ 26,217 885
Deferred income taxes.................................... 12,136 16,481
Other assets............................................. 7,455 6,325
Excess of cost over net assets acquired, net ............ 6,605 --
-------- --------
Total assets of continuing operations.................... 538,938 421,047
-------- --------
Net assets of discontinued operations.................... 8,727 28,067
-------- --------
Total Assets........................................... $547,665 $449,114
======== ========
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses................. $ 49,582 $ 26,958
Unsecured notes payable............................... 19,000 57,300
Trust deed notes payable.............................. 17,174 4,467
10 1/2% senior notes due 2000......................... 78,800 100,000
8 1/2% senior notes due 2007, net..................... 99,331 --
-------- --------
Total Liabilities..................................... 263,887 188,725
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 10,000,000 shares
authorized; none issued.............................. -- --
Common stock, $.01 par value; 100,000,000 shares
authorized; 29,637,281 and 29,629,981 shares
outstanding at December 31, 1997 and 1996,
respectively......................................... 296 296
Paid-in capital....................................... 283,525 283,331
Accumulated deficit................................... (43) (23,238)
-------- --------
Total stockholders' equity............................ 283,778 260,389
-------- --------
Total Liabilities and Stockholders' Equity.......... $547,665 $449,114
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON RETAINED
NUMBER OF STOCK EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1996 COMMON PAR PAID-IN (ACCUMULATED
AND 1997 SHARES VALUE CAPITAL DEFICIT)
- ------------------------------------- ---------- ------ -------- ------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994........... 30,621,931 $306 $289,447 $ 2,990
Exercise of stock options and related
income tax benefit.................. 9,000 -- 64 --
Repurchase of common shares.......... (570,650) (5) (3,856) --
Cash dividends declared ($.12 per
share).............................. -- -- -- (3,657)
Net (loss)........................... -- -- -- (27,363)
---------- ---- -------- --------
BALANCE, DECEMBER 31, 1995........... 30,060,281 301 285,655 (28,030)
Repurchase of common shares.......... (430,300) (5) (2,324) --
Cash dividends declared ($.12 per
share).............................. -- -- -- (3,601)
Net income........................... -- -- -- 8,393
---------- ---- -------- --------
BALANCE, DECEMBER 31, 1996........... 29,629,981 296 283,331 (23,238)
Exercise of stock options and related
income tax benefit.................. 292,100 3 2,315 --
Repurchase of common shares.......... (284,800) (3) (2,121) --
Cash dividends declared ($.14 per
share) ............................. -- -- -- (4,131)
Net income........................... -- -- -- 27,326
---------- ---- -------- --------
BALANCE, DECEMBER 31, 1997........... 29,637,281 $296 $283,525 $ (43)
========== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................... $ 27,326 $ 8,393 $(27,363)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities of continuing operations:
Discontinued operations....................... (3,350) (642) 5,006
Noncash charge for impairment of long-lived
assets....................................... -- -- 46,491
Depreciation and amortization................. 586 555 231
Amortization of excess of cost over net assets
acquired..................................... 245 -- --
Changes in cash and equivalents due to:
Inventories................................. (615) (5,376) 52,459
Receivables and accrued interest............ (1,804) (992) 5,988
Investment in and advances to unconsolidated
joint ventures............................. (25,332) 3,576 (3,015)
Accounts payable and accrued expenses....... 21,083 2,797 (4,665)
Deferred income taxes....................... 4,345 1,124 (15,805)
Other, net.................................. 4,555 299 206
-------- -------- --------
Net cash provided by (used in) continuing
operations..................................... 27,039 9,734 59,533
Net cash provided by (used in) discontinued
operations..................................... 37,088 (22,785) 21,371
-------- -------- --------
Net cash provided by (used in) operating
activities..................................... 64,127 (13,051) 80,904
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid for acquisition................... (65,842) -- --
Net additions to property and equipment......... (1,264) (242) (183)
Sales (purchases) of investment securities...... 5,329 81 (1,539)
Proceeds from the sale of discontinued
operations..................................... 8,379 -- --
-------- -------- --------
Net cash provided by (used in) investing
activities..................................... (53,398) (161) (1,722)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) bank lines of
credit and term loans.......................... (38,300) 8,800 (37,750)
Net proceeds from the issuance of 8 1/2% senior
notes.......................................... 96,931 -- --
Principal payments on senior notes and trust
deed notes payable............................. (27,707) (11,021) (12,885)
Dividends....................................... (4,131) (3,601) (3,657)
Repurchase of common shares..................... (2,124) (2,329) (3,861)
Proceeds from exercise of stock options......... 1,705 -- 64
-------- -------- --------
Net cash provided by (used in) financing
activities..................................... 26,374 (8,151) (58,089)
-------- -------- --------
Net increase (decrease) in cash and equivalents. 37,103 (21,363) 21,093
Cash and equivalents at beginning of period..... 16,234 37,597 16,504
-------- -------- --------
Cash and equivalents at end of period........... $ 53,337 $ 16,234 $ 37,597
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
SUMMARY OF CASH BALANCES:
Continuing operations ................................. $ 8,381 $ 5,252 $ 290
Discontinued operations................................ 44,956 10,982 37,307
------- ------- -------
$53,337 $16,234 $37,597
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest--continuing operations.................... $17,026 $16,687 $19,200
Income taxes....................................... 15,500 1,477 530
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Land acquisitions financed by purchase money trust
deeds............................................... $19,214 $ 635 $ 9,444
Expenses capitalized in connection with the issuance
of the 8 1/2% senior notes due 2007................. 2,377 -- --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. COMPANY ORGANIZATION AND OPERATIONS
Standard Pacific Corp., a Delaware corporation (hereinafter referred to as
the "Company"), operates primarily as a geographical diversified builder of
single-family homes for use as primary residences with operations throughout
the major metropolitan markets in California and Texas. Approximately 79
percent of the Company's home deliveries (including the unconsolidated joint
ventures) were in California for the year ended December 31, 1997. There have
been periods of time in California where economic growth has slowed and the
average sales price of homes in certain areas in California in which the
Company does business have declined. There can be no assurance that home sales
prices will not decline in the future.
The Company's business is affected by national, world and local economic
conditions and events and the effect such conditions and events have on the
markets it serves in California and Texas and in particular by the level of
mortgage interest rates and consumer confidence in those regions. The Company
cannot predict whether interest rates will be at levels attractive to
prospective homebuyers. If interest rates increase, and in particular mortgage
interest rates, the Company's operating results could be adversely impacted.
In August 1997, the Company formed Family Lending Services, Inc. ("Family
Lending Services"), which will operate as a mortgage banking subsidiary of the
Company, offering mortgage financing to the Company's home buyers and others.
Certain assets were contributed from Standard Pacific Savings, F.A.
("Savings") to capitalize this entity. Family Lending Services is in the
process of obtaining required regulatory approvals and mortgage warehouse
financing and is currently expected to begin offering mortgage financing to
home buyers in the second quarter of 1998. Accordingly, the financial position
and related results of operations of Family Lending Services for the year
ended December 31, 1997 have been reflected as continuing operations in the
accompanying consolidated balance sheets and statements of operations.
The consolidated financial statements also include Standard Pacific Savings,
F.A., a federally chartered savings and loan institution, and Panel Concepts,
Inc., an office furniture manufacturing subsidiary, which have been treated as
discontinued operations (See Note 12).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Investments in unconsolidated joint
ventures in which the Company has less than a controlling interest are
accounted for using the equity method.
b. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
c. Cash and Equivalents
For purposes of the consolidated statements of cash flows, cash and
equivalents include cash on hand, demand deposits, and all highly liquid
short-term investments, including interest bearing securities purchased with a
remaining maturity of three months or less.
F-8
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
d. Real Estate Inventories
For real estate under development the Company capitalizes direct carrying
costs, including interest, property taxes and related development costs. Field
construction supervision and related direct overhead are also included in the
capitalized cost of real estate inventories. General and administrative costs
are expensed as incurred.
Effective December 31, 1995, the Company adopted the provisions of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to be Disposed Of" (FAS 121). FAS 121
requires long-lived assets, including real estate inventories, that are
expected to be held and used in operations to be carried at the lower of cost
or, if impaired, the fair value of the asset, rather than the net realizable
value. Long-lived assets to be disposed of should be reported at the lower of
carrying amount or fair value less cost to sell. In evaluating long-lived
assets held for use, an impairment loss is recognized if the sum of the
expected future cash flows (undiscounted and without interest charge) is less
than the carrying amount of the asset. Once a determination has been made that
an impairment loss should be recognized for real estate inventories expected
to be held and used, various assumptions and estimates are used to determine
fair value including, among others, estimated costs of construction,
development and marketing, sales absorption rates, anticipated sales prices
and carrying costs. The calculation of the impairment loss is based on
estimated future cash flows which are calculated to include an appropriate
return and interest. The estimates used to determine the impairment adjustment
could change in the near term as the economy in the Company's key markets
change.
The effect of the adoption of FAS 121, plus the effects of continued adverse
trends experienced during 1995 in certain of the geographic markets in which
the Company operates, on the values of certain of the Company's land holdings,
particularly in San Diego county, resulted in a pretax noncash charge of $46.5
million for the year ended December 31, 1995. These adverse developments
included, among other things, record high foreclosure rates, declines in
median home prices and continued anemic economic recovery.
e. Capitalization of Interest
The Company follows the practice of capitalizing interest on real estate
inventories during the period of development in accordance with Financial
Accounting Standards No. 34, "Capitalization of Interest Cost." Interest
capitalized as a cost of real estate under development is included in cost of
sales as related units are sold. The following is a summary of interest
capitalized and expensed from continuing operations for the following periods:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Total interest incurred during the period........... $17,026 $16,687 $19,200
Less: Interest capitalized as a cost of real estate
under development.................................. 12,045 9,545 17,340
------- ------- -------
Interest expense.................................... $ 4,981 $ 7,142 $ 1,860
======= ======= =======
Interest previously capitalized as a cost of real
estate under development, included in cost of
sales.............................................. $23,475 $16,920 $27,638(1)
======= ======= =======
Capitalized interest in ending inventories.......... $13,712 $25,142 $32,517
======= ======= =======
</TABLE>
- --------
(1) Excludes $11.6 million of interest included in the FAS 121 adjustment.
F-9
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
f. Property and Equipment
Property and equipment is recorded at cost. Depreciation and amortization is
recorded using the straight-line method over the estimated useful lives of the
assets.
g. Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
statement requires a liability approach for measuring deferred taxes based on
temporary differences between the financial statement and tax bases of assets
and liabilities existing at each balance sheet date using enacted tax rates
for years in which taxes are expected to be paid or recovered.
h. Excess of Cost Over Net Assets Acquired
The excess amount paid for a business acquisition over the net fair value of
assets acquired and liabilities assumed has been capitalized in the
accompanying consolidated balance sheets and is being amortized on a straight-
line basis over seven years. Amortization expense for the year ended December
31, 1997 was $245,000. (See Note 4)
i. Revenue Recognition
Revenues of residential housing are recorded after construction is
completed, required down payments are received and title passes.
j. Warranty Costs
Estimated future warranty costs are charged to cost of sales in the period
when the revenues from home closings are recognized.
k. Net Income Per Share
Effective December 31, 1997 the Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings per Share" (FAS 128). This statement
requires the presentation of both basic and diluted net income per share for
financial statement purposes. Basic net income per share is computed by
dividing income available to common stockholders by the weighted average
number of common shares outstanding. Diluted net income per share includes the
effect of the potential shares outstanding, including dilutive stock options
using the treasury stock method. The table below reconciles the components of
the basic net income per share calculation to diluted net income per share.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1997 1996 1995
------------------------ ----------------------- ---------------------------
INCOME SHARES EPS INCOME SHARES EPS INCOME SHARES EPS
------- ---------- ----- ------ ---------- ----- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Net Income (Loss)
Per Share:
Income (loss) available
to common stockholders
before discontinued
operations............ $23,976 29,504,477 $0.82 $7,751 30,000,492 $0.26 $(22,357) 30,488,676 $(0.73)
Effect of Dilutive
Securities:
Stock options.......... -- 303,225 -- 11,103 -- --
------- ---------- ------ ---------- -------- ----------
Diluted Net Income
(Loss) Per Share: $23,976 29,807,702 $0.81 $7,751 30,011,595 $0.26 $(22,357) 30,488,676 $(0.73)
======= ========== ===== ====== ========== ===== ======== ========== ======
</TABLE>
F-10
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
In January 1998, the Company granted an additional 400,000 stock options
which were not considered in the calculation above for 1997, however, the
effect of these stock options would not have had an impact on the above
calculation as they were antidilutive for purposes of computing diluted net
income per share.
l. Stock-Based Compensation
The Company accounts for its stock-based compensation plan using the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25).
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). Under the provisions of FAS 123, companies can elect
to account for stock-based compensation plans using a fair-value-based method
or continue measuring compensation expense for those plans using the intrinsic
value method prescribed in APB 25. FAS 123 requires that companies electing to
continue using the intrinsic value method must make pro forma disclosures of
net income and earnings per share as if the fair-value-based method of
accounting had been applied.
Effective December 31, 1996, the Company adopted FAS 123 for financial
statement disclosure purposes only and accordingly, the adoption had no impact
on the Company's results of operations or financial position for the year then
ended.
m. Reclassifications
Effective January 1, 1997, the Company changed its presentation of selling
costs in its consolidated statements of operations whereby selling costs are
now combined with general and administrative expenses. This presentation is
consistent with industry practice. Previously, the Company included these
costs as a component of cost of sales. The Company reclassified the prior
period amounts to conform with the 1997 presentation.
Additionally, certain other items in prior period financial statements have
been reclassified to conform with current year presentation.
3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
Summarized financial information related to the Company's joint ventures
accounted for under the equity method are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1997 1996
------- -------
<S> <C> <C>
Assets:
Cash...................................................... $ 5,545 $ 545
Real estate in process of development and completed model
homes.................................................... 74,835 9,809
Other assets.............................................. 1,319 3,355
------- -------
$81,699 $13,709
======= =======
Liabilities and Equity:
Accounts payable and accrued expenses..................... $ 5,248 $ 3,409
Construction loans payable................................ 17,442 7,153
Equity.................................................... 59,009 3,147
------- -------
$81,699 $13,709
======= =======
</TABLE>
F-11
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Company's share of equity shown above is approximately $23.5 million and
$943,000 at December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Revenues............................................. $24,427 $32,168 $46,166
Cost of revenues..................................... 17,591 23,817 32,881
------- ------- -------
Net earnings of joint ventures....................... $ 6,836 $ 8,351 $13,285
======= ======= =======
</TABLE>
The Company's share of earnings in the joint ventures detailed above varies,
but in no case is its share of earnings greater than 50 percent. Additionally,
the Company's ownership interests in the joint ventures varies, but in no case
does it exceed 50 percent.
In addition, the sole purpose of two of the joint ventures which the Company
is party to is to develop finished lots whereby the Company will purchase the
lots from the joint venture to construct homes thereon. The Company does not
anticipate recording any income or loss from these two joint ventures.
4. ACQUISITION
On September 30, 1997, the Company acquired all of the outstanding common
stock of Duc Development Company ("Duc"), a privately held northern California
homebuilding company, for cash consideration of approximately $16 million of
which approximately $5 million is contingent consideration which is to be paid
upon the Company obtaining entitlement approvals on a certain parcel of land.
Upon such payment, the amount will be recorded as real estate inventory. In
connection with this acquisition, the Company acquired certain other real
estate assets related to Duc's operations for approximately $55 million in
cash and the assumption of approximately $8 million of debt.
The acquisition has been accounted for as a purchase, and accordingly, the
purchase price has been allocated to the net assets acquired based upon their
estimated fair market values as of the date of acquisition. The excess of the
purchase price over the estimated fair value of net assets acquired totaled
approximately $6.85 million, which has been recorded as excess of cost over
net assets acquired in the accompanying consolidated balance sheets and is
being amortized on a straight-line basis over seven years. In addition,
operations for Duc are included in the accompanying statement of operations
commencing October 1, 1997.
The pro forma effect of including Duc's operations in the Company's
consolidated operating results since January 1, 1997 is not presented, as the
impact is not material.
5. UNSECURED NOTES PAYABLE AND TRUST DEED NOTES PAYABLE
a. Unsecured Notes Payable to Banks
In August 1997, the Company and its bank group amended the unsecured
Revolving Credit Facility (the "Facility") to, among other things, increase
the commitment to $275 million, increase the term of the Facility from three
years to four years and reduce the cost of borrowings and other fees. The
Facility has a current maturity date of July 31, 2001. The Facility contains
covenants which require, among other things, the maintenance of certain
amounts of tangible stockholders' equity, the maintenance of debt-to-equity
ratios, and minimum interest coverage ratio provisions, as defined. The
Facility also contains provisions which may, in certain circumstances, limit
the amount the Company may borrow under the credit facility. At December 31,
F-12
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1997, the Company had borrowings of $19.0 million outstanding under this
Facility. Interest rates charged under this Facility primarily include
Eurodollar and prime rate pricing options. In addition to fees charged on the
commitment and unused portion of the Facility, this Facility also requires the
Company to maintain a compensating balance, as defined.
As of December 31, 1997, and throughout the year, the Company was in
compliance with the covenants of the Revolving Credit Facility.
b. Trust Deed Notes Payable
At December 31, 1997 and 1996, trust deed notes payable primarily consist of
trust deeds on land purchases. At December 31, 1997, the weighted average
interest rate on these trust deeds was approximately 8.0 percent.
c. Borrowings and Maturities
The following summarizes the borrowings during the three years ended
December 31, 1997 for the unsecured notes payable and trust deed notes
payable:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Maximum borrowings outstanding during year at
month end...................................... $98,295 $91,299 $101,947
Average outstanding balance during the year..... $45,395 $78,552 $ 86,377
Weighted average interest rate for the year..... 7.3% 6.8% 7.5%
Weighted average interest rate on borrowings
outstanding at year end........................ 7.9% 7.1% 6.8%
</TABLE>
Maturities of the trust deed notes payable and the 8 1/2% and 10 1/2% Senior
Notes (see Note 6 below) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
<S> <C>
1998............................................................. $ 34,836
1999............................................................. 22,338
2000............................................................. 38,800
2001............................................................. --
2002............................................................. --
Thereafter....................................................... 99,331
--------
$195,305
========
</TABLE>
6. SENIOR NOTES
In 1993, the Company issued $100 million principal amount of its 10 1/2%
Senior Notes due March 1, 2000 (the "10 1/2% Senior Notes"). Interest is due
and payable on March 1 and September 1 of each year. The 10 1/2% Senior Notes
are not redeemable at the option of the Company prior to maturity. The Company
is required to make annual mandatory sinking fund payments sufficient to
retire 20 percent of the original aggregate principal amount of the Notes ($20
million per year) commencing on March 1, 1997, at a redemption price of 100
percent of the principal amount, with the balance of the notes ($38.8 million)
retired on March 1, 2000. The Company made its first $20 million sinking fund
payment on the 10 1/2% Senior Notes on March 1, 1997.
In June 1997, the Company issued $100 million of 8 1/2% Senior Notes due
June 15, 2007 (the "8 1/2% Senior Notes"). The 8 1/2% Senior Notes were issued
at a discount to yield approximately 8.6 percent and have been reflected net
of the unamortized discount in the accompanying consolidated balance sheets.
Interest is due and payable on June 15 and December 15 of each year until
maturity. These notes are redeemable at the option of
F-13
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
the Company, in whole or in part, commencing June 15, 2002 at a price of
104.25 percent of par value, with the call price reducing ratably to par on
June 15, 2005. Net proceeds to the Company after offering expenses were
approximately $96.9 million.
Both the 10 1/2% and 8 1/2% Senior Notes (the "Notes") are senior unsecured
obligations of the Company and rank pari passu with the Company's other
existing senior unsecured indebtedness. The Company will, under certain
circumstances, be obligated to make an offer to purchase a portion of both the
10 1/2% and 8 1/2% Senior Notes in the event of the Company's failure to
maintain a minimum consolidated net worth, as defined, and under certain other
circumstances. In addition, the Notes contain other restrictive covenants
which, among other things, impose certain limitations on the ability of the
Company to (i) incur additional indebtedness, (ii) create liens, (iii) make
restricted payments, as defined, and (iv) sell assets. As of December 31,
1997, the Company was in compliance with the covenants of both the 10 1/2% and
8 1/2% Senior Notes.
7. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate:
Cash and Equivalents--The carrying amount is a reasonable estimate of
fair value. These assets primarily consist of short term investments and
demand deposits.
Investment Securities Held to Maturity--These investments for 1996
consist primarily of U.S. government and corporate debt securities which
are publicly traded. The fair value of these issues is based on their
quoted market prices at year end.
Revolving Credit Facility--The carrying amounts of the revolving credit
obligations approximate market value because of the frequency of repricing
the borrowings (usually 7 to 90 day maturities).
Trust Deed Notes Payable--These notes are primarily for purchase money
deeds of trust on land acquired. These notes have maturities ranging from 3
months to three years. The rates of interest paid on these notes
approximate the current rates available for secured real estate financing
with similar terms and maturities, therefore, carrying amounts approximate
fair value.
10 1/2% Senior Notes due 2000--This issue is publicly traded on the New
York Stock Exchange. Consequently, the fair value of this issue is based on
its quoted market price at year end.
8 1/2% Senior Notes due 2007--This issue is also publicly traded on the
New York Stock Exchange. As a result, the fair value of this issue is based
on its quoted market price at year end.
The estimated fair values of the Company's financial instruments from
continuing operations are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------
1997 1996
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and equivalents.................. $ 8,381 $ 8,381 $ 5,252 $ 5,252
Investment securities held to
maturity............................. -- -- 5,329 5,379
Financial Liabilities:
Revolving credit facility............. $19,000 $ 19,000 $ 57,300 $ 57,300
Trust deed notes payable.............. 17,174 17,174 4,467 4,467
10 1/2% senior notes due 2000......... 78,800 82,669 100,000 103,375
8 1/2% senior notes due 2007.......... 99,331 102,990 -- --
</TABLE>
F-14
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities under noncancelable operating leases.
Generally, the Company is required to pay taxes and insurance and maintain the
assets under such operating leases. Future minimum rental payments on
operating leases having an initial term in excess of one year as of December
31, 1997, including Savings, are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 990
1999.............................................................. 950
2000.............................................................. 954
2001.............................................................. 859
2002.............................................................. 344
Thereafter........................................................ 210
------
Subtotal........................................................ 4,307
Less--Sublease income............................................. (323)
------
Net rental obligations.......................................... $3,984
======
</TABLE>
Rent expense, net of sublease income, under noncancelable operating leases
for the three years ended December 31, 1997 was approximately $1.3 million,
$1.4 million and $1.4 million, respectively.
The Company and certain of its subsidiaries are parties to claims and
litigation proceedings arising in the normal course of business. Although the
legal responsibility and financial impact with respect to certain claims and
litigation cannot presently be ascertained, the Company does not believe that
these matters will result in the payment by the Company of monetary damages,
net of any applicable insurance proceeds, that, in the aggregate, would be
material in relation to the consolidated financial position of the Company. It
is reasonably possible that the reserves provided for by the Company with
respect to such claims and litigation could change in the near term.
9. INCOME TAXES
The Company's provision (benefit) for income taxes from continuing
operations includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------ --------
<S> <C> <C> <C>
Current:
Federal.......................................... $12,909 $ 766 $ 3,301
State............................................ 3,471 209 991
------- ------ --------
16,380 975 4,292
------- ------ --------
Deferred:
Federal.......................................... 535 3,254 (14,731)
State............................................ 155 968 (4,451)
------- ------ --------
690 4,222 (19,182)
------- ------ --------
Total Provision (Benefit).......................... $17,070 $5,197 $(14,890)
======= ====== ========
</TABLE>
F-15
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The components of the Company's deferred income tax asset (liability) from
continuing operations as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Inventory adjustments...................................... $10,610 $12,093
Financial accruals......................................... 5,885 4,144
Nondeductible purchase price............................... (4,613) --
Other...................................................... 254 244
------- -------
$12,136 $16,481
======= =======
</TABLE>
At December 31, 1997, the Company has a consolidated net deferred tax asset
of approximately $12.1 million reflecting the balance of the benefit created
primarily as a result of the $46.5 million noncash charge taken during 1995
related to the impairment of long-lived assets. A significant portion of this
asset's realization is dependent upon the Company's ability to generate
sufficient taxable income in future years. Although realization is not
assured, management believes it is more likely than not that the net deferred
tax asset will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income are reduced or if tax rates are lowered.
The effective tax rate differs from the Federal statutory rate of 35 percent
for 1997 and 34 percent for 1996 and 1995 due to the following items:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Financial income (loss) from continuing
operations before income taxes............... $41,046 $12,948 $(37,247)
======= ======= ========
Provision (benefit) for income taxes at
statutory rate............................... $14,366 $ 4,402 $(12,664)
Increases (decreases) in tax resulting from:
State income taxes, net..................... 2,481 796 (2,286)
Other....................................... 223 (1) 60
------- ------- --------
Provision (benefit) for income taxes.......... $17,070 $ 5,197 $(14,890)
======= ======= ========
Effective tax (benefit) rate.................. 41.6% 40.1% (40.0)%
======= ======= ========
</TABLE>
10. STOCK OPTION PLAN
In 1991, the Company adopted the 1991 Employee Stock Incentive Plan (the
"Plan") pursuant to which officers, directors and employees of the Company are
eligible to receive options to purchase common stock of the Company. Under the
Plan the maximum number of shares of Company stock that may be issued pursuant
to awards granted is one million. On May 13, 1997, the shareholders of the
Company approved the 1997 Stock Incentive Plan (the "1997 Plan"). Under the
1997 Plan, the maximum number of shares of Company stock that may be issued is
two million.
Options are typically granted to purchase shares at prices equal to the fair
market value of the shares at the date of grant. The options typically vest
over a one to five year period and are generally exercisable at various dates
over one to 10 year periods. When the options are exercised, the proceeds are
credited to equity along with the related income tax benefits, if any.
F-16
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following is a summary of the transactions relating to the two
respective Plans for the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------ -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Options, beginning of
year................... 928,590 $ 6.30 721,590 $9.73 771,990 $9.80
Granted................. 343,000 10.70 365,000 6.35 20,000 5.75
Exercised............... (292,100) 5.81 -- -- (9,000) 6.88
Canceled................ (20,500) 7.83 (158,000) 9.48 (61,400) 9.76
--------- ------ -------- ----- ------- -----
Outstanding, end of
year................... 958,990 $ 7.99 928,590 $6.30 721,590 $9.73
========= ====== ======== ===== ======= =====
Options exercisable at
end of year............ 360,990 588,590 671,590
========= ======== =======
Options available for
future grant........... 1,685,275 7,775 214,775
========= ======== =======
</TABLE>
In January 1998, the Company granted an additional 400,000 stock options
pursuant to the 1997 Plan.
During the fourth quarter of 1996 the Company repriced 326,100 options which
were previously granted to nonexecutive employees. The new price represents
the fair market value of the shares at the date of repricing. Additionally,
the weighted average exercise price for all options outstanding as of December
31, 1996 reflects the repriced options at their new exercise price.
The following information is provided pursuant to the requirements of FAS
123.
The fair value of each option granted during the three years in the period
ended December 31, 1997 is estimated using the Black--Scholes option-pricing
model on the date of grant using the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Dividend yield.................................... 1.31% 2.0% 2.1%
Expected volatility............................... 43.80% 46.30% 53.46%
Risk-free interest rate........................... 6.17% 6.12% 6.70%
Expected life..................................... 5 years 5 years 5 years
</TABLE>
The 958,990 options outstanding as of December 31, 1997 have exercise prices
between $5.38 and $13.75, with a weighted average exercise price of $7.99 and
a weighted average remaining contractual life of 7.72 years. As of December
31, 1997, 360,990 of these options are exercisable with a weighted average
exercise price of $6.47. The weighted average fair value of options granted
during the years ended December 31, 1997, 1996 and 1995 was $6.55, $2.75 and
$2.66, respectively.
F-17
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
During the years ended December 31, 1997, 1996 and 1995, no compensation
expense was recognized related to the stock options granted, however, had
compensation cost been determined consistent with FAS 123 for the Company's
1997, 1996 and 1995 grants for its stock-based compensation plan, the
Company's net income (loss), and diluted net income (loss) per share for the
years ended December 31, 1997, 1996 and 1995 would approximate the pro forma
amounts below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss)....... $27,326 $27,100 $8,393 $7,619 $(27,363) $(27,394)
Diluted net income
(loss) per common
share.................. $ .92 $ .91 $ .28 $ .25 $ (.90) $ (.90)
</TABLE>
The effects of applying FAS 123 in this pro forma disclosure are not
indicative of future amounts.
11. STOCKHOLDER RIGHTS PLAN AND COMMON STOCK REPURCHASE PLAN
The Company has a stockholder rights agreement (the "Agreement") in place.
Under the Agreement, one right will be granted for each share of the Company's
outstanding common stock. Each right entitles the holder, in certain takeover
situations, as defined, and after paying the exercise price (currently $40),
to purchase Company common stock having a market value equal to two times the
exercise price. Also, if the Company is merged into another corporation, or if
50 percent or more of the Company's assets are sold, the rightholders may be
entitled, upon payment of the exercise price, to buy common shares of the
acquiring corporation at a 50 percent discount from the then current market
value. In either situation, these rights are not available to the acquiring
party. However, these exercise features will not be activated if the acquiring
party makes an offer to acquire all of the Company's outstanding shares at a
price which is judged by the Board of Directors to be fair to all Company
stockholders. The rights may be redeemed by the Company under certain
circumstances at the rate of $.01 per right. The rights will expire on
December 31, 2001, unless earlier redeemed or exchanged.
In July 1995, the Board of Directors of the Company authorized the
repurchase of up to $10 million of the Company's common stock. In January
1997, the Board increased the repurchase limit to $20 million. For the year
ended December 31, 1997, the Company repurchased 284,800 shares of its common
stock for an aggregate price of $2.1 million. Since July 1995, the Company has
repurchased an aggregate of 1,285,750 shares of its common stock for
approximately $8.3 million through the year ended December 31, 1997.
12. DISCONTINUED OPERATIONS
In May 1997, the Company's Board of Directors adopted a plan of disposition
(the "Plan") for the Company's savings and loan subsidiary. Pursuant to the
Plan, the Company sold substantially all of Savings' mortgage loan portfolio
in June 1997. The proceeds from the sale of the mortgages were used to pay off
substantially all of the outstanding balances of Federal Home Loan Bank
advances with the remaining amount temporarily invested until the savings
deposits are sold along with Savings' remaining assets. In June 1997, the
Company also entered into a definitive agreement to sell the remainder of
Savings' business, including Savings' charter. The definitive agreement was
subject to a number of conditions, including, approval of the transaction by
the Office of Thrift Supervision ("OTS"). As a result of the failure of the
OTS to approve the transaction prior to the definitive agreement's termination
date, the definitive agreement terminated on January 31, 1998. The Company
plans to continue pursuing a disposition strategy with respect to Savings and,
therefore, Savings
F-18
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
has been accounted for as a discontinued operation and the results of its
operations have been segregated in the accompanying consolidated financial
statements. Management currently estimates that both the disposition of
Savings under the Plan and the operating results of Savings for the period
through the disposition will not result in a significant gain or loss to the
Company.
In November 1997, the Company entered into a definitive agreement to sell
all of the outstanding stock of Panel Concepts, Inc. ("Panel") to a third
party which closed December 1, 1997. A net gain of approximately $3.3 million
has been reflected in the accompanying consolidated results of operations.
Proceeds from the sale of Panel were approximately $9.5 million before
transaction and other related costs. In addition, certain non-operating assets
of Panel totaling approximately $9 million were distributed to the Company
prior to the closing.
Panel has also been accounted for as a discontinued operation and,
accordingly, the results of its operations have been segregated in the
accompanying consolidated statements of operations. Additionally, the assets
and liabilities of both Savings and Panel have been classified in the
accompanying consolidated balance sheets as "Net assets of discontinued
operations."
Interest income and product sales from these discontinued operations
aggregated $31,784,000, $39,383,000, and $40,982,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
The components of net assets of discontinued operations included in the
consolidated balance sheets at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------
1997 1996
------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Cash and equivalents........................................... $44,956 $ 10,982
Accounts receivable, net....................................... -- 2,425
Investment securities available for sale....................... 22,559 42,440
Mortgage notes receivable and accrued interest, net............ 317 199,135
Manufacturing inventories...................................... -- 1,432
Property and equipment, net of accumulated depreciation and
amortization of $598 and $4,189, respectively................. 98 4,527
Real estate acquired in settlement of loans, net............... -- 2,079
Deferred income taxes.......................................... 1,273 1,581
Investment in FHLB stock....................................... 8,465 7,958
Other assets................................................... 108 1,813
------- --------
Total assets--discontinued operations........................ $77,776 $274,372
------- --------
LIABILITIES
Savings accounts............................................... $50,230 $132,813
FHLB advances.................................................. 18,000 109,000
Accounts payable and accrued expenses.......................... 819 4,492
------- --------
Total liabilities--discontinued operations................... 69,049 246,305
------- --------
Net assets of discontinued operations.......................... $ 8,727 $ 28,067
======= ========
</TABLE>
F-19
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. RESULTS OF QUARTERLY OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1997:
Revenues..................... $111,303 $140,578 $177,150 $155,541 $584,571
Income from continuing
operations before taxes..... 5,146 7,955 11,660 16,285 41,046
Income (loss) from
discontinued operations, net
of income taxes............. 484 (24) 367 (779) 48
Gain on disposal of
discontinued operation, net
of income taxes............. -- -- -- 3,302 3,302
Net income................... $ 3,517 $ 4,667 $ 7,241 $ 11,901 $ 27,326
======== ======== ======== ======== ========
Diluted Net Income Per Share:
Income per share from
continuing operations....... $ 0.10 $ 0.16 $ 0.23 $ 0.32 $ 0.81
Income (loss) per share from
discontinued operations, net
of income taxes............. 0.02 0.00 0.01 (0.03) 0.00
Gain per share on disposal of
discontinued operation, net
of income taxes............. -- -- -- 0.11 0.11
-------- -------- -------- -------- --------
Net income per share......... $ 0.12 $ 0.16 $ 0.24 $ 0.40 $ 0.92
======== ======== ======== ======== ========
1996:
Revenues..................... $ 61,584 $101,727 $105,417 $131,135 $399,863
Income from continuing
operations before taxes..... 715 2,902 4,158 5,173 12,948
Income (loss) from
discontinued operations, net
of income taxes............. 144 478 (472) 492 642
Net income................... $ 573 $ 2,211 $ 2,025 $ 3,584 $ 8,393
======== ======== ======== ======== ========
Diluted Net Income Per Share:
Income per share from
continuing operations....... $ 0.02 $ 0.06 $ 0.08 $ 0.10 $ 0.26
Income (loss) per share from
discontinued operations, net
of income taxes............. -- 0.01 (0.01) 0.02 0.02
-------- -------- -------- -------- --------
Net income per share......... $ 0.02 $ 0.07 $ 0.07 $ 0.12 $ 0.28
======== ======== ======== ======== ========
</TABLE>
- --------
(1) Some amounts do not add across due to rounding differences in quarterly
amounts.
14. SUBSEQUENT EVENT (UNAUDITED)
In February 1998, the Company issued $100 million of 8% Senior Notes due
February 15, 2008 (the "Old Notes"). The Old Notes were issued at a discount
to yield approximately 8.1 percent. Interest is due and payable on February 15
and August 15 of each year until maturity. These notes are redeemable at the
option of the Company, in whole or in part, commencing February 15, 2003 at
104.00 percent of par, with the call price reducing ratably to par on February
15, 2006. Net proceeds to the Company after offering expenses were
approximately $97.3 million. Approximately $54.3 million of the net proceeds
was used to repay the indebtedness outstanding under the Revolving Credit
Facility on the date of closing (February 10, 1998), with the balance of the
net proceeds to be used (i) to fund a $20 million sinking fund payment due on
March 1, 1998 on the Company's 10 1/2% Senior Notes, (ii) to repay an
approximately $11.2 million trust deed note payable due in March of 1998 and
(iii) for general corporate purposes.
F-20
<PAGE>
STANDARD PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS PRESENTED IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Old Notes are senior unsecured obligations of the Company and rank pari
passu with the Company's other existing senior unsecured indebtedness. The
Company will, under certain circumstances, be obligated to make an offer to
purchase a portion of the Old Notes in the event of the Company's failure to
maintain a minimum consolidated net worth, as defined, and under certain other
circumstances. In addition, the Old Notes contain other restrictive covenants
which, among other things, impose certain limitations on the ability of the
Company to (i) incur additional indebtedness, (ii) create liens, (iii) make
restricted payments, as defined, and (iv) sell assets.
F-21
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized. This Prospectus does not constitute an offer
to sell, or solicitation of an offer to buy, to any person in any jurisdiction
where such an offer or solicitation would be unlawful. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information contained herein is correct as of
any time subsequent to the date hereof.
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Summary.................................................................... 4
Statement Regarding Forward Looking Disclosure............................. 14
Risk Factors............................................................... 14
The Exchange Offer......................................................... 17
Capitalization............................................................. 26
Selected Consolidated Financial Data....................................... 27
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 28
Business................................................................... 35
Description of Certain Indebtedness........................................ 41
Description of the New Notes............................................... 42
Plan of Distribution....................................................... 58
Certain United States Federal Income Tax Considerations.................... 59
Legal Matters.............................................................. 62
Independent Auditors....................................................... 62
Index to Financial Statements.............................................. F-1
</TABLE>
[LOGO OF STANDARD PACIFIC CORP.]
STANDARD PACIFIC CORP.
Offer for All Outstanding
8% Senior Notes due 2008
in Exchange for
8% Series A Senior Notes due 2008
----------------
PROSPECTUS
----------------
April , 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law ("DGCL") makes provision
for the indemnification of officers and directors in terms sufficiently broad
to indemnify officers and directors of Standard Pacific Corp. (the
"Registrant") under certain circumstances from liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933.
The Registrant's Certificate of Incorporation ("Certificate") and Bylaws
provide, in effect, that, to the fullest extent and under the circumstances
permitted by Section 145 of the DGCL, the Registrant will indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that the is a director
or officer of the Registrant or is or was serving at the request or the
Registrant as a director or officer of another corporation or enterprise. The
Registrant has also entered into indemnification agreements with its officers
and directors. The Registrant may, in its discretion, similarly indemnify its
employees and agents. The Registrant's Certificate relieves its directors from
monetary damages to the Registrant or its stockholders for breach of such
director's fiduciary duty as a director to the fullest extent permitted by the
DGCL. Under Section 102(b)(7) of the DGCL, a corporation may relieve its
directors from personal liability to such corporation or its stockholders for
monetary damages for any breach of their fiduciary duty as directors except
(i) for a breach of the duty of loyalty, (ii) for failure to act in good
faith, (iii) for intentional misconduct or knowing violation of law, (iv) for
willful or negligent violations of certain provisions in the DGCL imposing
certain requirements with respect to stock repurchases, redemptions and
dividends, or (v) for any transactions from which the director derived an
improper personal benefit. Depending upon the character of the proceeding,
under Delaware law, the Registrant may indemnify against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any action, suit or proceeding if the
person indemnified acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interest of the Registrant, and,
with respect to any criminal action or proceeding, had no cause to believe his
or her conduct was unlawful. To the extent that a director or officer of the
Registrant has been successful in the defense of any action, suit or
proceeding referred to above, the Registrant would have the right to indemnify
him or her against expenses (including attorneys' fees) actually and
reasonably incurred in connection therewith.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
*1.1 Purchase Agreement, dated February 5, 1998, by and among the Company
and SBC Warburg Dillon Read Inc., BancAmerica Robertson Stephens and
Donaldson Lufkin & Jenrette Securities Corporation.
*4.1 Rights Agreement, dated as of December 31, 1991, between the Company
and Manufacturers Hanover Trust Company of California, as Rights
Agent, incorporated by reference to Exhibit 4.1 of the Registration
Statement on Form S-4 (file no. 33-42293).
*4.2 Standard Pacific Corp. Officers' Certificate dated March 5, 1993
with respect to the Company's 10 1/2% Senior Notes due 2000
incorporated by reference to Exhibit 4 of the Company's Current
Report on Form 8-K dated March 5, 1993.
*4.3 Standard Pacific Corp. Officers' Certificate dated June 17, 1997
with respect to the Registrant's 8 1/2% Senior Notes due 2007
incorporated by reference to Exhibit 4.1 of the Company's Current
Report on Form 8-K dated June 17, 1997.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
*4.4 Standard Pacific Corp. Officers' Certificate dated February 5, 1998
with respect to the Company's 8% Senior Notes due 2008 incorporated
by reference to Exhibit 4.4 of the Company's Annual Report on Form
10-K dated March 10, 1998.
*4.5 Registration Rights Agreement dated as of February 5, 1998 between
the Company and SBC Warburg Dillon Read Inc., BancAmerica Robertson
Stephens and Donaldson Lufkin & Jenrette Securities Corporation
incorporated by reference to Exhibit 4.5 of the Company's Annual
Report on Form 10-K dated March 10, 1998.
4.6 Form of Standard Pacific Corp. Officers' Certificate dated ,
1998 with respect to the Company's 8% Series A Senior Notes due
2008.
*4.7 Indenture dated as of April 1, 1992 by and between the Company and
United States Trust Company of New York, Trustee, incorporated by
reference to Exhibit 4 to the Company's Current Report on Form 8-K
dated February 24, 1993.
4.8 Form of Letter of Transmittal regarding the offer for all
outstanding 8% Senior Notes due 2008 in exchange for 8% Series A
Senior Notes due 2008.
*5.1 Opinion of Gibson, Dunn & Crutcher LLP.
*12.1 Statements re computation of ratios.
*23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).
*23.2 Consent of Arthur Andersen LLP.
*24.1 Power of Attorney.
*25.1 Statement of Eligibility of Trustee under the Trust Indenture Act of
1939 on Form T-1.
99.1 Notice of Guaranteed Delivery
</TABLE>
- --------
* Previously filed.
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
ITEM 22. UNDERTAKINGS
The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification
II-2
<PAGE>
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning the transaction that was not
the subject of and included in the registration statement when it became
effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Costa Mesa, State of California, on April 23, 1998.
STANDARD PACIFIC CORP.
/s/ Arthur E. Svendsen
By: _________________________________
Arthur E. Svendsen Chairman of
the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
the Registration Statement has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Arthur E. Svendsen Chairman of the Board, Chief April 23, 1998
____________________________________ Executive Officer and
Arthur E. Svendsen Director
* Stephen J. Scarborough President and Director April 23, 1998
____________________________________
Stephen J. Scarborough
* Andrew H. Parnes Vice President, Chief April 23, 1998
____________________________________ Financial Officer and
Andrew H. Parnes Treasurer
* Dr. James L. Doti Director April 23, 1998
____________________________________
Dr. James L. Doti
Director April , 1998
____________________________________
Ronald R. Foell
* Keith D. Koeller Director April 23, 1998
____________________________________
Keith D. Koeller
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Director April , 1998
____________________________________
William H. Langenberg
* Donald H. Spengler Director April 23, 1998
____________________________________
Donald H. Spengler
Director April , 1998
____________________________________
Robert J. St. Lawrence
*By: /s/ Arthur E. Svendsen
--------------------------------
Arthur E. Svendsen
as attorney in fact
pursuant to power of attorney
filed with the Commission
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------- -------------- -------------
<C> <S> <C>
*1.1 Purchase Agreement, dated February 5, 1998, by and
among the Company and SBC Warburg Dillon Read Inc.,
BancAmerica Robertson Stephens and Donaldson Lufkin &
Jenrette Securities Corporation.
*4.1 Rights Agreement, dated as of December 31, 1991,
between the Company and Manufacturers Hanover Trust
Company of California, as Rights Agent, incorporated
by reference to Exhibit 4.1 of the Registration
Statement on Form S-4 (file no. 33-42293).
*4.2 Standard Pacific Corp. Officers' Certificate dated
March 5, 1993 with respect to the Company's 10 1/2%
Senior Notes due 2000 incorporated by reference to
Exhibit 4 of the Company's Current Report on Form 8-K
dated March 5, 1993.
*4.3 Standard Pacific Corp. Officers' Certificate dated
June 17, 1997 with respect to the Registrant's 8 1/2%
Senior Notes due 2007 incorporated by reference to
Exhibit 4.1 of the Company's Current Report on Form 8-
K dated June 17, 1997.
*4.4 Standard Pacific Corp. Officers' Certificate dated
February 5, 1998 with respect to the Company's 8%
Senior Notes due 2008 incorporated by reference to
Exhibit 4.4 of the Company's Annual Report on Form 10-
K dated March 10, 1998.
*4.5 Registration Rights Agreement dated as of February 5,
1998 between the Company and SBC Warburg Dillon Read
Inc., BancAmerica Robertson Stephens and Donaldson
Lufkin & Jenrette Securities Corporation incorporated
by reference to Exhibit 4.5 of the Company's Annual
Report on Form 10-K dated March 10, 1998.
4.6 Form of Standard Pacific Corp. Officers' Certificate
dated , 1998 with respect to the Company's 8%
Series A Senior Notes due 2008.
*4.7 Indenture dated as of April 1, 1992 by and between the
Company and United States Trust Company of New York,
Trustee, incorporated by reference to Exhibit 4 to the
Company's Current Report on Form 8-K dated February
24, 1993.
4.8 Form of Letter of Transmittal regarding the offer for
all outstanding 8% Senior Notes due 2008 in exchange
for 8% Series A Senior Notes due 2008.
*5.1 Opinion of Gibson, Dunn & Crutcher LLP.
*12.1 Statements re computation of ratios.
*23.1 Consent of Gibson, Dunn & Crutcher LLP (included in
Exhibit 5.1).
*23.2 Consent of Arthur Andersen LLP.
*24.1 Power of Attorney.
*25.1 Statement of Eligibility of Trustee under the Trust
Indenture Act of 1939 on Form T-1.
99.1 Notice of Guaranteed Delivery
</TABLE>
- --------
* Previously filed.
<PAGE>
EXHIBIT 4.6
STANDARD PACIFIC CORP.
OFFICERS' CERTIFICATE
---------------------
Pursuant to Sections 2.01 and 2.03(a) of the Indenture, dated as of April
1, 1992 (the "Indenture"), between Standard Pacific Corp., a Delaware
corporation (the "Company"), and United States Trust Company of New York, as
Trustee (the "Trustee"), the undersigned, Stephen J. Scarborough and Andrew H.
Parnes, the President and Vice President, Treasurer and Chief Financial Officer
of the Company, respectively, hereby certify on behalf of the Company as
follows:
1. Authorization. The establishment of 8% Series A Senior Notes as
a series of Securities of the Company (the "Notes") has been approved and
authorized in accordance with the provisions of the Indenture. The form of
Note attached hereto as Exhibit A has been approved and authorized in
accordance with the provisions of the Indenture.
2. Compliance with Conditions Precedent. All conditions precedent
provided for in the Indenture relating to the establishment and issue of
the Notes as a series of Securities of the Company and the establishment
of a form of Note as a Security have been complied with.
3. Terms. The terms of the series of Securities established
pursuant to this Officers' Certificate shall be as follows:
(a) Title. The title of the series of Securities established
hereby is the "8% Series A Senior Notes due 2008."
(b) Aggregate Principal Amount. The limit upon the aggregate
principal amount of the Notes which may be authenticated and
delivered under the Indenture (except for Notes authenticated and
delivered upon registration of transfer of, or in exchange for, or in
lieu of, other Notes pursuant to Sections 2.08, 2.09, 2.11, 3.06 and
9.05 of the Indenture and except for any Notes which, pursuant to
Section 2.04 of the Indenture, are deemed never to have been
authorized and delivered thereunder) is $175,000,000 of which up to
$100,000,000 will be issued on the date hereof and the remainder of
which will remain available for future issuance.
<PAGE>
(c) Book-Entry System.
(i) Form. The Notes shall be issued in the form of one or
more permanent global Notes (each a "Global Note"), registered in
the name of the Depositary (as defined in the Indenture) or its
nominee, substantially in the form of Exhibit A, deposited with
the Trustee, as custodian for the Depositary or its nominee, duly
executed by the Company and authenticated by the Trustee as
herein provided.
(ii) Global Legend. Each Global Note shall bear the
following legend (the "Global Legend") on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET,
NEW YORK, NEW YORK), A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
2
<PAGE>
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS GLOBAL
SECURITY IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.
(iii) Book-Entry Provisions for Global Notes.
(A) No members of, or participants in, the Depositary ("Agent
Members") shall have any rights under the Indenture with respect
to any Global Note held on their behalf by the Depositary, or the
Trustee as its custodian, or under the Global Note, and the
Depositary may be treated by the Company, the Trustee and any
agent of any of them as the absolute owner of such Global Note
for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any
agent of any of them from giving effect to any written
certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Global Note.
(B) Except as provided in the following sentence transfers of a
Global Note shall be limited to transfers of such Global Note in
whole, but not in part, to the Depositary, its successors or
their respective nominees. Physical certificated Notes
("Certificated Notes") shall be transferred to all beneficial
owners in exchange for their beneficial interests in any Global
Note if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for such Global
Note and a successor depository is not appointed by the Company
within 90 days of such notice, (ii) the Company, in its sole
discretion, shall so request or (iii) an Event of Default has
occurred and is continuing and the Registrar shall have received
a request from the Depository to issue such Certificated Notes.
(C) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to subparagraph (B) of this paragraph,
the Global Note shall be deemed to be surrendered to the Trustee
for cancellation, and the Company shall execute, and the Trustee
shall authenticate and deliver, to
3
<PAGE>
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in such Global Note an equal aggregate principal
amount of Certificated Notes of authorized denominations.
(d) Persons to Whom Interest Payable. Interest on the Notes shall
be payable to the person in whose name a Note is registered at the
close of business (whether or not a Business Day) on the Regular
Record Date (as defined in the Indenture), for such interest payment,
except (i) that interest payable on February 15, 2008 shall be payable
to the person to whom principal is payable, and (ii) that default
interest shall be payable in the manner provided in Section 2.13 of
the Indenture.
(e) Stated Maturity. The date on which the principal of the
Notes shall be payable, unless accelerated pursuant to the Indenture,
is February 15, 2008.
(f) Rate of Interest; Interest Payment Dates; Regular Record
Dates; Overdue Principal and Interest.
(i) Rate of Interest. The principal amount of each of the
Notes shall bear simple interest at the rate of 8% per annum. The
date from which interest shall accrue for each of the Notes shall
be February 10, 1998 or in the case of Notes issued after August
15, 1998, the Interest Payment Date next preceding the date of
issuance of such Notes. Interest shall be computed on the basis of
a 360-day year of twelve 30-day months.
(ii) Interest Payment Dates. Interest on the Notes shall
be payable semiannually in arrears on February 15 and August 15 of
each year, commencing August 15, 1998.
If any Interest Payment Date or Maturity of the Notes falls
on a day that is not a Business Day, the payment due on such
Interest Payment Date or at Maturity will be made on the following
day that is a Business Day as if it were made on the date such
payment was due and no interest shall accrue on the amount so
payable for the period from and after such Interest Payment Date
or Maturity, as the case may be.
(iii) Regular Record Dates. The Regular Record Dates for
interest payable on each February 15 and August 15 will be the
immediately preceding February 1 and August 1 (whether or not a
Business Day), respectively.
(iv) Overdue Principal and Interest. Overdue principal
and, to the extent payment of such interest shall be legally
enforceable, overdue installments of interest shall bear interest
at the rate of 8% per annum.
4
<PAGE>
(g) Place of Payment; Registration of Transfer and Exchange;
Notices to Company.
(i) Place of Payment. Payment of the principal of and
interest on the Notes will be made at the Corporate Trust Office
of the Trustee in the Borough of Manhattan, The City of New York,
and at any other office or agency designated by the Company for
such purpose; provided, however, that at the option of the
-------- -------
Company, payment of interest due (other than at Maturity or upon
Redemption) may be made by check mailed to the address of the
person entitled thereto as such address shall appear in the
register of Securities.
(ii) Registration of Exchange and Transfer. Notes may be
presented for exchange and registration of transfer at the
Corporate Trust Office of the Trustee in the Borough of Manhattan,
The City of New York, or at the office of any transfer agent
hereafter designated by the Company for such purpose.
5
<PAGE>
(iii) Notices to Company. Notices and demands to or upon the
Company in respect to the Notes and the Indenture may be served
at Standard Pacific Corp., 1565 West MacArthur Boulevard, Costa
Mesa, California 92636, Attention: Vice President and Treasurer.
(h) Optional Redemption. Except as set forth in the following
paragraph, the Notes will not be redeemable at the option of the
Company prior to February 15, 2003. Thereafter, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time
or from time to time, upon not less than 30 nor more than 60 days'
prior notice mailed by first-class mail to each Holder's registered
address, at the following redemption prices (expressed in percentages
of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest
payment date), if redeemed during the 12-month period commencing on
February 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003....................................... 104.00%
2004....................................... 102.67%
2005....................................... 101.33%
2006 and thereafter........................ 100.00%
</TABLE>
If less than all of the Notes are to be redeemed, the Trustee
will select the Notes to be redeemed on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem to
be fair and appropriate.
(i) Acceleration. The principal amount of the Notes shall be
payable upon declaration of acceleration of the maturity thereof
pursuant to Section 6.02 of the Indenture.
(j) Change of Control. Upon the occurrence of a Change of
Control, each Holder shall have the right to require that the Company
repurchase all or a portion of such Holder's Notes at a purchase price
in cash equal to 101 percent of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase (subject to the
right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date), in accordance
with the provisions of the next paragraph.
Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee stating:
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<PAGE>
(aa) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Notes
at a purchase price in cash equal to 101 percent of the principal
amount outstanding at the repurchase date plus accrued and unpaid
interest to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest
on the relevant interest payment date) (the "Repurchase Price");
(bb) the circumstances and relevant facts and relevant financial
information regarding such Change of Control;
(cc) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed) (the
"Repurchase Date");
(dd) that any Note not tendered or accepted for payment will continue
to accrue interest;
(ee) that any Note accepted for payment shall cease to accrue interest
after the Repurchase Date;
(ff) that Holders electing to have a Note purchased will be required
to surrender the Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse side of the Note completed, to
the Paying Agent at the address specified in the Notice at least
five days before the Repurchase Date;
(gg) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than three days prior to the
Repurchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount
of the Note the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have the Note
purchased; and
(hh) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
On the Repurchase Date, the Company shall (i) accept for payment
Notes or portions thereof properly tendered, (ii) deposit with the
Paying Agent money sufficient to pay the purchase price of all Notes
or portions thereof so accepted and (iii) deliver to the Trustee Notes
so accepted together with an Officers' Certificate stating the Notes
or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail or deliver to Holders of Notes so accepted,
payment in an amount equal to the Repurchase Price, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new
Note equal
7
<PAGE>
in principal amount of any unpurchased portion of the Note
surrendered. The Company will publicly announce the results on or as
soon after as practical the Repurchase Date. For purposes of this
paragraph (j), the Trustee shall act as the Paying Agent.
(k) Registrar of Securities; Paying Agent. The Company hereby
appoints the Trustee as the Registrar and initial Paying Agent. The
books of the Registrar of the Securities for the Notes will be
initially maintained at the Corporate Trust Office of the Trustee.
(l) Compliance with Securities Laws. The Company shall comply, to
the extent applicable, with the requirements of Section 14(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
any other securities laws or regulations in connection with the
repurchase of Notes pursuant to Section 3(h), 3(j), 3(m)(i) or 3(m)(v)
hereunder. To the extent that the provisions of any securities laws or
regulations conflict with said provisions hereunder, the Company shall
comply with the applicable securities laws and regulations and shall
not be deemed to have breached its obligations under said provisions
hereunder by virtue thereof.
(m) Certain Covenants of the Company. The Company covenants as
follows:
(i) Maintenance of Consolidated Net Worth. The Company shall
furnish to the Trustee a certificate (signed by a Vice President,
and by its Treasurer, its Secretary or an Assistant Secretary)
within 45 days after the end of each fiscal quarter of the Company
(90 days after the end of its fiscal year) setting forth the
Consolidated Net Worth of the Company and its Restricted
Subsidiaries at the end of such fiscal quarter. If the
Consolidated Net Worth of the Company and its Restricted
Subsidiaries at the end of any two consecutive fiscal quarters is
less than $200,000,000, then the Company shall make an offer to
all Holders to acquire (the "Offer") on the last day of the fiscal
quarter next following such second fiscal quarter or, if such
second fiscal quarter ends on the last day of the Company's fiscal
year, 135 days after the end of such second fiscal quarter (the
"Purchase Date"), 10% of the aggregate principal amount of Notes
originally issued (or, if less than 10% of the principal amount of
the Notes originally issued are then outstanding, then all of the
Notes outstanding at that time, such amount being referred to as
the "Offer Amount") at a purchase price equal to 100% of the
aggregate principal amount thereof together with accrued and
unpaid interest to the Purchase Date. In no event shall the
failure to meet the minimum Consolidated Net Worth stated above at
the end of any fiscal quarter be counted toward more than one
Offer.
8
<PAGE>
The Company shall provide the Trustee with notice of the
Offer at least 45 days before any such Purchase Date and at least
10 days before the notice of any Offer is mailed to Holders. The
Company shall notify the Trustee promptly after the occurrence of
any of the events specified in this paragraph (i).
Notice of an Offer shall be mailed by the Trustee not less
than 30 days nor more than 60 days before the Purchase Date to
the Holders of the Notes at their last registered address. The
Offer shall remain open from the time of mailing until 5 days
before the Purchase Date. The Notice shall be accompanied by a
copy of the information regarding the Company required to be
contained in a Quarterly Report on Form 10-Q for the second
fiscal quarter referred to above if such second fiscal quarter is
one of the Company's first three fiscal quarters. If such second
fiscal quarter is the Company's last fiscal quarter, a copy of
the information required to be contained in an Annual Report to
Shareholders pursuant to Rule 14a-3 under the Exchange Act for
the fiscal year ending with such second fiscal quarter shall
either accompany the notice or be mailed to Holders not less than
15 days before the Purchase Date. The Notice shall contain all
instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Offer. The Notice, which shall
govern the terms of the Offer, shall state:
(aa) that the Offer is being made pursuant to this paragraph
(m)(i);
(bb) the Offer Amount, the purchase price and the Purchase Date;
(cc) that any Note not tendered or accepted for payment will
continue to accrue interest;
(dd) that any Note accepted for payment pursuant to the Offer
shall cease to accrue interest after the Purchase Date;
(ee) that Holders electing to have a Note purchased pursuant to
an Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the
reverse side of the Note completed, to the Paying Agent at
the address specified in the Notice at least five days
before the Purchase Date;
(ff) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than three days prior
to the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder,
the principal amount of the
9
<PAGE>
Note the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have the Note
purchased;
(gg) that if Notes in a principal amount in excess of the Offer
Amount are tendered pursuant to the Offer, the Company shall
purchase Notes on a pro rata basis or by lot or in such
other manner as the Trustee shall deem fair and appropriate;
and
(hh) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
On the Purchase Date, the Company shall (i) accept for
payment Notes or portions thereof properly tendered pursuant to
the Offer (on a pro rata basis, by lot or in such other manner
specified by the Trustee if required pursuant to paragraph (gg)
above), (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Notes or portions thereof so
accepted and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or
portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail or deliver to Holders of Notes so
accepted, payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail or deliver to
such Holders a new Note equal in principal amount of any
unpurchased portion of the Note surrendered. Any Notes not so
accepted shall be promptly mailed or delivered by the Company to
the Holder thereof. The Company will publicly announce the
results of the Offer on or as soon as practicable after the
Purchase Date. For purposes of this paragraph (m)(i), the Trustee
shall act as the Paying Agent.
(ii) Limitation on Additional Indebtedness. The Company
will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, Incur any Indebtedness unless, after
giving effect thereto, either (i) the ratio of Indebtedness of
the Company and the Restricted Subsidiaries (excluding, for
purposes of this calculation only, (A) purchase money mortgages
that are Non-Recourse Indebtedness, and (B) Indebtedness Incurred
under letters of credit, escrow agreements and surety bonds
obtained in the ordinary course of business) to Consolidated
Tangible Net Worth of the Company is less than 2.25 to 1; or (ii)
the Consolidated Coverage Ratio exceeds 2.0 to 1.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may Incur: (A) Indebtedness under one or more Bank
Credit Facilities in an amount not in excess of $275 million; (B)
purchase money mortgages that are Non-Recourse Indebtedness; (C)
obligations Incurred under letters of credit, escrow agreements
and surety bonds in the ordinary
10
<PAGE>
course of business; (D) Indebtedness Incurred under a Warehouse
Facility, provided that the amount of such Indebtedness
(excluding funding drafts issued thereunder) outstanding at any
time pursuant to this clause (D) may not exceed 98 percent of the
value of the Mortgages pledged to secure Indebtedness thereunder;
and (E) Indebtedness Incurred solely for the purpose of
refinancing or repaying any existing Indebtedness so long as (I)
the principal amount of such new Indebtedness does not exceed the
principal amount of the existing Indebtedness refinanced or
repaid (plus the premiums or other payments required to be paid
in connection with such refinancing or repayment and the expenses
incurred in connection therewith), (II) the maturity of such new
Indebtedness is not earlier than that of the existing
Indebtedness to be refinanced or repaid, (III) such new
Indebtedness, determined as of the date of incurrence, has an
Average Life at least equal to the remaining Average Life of the
Indebtedness to be refinanced or repaid, (IV) the new
Indebtedness is pari passu with or subordinate to the
Indebtedness being refinanced or repaid, and (V) the existing and
new Indebtedness are obligations of the same entity.
(iii) Limitations on Liens. The Company will not, and will
not permit any Restricted Subsidiary to, issue, assume, guarantee
or suffer to exist any Indebtedness secured by any mortgage,
pledge, lien or other encumbrance of any nature (herein
collectively referred to as a "lien" or "liens") upon any
property of the Company or any Restricted Subsidiary, or on any
shares of stock of any Restricted Subsidiary, without in any such
case effectively providing that the Notes (together with, if the
Company shall so determine, any other Indebtedness of the Company
or such Restricted Subsidiary ranking pari passu with the Notes)
shall be secured equally and ratably with such Indebtedness,
except that the foregoing restrictions shall not apply to: (A)
liens existing on December 31, 1997; (B) pledges, guarantees and
deposits under workers' compensation laws, unemployment insurance
laws or similar legislation, good faith deposits under bids,
tenders or contracts, deposits to secure public or statutory
obligations or appeal or similar bonds, and liens created by
special assessment districts used to finance infrastructure
improvements; (C) liens existing on property or assets of any
entity on the date on which it becomes a Restricted Subsidiary,
which secured Indebtedness is not Incurred in contemplation of
such entity becoming a Restricted Subsidiary; (D) liens on or
leases of model home units; (E) liens on property, inventory and
receivables of Panel Concepts, Inc. ("Panel Concepts") to provide
working capital (exclusive of cash and cash equivalents) for
Panel Concepts in the ordinary course of business; (F)
Capitalized Lease Obligations entered into in the ordinary course
of business in amounts not in excess of $10,000,000 in the
aggregate; (G) the replacement of any of the items set forth in
clauses (A) through (F) above, provided that (i) the principal
amount of the Indebtedness secured by liens
11
<PAGE>
shall not be increased, (ii) such Indebtedness, determined as of
the date of Incurrence, has an Average Life at least equal to the
remaining Average Life of the Indebtedness to be refinanced,
(iii) the maturity of such Indebtedness is not earlier than that
of the Indebtedness to be refinanced, and (iv) the liens shall be
limited to the property or part thereof which secured the lien so
replaced or property substituted therefor as a result of the
destruction, condemnation or damage of such property; (H) liens
on property acquired, constructed or improved by the Company or
any Restricted Subsidiary, which liens are either existing at the
time of such acquisition or at the time of completion of
construction or improvement or created within 120 days after such
acquisition, completion or improvement, to secure Indebtedness
Incurred or assumed to finance all or part of such property,
including any increase in the principal amount of such
Indebtedness and any extension of the repayment schedule and
maturity of such Indebtedness Incurred or entered into in the
ordinary course of business; (I) liens or priorities incurred in
the ordinary course of business, such as laborers', employees',
carriers', mechanics', vendors' and landlords' liens or
priorities; (J) liens for certain taxes and certain survey and
title exceptions; (K) liens arising out of judgments or awards
against the Company or any Restricted Subsidiary with respect to
which the Company or such Restricted Subsidiary is in good faith
prosecuting an appeal or proceeding for review and with respect
to which it has secured a stay of execution pending such appeal
or proceeding for review; (L) liens on property owned by any
Homebuilding Joint Venture; (M) liens securing a Warehouse
Facility, provided that such liens shall not extend to any assets
other than the mortgages, promissory notes and other collateral
that secures mortgage loans made by the Company or any of its
Restricted Subsidiaries; and (N) liens which would otherwise be
subject to the foregoing restrictions which, when the
Indebtedness relating to those liens is added to all other then
outstanding Indebtedness of the Company and the Restricted
Subsidiaries secured by liens and not listed in clauses (A)
through (M) above, does not exceed $50,000,000.
12
<PAGE>
(iv) Limitation on Restricted Payments. The Company will
not, nor will it permit any Restricted Subsidiary to, directly or
indirectly, (A) declare or pay any dividend on, or make any
distribution in respect of, or purchase, redeem or otherwise
acquire or retire for value, any Capital Stock of the Company
other than through the issuance solely of the Company's own
Capital Stock (other than Disqualified Stock), or rights thereto;
(B) make any principal payment on, or redeem, repurchase, defease
or otherwise acquire or retire for value prior to scheduled
principal payments or maturity, Indebtedness of the Company or
any Restricted Subsidiary which is expressly subordinated in
right of payment to the Notes (other than Indebtedness Incurred
after the issuance of the Notes provided that such repayment,
redemption, repurchase, defeasance or other retirement is made
substantially concurrent with the receipt of proceeds from the
Incurrence of Indebtedness that by its terms is both subordinated
in right of payment to the Notes and matures, by sinking fund or
otherwise, after February 15, 2008; or (C) make any Restricted
Investment (such payments or any other actions described in (A),
(B) and (C) being referred to herein collectively as, "Restricted
Payments") unless (I) at the time of, and after giving effect to,
the proposed Restricted Payment, no Event of Default (and no
event that, after notice or lapse of time, or both, would become
an Event of Default) shall have occurred and be continuing, (II)
the Company is able to Incur an additional $1.00 of Indebtedness
pursuant to the first paragraph of Section (m)(ii) herein, and
(III) at the time of, and after giving effect thereto, the sum of
the aggregate amount expended (or with respect to guaranties or
similar arrangements the amount then guaranteed) for all such
Restricted Payments (the amount expended for such purposes, if
other than in cash, to be determined by the Board of Directors of
the Company, whose determination shall be conclusive and
evidenced by a resolution of such Board of Directors filed with
the Trustee) subsequent to June 30, 1997 shall not exceed the sum
of (aa) 50% of the aggregate Consolidated Net Income (or, in case
such aggregate Consolidated Net Income shall be a deficit, minus
100% of such deficit) of the Company accrued on a cumulative
basis subsequent to June 30, 1997, (bb) the aggregate net
proceeds, including the fair market value of property other than
cash (as determined by the Board of Directors of the Company,
whose determination shall be conclusive and evidenced by a
resolution of such Board of Directors filed with the Trustee),
received by the Company from the issuance or sale, after February
10, 1998, of Capital Stock (other than Disqualified Stock) of the
Company, including Capital Stock (other than Disqualified Stock)
of the Company issued subsequent to February 10, 1998 upon the
conversion of Indebtedness of the Company initially issued for
cash, (cc) 100% of dividends or distributions (the fair value of
which, if other than cash, to be determined by the Board of
Directors, in good faith) paid to the Company (or any Restricted
13
<PAGE>
Subsidiary) by an Unrestricted Subsidiary, Homebuilding Joint
Venture or any other person in which the Company (or any
Restricted Subsidiary), directly or indirectly, has an ownership
interest but less than a 100% ownership interest to the extent
that such dividends or distributions do not exceed the amount of
loans, advances or capital contributions made to any such entity
or person subsequent to February 10, 1998 and included in the
calculation of Restricted Payments, and (dd) $40,000,000;
provided, however, that the foregoing shall not prevent (i) the
-------- -------
payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration the making of
such payment would have complied with the provisions of this
limitation on dividends; provided, however, that such dividend
shall be included in future calculations of Restricted Payments,
(ii) the retirement of any shares of the Company's Capital Stock
by exchange for, or out of proceeds of the substantially
concurrent sale of, other shares of its Capital Stock (other than
Disqualified Stock); provided, however, that the aggregate net
proceeds from such sale shall be excluded from the calculation of
the amounts under subclause (bb) above, (iii) the redemption,
repayment, repurchase, defeasance or other retirement of
Indebtedness with proceeds received from the substantially
concurrent sale of shares of the Company's Capital Stock (other
than Disqualified Stock); provided however, that the aggregate
net proceeds from such sale shall be excluded from the
calculation of the amounts under subclause (bb) above, or (iv)
any investment or investments in Standard Pacific Savings, F.A.
("Savings") by the Company or any of its Restricted Subsidiaries
for the purpose of causing Savings to comply with any regulatory
agreements existing on February 10, 1998 or with any applicable
law, rule, regulation, official interpretation of law, rule or
regulation or official directive which governs the capital
maintenance, net worth or similar regulatory requirements
applicable to Savings.
14
<PAGE>
(v) Limitation on Asset Sales. The Company will not, and
will not permit any Restricted Subsidiary to, make an Asset
Disposition, other than for fair market value and in the ordinary
course of business, with an aggregate net book value as of the
end of the immediately preceding fiscal quarter greater than 10%
of the Company's total consolidated assets as of that date,
unless (A) the consideration received by the Company (or a
Restricted Subsidiary, as the case may be) for such disposition
consists of at least 70% cash; provided, however, that for
-------- -------
purposes of this provision (A), the amount of any liabilities
assumed by the transferee and any notes or other obligations
received by the Company or a Restricted Subsidiary which are
immediately converted into cash shall be deemed to be cash, and
(B) the Company shall within one year after the date of such sale
or sales, apply the Net Proceeds from such sale or sales in
excess of an amount equal to 10% of the Company's total
consolidated assets to (I) a purchase of or an Investment in
Additional Assets (other than cash or cash equivalents), (II)
repayment of indebtedness of the Company which is pari passu with
----------
the Notes, and/or (III) make an offer to acquire all or
part of the Notes at a purchase price equal to the principal
amount thereof plus accrued and unpaid interest thereon to the
purchase date.
In the event the Company elects to or shall be required to
offer to redeem Notes pursuant to the provisions of this
paragraph (m)(v), the Company shall deliver to the Trustee an
Officers' Certificate specifying the Asset Sale Offer Amount (as
defined below) and the Asset Sale Purchase Date (as defined
below). Within 15 days thereafter, the Company shall mail or
cause the Trustee to mail (in the Company's name and at its
expense) an offer to redeem (the "Asset Sale Offer") to each
Holder of Notes. The redemption price shall be 100% of the
principal amount of the Notes plus accrued interest to the
redemption date and upon surrender to the Trustee or the Paying
Agent, the Holders of such Notes shall be paid the redemption
price. The date designated for repurchase of Notes pursuant to an
Asset Sale Offer (the "Asset Sale Purchase Date") shall be a date
designated by the Company that is not less than 30 days nor more
than 60 days before notice of an Asset Sale Offer is to be and
shall be mailed by the Trustee to the Holders of the Notes at
their last registered address. The Asset Sale Offer shall remain
open from the time of mailing until 5 days before the Asset Sale
Purchase Date. The Notice shall contain all instructions and
materials necessary to enable such Holders to tender Notes
pursuant to the Asset Sale Offer. The Notice, which shall govern
the terms of the Asset Sale Offer, shall state:
(aa) that the Asset Sale Offer is being made pursuant to this
paragraph (m)(v);
15
<PAGE>
(bb) the amount of Notes offered to be redeemed (the "Asset Sale
Offer Amount"), the purchase price and the Asset Sale
Purchase Date;
(cc) that any Note not tendered or accepted for payment will
continue to accrue interest;
(dd) that any Note accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Asset
Sale Purchase Date;
(ee) that Holders electing to have a Note purchased pursuant to
an Asset Sale Offer will be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase"
on the reverse side of the Note completed, to the Paying
Agent at the address specified in the Notice at least five
days before the Asset Sale Purchase Date;
(ff) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than three days prior
to the Asset Sale Purchase Date, a telegram, telex,
facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Note the Holder
delivered for purchase and a statement that such Holder is
withdrawing his election to have the Note purchased;
(gg) that if Notes in a principal amount in excess of the Asset
Sale Offer Amount are tendered pursuant to the Asset Sale
Offer, the Company shall purchase Notes on a pro rata basis
or by lot or in such other manner as the Trustee shall deem
fair and appropriate; and
(hh) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
On the Asset Sale Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof properly tendered
pursuant to the Asset Sale Offer (on a pro rata basis, by lot or
in such other manner specified by the Trustee if required
pursuant to paragraph (gg) above), (ii) deposit with the Paying
Agent money sufficient to pay the purchase price of all Notes or
portions thereof so accepted and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating
the Notes or portions thereof accepted for payment by the
Company. The Paying Agent shall promptly mail or deliver to
Holders of Notes so accepted, payment in an amount equal to the
purchase price, and the Trustee shall promptly
16
<PAGE>
authenticate and mail or deliver to such Holders a new Note equal
in principal amount of any unpurchased portion of the Note
surrendered. Any Notes not so accepted shall be promptly mailed
or delivered by the Company to the Holder thereof. The Company
will publicly announce the results of the Asset Sale Offer on or
as soon after as practical the Asset Sale Purchase Date. For
purposes of this paragraph (m)(v), the Trustee shall act as the
Paying Agent.
(vi) Transactions with Affiliates. (A) The Company shall
not, and shall not permit any Restricted Subsidiary to, enter
into or permit to exist any transaction or series of related
transactions (including the purchase, sale, lease or exchange of
any property, employee compensation arrangements or the rendering
of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless the terms thereof (I) are no less favorable
to the Company or such Restricted Subsidiary than those that
could be obtained at the time of such transaction in arm's-length
dealings with a person who is not such an Affiliate; and (II) if
such Affiliate Transaction (or series of related Affiliate
Transactions) involve aggregate payments in an amount in excess
of $10 million in any one year, (aa) are set forth in writing,
(bb) comply with clause (I) above and (cc) have been approved by
a majority of the disinterested members of the Board of
Directors.
(B) The provisions of the foregoing paragraph (A) shall
not prohibit (I) any Restricted Payment permitted to be paid
pursuant to the covenant described under clause (m)(iv) above;
(II) any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise, pursuant to, or the
funding of, employment arrangements, stock options and stock
ownership plans in the ordinary course of business and approved
by the Board of Directors or a committee thereof; (III) the grant
of stock options or similar rights to employees and directors of
the Company in the ordinary course of business and pursuant to
plans approved by the Board of Directors or a committee thereof;
(IV) loans or advances to employees in the ordinary course of
business of the Company or its Restricted Subsidiaries; (V) fees,
compensation or employee benefit arrangements paid to and
indemnity provided for the benefit of directors, officers or
employees of the Company or any Subsidiary in the ordinary course
of business; or (VI) any Affiliate Transaction between the
Company and a Restricted Subsidiary or between Restricted
Subsidiaries.
(vii) Limitation on Payment Restrictions Affecting
Restricted Subsidiaries. The Company will not, and will not
permit any Restricted Subsidiary to, create or otherwise cause or
permit to exist or become effective, any consensual encumbrance
or consensual restriction on the ability of any Restricted
Subsidiary (I) to pay dividends or make any other
17
<PAGE>
distributions on its Capital Stock to the Company or a Restricted
Subsidiary or pay any Indebtedness owed to the Company, (II) to
make any loans or advances to the Company or (III) transfer any
of its property or assets to the Company, except: (aa) any
encumbrance or restriction pursuant to an agreement in effect at
or entered into on February 10, 1998; (bb) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to
an agreement relating to any Indebtedness Incurred by such
Restricted Subsidiary which was entered into on or prior to the
date on which such Restricted Subsidiary was acquired by the
Company (other than as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate,
the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary
or was acquired by the Company) and outstanding on such date;
(cc) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (aa) or (bb) of this covenant (or
effecting a Refinancing of such Refinancing Indebtedness pursuant
to this clause (cc)) or contained in any amendment to an
agreement referred to in clause (aa) or (bb) of this covenant or
this clause (cc); provided, however, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained
in any such refinancing agreement or amendment are no more
restrictive in any material respect than the encumbrances and
restrictions with respect to such Restricted Subsidiary contained
in such agreements; (dd) any such encumbrance or restriction
consisting of customary contractual non-assignment provisions to
the extent such provisions restrict the transfer of rights,
duties or obligations under such contract; (ee) in the case of
clause (III) above, restrictions contained in security agreements
or mortgages securing Indebtedness of a Restricted Subsidiary to
the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages; (ff)
any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition
of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or
disposition; and (gg) any restriction imposed by applicable law.
(viii) Restricted and Unrestricted Subsidiaries. The
Company will not permit any Restricted Subsidiary to be
designated as an Unrestricted Subsidiary unless the Company and
its Restricted Subsidiaries would thereafter be permitted to (A)
Incur at least $1.00 of Indebtedness under the first paragraph
(m)(ii) above and (B) make a Restricted Payment of at least $1.00
under paragraph (m)(iv) above.
The Company will not permit any Unrestricted Subsidiary to
be designated as a Restricted Subsidiary unless such Subsidiary
has outstanding no Indebtedness except such Indebtedness as the
Company
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could permit it to become liable for immediately after becoming a
Restricted Subsidiary under paragraph (m)(ii) above.
Promptly after the adoption of any Board Resolution
designating a Restricted Subsidiary as an Unrestricted Subsidiary
or an Unrestricted Subsidiary as a Restricted Subsidiary, a copy
thereof shall be filed with the Trustee, together with an
Officers' Certificate stating that the provisions of this
paragraph (m)(viii) have been complied with in connection with
such designation.
The Company will not permit Standard Pacific of Texas, Inc.
to be designated as an Unrestricted Subsidiary or permit the
assets of the Company or any Subsidiary employed in the
homebuilding operations to be transferred to an Unrestricted
Subsidiary, except in amounts permitted under paragraph (m)(iv)
above.
(ix) Successor Corporation. The Company will not
consolidate with, merge into or transfer all or substantially all
of its assets to another person unless (i) such person (if other
than the Company) is a corporation organized under the laws of
the United States or any state thereof or the District of
Columbia and expressly assumes all the obligations of the Company
under the Indenture and the Notes; (ii) immediately after giving
effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; (iii) the Consolidated Net Worth
of the obligor of the Notes immediately after giving effect to
such transaction (exclusive of any adjustments to Consolidated
Net Worth relating to transaction costs and accounting
adjustments resulting from such transaction) is not less than the
Consolidated Net Worth of the Company immediately prior to such
transaction; and (iv) the surviving corporation would be able to
Incur at least an additional $1.00 of Indebtedness pursuant to
the first paragraph of the covenant described under paragraph
(m)(ii).
(x) Reports to Holders of the Notes. So long as the
Company is subject to the periodic reporting requirements of the
Exchange Act, it shall continue to furnish the information
required thereby to the SEC. Even if the Company is entitled
under the Exchange Act not to furnish such information to the SEC
or to the holders of the Notes, it will nonetheless continue to
furnish information under Section 13 or 15(d) of the Exchange Act
to the SEC and the Trustee as if it were subject to such periodic
reporting requirements.
(n) Additional Events of Default. In addition to the Events of
Default specified in the Indenture, the following shall constitute
Events of Default under Section 6.01 of the Indenture with respect to
the Notes: (i) default under
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any mortgage, indenture (including the Indenture) or instrument under
which is issued or which secures or evidences Indebtedness of the
Company or any Restricted Subsidiary (other than Non-Recourse
Indebtedness) which default constitutes a failure to pay principal of
such Indebtedness in an amount of $20,000,000 or more when due and
payable (other than as a result of acceleration) or results in
Indebtedness (other than Non-Recourse Indebtedness) in the aggregate
of $20,000,000 or more becoming or being declared due and payable
before it would otherwise become due and payable, and (ii) entry of a
final judgment for the payment of money against the Company or any
Restricted Subsidiary in an amount of $5,000,000 or more which remains
undischarged or unstayed for a period of 60 days after the date on
which the right to appeal such judgment has expired or becomes subject
to an enforcement proceeding.
(o) Certain Definitions. The following terms shall have the
meanings indicated for purposes of this Officers' Certificate. All
capitalized terms used in this Officers' Certificate and not otherwise
defined herein shall have the meanings set forth in the Indenture.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; or (ii) the
Capital Stock of a person that becomes a Restricted Subsidiary as a
result of the acquisition of such Capital Stock by the Company or
another Restricted Subsidiary; provided, however, that any such
Restricted Subsidiary is primarily engaged in a Related Business. For
purposes of this definition, "Related Business" means any business
related, ancillary or complimentary (as defined in good faith by the
Board of Directors) to the business of the Company and the Restricted
Subsidiaries on February 10, 1998.
"Affiliate" of any specified person means any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person. For the purposes
of this definition, "control" when used with respect to any specified
person means the power to direct or cause the direction of the
management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or
other-wise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or
dispositions) by the Company or any Restricted Subsidiary, including
any disposition by means of a merger, consolidation or similar
transaction (each referred to for the purposes of this definition as a
"disposition"), of (i) any shares of Capital Stock of a Restricted
Subsidiary (other than directors' qualifying shares and, to the extent
required by local ownership laws in foreign countries, shares owned by
foreign shareholders); (ii) all or substantially all the assets of any
division, business segment or
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comparable line of business of the Company or any Restricted
Subsidiary; or (iii) any other assets of the Company or any Restricted
Subsidiary having a fair market value (as determined in good faith by
the Board of Directors) in excess of $250,000 disposed of in a single
transaction or series of related transactions outside of the ordinary
course of business of the Company or such Restricted Subsidiary (other
than, in the case of (i), (ii) and (iii) above, a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal
payment (assuming the exercise by the obligor of such Indebtedness of
all unconditional (other than as to the giving of notice) extension
options of each such scheduled payment date) of such Indebtedness
multiplied by the amount of such principal payment by (ii) the sum of
all such principal payments.
"Bank Credit Facility" means the Revolving Credit Facility and
any bank credit agreement or credit facility entered into in the
future by the Company or any Restricted Subsidiary, as any of the same
may be amended, waived, modified, refinanced or replaced from time to
time.
"Capitalized Lease Obligations" means any obligations under a
lease that is required to be capitalized for financial reporting
purposes in accordance with generally accepted accounting principles.
"Capital Stock" of any person means any and all shares,
interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) equity of
such person, including any Preferred Stock, but excluding any debt
securities convertible into such equity.
"Change of Control" means the occurrence of any of the following
events:
(i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), is or becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that for purposes of this clause such person or group shall be
deemed to have "beneficial ownership" of all shares that any such
person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly
or indirectly, of more than 50 percent of the total voting power of
the Voting Stock of the Company;
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors
(together with any
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new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was
approved by a majority vote of the directors of the Company then still
in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board of
Directors then in office; or
(iii) the merger or consolidation of the Company with or
into another person or the merger of another person with or into the
Company, or the sale of all or substantially all the assets of the
Company to another person, other than any such sale to one or more
Restricted Subsidiaries, and in the case of any such merger or
consolidation, the securities of the Company that are outstanding
immediately prior to such transaction and which represent 100 percent
of the aggregate voting power of the Voting Stock of the Company are
changed into or exchanged for cash, securities or property, unless
pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of
the surviving corporation, or a parent corporation that owns all of
the Capital Stock of such surviving corporation, that represent
immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving
corporation or such parent corporation, as the case may be.
"Consolidated Coverage Ratio" with respect to the Company as of
any date of determination means the ratio of the Company's EBITDA to
its Consolidated Interest Incurred for the four fiscal quarters ending
immediately prior to the date of determination. Notwithstanding clause
(ii) of the definition of Consolidated Net Income, if the Indebtedness
which is being Incurred is Incurred in connection with an acquisition
by the Company or a Restricted Subsidiary, the Consolidated Coverage
Ratio shall be determined after giving effect to both the Consolidated
Interest Incurred related to the Incurrence of such Indebtedness and
the EBITDA as if the acquisition had occurred at the beginning of the
four fiscal quarter period (x) of the person becoming a Restricted
Subsidiary, or (y) in the case of an acquisition of assets that
constitute substantially all of an operating unit or business,
relating to the assets being acquired by the Company or a Restricted
Subsidiary.
"Consolidated Interest Expense" of the Company means, for any
period, the aggregate amount of interest which, in accordance with
generally accepted accounting principles as in effect on February 10,
1998, would be included on an income statement for the Company and its
Restricted Subsidiaries on a consolidated basis, whether expensed
directly, or included as a component of cost of goods sold, or
allocated to joint ventures or otherwise (including, but not limited
to, imputed interest included on Capitalized Lease Obligations, all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, the net costs
associated with Hedging
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Obligations, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of
discount or premium, if any, and all other non-cash interest expense),
excluding interest expense related to mortgage banking operations plus
the product of (i) cash dividends paid on any Preferred Stock of the
Company times (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective aggregate
federal, state and local tax rate of the Company, expressed as a
decimal.
"Consolidated Interest Incurred" of the Company means, for any
period, (i) the aggregate amount of interest which, in accordance with
generally accepted accounting principles as in effect on February 10,
1998, would be included on an income statement for the Company and its
Restricted Subsidiaries on a consolidated basis, whether expensed
directly, or included as a component of cost of goods sold, or
allocated to joint ventures or otherwise (including, but not limited
to, imputed interest included on Capitalized Lease Obligations, all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, the net costs
associated with Hedging Obligations, amortization of discount or
premium, if any, and all other non-cash interest expense), excluding
interest expense related to mortgage banking operations, plus or
minus, without duplication; (ii) the difference between capitalized
interest for such period and the interest component of cost of goods
sold for such period; plus (iii) the product of (A) cash dividends
paid on any Preferred Stock of the Company, times (B) a fraction, the
numerator of which is one and the denominator of which is one minus
the then current effective aggregate federal, state and local tax rate
of the Company, expressed as a decimal.
"Consolidated Net Income" for any period, means the aggregate of
the Net Income of the Company and its Restricted Subsidiaries for such
period on a consolidated basis determined in accordance with generally
accepted accounting principles as in effect on February 10, 1998,
provided that (i) the Net Income of any person in which the Company or
any Restricted Subsidiary has, a joint interest with a third party
(other than an Unrestricted Subsidiary) shall be included only to the
extent of the lesser of (A) the amount of dividends or distributions
actually paid to the Company or a Restricted Subsidiary or (B) the
Company's direct or indirect proportionate interest in the Net Income
of such person, provided that, so long as the Company or a Restricted
Subsidiary has an unqualified legal right to require the payment of a
dividend or distribution, Net Income shall be determined solely
pursuant to clause (B); (ii) the Net Income of any person acquired in
a pooling of interests transaction for any period prior to the date of
such acquisition shall be excluded; and (iii) the Net Income of any
Unrestricted Subsidiary shall be included only to the extent of the
amount of dividends or distributions (the fair value of which, if
other than in cash, to be determined by the Board of Directors, in
good faith) by such Subsidiary to the Company or to any of its
consolidated Restricted Subsidiaries; and (iv) the Net Income of any
Unrestricted Subsidiary, any Homebuilding Joint Venture or any
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<PAGE>
other person in which the Company or any Restricted Subsidiary has a
joint interest with a third party that is not existing on December 31,
1997 shall be included only to the extent that the aggregate amount of
dividends or distributions (the fair value of which, if other than
cash, to be determined by the Board of Directors, in good faith) by
such Subsidiary or Homebuilding Joint Venture to the Company or to any
of its consolidated Restricted Subsidiaries exceeds the aggregate
amount of unpaid loans or advances and unreturned capital
contributions made by the Company or any Restricted Subsidiary in or
to such Subsidiary or Homebuilding Joint Venture.
"Consolidated Net Worth" of the Company means consolidated
stockholders' equity less any increase in stockholders' equity of each
of the Unrestricted Subsidiaries subsequent to December 31, 1997
attributable to the Company or any of its Restricted Subsidiaries, as
determined in accordance with generally accepted accounting principles
as in effect on February 10, 1998.
"Consolidated Tangible Net Worth" with respect to the Company
means the consolidated stockholders' equity of the Company, as
determined in accordance with generally accepted accounting
principles, as in effect on February 10, 1998, less (i) that portion
of any increase in each of the Unrestricted Subsidiaries'
stockholders' equity subsequent to December 31, 1997 attributable to
the Company or any of its Restricted Subsidiaries, as determined in
accordance with generally accepted accounting principles, as in effect
on the date of the issuance of the Notes, and (ii) the Intangible
Assets of the Company and the Restricted Subsidiaries. "Intangible
Assets" means the amount (to the extent reflected in determining
consolidated stockholders' equity) of (A) all write-ups (other than
write-ups of tangible assets of a going concern business made within
twelve months after the acquisition of such business) in the book
value of any asset owned by the Company or any Restricted Subsidiary,
and (B) all goodwill, trade names, trademarks, patents, unamortized
debt discount and expense and other like intangibles.
"Disqualified Stock" means, with respect to any person, any
Capital Stock which by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable) or upon the
happening of any event (i) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise; (ii) is
convertible or exchangeable, at the option of the holder thereof, for
Indebtedness or Disqualified Stock; or (iii) is redeemable at the
option of the holder thereof, in whole or in part, in each case on or
prior to February 15, 2009. Notwithstanding the foregoing,
"Disqualified Stock" shall not include Capital Stock which is
redeemable solely pursuant to a change in control provision that does
not (A) cause such Capital Stock to become redeemable in circumstances
which would not constitute a Change of Control and (B) require the
Company to pay the redemption price therefor prior to the repurchase
date specified under "Change of Control" above.
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"EBITDA" of the Company for any period means the sum of
Consolidated Net Income plus Consolidated Interest Expense plus,
without duplication, the following to the extent deducted in
calculating such Consolidated Net Income: (i) income tax expense, (ii)
depreciation expense, (iii) amortization expense and (iv) all other
non-cash items reducing Consolidated Net Income (other than items that
will require cash payments in the future and for which an accrual or
reserve is, or is required by generally accepted accounting principals
as in effect on the date of issuance of the Notes to be, made), less
all non-cash items increasing Consolidated Net Income, in each case
for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in
the same proportion) that the net income of such Subsidiary was
included in calculating Consolidated Net Income.
"Hedging Obligations" of any person means the net obligations of
such person pursuant to any Interest Rate Agreement or any foreign
exchange contract, currency swap agreement or other similar agreement
to which such person is a party or a beneficiary.
"Homebuilding Joint Venture" means (i) any Unrestricted
Subsidiary and (ii) any person in which the Company or any of its
Subsidiaries has an ownership interest but less than a 100% ownership
interest that, in each case, was formed for and is engaged in
homebuilding operations.
"Incur" means issue, assume, guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock
of a person existing at the time such person becomes a Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be
deemed to be Incurred by such Subsidiary at the time it becomes a
Subsidiary; provided further, however, that in the case of a discount
security, neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of
Indebtedness. The term "Incurrence" when used as a noun shall have a
correlative meaning.
"Indebtedness" means on any date of determination (without
duplication), (i) the principal of and premium (if any) in respect of
(A) indebtedness of such person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such person is responsible or
liable; (ii) all Capitalized Lease Obligations of such person; (iii)
all obligations of such person issued or assumed as the deferred
purchase price of property or services, all conditional sale
obligations of such person and all obligations of such person under
any title retention agreement (but excluding accounts payable and
accrued expenses arising in the ordinary course of business and which
are not more than 90 days past due and not in dispute) which would
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appear as a liability on a balance sheet of a person prepared on a
consolidated basis in accordance with generally accepted accounting
principles, which purchase price or obligation is due more than six
months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services
(provided that, in the case of obligations of an acquired person
assumed in connection with an acquisition of such person, such
obligations would constitute Indebtedness of such person); (iv) all
obligations of such person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii)
above) entered into in the ordinary course of business of such person
to the extent such letters of credit are not drawn upon or, if and to
the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following receipt by such person of a demand for
reimbursement following payment on the letter of credit); (v) the
amount of all obligations of such person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock
or, with respect to any Subsidiary of such person, any Preferred Stock
(but excluding, in each case, any accrued dividends); (vi) all
obligations of the type referred to in clauses (i) through (v) of
other persons and all dividends of other persons for the payment of
which, in either case, such person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including by means
of any guarantee; (vii) all obligations of the type referred to in
clauses (i) through (vi) of other persons secured by any lien on any
property or asset of such person (whether or not such obligation is
assumed by such person), the amount of such obligation being deemed to
be the lesser of the value of such property or assets or the amount of
the obligation so secured; and (viii) to the extent not otherwise
included in this definition, Hedging Obligations of such Person. The
amount of Indebtedness of any person at any date shall be the
outstanding balance at such date of all unconditional obligations as
described above and the maximum liability, upon the occurrence of the
contingency, other than a contingency solely within the control of
such person, giving rise to the obligation, of any contingent
obligations as described above at such date; provided, however, that
the amount outstanding at any time of any Indebtedness issued with
original issue discount shall be deemed to be the face amount of such
Indebtedness less the remaining unamortized portion of the original
issue discount of such indebtedness at such time as determined in
conformity with generally accepted accounting principles.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Restricted
Subsidiary against fluctuations in interest rates.
"Investment" in any person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet
of such person) or other
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extensions of credit (including by way of guarantee or similar
arrangement) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such person.
"Mortgage" means a first priority mortgage or first priority deed
of trust on improved real property.
"Net Income" of any person means the net income (loss) of such
person, determined in accordance with generally accepted accounting
principles, as in effect on February 10, 1998; excluding, however,
from the determination of Net Income all gains (to the extent that
they exceed all losses) realized upon the sale or other disposition
(including, without limitation, dispositions pursuant to sale
leaseback transactions) of any real property or equipment of such
person, which is not sold or otherwise disposed of in the ordinary
course of business, or of any capital stock of such person or its
subsidiaries owned by such person.
"Net Proceeds" means with respect to any sale, assignment,
exchange, lease, transfer or other disposition of assets, the
consideration received by the Company (or a Restricted Subsidiary, as
the case may be) for such disposition after (a) provision for all
income and other taxes resulting from such asset disposition, (b)
payment of all brokerage commissions, underwriting, legal, accounting,
appraisal and other fees and expenses related to such asset sale and
(c) deduction of appropriate amounts to be provided by the Company or
a Restricted Subsidiary as a reserve, in accordance with generally
accepted accounting principles, against any liabilities associated
with the assets sold or disposed of in such asset disposition and
retained by the Company or a Restricted Subsidiary after such asset
sale, including, without limitation, pension and other post-employment
benefit liabilities and against any indemnification obligations
associated with the assets sold or disposed of in such asset sale.
"Non-Recourse Indebtedness" means Indebtedness or other
obligations secured by a lien on property to the extent that the
liability for such Indebtedness or other obligations is limited to the
security of the property without liability on the part of the Company
or any Subsidiary (other than the Subsidiary which holds title to such
property) for any deficiency.
"Person" means an individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company,
limited liability partnership, trust, unincorporated organization, or
government or any agency or political subdivision thereof.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) which is
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preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of
such corporation, over shares of Capital Stock of any other class of
such corporation.
"Refinance" means, in respect of Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to
issue other Indebtedness in exchange or replacement for, such
Indebtedness. "Refinancing" shall have a correlative meaning.
"Restricted Investment" means any loan, advance, capital
contribution or transfer (including by way of guaranty or other
similar arrangement) in or to any Unrestricted Subsidiary,
Homebuilding Joint Venture or any person in which the Company,
directly or indirectly, has an ownership interest but less than 100
percent ownership interest; provided, however, that loans, advances,
capital contributions or transfers (including by way of guaranty or
other similar arrangement) to a Homebuilding Joint Venture shall be
counted as a Restricted Investment only to the extent that the
aggregate at any one time outstanding of all such amounts expended (or
with respect to guaranties or similar arrangements the amounts then
guaranteed) exceed, subsequent to December 31, 1996, $20 million for
any one Homebuilding Joint Venture or $80 million in the aggregate for
all Homebuilding Joint Ventures. Restricted Investment shall include
the fair market value of the net assets of any Restricted Subsidiary
that at any time is designated an Unrestricted Subsidiary. Any
property transferred to an Unrestricted Subsidiary, and the net assets
of a Restricted Subsidiary that is designated an Unrestricted
Subsidiary, shall be valued at fair market value at the time of such
transfer, in each case as determined by the Board of Directors of the
Company in good faith. The net assets of Panel Concepts shall not be
counted as a Restricted Investment if (i) a sale of all or a portion
of the Capital Stock of Panel Concepts causes Panel Concepts to become
an Unrestricted Subsidiary; (ii) at the time of such sale, the net
book value of the assets of Panel Concepts represent less than 10
percent of the consolidated assets of the Company and its Restricted
Subsidiaries; and (iii) the net proceeds of any such sale and any
subsequent sale of the Capital Stock of Panel Concepts to any person
other than the Company or any Restricted Subsidiary are paid or
distributed to the Company or any Restricted Subsidiary.
"Restricted Subsidiary" means any Wholly-Owned Subsidiary that
has not been designated an Unrestricted Subsidiary.
"Subsidiary" means a corporation, a majority of the capital stock
with voting power to elect directors of which is directly or
indirectly owned by the Company and its Subsidiaries, or any person in
which the Company and its Subsidiaries have at least a majority
ownership interest.
"Unrestricted Subsidiary" means (i) any Subsidiary in which the
Company, directly or indirectly, has less than a 100% ownership
interest; (ii) any
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Wholly Owned Subsidiary which in accordance with paragraph (m)(viii)
above has been designated in a resolution adopted by the Board of
Directors of the Company as an Unrestricted Subsidiary, in each case
unless and until such Subsidiary shall be designated as a Restricted
Subsidiary in accordance with paragraph (m)(viii) above; and (iii) any
Wholly-Owned Subsidiary a majority of the voting stock of which shall
at the time be owned directly or indirectly by one or more
Unrestricted Subsidiaries.
"Voting Stock", with respect to any person, means securities of
any class of Capital Stock of such person entitling the holders
thereof (whether at all times or only so long as no senior class of
stock has voting power by reason of any contingency) to vote in the
election of members of the board of directors of such person.
"Warehouse Facility" means a Bank Credit Facility to finance the
making of Mortgage loans originated by the Company or any of its
Subsidiaries.
"Wholly Owned Subsidiary" means a Subsidiary, all of the capital
stock (whether or not voting, but exclusive of directors' qualifying
shares) of which is owned by the Company or a Wholly-Owned Subsidiary.
Each of the undersigned, for himself, states that he has read and is
familiar with the provisions of Article Two of the Indenture relating to the
establishment of a series of Securities thereunder and the establishment of
forms of Securities representing a series of Securities thereunder and, in each
case, the definitions therein relating thereto; that he is generally familiar
with the other provisions of the Indenture and with the affairs of the Company
and its acts and proceedings and that the statements and opinions made by him in
this Officers' Certificate are based upon such familiarity; and that he has made
such examination or investigation as is necessary to enable him to determine
whether or not the covenants and conditions referred to above have been complied
with; and in his opinion, such covenants and conditions have been complied with.
29
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto signed this Certificate on
behalf of the Company this ____ day of April, 1998.
STANDARD PACIFIC CORP.
By:_______________________________
Name: Stephen J. Scarborough
Title: President
By:_______________________________
Name: Andrew H. Parnes
Title: Vice President-Finance,
Treasurer and Chief
Financial Officer
<PAGE>
EXHIBIT A
No. R-1 STANDARD PACIFIC CORP. $[_________]
CUSIP NO.: 85375c AD 3
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR NOTES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER
THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK), A NEW YORK
CORPORATION, TO THE ISSUER OR ITS AGENT FOR THE REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
Standard Pacific Corp., a Delaware corporation, promises to pay to Cede & Co.,
or registered assigns, the principal sum of [____________] Million Dollars
($[____________]) on February 15, 2008.
A-1
<PAGE>
8% SERIES A SENIOR NOTE DUE 2008
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Dated: _________, 1998
STANDARD PACIFIC CORP.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Attest:
________________________________________
Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Note is one of the Securities
referred to in the within
mentioned Indenture.
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By:
----------------------------------
Authorized Signatory
A-2
<PAGE>
STANDARD PACIFIC CORP.
8% SENIOR NOTE DUE 2008
1. Interest.
Standard Pacific Corp., a Delaware corporation (the "Company"), promises to
pay interest on the principal amount of this Note at the rate per annum shown
above. The Company will pay interest semiannually on February 15 and August 15
of each year (the "Interest Payment Date"), commencing August 15, 1998.
Interest on the Note will accrue from February 10, 1998 or, in the case of a
note issued after August 15, 1998, the Interest Payment Date next preceding the
date of issuance of such note. Interest will be computed on the basis of a 360-
day year of twelve 30-day months. Overdue principal and, to the extent payment
of such interest shall be legally enforceable, overdue installments of interest
shall bear interest at the rate per annum shown above.
2. Method of Payment.
The Company will pay interest on the Notes (except default interest, which
shall be payable in the manner provided in Section 2.13 of the Indenture) to the
persons who are registered holders of Notes at the close of business on the
February 1 or August 1 next preceding the Interest Payment Date (the "Record
Date"). Holders must surrender Notes to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal and interest by its check
payable in such money. It may mail an interest check to a Holder's registered
address.
3. Paying Agent and Registrar.
Initially, United States Trust Company of New York (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without notice. The Company or any of its subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture.
The Company issued the Notes under an Indenture dated as of April 1, 1992
(the "Indenture") between the Company and the Trustee. The terms of the Notes
include those stated in the Indenture, those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)77aaa-77bbbb)
(the "Act") as in effect on the date of the Indenture and as may be amended from
time to time, and those incorporated by reference into the Indenture pursuant to
an Officers' Certificate of the Company dated __________, 1998 (the "Officers'
Certificate") delivered pursuant to Sections 2.01 and 2.03(a) of the Indenture.
The Notes are subject to and governed by all such terms, and holders of Notes
are referred to the Indenture, the Officers' Certificate and the Act for a
statement of them. All capitalized terms used in this Note and not otherwise
defined herein shall have the meanings set forth in the Indenture and the
A-3
<PAGE>
Officers' Certificate. The Notes are general unsecured obligations of the
Company limited to the aggregate principal amount of $175,000,000.
5. Optional Redemption.
The Notes will not be redeemable at the option of the Company prior to
February 15, 2003. Thereafter, the Notes will be redeemable, at the Company's
option, in whole or in part, at any time or from time to time, upon not less
than 30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's registered address, at the following redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on February 15 of the years set
forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003............................................ 104.00%
2004............................................ 102.67%
2005............................................ 101.33%
2006 and thereafter............................. 100.00%
</TABLE>
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at his
registered address. Notes in denominations larger than $1,000 may be redeemed in
part. On and after the redemption date interest ceases to accrue on Notes or
portions of them called for redemption.
7. Selection.
If less than all of the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed on a pro rata basis, by lot or by such other method as
the Trustee in its sole discretion shall deem to be fair and appropriate.
8. Mandatory Repurchase Obligation.
If there is a Change of Control of the Company, the Holder of this Note
shall have the right to require the Company to repurchase all or a portion of
this Note at a purchase price equal to 101% of the principal amount hereof plus
accrued and unpaid interest to the date of repurchase, as provided in, and
subject to the terms of, the Indenture. In addition, under certain
circumstances, if the Company fails to maintain a certain specified minimum
Consolidated Net Worth or engages in certain asset sales, the Company shall be
required to offer to purchase a portion of the aggregate principal amount of
Notes outstanding together with accrued and unpaid interest to the date of
purchase, as provided in, and subject to the terms of, the Indenture.
A-4
<PAGE>
9. Denominations, Transfer, Exchange.
If the Notes are issued in global form, and this Note contains a legend in
the face hereof to such effect, the provisions of this Section 9 shall be deemed
superseded by such legend and Section 3(c) of the Officers Certificate, to the
extent the provisions of this Section 9 are inconsistent with such legend or
Section 3(c).
The Notes are issuable in registered form, without coupons, in
denominations of $1,000 and any amount in excess thereof which is an integral
multiple of $1,000. As provided in the Indenture and subject to certain
limitations therein set forth, Notes are exchangeable for a like aggregate
principal amount of Notes of like tenor of any authorized denomination, as
requested by the Holder surrendering the same, upon surrender of the Note or
Notes to be exchanged at any office or agency where Notes may be presented for
registration of transfer.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of Notes is registrable in the register of Notes upon
surrender of a Note for registration of transfer at the Corporate Trust Office
of the Trustee in the Borough of Manhattan, The City of New York, or at the
office of any transfer agent hereafter designated by the Company for such
purpose, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more new
Notes of like tenor, of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
No service charge shall be made by the Company, the Trustee or the
Registrar for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax, assessment or other
governmental charge payable in connection therewith (other than exchanges
pursuant to Sections 2.11, 3.06 or 9.05 of the Indenture not involving any
transfer).
10. Person Deemed Owner.
The registered holder of a Note may be treated as the owner of it for all
purposes.
A-5
<PAGE>
11. Amendment, Waiver.
The Indenture permits, in certain circumstances therein specified, the
amendment thereof without the consent of the Holders of the Notes. The
Indenture also permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations under the
Indenture of the Company and the rights of Holders of the Notes at any time by
the Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Notes at the time Outstanding. The Indenture
also contains provisions permitting the Holders of a majority in aggregate
principal amount of the Notes at the time Outstanding, on behalf of the Holders
of all the Notes, to waive compliance by the Company with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holders shall be conclusive and
binding upon the Holder of this Note and upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Note.
12. Successor Corporation.
When a successor corporation assumes all the obligations of its predecessor
under the Notes and the Indenture, the predecessor corporation will be released
from those obligations.
13. Defaults and Remedies.
The following are Events of Default: (i) failure by the Company to pay
interest on the Notes when due which default continues for a period of 30 days
or the principal of the Notes when due; (ii) failure by the Company to perform
any other covenant in the Notes or the Indenture for 45 days after receipt by
the Company of a Notice of Default; (iii) default under any mortgage, indenture
(including the Indenture) or instrument under which is issued or which secures
or evidences Indebtedness of the Company or any Restricted Subsidiary (other
than Non-Recourse Indebtedness) which default constitutes a failure to pay
principal of such Indebtedness in an amount of $20,000,000 or more when due and
payable (other than as a result of acceleration) or results in Indebtedness
(other than Non-Recourse Indebtedness) in the aggregate of $20,000,000 or more
becoming or being declared due and payable before it would otherwise become due
and payable; (iv) entry of a final judgment for the payment of money against the
Company or any Restricted Subsidiary in an amount of $5,000,000 or more which
remains undischarged or unstayed for a period of 60 days after the date on which
the right to appeal such judgment has expired or become subject to an
enforcement proceeding; or (v) certain events of bankruptcy, insolvency or
reorganization.
In case an Event of Default (other than arising out of certain events of
bankruptcy, insolvency or reorganization) occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of the Notes at the
time Outstanding, by notice in writing to the Company (and to the Trustee if
given by the Holders), may declare to be due and payable immediately that
portion of the principal amount of the Notes at the time Outstanding and accrued
and unpaid interest if any, to the date of acceleration and upon such
declaration the same shall become and be immediately due and payable. In case
an Event of Default arising out of certain events of bankruptcy, insolvency or
reorganization occurs and is continuing, the outstanding principal of and
accrued and unpaid interest if any, on the Notes shall become and be
A-6
<PAGE>
immediately due and payable without any declaration or other act on the part of
the Trustee or any of the Holders.
Such declaration or acceleration and its consequences may be rescinded by
Holders of a majority in aggregate principal amount of Notes at the time
Outstanding if all existing Events of Default have been cured or waived (except
non-payment of principal that has become due solely because of the acceleration)
and if the rescission would not conflict with any judgment or decree.
An existing Default (other than a default in payment of principal of or
interest on the Notes or default with respect to a provision which cannot be
modified under the terms of the Indenture without the consent of each Note
Holder affected) may be waived by the Holders of a majority in aggregate
principal amount of Notes at the time Outstanding upon the conditions provided
in the Indenture.
14. Trustee Dealings with Company.
United States Trust Company of New York, the Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company or its Affiliates, with the same
rights it would have if it were not Trustee.
15. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder of a Note by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
16. Authentication.
This Security shall not be valid until the Trustee signs the certificate of
authentication on the second page of this Note.
A-7
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT.....Custodian.....
(Cust.) (Minor)
TEN ENT - as tenants by the entireties Under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
of survivorship and not as .......................
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
-----------------------
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
Please Insert Social Security or Employer
Identification Number of Assignee
- --------------------------------------------------
- -
- --------------------------------------------------
________________________________________________________________________________
Please Print or Typewrite Name and Address
Including Postal Zip Code of Assignee
____________________________________________________________________________ the
within Security and all rights thereunder, hereby irrevocably constituting
and appointing
_______________________________________________________________________ attorney
to Transfer said Security on the books of the Company, with full power
of substitution in the premises.
Dated: ___________________________________ Signature___________________________
NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within note in every particular, without
alteration or enlargement or any change whatever.
A-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased or redeemed by the Company
pursuant to the Indenture, check the box:
[_]
If you want to elect to have only part of this Security purchased by the
Company pursuant to paragraphs 3(j), 3(m)(i) or 3(m)(v) of the Officers'
Certificate adopted pursuant to Sections 2.01 and 2.03 of the Indenture, state
the amount.
$_____________
Date:_________________ Your Signature:_______________________________________
(Sign exactly as your name appears on
the first page of this Security)
Signature Guarantee:_____________________________________________
NOTICE: Signature(s) must be guaranteed by a member firm of a major stock
exchange or a commercial bank or Trust company.
A-9
<PAGE>
EXHIBIT 4.8
LETTER OF TRANSMITTAL
OFFER FOR ALL OUTSTANDING
8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
8% SERIES A SENIOR NOTES DUE 2008
OF
STANDARD PACIFIC CORP.
- --------------------------------------------------------------------------------
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY
TIME, ON MAY 27, 1998, UNLESS EXTENDED
The Exchange Agent is United States Trust Company of New York, whose
mailing address, facsimile number and telephone number are as follows:
<TABLE>
<CAPTION>
By Hand up to 4:30 PM: By Overnight Courier or by Hand after 4:30 PM:
<S> <C>
United States Trust Company of New York United States Trust Company of New York
111 Broadway 770 Broadway, 13th Floor
Lower Level New York, New York 10003
Attn: Corporate Trust Services Attn: Corporate Trust Services
New York, New York 10006
</TABLE>
By Facsimile:
United States Trust Company of New York
Fax: (212) 780-0592
Confirm by Telephone: (800) 548-6565
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of this Letter of Transmittal via facsimile to a
number other than as set forth above does not constitute a valid delivery.
This Letter of Transmittal is to be completed by holders of 8% Senior
Notes due 2008 (the "Old Notes") either if Old Notes are to be forwarded
herewith or if tenders of Old Notes are to be made by book-entry transfer to an
account maintained by United States Trust Company of New York (the "Exchange
Agent") at The Depository Trust Company (the "DTC") pursuant to the procedures
set forth in "THE EXCHANGE OFFER--Procedures for Tendering" in the Prospectus
(as defined herein).
Holders of Old Notes whose certificates (the "Certificates") for such
Old Notes are not immediately available or who cannot deliver their Certificates
and all other required documents to the Exchange Agent on or prior to the
Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "THE EXCHANGE
OFFER--Procedures for Tendering" in the Prospectus.
If any tendered Old Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Old Notes than
are tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expenses to the tendering holder promptly following the Expiration
Date (as defined in the Prospectus).
DELIVERY OF DOCUMENTS TO THE DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
The undersigned has completed the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
<TABLE>
<CAPTION>
==================================================================================================================
DESCRIPTION OF SECURITIES TENDERED
- ------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF REGISTERED HOLDER AS IT
APPEARS ON THE PRIVATELY PLACED 8% CERTIFICATE NUMBER(S) OF OLD PRINCIPAL AMOUNT OF OLD
SENIOR NOTES DUE 2008 ("OLD NOTES") NOTES TRANSMITTED NOTES TRANSMITTED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
================================================================================
</TABLE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution______________________________________________
Account Number_____________________________________________________________
Transaction Code Number____________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)_______________________________________________
Window Ticket Number (if any)______________________________________________
Date of Execution of Notice Guaranteed Delivery____________________________
Name of Institution which Guaranteed Delivery______________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution______________________________________________
Account Number_____________________________________________________________
Transaction Code Number____________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND ANY NON-EXCHANGED OLD
NOTES ARE TO BE RETURNED BY CREDITING DTC ACCOUNT NUMBER SET FORTH ABOVE.
2
<PAGE>
Ladies and Gentlemen:
1. The undersigned hereby agrees to exchange the aggregate principal
amount of privately placed 8% Senior Notes Due 2008 (the "Old Notes") for a like
principal amount of 8% Series A Senior Notes Due 2008 (the "Notes") of Standard
Pacific Corp., a Delaware corporation (the "Company"), upon the terms and
subject to the conditions contained in the Registration Statement on Form S-4
filed by the Company with the Securities and Exchange Commission (the
"Registration Statement") and the accompanying Prospectus dated April 27, 1998
included therein (the "Prospectus"), receipt of which is hereby acknowledged.
2. The undersigned hereby acknowledges and agrees that the Notes
will bear interest from the most recent date to which interest has been paid on
the Old Notes or, if no interest has been paid on the Old Notes, from February
10, 1998. Accordingly, the undersigned will forgo accrued but unpaid interest
on his, her or its Old Notes that are exchanged for Notes, but will receive
such interest under the Notes.
3. The undersigned hereby represents and warrants that he, she or it
has full authority to tender the Old Notes described above. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Company to be necessary or desirable to complete the exchange of the Old Notes.
4. The undersigned understands that the tender of the Old Notes
pursuant to all of the procedures set forth in the Prospectus will constitute an
agreement between the undersigned and the Company as to the terms and conditions
set forth in the Prospectus.
5. The undersigned hereby represents and warrants that the
undersigned (i) is not an affiliate of the Company within the meaning of Rule
405 of the Securities Act of 1933, as amended (the "Securities Act") and (ii) is
acquiring the Notes in the ordinary course of the business of the undersigned
and, if the undersigned is not a broker-dealer, that the undersigned is not
engaged in, and does not intend to engage in, a distribution of the Notes.
6. If the undersigned is a broker-dealer, (i) it hereby represents
and warrants that it acquired the Old Notes for its own account as a result of
market-making activities or other trading activities and (ii) it hereby
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of the Notes received hereby.
Neither the acknowledgment contained in the foregoing sentence nor the delivery
of such a prospectus shall be deemed an admission that the undersigned is an
"underwriter" within the meaning of the Securities Act.
7. Any obligation of the undersigned hereunder, shall be binding
upon the successors, assigns, executors, administrators, trustees in bankruptcy
and legal and personal representatives of the undersigned.
3
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 1)
To be completed ONLY IF the Notes are to be issued in the name of
someone other than the undersigned or are to be sent to someone other than the
undersigned or to the undersigned at an address other than that provided above:
Name____________________________________________________________________________
(PLEASE PRINT)
Address_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Telephone No.:__________________________________________________________________
(INCLUDE AREA CODE)
Mail to:
Name____________________________________________________________________________
(PLEASE PRINT)
Address_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Telephone No.:__________________________________________________________________
(INCLUDE AREA CODE)
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURE
________________________________________________________________________________
(NAME OF REGISTERED HOLDER)
By:_____________________________________________________________________________
Name:___________________________________________________________________________
Title:__________________________________________________________________________
(Must be signed by registered holder exactly as name appears on
Certificates for Old Notes or on the register of holders of Old Notes maintained
by United States Trust Company of New York, as trustee for the Old Notes (the
"Trustee"), or any person(s) authorized to become the registered holder(s) of
the Old Notes by endorsements and documents transmitted herewith (including such
opinions of counsel, certifications and other information as may be required by
the Trustee to comply with the restrictions on transfer applicable to the Old
Notes). If signature is by trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.)
Address:________________________________________________________________________
Telephone No.:__________________________________________________________________
(INCLUDE AREA CODE)
Taxpayer Identification No.:____________________________________________________
Signature Guaranteed By:________________________________________________________
(SEE INSTRUCTION 1)
Title:__________________________________________________________________________
Name of Institution:____________________________________________________________
Address_________________________________________________________________________
Telephone No.:__________________________________________________________________
(INCLUDE AREA CODE)
Date:___________________________________________________________________________
PLEASE READ THE INSTRUCTIONS BELOW, WHICH
FORM A PART OF THIS LETTER OF TRANSMITTAL.
5
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of
Transmittal must be guaranteed by a firm that is a member of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office in the
United States which is a member of a recognized Medallion Signature Program
approved by the Securities Transfer Association, Inc. (an "Eligible
Institution") unless (i) the "Special Issuance and Delivery Instructions" above
have not been completed or (ii) the Old Notes described above are tendered for
the account of an Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND OLD NOTES. This Letter of
Transmittal is to be completed either if (a) Certificates are to be forwarded
herewith or (b) tenders are to be made pursuant to the procedures for tender by
book-entry transfer set forth in "THE EXCHANGE OFFER--Procedures for Tendering"
in the Prospectus. Certificates, or timely confirmation of a book-entry
transfer of such Old Notes into the Exchange Agent's account at the DTC, as well
as this Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth herein on or prior to the Expiration Date. Old Notes
may be tendered in whole or in part in the principal amount of integral
multiples of $1,000.
THE METHOD OF DELIVERY OF OLD NOTES AND OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE RESPECTIVE HOLDER. IF DELIVERY IS BY MAIL, REGISTERED
MAIL (WITH RETURN RECEIPT), PROPERLY INSURED, IS SUGGESTED.
3. GUARANTEED DELIVERY PROCEDURES. Registered holders who wish to
tender their Old Notes and (i) whose Old Notes are not immediately available, or
(ii) who cannot deliver their Old Notes, the Letter of Transmittal or any other
required documents to the Exchange Agent on or prior to the Expiration Date, or
(iii) who cannot complete the procedures for delivery by book-entry transfer on
a timely basis may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) substantially in the form made available by the Company; and
(c) Such properly completed and executed Letter of Transmittal
(or facsimile thereof), as well as the Certificate(s) (or a Book-Entry
Confirmation (as defined in the Prospectus)) representing all tendered
Old Notes in proper form for transfer and all other documents required
by the Letter of Transmittal are received by the Exchange Agent within
five New York Stock Exchange trading days after the Expiration Date.
Upon request of the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to registered holders who wish to tender their Old Notes according
to the guaranteed delivery procedures set forth above.
4. SIGNATURES ON LETTER OF TRANSMITTAL, BOND POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by a person other than a
registered holder of any Old Notes, such Old Notes must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name or names of the registered holder or holders appear on the Old Notes.
If this Letter of Transmittal or any Old Notes or bond power is signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
person should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
5. EXCHANGE OF OLD NOTES ONLY. Only the above-described Old Notes
may be exchanged for Notes pursuant to the Exchange Offer.
6
<PAGE>
6. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will
be accepted only in the principal amount of integral multiples of $1,000.
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time. a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth above or in the
Prospectus on or prior to the Expiration Date. Any such notice of withdrawal
must specify the name of the person who tendered the Old Notes to be withdrawn,
the aggregate principal amount of Old Notes to be withdrawn, and (if
Certificates for Old Notes have been tendered) the name of the registered holder
of the Old Notes as set forth on the Certificate for the Old Notes, if different
from that of the person who tendered such Old Notes. If Certificates for the
Old Notes have been delivered or otherwise identified to the Exchange Agent,
then prior to the physical release of such Certificates for the Old Notes, the
tendering holder must submit the serial numbers shown on the particular
Certificates for the Old Notes to be withdrawn and the signature on the notice
of withdrawal must be guaranteed by an Eligible Institution, except in the case
of Old Notes tendered for the account of an Eligible Institution. If Old Notes
have been tendered pursuant to the procedures for book-entry transfer set forth
in the Prospectus under "THE EXCHANGE OFFER--Procedures for Tendering," the
notice of withdrawal must specify the name and number of the account at the DTC
to be credited with the withdrawal of Old Notes, in which case a notice of
withdrawal will be effective if delivered to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. Withdrawals of tenders of Old
Notes may not be rescinded. Old Notes properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "THE EXCHANGE OFFER--Procedures for
Tendering."
7. MISCELLANEOUS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Old Notes will be resolved by the Company, whose determination will be final and
binding. The Company reserves the absolute right to reject any or all tenders
that are not in proper form or the acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) will be final and
binding. Unless waived, any irregularities in connection with tenders or
consents must be cured within such time as the Company shall determine. Neither
the Company nor the Exchange Agent shall be under any duty to give notification
of defects in such tenders or shall incur liabilities for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the irregularities
have not been cured or waived will be returned by the Exchange Agent to the
tendering holder thereof.
7
<PAGE>
IMPORTANT TAX INFORMATION
Under current Federal income tax law, an Old Noteholder whose tendered
Old Notes are accepted for payment generally is required to provide the Exchange
Agent (as agent for the payer) with his or her correct taxpayer identification
number ("TIN") on Substitute Form W-9 below. If such Old Noteholder is an
individual, the TIN is his or her social security number. If the Exchange Agent
is not provided with the correct TIN, the Old Noteholder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that are
made to such Old Noteholders with respect to Notes exchanged pursuant to the
Offer may be subject to backup withholding.
Certain Old Noteholders (including, among others, all corporations and
certain foreign individuals) may not be subject to these backup withholding and
reporting requirements. Exempt Old Noteholders should indicate their exempt
status on Substitute Form W-9. In order for a foreign individual to qualify as
an exempt recipient, that Old Noteholder must submit a properly completed
Internal Revenue Service Form W-8, signed under penalties of perjury, attesting
to his or her exempt status. Such statements can be obtained from the Exchange
Agent. See the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Exchange Agent is required to
withhold 31 percent of any such payments made to the Old Noteholder. Backup
withholding is not an additional tax. Rather, the federal income tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to an Old
Noteholder with respect to Old Notes exchanged pursuant to the Offer, each Old
Noteholder is required to notify the Exchange Agent of his, her or its correct
TIN by completing the Substitute Form W-9 below certifying the TIN provided on
such form is correct (or that such Old Noteholder is awaiting a TIN) and that
(1) the Old Noteholder has not been notified by the Internal Revenue Service
that he, she or it is subject to backup withholding as a result of a failure to
report all interest or dividends or (2) the Internal Revenue Service has
notified the Old Noteholder that he, she or it is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Old Noteholder is required to give the Exchange Agent the social
security number or employer identification number of the record owner of the Old
Notes. If the Old Notes are in more than one name or are not in the name of the
actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on which
number to report.
8
<PAGE>
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN IN THE ---------------------------------
BOX AT RIGHT AND CERTIFY BY SIGNING AND Social Security Number
DATING BELOW. OR
---------------------------------
SUBSTITUTE Employer Identification Number
--------------------------------------------------------------------------------------------------
Form W-9 PART 2--Certificate Under penalties of perjury, I certify that:
Department of the Treasury (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting
for a number to be issued to me) and
Internal Revenue Service
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding,
(b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject
PAYER'S REQUEST FOR to backup withholding as a result of a failure to report all interest or dividends or (c)
TAXPAYER IDENTIFICATION the IRS has notified me that I am no longer subject to backup withholding.
NUMBER (TIN)
Certification Instructions--You must cross out Item (2) above if you have been notified by
the IRS that you are currently subject to backup withholding because of under-reporting
interest or dividends on your tax return. However, if after being notified by the IRS
that you were subject to backup withholding you received another notification from the
IRS that you are no longer subject to backup withholding, do not cross out such Item (2).
--------------------------------------------------------------------------------------------------
Part 3
SIGNATURE:________________________________ DATE:_________________________ Awaiting
TIN [_]
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31
PERCENT OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART THREE OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, 31 percent of
all reportable payments made to me thereafter will be withheld until I provide a
number.
_______________________________________ _______________________________
Signature Date
- --------------------------------------------------------------------------------
9
<PAGE>
EXHIBIT 99.1
NOTICE OF GUARANTEED DELIVERY
OFFER FOR ALL OUTSTANDING
8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
8% SERIES A SENIOR NOTES DUE 2008
OF
STANDARD PACIFIC CORP.
- --------------------------------------------------------------------------------
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON MAY 27, 1998, UNLESS EXTENDED
- --------------------------------------------------------------------------------
Registered holders of privately placed 8% Senior Notes due 2008 (the "Old
Notes") who wish to tender their Old Notes in exchange for a like principal
amount of 8% Series A Senior Notes due 2008 (the "New Notes") and (i) whose Old
Notes are not immediately available, or (ii) who cannot deliver their Old Notes
and Letter of Transmittal or any other documents required by the Letter of
Transmittal to United States Trust Company of New York, as exchange agent (the
"Exchange Agent"), on or prior to the Expiration Date, or (iii) who cannot
complete the procedures for delivery by book-entry transfer on a timely basis
must use this Notice of Guaranteed Delivery or one substantially equivalent
hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by
facsimile transmission or mail to the Exchange Agent. See "THE EXCHANGE OFFER--
Guaranteed Delivery Procedures" in the Prospectus.
THE EXCHANGE AGENT FOR THE OFFER IS
UNITED STATES TRUST COMPANY OF NEW YORK
By Hand up to 4:30 PM: By Overnight Courier or by Hand after
4:30 PM on the Expiration Date
United States Trust Company of New York
111 Broadway United States Trust Company of New York
Lower Level 770 Broadway, 13th Floor
Attn: Corporate Trust Services New York, New York 10003
New York, New York 10006 Attn: Corporate Trust Services
By Facsimile:
United States Trust Company of New York
Fax: (212) 780-0592
Confirm by Telephone: (800) 548-6565
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED ON THE LETTER
OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes indicated
below, upon the terms and subject to the conditions contained in the
Registration Statement on Form S-4 filed by Standard Pacific Corp., a Delaware
corporation, with the Securities and Exchange Commission (the "Registration
Statement") and the accompanying Prospectus dated April 27, 1998 included
therein (the "Prospectus"), receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
Name and Address of Registered Certificate Number(s) Principal Amount of
Holder as it appears on the Old Notes of Old Notes transmitted Old Notes transmitted
- ------------------------------------- ------------------------ ---------------------
<S> <C> <C>
- ------------------------------------- ------------------------ ---------------------
- ------------------------------------- ------------------------ ---------------------
- ------------------------------------- ------------------------ ---------------------
- ------------------------------------- ------------------------ ---------------------
- ------------------------------------- ------------------------ ---------------------
</TABLE>
2
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, which is a member of a recognized
Medallion Signature Program approved by the Securities Transfer Association,
Inc., hereby guarantees to deliver to the Exchange Agent at one of its addresses
set forth above, either the Old Notes tendered hereby in proper form for
transfer, or confirmation of the book-entry transfer of such Old Notes to the
Exchange Agent's account at The Depository Trust Company pursuant to the
procedures for book-entry transfer set forth in the Prospectus, in either case
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, and any other
documents required by the Letter of Transmittal within three New York Stock
Exchange, Inc. trading days after the date of execution of this Notice of
Guaranteed Delivery.
Name of Firm:
----------------------------------------------------------------
- -----------------------------------------------------------------------------
(Authorized Signature)
Address:
---------------------------------------------------------------------
(Zip Code)
Area Code and Telephone Number:
----------------------------------------------
Name:
------------------------------------------------------------------------
(Please Type or Print)
Title:
-----------------------------------------------------------------------
Date: , 1998
----------------------
If Old Notes will be tendered by book-entry transfer, provide the
following information:
DTC Account Number:
---------------------
Date:
-----------------------------------
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
