<PAGE>
Preliminary Prospectus Supplement dated February 19, 1999
Filed pursuant to Rule 424(B)(5)
S.E.C. File No. 333-64719
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this prospectus supplement. +
+This prospectus supplement and the accompanying prospectus are part of an +
+effective registration statement filed with the SEC. This prospectus +
+supplement and the accompanying prospectus are not offers to sell these +
+securities or our solicitation of your offer to buy these securities in any +
+jurisdiction where that would not be permitted or legal. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION -- February 19, 1999
================================================================================
Prospectus Supplement
, 1999
(To prospectus dated October 23, 1998)
[LOGO OF
STANDARD PACIFIC CORP.
Standard Pacific Corp. APPEARS HERE]
$100,000,000
% Senior Subordinated Notes due 2009
- --------------------------------------------------------------------------------
The Company: The Notes and the Offering:
. We are a geographically . Maturity: March , 2009.
diversified builder of high-
quality, single-family homes . Interest Payment: Semi-annually in
designed principally for a cash on March and September commencing
broad range of move-up home September , 1999.
buyers.
. Optional Redemption: We may redeem any
. Standard Pacific Corp. or all of the notes at any time after
1565 West MacArthur Boulevard March , 2004 at the redemption
Costa Mesa, California 92626 prices described herein plus accrued
(714) 668-4300 interest.
. The notes will not be listed on . Mandatory Offers to Purchase: Upon a
any securities exchange or NASDAQ. change of control, or in the event of
certain asset sales, we are required
to make an offer to purchase the
notes.
. Ranking: The notes are unsecured and
rank junior in right of payment to all
of our senior debt. The notes will
also be effectively subordinated to
all liabilities of our subsidiaries.
. Use of Proceeds: Retirement of the
$19.6 million balance of our
outstanding 10 1/2% Senior Notes due
2000 and repayment of indebtedness
under our revolving credit facility.
. Closing: , 1999.
---------------------------------------------------------------------------
Per Note Total
---------------------------------------------------------------------------
Public offering price: % $
Underwriting fees: % $
Proceeds to the Company: % $
--------------------------------------------------------------------------
This investment involves risk. See "Risk Factors," beginning on page S-7.
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus supplement. Nor have they made, nor
will they make, any determination as to whether anyone should buy these
securities. Any representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette
Salomon Smith Barney
Warburg Dillon Read LLC
Jefferies & Company, Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PROSPECTUS
PAGE PAGE
<S> <C> <C> <C>
Forward-Looking Statements........... i Available Information................ 2
Prospectus Supplement Summary........ S-1 Incorporation of Certain Documents by
Risk Factors......................... S-7 Reference........................... 2
Earnings to Fixed Charges Ratios..... S-12 The Company.......................... 3
Use of Proceeds...................... S-12 Use of Proceeds...................... 4
Capitalization....................... S-13 Earnings to Fixed Charges Ratios..... 4
Business............................. S-14 Description of Debt Securities....... 4
Description of Notes................. S-20 Description of Stock................. 7
Underwriting......................... S-43 Description of Warrants.............. 11
Legal Matters........................ S-43 Plan of Distribution................. 12
Experts.............................. 13
Legal Matters........................ 13
</TABLE>
FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the
information incorporated into them by reference include forward-looking
statements. These forward-looking statements involve risks, uncertainties and
other factors that may cause our actual results to differ materially from the
results we discuss in the forward-looking statements. These risks,
uncertainties and other factors include, but are not limited to the matters set
forth in this prospectus supplement under the section "Risk Factors" and the
following:
. changes in local and general economic and market conditions, including
consumer confidence;
. changes in interest rates and the availability of mortgage financing;
. changes in costs and availability of material, supplies and labor;
. the cyclical and competitive nature of homebuilding;
. the availability of capital;
. changes in the availability of suitable undeveloped land at reasonable
prices;
. changes in governmental regulation;
. adverse weather conditions and natural disasters; and
. adverse consequences of the Year 2000 issue.
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
This is only a summary of the offering. To fully understand the investment
you are contemplating, you should read this prospectus supplement, the
prospectus and the detailed information incorporated into them by reference
before you decide to make an investment. Unless the context otherwise requires,
the terms "we," "us" and "our" refer to Standard Pacific Corp., a Delaware
corporation, and its predecessors and subsidiaries.
The Company
We design, construct and sell high quality, single-family homes designed
principally for a broad range of move-up home buyers. For over 30 years, we
have been a leading builder in California. We also have well- established
operations in Texas and recently entered the Phoenix, Arizona market by
acquiring an existing homebuilding operation. Our business is geographically
diversified, with operations in Orange, Los Angeles, Riverside, San Bernardino,
San Diego and Ventura Counties in southern California, in the San Francisco Bay
area of northern California, in the Dallas, Houston and Austin markets in Texas
and in the Phoenix metropolitan area in Arizona.
We believe we are well-positioned to continue to benefit from the strength
of the California, Texas and Arizona housing markets. California and Texas are
two of the largest and most diversified states in terms of economic activity.
They are also the first and second largest housing markets in the nation (based
on dollar value of single-family building permits). Arizona is the second
fastest growing state in the United States (based on growth in jobs, gross
state product and population) and Phoenix is one of the nation's largest
metropolitan housing markets (based on dollar value of single-family building
permits). Historically, employment growth has been an indicator of a healthy
economy and strong housing demand. In 1998, non-farm employment in California,
Texas and Arizona increased 3.1%, 3.3% and 4.5%, respectively, compared with a
national average of 2.5% during the same period. The estimated number of
single-family building permits issued in California, Texas and Arizona in 1998
increased 17.3%, 16.5% and 9.1%, respectively, over the prior year, which
compares to a 10.5% growth rate in the United States.
The strength of the California and Texas economies and housing markets, as
well as our expansion into Arizona, has resulted in increased demand for and
deliveries of our homes. In 1998, the number of homes we delivered increased
19.6% to 2,328, our revenues increased 29.9% to $759.6 million, and EBITDA
increased 63.6% to $110.8 million from 1997. In addition, at December 31, 1998,
our backlog consisted of a year-end record 1,111 homes, with an estimated value
of $336 million, compared to 566 homes, with an estimated value of $192
million, at December 31, 1997.
We believe that our long history of building high quality homes and our
conservative operating strategy have enabled us to successfully withstand
cyclical economic downturns and position us to capitalize on future market
opportunities. The main elements of our strategy include:
. focusing on the broad market of primary residences for move-up buyers,
which we believe is more resistant to economic downturns than the market
for second or vacation homes;
. capitalizing on our established reputation for designing, constructing
and selling high quality, single-family homes;
. a conservative operating strategy designed to reduce land and housing
inventory risks;
. leveraging our established reputation and long standing relationships
with landowners to secure quality land positions in California and
continuing to build our reputation and relationships in Texas and
Arizona;
. geographic diversification in markets of significant size with attractive
job and population growth;
. controlling overhead and operating expenses; and
. capitalizing on our experienced management and decentralized operations.
S-1
<PAGE>
Recent Developments
1998 Fourth Quarter and Year-End Financial Results
We recently announced unaudited 1998 fourth quarter and year-end results.
Our revenues for the fourth quarter ended December 31, 1998 increased 102.8% to
a record $315.4 million, from $155.5 million for the same period of 1997.
EBITDA for the fourth quarter ended December 31, 1998 increased 93.6% to
$45.5 million, from $23.5 million for the previous year period. The significant
improvement in revenue and EBITDA for the quarter was principally a result of a
99.8% increase in home deliveries (excluding unconsolidated joint ventures) and
a 3.8% increase in average selling price of our homes to $337,000 (excluding
unconsolidated joint ventures). The higher level of home deliveries was fueled
principally by the strong California housing market as well as from our new
Arizona operations in metropolitan Phoenix. The increase in the average home
price reflects price increases resulting both from the strong housing market
and the delivery of larger, more expensive homes in California.
Revenues for the year ended December 31, 1998 increased 29.9% to a record
$759.6 million, from $584.6 million for the previous year. EBITDA for the year
ended December 31, 1998 increased 63.6% to $110.8 million, from $67.7 million
in 1997. This increase was largely the result of an increase in revenues from
higher home deliveries and average selling price and a 260 basis point
improvement in the homebuilding gross margin percentage.
Our net new home orders for the fourth quarter ended December 31, 1998
increased 13.5% to a record 495 homes, including 119 new home orders from our
recently acquired Arizona operations, from 436 for the same period of 1997.
Excluding Arizona orders, net new home orders decreased 13.8% from the prior
year fourth quarter. This decline is primarily attributable to the reduced
availability of homes for sale in many of our southern California locations due
to the strong sales levels experienced earlier in the year. Orders in the
San Francisco Bay area increased 84.7% during the fourth quarter ended December
31, 1998 over the same period in 1997, both as a result of a resurgence in
demand for new homes, as well as an increase in the number of our new
communities in that region. Our net new home orders for the year ended December
31, 1998 increased 22.4% to 2,482 homes, from 2,027 for the previous year.
Our home deliveries for the fourth quarter ended December 31, 1998 increased
92.2% to a record 940 homes, from 489 homes for the same period of 1997. Home
deliveries for the year ended December 31, 1998 increased 19.6% to 2,328 homes,
from 1,946 homes for the previous year. Our backlog of pre sold homes at
December 31, 1998 increased 96.3% to a year-end record 1,111 homes, with an
estimated value of $336 million, compared to 566 homes, with an estimated value
of $192 million, at December 31, 1997.
Expansion into Arizona
In the third quarter of 1998, we expanded into the Phoenix, Arizona market
with the acquisition of a portion of the Arizona single-family homebuilding
operations of Shea Homes, Inc. (formerly known as UDC Homes, Inc.). With this
acquisition, we purchased or assumed the rights to acquire over 2,000 single-
family lots located in 13 communities in the Phoenix metropolitan area, of
which seven communities were active subdivisions at the close of the
transaction. As part of the acquisition, the division's existing management
team and selected operating personnel joined Standard Pacific. We paid a total
of approximately $59 million for these assets with borrowings under our
revolving credit facility.
S-2
<PAGE>
The Offering
Securities Offered.......... $100 million aggregate principal amount of %
Senior Subordinated Notes due March , 2009.
Maturity Date............... March , 2009.
Interest Payment Dates...... Interest will accrue from the date of issuance
and will be payable semi-annually on each March
and September , commencing September , 1999.
Optional Redemption......... At any time on or after March , 2004, we may
redeem the notes, in whole or in part, at the
redemption prices listed in the section
"Description of Notes" under the heading
"Optional Redemption."
Change of Control........... Upon a change of control as described in the
section "Description of Notes," you will have the
right to require us to purchase some or all of
your notes at 101% of the principal amount, plus
accrued interest to the date of purchase. We
cannot assure you that upon a change of control,
we will have sufficient funds to purchase any of
your notes.
Additional Offer to Under certain circumstances, we will be required
Purchase.................... to make an offer to purchase a portion of the
notes in the event of certain asset sales. For
more details, see the section "Description of
Notes" under the heading "Certain Covenants--
Limitation on Asset Sales."
Ranking..................... These notes are unsecured and rank junior in
right of payment to all of our senior debt. Your
right to payment under these notes will be:
. junior to the rights of our secured creditors
to the extent of their security in our assets;
. junior to the rights of creditors under our
other senior debt, including our revolving
credit facility; and
. senior to the rights of creditors under those
debts, if any, expressly subordinated to the
notes.
At December 31, 1998, assuming we had completed
this offering on that date, we would have had
approximately $447.0 million of debt outstanding
(including these notes, but excluding
indebtedness relating to our financial services
subsidiary, discontinued operations and trade
payables), of which $347.0 million would have
been senior debt and none of which would have
been subordinated to the notes.
The notes will be effectively subordinated to all
liabilities of our subsidiaries. At December 31,
1998 the indebtedness of our subsidiaries totaled
approximately $9.0 million (excluding
indebtedness relating to our financial services
subsidiary and discontinued operations).
S-3
<PAGE>
Certain Covenants........... We will issue the notes under an indenture. The
indenture will, among other things, restrict our
ability and the ability of our restricted
subsidiaries to:
. borrow money;
. pay dividends on or repurchase our capital
stock;
. make distributions;
. make investments in subsidiaries that are not
restricted;
. incur debt that is senior to the notes and
junior to senior debt;
. incur certain liens;
. merge with or into other companies; and
. enter into certain kinds of transactions with
our affiliates.
For more details, see the section "Description of
Notes" under the heading "Certain Covenants."
Use of Proceeds............. We will use the net proceeds from this offering:
. to retire the remaining $19.6 million balance
of our outstanding 10 1/2% Senior Notes due
March 1, 2000; and
. to repay indebtedness under our revolving
credit facility.
For more details, see the section "Use of
Proceeds."
S-4
<PAGE>
Summary Consolidated Financial Information And Operating Data
The following financial data for the years ended December 31, 1997, 1996,
and 1995 were derived from our audited consolidated financial statements. The
financial data for the nine months ended September 30, 1998 and 1997 were
derived from our unaudited consolidated financial statements.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ ----------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
($ in thousands, except average selling
prices)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Revenues.................... $444,182 $429,030 $584,571 $399,863 $346,263
Cost of sales(1)............ 361,470 364,775 490,876 348,066 307,794
Non-cash charge for
impairment of long-lived
assets(2).................. -- -- -- -- 46,491
-------- -------- -------- -------- --------
Gross margin.............. 82,712 64,255 93,695 51,797 (8,022)
-------- -------- -------- -------- --------
Selling, general and
administrative
expenses(1)................ 37,339 38,869 52,141 37,351 34,873
Income from unconsolidated
joint ventures............. 1,725 2,665 3,787 4,708 6,953
Interest expense............ 904 3,956 4,981 7,142 1,860
Amortization of excess cost
over net assets acquired... 817 -- 245 -- --
Other income (expense)...... (62) 664 931 936 555
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes and
extraordinary charge....... 45,315 24,759 41,046 12,948 (37,247)
(Provision) benefit for
income taxes............... (18,790) (10,163) (17,070) (5,197) 14,890
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
before extraordinary
charge..................... 26,525 14,596 23,976 7,751 (22,357)
Income (loss) from
discontinued operations,
net of taxes(3)............ (143) 829 48 642 (5,006)
Gain on disposal of
discontinued operation,
net of income taxes(3)..... -- -- 3,302 -- --
Extraordinary charge from
early extinguishment of
debt, net of income
taxes...................... (1,328) -- -- -- --
-------- -------- -------- -------- --------
Net income (loss)........... $ 25,054 $ 15,425 $ 27,326 $ 8,393 $(27,363)
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges(4)................. 3.20x 3.49x 3.86x 2.38x 1.95x
Selected Operating Data
New homes delivered:
Southern California....... 649 650 849 765 691
Northern California....... 330 485 628 366 251
-------- -------- -------- -------- --------
Total California........ 979 1,135 1,477 1,131 942
-------- -------- -------- -------- --------
Dallas/Austin............. 214 158 234 211 182
Houston................... 123 118 168 127 117
-------- -------- -------- -------- --------
Total Texas............. 337 276 402 338 299
-------- -------- -------- -------- --------
Arizona................... 37 -- -- -- --
-------- -------- -------- -------- --------
Consolidated total........ 1,353 1,411 1,879 1,469 1,241
Unconsolidated joint
ventures (California).... 35 46 67 154 195
-------- -------- -------- -------- --------
Total................... 1,388 1,457 1,946 1,623 1,436
======== ======== ======== ======== ========
Average selling price:
California deliveries,
excluding joint
ventures................. $368,203 $328,610 $337,649 $292,007 $308,383
Texas deliveries.......... $215,016 $190,551 $195,631 $185,622 $180,058
Arizona deliveries........ $179,611 $ -- $ -- $ -- $ --
Combined, excluding joint
ventures................. $324,891 $301,605 $307,265 $267,529 $277,465
Combined, including joint
ventures................. $325,013 $303,923 $309,239 $261,681 $271,936
Net new orders:
Southern California....... 1,103 702 922 863 653
Northern California....... 455 522 607 474 284
-------- -------- -------- -------- --------
Total California........ 1,558 1,224 1,529 1,337 937
-------- -------- -------- -------- --------
Dallas/Austin............. 246 168 238 212 203
Houston................... 127 146 190 128 132
-------- -------- -------- -------- --------
Total Texas............. 373 314 428 340 335
-------- -------- -------- -------- --------
Arizona................... 46 -- -- -- --
-------- -------- -------- -------- --------
Consolidated total........ 1,977 1,538 1,957 1,677 1,272
Unconsolidated joint
ventures (California).... 10 53 70 121 208
-------- -------- -------- -------- --------
Total................... 1,987 1,591 2,027 1,798 1,480
======== ======== ======== ======== ========
Backlog at period end (in
units)(5).................. 1,556 633 566 485 312
Backlog at period end
(estimated dollar
value)(5).................. $500,937 $210,242 $191,682 $168,674 $ 77,945
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
Four Quarters Ended
------------------------------------------
December 31,
September 30, ----------------------------
1998 1997 1996 1995
------------- -------- -------- --------
<S> <C> <C> <C> <C>
Other Data
Gross margin percentage(6)....... 18.7% 16.0% 13.0% 11.1%
EBITDA(7)........................ $88,721 $67,743 $40,807 $38,020
EBITDA margin percentage......... 14.8% 11.6% 10.2% 11.0%
Interest incurred(8)............. $24,382 $17,026 $16,687 $19,200
Ratio of EBITDA to interest
incurred........................ 3.6x
Ratio of total debt to EBITDA.... 4.5x
<CAPTION>
At At December 31,
September 30, ----------------------------
1998 1997 1996 1995
------------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance Sheet Data
Real estate inventories.......... $655,404 $451,848 $372,645 $367,676
Total assets(3).................. 778,490 547,665 449,114 444,603
Total debt(3).................... 403,158 214,305 161,767 163,354
Stockholders' equity............. 306,638 283,778 260,389 257,926
</TABLE>
- --------
(1) Effective January 1, 1997, we changed our presentation of selling costs.
Selling costs are now combined with general and administrative expenses.
This presentation is consistent with industry practice. Previously, we
included these costs as a component of cost of sales. We have reclassified
the prior period amounts to conform with the 1997 presentation.
(2) Reflects our adoption, 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. 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, our Board of Directors adopted a plan for the disposition of
our savings and loan subsidiary which disposition is pending pursuant to a
definitive agreement dated August 28, 1998. In December 1997, we completed
the sale of Panel Concepts, our former office furniture manufacturing
subsidiary. Accordingly, we have accounted for the savings and loan
subsidiary and Panel Concepts as discontinued operations.
(4) 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. Earnings consist of earnings (loss) before
(a) income taxes, (b) interest expensed, (c) amortization of capitalized
interest in cost of sales, (d) income from unconsolidated joint ventures,
(e) a nonrecurring noncash charge of $46.5 million in 1995 related to real
estate inventories, (f) one-third of estimated rent expense as
representative of the interest portion of rentals and amortization of debt
expense and (g) discontinued operations and an extraordinary charge from
early extinguishment of debt of $1.3 million, net of taxes, in 1998, and
includes (h) income distributions from unconsolidated joint ventures.
(5) For information concerning cancellation rates and contractual arrangements
under which homes are presold, see the section "Business--Marketing and
Sales."
(6) The 1995 gross margin percentage excludes the $46.5 million non-cash charge
for the adoption of FAS 121.
(7) EBITDA means earnings (loss) before (a) income taxes, (b) interest
expensed, (c) amortization of capitalized interest included in cost of
sales, (d) depreciation and amortization, (e) income from unconsolidated
joint ventures, (f) a nonrecurring noncash charge of $46.5 million in 1995
related to real estate inventories and (g) discontinued operations and an
extraordinary charge from early extinguishment of debt of $1.3 million, net
of taxes, in 1998, and includes (h) 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.
(8) Interest incurred represents interest expensed and interest capitalized
into real estate inventories for the applicable periods and excludes
interest attributable to discontinued operations.
S-6
<PAGE>
RISK FACTORS
Before purchasing these notes, you should carefully consider the risk
factors set forth below, as well as the other information included in this
prospectus supplement, the accompanying prospectus and the information
incorporated by reference in them.
We Have a Substantial Amount of Indebtedness
We currently have a significant amount of debt. As of December 31, 1998,
after giving effect to this offering, our total consolidated indebtedness would
have been $447.0 million (excluding indebtedness relating to our financial
services subsidiary, discontinued operations and trade payables). In addition,
subject to the restrictions in the indenture relating to the notes, we may
incur additional indebtedness in the future. Our indebtedness could have
important consequences to you, including:
. limiting our ability to satisfy our obligations with respect to the
notes;
. requiring us to dedicate a substantial portion of our cash flows from
operations to payments on our debt;
. limiting our ability to obtain future financing for working capital,
capital expenditures, acquisitions and other general corporate
requirements;
. making us more vulnerable to general adverse economic and industry
conditions;
. limiting our flexibility in planning for, or reacting to, changes in our
business and the homebuilding industry; and
. putting us at a disadvantage compared to competitors who have less debt.
Our ability to meet our debt service obligations depends on our future
performance. Numerous factors outside of our control, including changes in
financial, political and business conditions in the markets in which we do
business, affect our operating results. Any adverse changes in these factors
could adversely affect our operating results. We cannot assure you that we will
be able to generate sufficient cash flow from operations or that future
borrowings will be available to us under our credit facility in amounts
sufficient to meet our debt service obligations, including the notes. We may
need to refinance all or a portion of our debt, including the notes, or obtain
alternative additional financing, to make required debt service payments. We
cannot be certain that we could refinance our debt or obtain alternative
additional financing on terms that are favorable to us.
Our credit facility and the indentures governing our other outstanding
public debt contain financial covenants. If we fail to comply with any of these
covenants, our debt could become due and payable before maturity, which could
adversely affect our operations, including our ability to make additional
borrowings under our revolving credit facility.
Economic Conditions and Interest Rates Affect Our Industry
The homebuilding industry is highly cyclical. Changes in world, national and
local economic conditions affect our business and our markets. In particular,
declines in consumer confidence or employment levels in our markets may
adversely affect the demand for homes and could in turn harm our operating
results. The recent downturn and continued instability in various Asian
economies and financial markets could harm the California, Texas and Arizona
economies and consumer demand for homes in those states.
Our customers typically finance their home purchase through lenders
providing mortgage financing. Increases in interest rates or decreases in
availability of mortgage financing could depress the market for new homes
because of the increased monthly mortgage costs, or the decreased availability
of financing, to potential home buyers. Even if some of our potential customers
do not need financing, changes in interest rates and mortgage availability
could make it harder for them to sell their existing homes to potential buyers
who need financing. This could adversely affect our operating results.
S-7
<PAGE>
Additional Capital May Not Be Available to Fund Future Growth
Our operations require significant amounts of cash, and we will be required
to seek additional capital, whether from sales of equity or borrowing more
money, for the future growth and development of our business. We can give no
assurance as to the terms or availability of such additional capital. Moreover,
the indentures for our outstanding debt and our revolving credit facility
contain provisions that may restrict the debt we may incur in the future. If we
are not successful in obtaining sufficient capital, it could reduce our sales
and may adversely affect our future growth and operating results.
We Depend on the California Market; Risk of California and Arizona Slow Growth
Initiatives
We presently conduct most of our business in California. Home prices in
California, including in some of the markets in which we operate, have declined
from time to time, particularly as a result of slow economic growth. We cannot
be certain that the current economic growth trend in California will continue.
If home prices decline in one or more of the markets in which we operate, our
results of operations may be adversely affected.
Several California cities and counties, including some in which we have sold
a significant number of homes, have in the past approved, or approved for
inclusion on the ballot, various "slow growth" initiatives and other ballot
measures which could impact the availability of affordable homes and land
within those localities. In addition, in Arizona a state ballot measure was
recently proposed (although it did not qualify for the ballot) which would have
restricted the ability of homebuilders to build outside of designated, pre-
existing urban areas. Introduction and voter approval of such measures could
harm our ability to build and sell homes in the affected markets. This in turn
could adversely affect our operating results.
Possible Shortage of Land for Purchase and Development; Inventory Risks
Our success in developing, building and selling homes depends in part upon
the continued availability of suitable undeveloped land at acceptable prices.
The availability of undeveloped land for purchase at favorable prices depends
on a number of factors outside of our control, including the risk of
competitive over-bidding of land prices and restrictive governmental
regulation. Should suitable land opportunities become less available, our
operating results could be adversely affected.
Land inventory risk can be substantial for homebuilders. The market value of
undeveloped land, buildable lots and housing inventories can fluctuate
significantly as a result of changing economic and market conditions. In the
event of significant changes in economic or market conditions, we may have to
sell homes at a loss or hold land in inventory longer than planned. Inventory
carrying costs can be significant and can result in losses in a poorly
performing project or market.
As a result of the national and California recessions which began in 1990,
in the early 1990's we recorded writedowns of approximately $8.8 million on
several of our California projects. As a result of continued decline in some of
our key markets, particularly San Diego, as well as adoption of a new
accounting rule by the Financial Accounting Standards Board that required us to
change our method of valuing long-lived assets, at December 31, 1995 we
recorded a $46.5 million noncash pretax charge against operations.
Our Industry is Highly Competitive
The homebuilding industry is highly competitive and fragmented. We compete
with numerous other residential construction firms, including large national
and regional firms, for customers, undeveloped land, financing, raw materials
and skilled labor. We compete on the basis of the location, design, quality and
price of, as well as available mortgage financing for, our homes. Some of these
firms have substantially greater financial resources than us. We also compete
with the resale of existing homes and, in some cases, with rental homes. An
oversupply of attractively priced resale or rental homes in our markets could
adversely affect our ability to sell homes profitably.
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Risk of Material and Labor Shortages
The residential construction industry has from time to time experienced
serious material and labor shortages, including shortages in insulation,
drywall, carpentry work, cement and lumber. These shortages can be more severe
during periods of strong demand for housing. Certain of these materials,
including lumber and cement in particular, have experienced volatile price
swings. Similar shortages and price increases in the future could cause delays
in and increase the costs of our home construction which in turn would
adversely affect our operating results.
We Are Subject to Extensive Government Regulation
Our homebuilding operations are subject to environmental, building, worker
health and safety, zoning and real estate regulations by various federal, state
and local authorities. These regulations, which affect all aspects of the
homebuilding process, including development, design, construction and sales,
can substantially delay or increase the costs of homebuilding activities. In
addition, regulations governing environmental and health matters may prohibit
or severely restrict homebuilding activity in environmentally sensitive
regions.
New housing developments, particularly in California, may be subject to
various assessments for schools, parks, streets, highways and other public
improvements. The costs of these assessments can be substantial and can cause
increases in the prices of our homes, which in turn could adversely affect our
operating results.
During the development process, we must obtain the approval of numerous
governmental authorities which regulate matters such 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 services.
The approval process can be lengthy and cause significant delays in the
development process. In addition, changes in local circumstances or laws may
require additional approvals or modifications to approvals previously obtained,
which can result in further delays. Such delays in the development process can
cause substantial increases to development costs, which in turn could adversely
affect our operating results.
Risk of Natural Disasters
We are subject to the risks associated with adverse weather conditions and
natural disasters which occur in our key markets, including:
. unusually heavy or prolonged rain;
. earthquakes;
. fires; and
. floods.
Such conditions can negatively affect our operations in the markets in which
they occur. In addition, California has periodically experienced drought
conditions which result in water conservation measures and sometimes rationing
by municipalities in which we do business. Restrictions by governmental
agencies on construction activity as a result of limited water supplies could
adversely affect our operating results.
Your Right to Receive Payments is Junior to Certain Other Existing and Future
Indebtedness
The notes rank behind all of our existing indebtedness (other than trade
payables, taxes and intercompany indebtedness). The notes will also rank behind
our future indebtedness (other than trade payables, taxes,
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intercompany indebtedness and indebtedness incurred in violation of the
Indenture), except any future indebtedness that expressly provides that it
ranks equal with, or subordinated in right of payment to, the notes. As a
result, upon any distribution to our creditors in a bankruptcy, liquidation or
reorganization relating to us, the holders of senior debt will be entitled to
be paid in full before any payment may be made with respect to the notes.
In addition, all payments on the notes will be blocked in the event of a
payment default on senior debt and may be blocked for up to 179 of 360
consecutive days in the event of certain non-payment defaults on senior debt.
In the event of a bankruptcy, liquidation or reorganization relating to us,
holders of the notes will participate with trade creditors and all other
holders of subordinated indebtedness in the assets remaining after we have
satisfied all of the senior debt. However, because the Indenture requires that
cash, securities or other property (other than Permitted Junior Securities (as
defined in the Indenture)) otherwise distributable to holders of the notes in a
bankruptcy or similar proceeding be paid to holders of senior debt instead,
holders of the notes may receive less, ratably, than holders of trade payables
in any such proceeding. In any of these cases, we may not have sufficient funds
to pay all of our creditors and holders of notes may receive less, ratably,
than the holders of senior debt.
In addition, our subsidiaries will not guarantee the notes. In the event of
a bankruptcy, liquidation or reorganization of any of our subsidiaries,
creditors of our subsidiaries will generally be entitled to payment of their
claims from the assets of those subsidiaries before any assets are made
available for distribution to us, except to the extent we may also have a claim
as a creditor.
Assuming we had completed this offering on December 31, 1998 and after
giving effect to the application of the estimated net proceeds of this
offering, the notes would have been subordinated to approximately
$347.0 million of senior debt (excluding indebtedness relating to our financial
services subsidiary, discontinued operations and trade payables) and
approximately $272.9 million would have been available for borrowing as
additional senior debt under our revolving credit agreement. In addition, the
notes would have been effectively junior to approximately $9.0 million of
indebtedness of our subsidiaries (excluding indebtedness relating to our
financial services subsidiary and discontinued operations). We and our
subsidiaries may be permitted to borrow substantial additional indebtedness,
including senior debt, in the future under the terms of the Indenture.
We May be Unable to Purchase the Notes Upon a Change of Control
If a change of control occurs as described in the section "Description of
Notes" of this prospectus supplement under the heading "Change of Control," we
will have to offer to purchase the notes at 101% of their principal amount,
together with all accrued and unpaid interest, if any. We cannot assure you
that we will have sufficient funds or that our other debt agreements will
permit us to purchase the notes upon a change of control. Our inability to
purchase the notes upon a change of control would constitute an event of
default under the indenture which governs the notes. A change of control may
also require us to offer to repurchase our other outstanding indebtedness and
cause a default under our credit facility. The change of control feature of the
notes could make it more difficult for a third party to acquire us, even if
such an acquisition would be beneficial to you and our stockholders.
Lack of Public Market for the Notes
These notes are a new issue of securities. There is no active public market
for these notes. We do not intend to apply for listing of these notes on a
securities exchange. The underwriters have informed us that they currently
intend to make a market in the notes. However, the underwriters are not
obligated to do so and may discontinue any market-making at any time. The
liquidity of the trading market in the notes, and the market prices quoted for
the notes, may be adversely affected by changes in the overall market for these
types of securities and by changes in our financial performance or prospects or
in the prospects for companies in our industry generally.
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As a result, we cannot assure you that an active trading market will develop
for the notes, that you will be able to sell the notes or that, if you can sell
your notes, you will be able to sell them at an acceptable price.
Risk Relating to the "Year 2000 Issue"
Our California divisions recently completed their computer software
conversion to a JD Edwards application system that is Year 2000 compliant. With
the successful completion of this conversion and a number of related and
unrelated hardware upgrades, we believe our computer information systems are
now Year 2000 compliant in all material respects. We are in the process of
assessing the Year 2000 compliance of our non-information technology internal
office systems. We are also in the process of surveying our significant
vendors, subcontractors, suppliers and financial institutions to assess the
state of their readiness for the Year 2000. We cannot currently determine to
what extent the Year 2000 issue will affect our non-information technology
office systems or these or other third parties, such as governmental agencies
on which we are dependent for zoning, building permits and related matters, or,
consequently, our business. Also, we could be materially impacted by widespread
economic or financial market disruptions as a result of Year 2000 failure in
other parties, industries or countries. While at present we do not believe the
Year 2000 issue will have a material adverse effect on our business, we can
give you no assurances in this regard.
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<PAGE>
EARNINGS TO FIXED CHARGES RATIOS
The following table sets forth our ratio of earnings to fixed charges for
the nine-month periods ended September 30, 1998 and 1997 and the five years
ended December 31, 1997, 1996, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
Nine months
ended
September
30, Year ended December 31,
----------- -----------------------------
1998 1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(1)......................... 3.20x 3.49x 3.86x 2.38x 1.95x 2.02x 1.02x
</TABLE>
- --------
(1) 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. Earnings consist of earnings (loss) before
(a) income taxes, (b) interest expensed, (c) amortization of capitalized
interest in cost of sales, (d) income from unconsolidated joint ventures,
(e) nonrecurring noncash charges of $46.5 million and $3.1 million in 1995
and 1993, respectively, related to real estate inventories, (f) one-third
of estimated rent expense as representative of the interest portion of
rentals and amortization of debt expense and (g) discontinued operations
and an extraordinary charge from early extinguishment of debt of $1.3
million, net of taxes, in 1998, and includes (h) income distributions from
unconsolidated joint ventures.
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the notes will be
approximately $97.5 million. We intend to use such net proceeds (1) to retire
our remaining outstanding 10 1/2% Senior Notes due 2000 (approximately $19.6
million) and (2) to repay outstanding indebtedness under our unsecured
revolving credit facility. Our revolving credit facility currently bears
interest at a Eurodollar based rate plus 120 basis points (the weighted average
interest rate at January 31, 1999 was approximately 6.39%) and matures on July
31, 2002. We may reborrow amounts repaid under the revolving credit facility
for general corporate purposes, including homebuilding operations, acquisitions
and working capital.
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CAPITALIZATION
The following table sets forth our consolidated capitalization at September
30, 1998 and as adjusted to give effect to the issuance of these notes and the
application of the estimated net proceeds of this offering.
<TABLE>
<CAPTION>
As of
September 30, 1998
--------------------
As
Actual Adjusted
--------- ----------
($ in thousands)
<S> <C> <C>
Debt(1):
Revolving credit facility(2)............................. $ 178,750 $ 100,937
Trust deed notes payable................................. 6,050 6,050
10 1/2% Senior Notes due 2000............................ 19,637 --
8 1/2% Senior Notes due 2007, net........................ 99,367 99,367
8% Senior Notes due 2008, net............................ 99,354 99,354
% Senior Subordinated Notes due 2009................ -- 100,000
--------- ---------
Total debt............................................. 403,158 405,708
--------- ---------
Stockholders' equity:
Preferred Stock, $.01 par value; 10,000,000 shares
authorized; none issued................................. -- --
Common Stock, $.01 par value; 100,000,000 shares
authorized; 29,767,280 shares issued and
outstanding(3).......................................... 298 298
Paid-in capital.......................................... 284,896 284,896
Retained earnings........................................ 21,444 21,444
--------- ---------
Total stockholders' equity............................. 306,638 306,638
--------- ---------
Total capitalization................................. $ 709,796 $ 712,346
========= =========
</TABLE>
- --------
(1) Excludes debt of our financial services subsidiary, including amounts
outstanding from time to time under its $15 million revolving warehouse
credit facility.
(2) At January 31, 1999, amounts outstanding under the revolving credit
facility totaled $200.0 million.
(3) Excludes 2,178,240 shares of common stock reserved at January 31, 1999 for
issuance upon exercise of outstanding options under our 1991 Employee Stock
Option Plan and 1997 Stock Incentive Plan.
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BUSINESS
We operate primarily as a geographically diversified builder of single-
family homes for use as primary residences. We have operations throughout the
major metropolitan markets in California, Texas and Arizona. For the year ended
December 31, 1998, approximately 72%, 20% and 8% of our home deliveries
(including unconsolidated joint ventures) were in California, Texas and
Arizona, respectively.
Standard Pacific Corp. was incorporated in the State of Delaware in 1991.
Through our predecessors, we commenced our homebuilding operations in 1966 with
a single tract of land in Orange County, California.
Strategy
We believe that our long history of building high quality homes and our
conservative operating strategy have enabled us to successfully weather
cyclical downturns and position us to capitalize on future market
opportunities. The main elements of our strategy include:
Focus on Broad Move-Up Market. We concentrate on the construction of single-
family homes for use as primary residences by move-up buyers. We believe 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 our homes
for the year ended December 31, 1998 was approximately $330,000. Currently, we
expect to concentrate our efforts on acquiring land that is suitable for the
construction and sale of homes generally in the price range of $150,000 to
$500,000, which represents a broad market segment in our market areas. We also
construct and sell homes in the $500,000 to $1,000,000 price range in certain
of our California markets.
Reputation for High Quality, Single-Family Homes. We believe that we have an
established reputation for providing high quality homes. We pride ourselves on
our ability to design unique and attractive homes and provide our customer with
a wide selection of options. We believe that our long history of providing high
quality homes has resulted in many repeat buyers and word-of-mouth sales.
Conservative Operating Strategy. We customarily acquire 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. We generally
purchase entitled land only when we project 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, we
have been able to respond to local market conditions and control the number of
our completed and unsold homes. Additionally, an increasing percentage of our
lots are controlled through joint ventures. We use joint ventures for certain
land development projects that have long lead times or are of significant size
requiring substantial capital investments.
Strong Land Position. We have been operating in California for over 30 years
and have an established reputation with land owners. We believe that our long
standing relationships with land owners and developers give us a competitive
edge in securing quality land positions at competitive prices in California. We
are also continuing to build our reputation and relationships in Texas and
Arizona. In order to ensure an adequate supply of land for future homebuilding
activities, we generally attempt to maintain an inventory of building sites
sufficient for construction of homes over a period of approximately three to
five years. We believe that our 13,869 owned or controlled building sites at
December 31, 1998, in addition to any land sites for which we may enter into
negotiations, will be sufficient for our operations over this period.
Geographic Diversification. We have focused our California homebuilding
activities in Orange, Los Angeles, Riverside, San Bernardino, San Diego and
Ventura Counties in southern California, and in the San Francisco Bay area of
northern California. In Texas, we have projects in the Dallas, Houston and
Austin markets. In the third quarter of 1998, we expanded into the Phoenix,
Arizona market with the acquisition of a portion of the homebuilding operations
of an established builder. Our strategy of diversifying among different
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geographic areas has enabled us to reduce the impact of adverse local economic
conditions. Additionally, we believe that we have significant opportunities to
expand in our existing markets and enter new geographic markets.
Control of Overhead and Operating Expenses. Throughout our history, we have
sought to minimize overhead expenses in order to be more flexible in responding
to the cyclical nature of our business. We strive to control our overhead costs
by centralizing certain of our administrative functions and by limiting the
number of middle level management positions.
Experienced Management and Decentralized Operations. Our 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 our corporate officers, and
thereafter, each manager conducts the operations of the division relatively
autonomously as a separate profit center.
Operations
We currently build homes in California, Texas and Arizona through a total of
seven geographic divisions, with 152 projects under development or held for
future development at December 31, 1998.
The table below sets forth selected information for each region in which we
operate and for our homebuilding operations as a whole for the periods
indicated.
<TABLE>
<CAPTION>
Year Ended As of
December 31, 1998 December 31, 1998(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>
Southern California(7).. 1,119 $372,015 47 15 3,406 610 377
Northern California..... 516 402,178 36 14 3,047 358 247
Houston................. 177 157,466 12 6 395 71 31
Dallas/Austin........... 288 251,099 21 11 1,714 105 88
Phoenix................. 188 161,649 26 9 2,984 347 368
----- -------- --- --- ------ ----- -----
Total Consolidated...... 2,288 $329,714 142 55 11,546 1,491 1,111
Unconsolidated Joint
Ventures-- California.. 40 $344,678 10 0 2,323 0 0
----- -------- --- --- ------ ----- -----
Totals for and as of the
year ended December 31,
1998................... 2,328 $329,972 152 55 13,869 1,491 1,111
===== ======== === === ====== ===== =====
Totals for and as of the
year ended December 31,
1997................... 1,946 $309,239 99 51 9,016 708 566
===== ======== === === ====== ===== =====
</TABLE>
Footnotes appear on next page
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- --------
(1) Includes as of December 31, 1998, 183 model homes and 136 completed and
unsold homes, and as of December 31, 1997, 102 model homes and 116
completed and unsold homes.
(2) The total number of projects held for development as of the end of each
period shown includes projects with homes in the sales stage, under
construction and projects in various stages of planning.
(3) The number of projects in the sales stage includes projects where the
sales office has opened and/or we have begun to enter into sales contracts
for the sale of homes.
(4) Includes sites for homes reflected in Homes Under Construction and Presold
Homes.
(5) Includes certain homes reflected in Presold Homes.
(6) For information concerning cancellation rates and contractual arrangements
under which homes are presold, see the section "--Marketing and Sales."
(7) Includes our Orange County, San Diego and Ventura divisions.
Substantially all of our homes are single-family detached dwellings,
although during the past few years up to 10% have been townhouses or
condominiums generally attached in varying configurations of two, three, four
and six dwelling units.
Our 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. While they 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, we also have built single-family attached
and detached homes ranging from 1,100 to 5,500 square feet. For the years ended
December 31, 1998, 1997 and 1996, the average selling prices of our homes,
including sales of the unconsolidated joint ventures, were $329,972, $309,239
and $261,681, respectively.
Land Acquisition, Development and Construction
In considering the purchase of land for the development of a project, we
review 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 rate;
. the expected absorption rate for new housing;
. environmental condition of the land;
. transportation conditions and availability; and
. the estimated costs of development.
Generally, if all requisite governmental agency approvals are not in place,
we enter into a conditional agreement to purchase a parcel of land, making only
a nominal deposit on the property. Our general policy is to complete a purchase
of land only when we 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 our being able to obtain all requisite approvals from
governmental agencies within a certain period of time. We customarily acquire
unimproved or improved land zoned for residential use which appears suitable
for the construction of 50 to 300 homes. Construction is then accomplished in
smaller sized increments. The number of homes built in the first increment of a
project is based upon our internal market studies. The timing and size of
subsequent increments depends on the sales rates of earlier increments. Our
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.
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We typically use both our equity (internally generated funds) and unsecured
financing in the form of bank debt and other unsecured debt to fund land
acquisitions. To a lesser extent, we also use purchase money trust deeds to
finance the acquisition of land. We also enter into land development joint
ventures from time to time, typically for projects that have long lead times or
require substantial capital investments. Generally, with the exception of joint
ventures, specific project financing is not used.
We essentially function as a general contractor with our 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. We do not have
long-term contractual commitments with any of our subcontractors, consultants
or suppliers of materials. However, because of our market presence and long-
term relationships, we have 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. We
believe that the low fixed labor expense resulting from conducting our
operations in this manner has been instrumental in enabling us to retain the
necessary flexibility to react to increases or decreases in demand for housing.
Although the construction time for our 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,
we can typically complete the construction phase of an increment within one of
our projects in approximately four to six months.
Joint Ventures
We enter into land development and homebuilding joint ventures from time to
time as a means of managing our risk profile and expanding our market
opportunities. Land development joint ventures are typically entered into with
other homebuilders and developers as a method of spreading the financial risks
associated with developing larger projects. Homebuilding joint ventures may
involve partnering with existing landowners as a means of acquiring desirable
properties. For the years ended December 31, 1998, 1997 and 1996, we delivered
40, 67 and 154 homes, respectively, through unconsolidated joint ventures.
In 1996, our Orange County division entered into a joint venture to develop
and deliver approximately 800 homes in Fullerton and Brea, California. During
1998, 1997 and 1996, we delivered 40, 52 and three new homes, respectively,
from this unconsolidated joint venture. As of December 31, 1998, we had made
investments of approximately $8.3 million in this joint venture.
In the first half of 1997, our northern California division entered into a
joint venture to develop approximately 700 lots and a championship golf course
in Gilroy, California. Fifty percent of these lots will be sold to us at cost
for the construction and sale of homes. As of December 31, 1998, we had made
investments of approximately $11.2 million in this joint venture.
During 1997, we 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, develop and operate a championship golf course, and develop
certain community amenities and commercial and industrial components. As a
one-third participant in this long-term project, we may be required to invest
up to $20 million in the project and will receive certain rights of first offer
entitling us to purchase at fair market value up to 1,000 finished lots from
the joint venture for construction and sale of homes by us. As of January 31,
1999, we did not have any net investment in this joint venture. Additionally,
we purchased 150 lots from the joint venture on which we will build and sell
homes.
In 1998, our San Diego division entered into a joint venture to develop
approximately 700 lots in Riverside County, California. Slightly more than one-
half of these lots will be sold to us at cost for the
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construction and sale of homes. As of December 31, 1998, we had made an
investment of approximately $5.8 million in this joint venture.
Marketing and Sales
Our homes are generally sold by our own sales personnel. Furnished and
landscaped model homes are typically maintained at each project site. Home
buyers 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. We make extensive use of advertisements in local
newspapers, illustrated brochures, billboards and on-site displays.
Our homes are typically sold during construction using sales contracts
which are usually accompanied by a cash deposit, although some of our homes
are sold after completion of construction. For a limited time, purchasers are
typically permitted to cancel these contracts if they fail to qualify for
financing. In some cases, purchasers are also permitted to cancel these
contracts if they are unable to sell their existing homes and under certain
other circumstances.
During each of the years ended December 31, 1998, 1997 and 1996, we
experienced cancellation rates of 25%, 22% and 24%, respectively. Although
cancellations can delay our delivery of homes, they have not, during the last
few years, had a material negative impact on sales, operations or liquidity.
In order to minimize the negative impact of cancellations, it is our policy to
closely monitor the progress of prospective buyers in obtaining financing and
to monitor and adjust our start plan to continuously match the level of demand
for our homes. Sales are recorded after construction is completed, required
down payments are received and title passes. At December 31, 1998, 1997 and
1996, we had an inventory of completed and unsold homes of 136, 116 and 206,
respectively.
Financing
In 1998, we began offering mortgage products to some of our southern
California homebuyers and others through our new mortgage banking subsidiary,
Family Lending Services, Inc. Our goal in 1999 is to expand the scope of
Family Lending's operations to serve all of our California operating
divisions.
In 1998, we also began offering mortgage loans to our Arizona homebuyers
through SPH Mortgage, a joint venture with Norwest Mortgage. During 1999 we
are expanding this operation into our Texas operating divisions.
Family Lending sells the loans it originates in the secondary mortgage
market, generally on a non-recourse basis, and retains some of the servicing
rights. It generally finances its loans held for sale with borrowings under
its line of credit (secured by the loans and certain servicing rights) with a
third party lender. SPH Mortgage generally sells the loans it originates, on a
non-recourse basis and with servicing rights released, to Norwest Mortgage.
Both mortgage banking operations seek to manage interest rate risk with
respect to loan commitments and loans held for sale by pre-selling loans.
The principal sources of revenues for these mortgage banking operations
are:
. fees generated from loan originations;
. net gains on the sale of loans;
. revenues from the sale of loan servicing rights; and
. interest income earned on loans during the period they are held prior to
sale.
Family Lending also earns loan servicing fees on loans for which it elects
to retain the servicing rights.
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<PAGE>
Family Lending and SPH Mortgage are each subject to numerous federal, state
and local laws, ordinances, rules and regulations concerning loans to
purchasers of homes as well as eligibility requirements for participation in
federal loan programs.
Competition
The home building industry is highly competitive, with homebuilders
competing for customers, desirable properties, financing, raw materials and
skilled labor. In each of the areas in which we operate, we compete 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 we do. In
addition, we compete with resales of existing residential housing by
individuals, financial institutions and others. We also compete with rental
properties in some markets.
Employees
At December 31, 1998, we had approximately 625 employees (excluding
employees of discontinued operations).
During the past five years, we have not directly experienced a work
stoppage in our operations caused by labor disputes. Construction of homes in
our projects has, from time to time, been delayed due to strikes by certain
construction unions against subcontractors retained by us or strikes against
suppliers of materials used in the construction of our homes. Such delays have
not had a significant adverse effect on our operations. We believe that our
relations with our 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 us, we lease approximately 17,000
square feet of office facilities in Costa Mesa, California under leases
expiring in 2002 on which our executive office and the offices of the Orange
County housing division are located. We also lease and sublease to an
unrelated third party an approximately 59,000 square foot manufacturing
facility at this location.
Our other real estate housing divisions occupy leased facilities ranging in
size from approximately 2,000 to 14,000 square feet and aggregating a total of
approximately 56,000 square feet. These leases expire from 2001 through 2006.
Family Lending Services occupies approximately 9,300 square feet of a
facility in Newport Beach, California under a lease that expires in February
2005.
We believe that all of our properties are currently satisfactory for the
purposes for which they are used.
Legal Proceedings
Various claims and actions, considered normal to our business, have been
asserted and are pending against us. We believe that such claims and actions
should not have a material adverse effect upon our results of operations,
financial position or liquidity.
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<PAGE>
DESCRIPTION OF NOTES
The following description of the particular terms of the notes supplements
and, to the extent inconsistent therewith, replaces the description of the
general terms of the Debt Securities set forth under the heading "Description
of Debt Securities" in the accompanying Prospectus, to which description
reference is hereby made. The notes offered hereby are to be issued under an
Indenture, dated as of March , 1999 (the "Indenture"), between the Company
and The First National Bank of Chicago, as trustee (the "Trustee"). The
following is a summary of the material provisions of the Indenture. The terms
of the notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. Holders of the notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
As used in this "Description of Notes," the term "Company" refers to
Standard Pacific Corp. and not any of its Subsidiaries. Certain terms used
herein are defined under "Certain Definitions" below. Capitalized terms that
are used but not otherwise defined herein have the meanings assigned to them
in the Indenture, and those definitions are incorporated herein by reference.
General
The notes will:
. mature on March , 2009;
. be general unsecured obligations of the Company;
. be junior in right of payment to all existing and future Senior Debt of
the Company; and
. be limited to $150 million in aggregate principal amount, $100 million of
which will be issued in the offering and the remainder of which will be
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 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
notes to participate in those assets) will be effectively junior 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 such case, the claims of the Company would still be junior to any security
interests in the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by the Company.
Each note will bear interest at the rate per annum shown on the cover page
of this prospectus supplement from March , 1999. Interest on the notes will
be payable on each March and September (each an "Interest Payment
Date"), commencing September , 1999, to holders of record at the close of
business on the and immediately preceding such interest payment
date. Interest on the notes will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
The notes are not savings accounts or deposits and are not insured by the
Federal Deposit Insurance Corporation.
Optional Redemption
The Company may not redeem the notes at its option prior to March , 2004.
Thereafter, the Company may redeem the notes, at its 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. Such
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redemption will be at the following redemption prices 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
March of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2004............................................................ %
2005............................................................ %
2006............................................................ %
2007 and thereafter............................................. %
</TABLE>
The prices are expressed in percentages of principal amount. 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.
Subordination
The payment of principal of, premium, if any, and interest on the notes by
the Company and any and all other Obligations in respect of the notes or on
account of any Claim (collectively, the "Subordinated Obligations") will be
junior in right of payment, as set forth in the Indenture, to the prior payment
in full of all Senior Debt, whether outstanding on the date of the Indenture or
thereafter incurred. Upon any distribution to creditors of the Company in any
Insolvency or Liquidation Proceeding relating to the Company or its property,
the holders of Senior Debt will be entitled to receive payment in full of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt) before any payment or distribution (other than Permitted Junior
Securities) is made on account of the Subordinated Obligations by or on behalf
of the Company, and, until all Obligations with respect to Senior Debt are paid
in full, any distribution to which the holders of notes would be entitled shall
be made to the holders of Senior Debt (except that holders of notes may receive
and retain Permitted Junior Securities).
The Company also may not make any payment on account of the Subordinated
Obligations or acquire any of the notes if:
. a default in the payment of the principal of, premium, if any, or
interest on Senior Debt occurs and is continuing beyond any applicable
period of grace; or
. any other default occurs and is continuing with respect to any
Designated Senior Debt that permits holders of the Designated Senior
Debt as to which such default relates to accelerate its maturity (a
"Non-Payment Default") and the Trustee receives a notice of such default
(a "Payment Blockage Notice") from the Senior Debt Representative or the
Representative of the holders of any Designated Senior Debt.
Payments on the notes may and shall be resumed:
(1) in the case of a payment default with respect to Senior Debt, upon the
date on which such default is cured or waived in writing in accordance
with the instruments governing such Senior Debt or such default shall
have ceased to exist; and
(2) in case of a Non-Payment Default, upon the earlier of:
(A) the date on which such nonpayment default is cured or waived in
writing in accordance with the instruments governing such Designated
Senior Debt;
(B) 179 days after the date on which the applicable Payment Blockage
Notice is received; or
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(C) the date on which the Trustee receives written notice from the Senior
Credit Representative or the Representative of other holders of
Designated Senior Debt, as the case may be, terminating the payment
blockage period or otherwise consenting to any proposed distribution
or payment.
With respect to any Non-Payment Default, during any consecutive 360-day
period, the aggregate of all periods of payment blockage shall not exceed 179
days and there shall be a period of at least 181 consecutive days in each
consecutive 360-day period when no payment blockage is in effect. No Non-
Payment Default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been cured or
waived in writing in accordance with the instruments governing such Senior Debt
for a period of not less than 90 days.
For purposes of the Indenture, a distribution may consist of cash,
securities or other property, by set-off or otherwise. The words "cash,
securities or other property" shall not be deemed to include any payment or
distribution of Permitted Junior Securities.
The Indenture will further require that the Company promptly notify holders
of Senior Debt if payment of the notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
any Insolvency or Liquidation Proceeding, holders of notes may recover less
ratably than creditors of the Company who are holders of Senior Debt. The
Indenture will limit, subject to certain financial tests, the amount of
additional Indebtedness, including Senior Debt, that the Company and its
Subsidiaries can incur. See "--Certain Covenants."
As used herein:
"Claim" means any and all rights to payment under or in respect of any note
or the Indenture, all rights, remedies, demands, causes of action and claims of
every type and description at any time held or asserted by, or arising in favor
of, any holder of a note against the Company or any of its assets, in each case
on account of any breach of any promise, obligation, agreement, indemnity or
covenant in a note or the Indenture or in any manner arising out of, or
directly relating to, the offer, sale or purchase of a note or the performance
or nonperformance or the payment or nonpayment thereof.
"Designated Senior Debt" means:
. Indebtedness or Obligations under the Senior Credit Facility; and
. any other Senior Debt permitted under the Indenture, the outstanding
principal amount of which is $25 million or more and that has been
designated by the Company as "Designated Senior Debt."
"Insolvency or Liquidation Proceeding" means:
. any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding, relative
to the Company or to the creditors of the Company, as such, or to the
assets of the Company;
. any liquidation, dissolution, reorganization or winding up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy; or
. any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of the Company.
"Permitted Junior Securities" means securities, including guarantees of any
debt securities, of the Company or any other corporation provided for by a plan
of reorganization or readjustment, which securities are equity securities or
debt securities which are subordinated in right of payment to Senior Debt at
least to the same extent as the notes are so subordinated as provided herein
and that have a final maturity and a weighted average life to maturity which is
the same as or greater than that of the notes and are not secured by any
collateral.
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<PAGE>
"Post-Petition Interest" means all interest accrued or accruing after the
commencement of any Insolvency or Liquidation Proceeding in accordance with and
at the contract rate (including, without limitation, any rate applicable upon
default) specified in the agreement or instrument creating, evidencing or
governing any Senior Debt whether or not pursuant to applicable law or
otherwise, the claim for such interest is allowed as a claim in such Insolvency
or Liquidation Proceeding.
"Senior Credit Representative" means Bank of America National Trust and
Savings Association, in its capacity as the administrative agent under the
Senior Credit Facility, or any successor thereto as an agent or administrative
agent for the lenders under the Senior Credit Facility, or as the sole lender
thereunder.
"Senior Debt" means all Indebtedness and other Obligations specified below
payable directly or indirectly by the Company, whether outstanding on the date
of the Indenture or thereafter created, incurred or assumed by the Company:
. the principal of and interest on and all other Obligations related to the
Senior Credit Facility (including, without limitation, all loans, letters
of credit and other extensions of credit under the Senior Credit
Facility, and all expenses, fees, reimbursements, indemnities and other
amounts owing pursuant to the Senior Credit Facility);
. the Outstanding Notes of the Company, including principal and interest on
such Indebtedness;
. any other Indebtedness of the Company, including principal and interest
on such Indebtedness unless the instrument under which such Indebtedness
is incurred expressly provides that it is on a parity with or junior in
right of payment to the notes; and
. all permitted renewals, extensions, refundings or refinancings thereof.
All Post-Petition Interest on Senior Debt shall constitute Senior Debt.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall
not include:
. any liability for federal, state, local or other taxes owed or owing by
the Company;
. any Indebtedness of the Company to any of its subsidiaries or other
Affiliates;
. any trade payables; or
. any Indebtedness of the Company to the extent not permitted by the
"Limitation on Additional Indebtedness" covenant or the "Senior
Subordinated Debt" covenant (see "--Certain Covenants").
To the extent any payment of Senior Debt (whether by or on behalf of the
Company or, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to a trustee, receiver or other similar party under any bankruptcy,
insolvency, receivership or similar law, then if such payment is recovered by,
or paid over to, such trustee, receiver or other similar party, the Senior Debt
or part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred. All Senior Debt
shall be and remain Senior Debt for all purposes of the Indenture, whether or
not subordinated in an Insolvency or Liquidation Proceeding.
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% 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.
S-23
<PAGE>
Within 30 days following any Change of Control, the Company shall mail a
notice to each holder with a copy to the Trustee stating:
. 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% 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);
. the circumstances and relevant facts and relevant financial information
regarding such Change of Control;
. the repurchase date (which shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed); and
. the instructions determined by the Company, consistent with the covenant
described hereunder, that a holder must follow in order to have its 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 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.
Upon the occurrence of a change of control (which term is defined broadly
under the Senior Credit Facility), the Senior Credit Representative may declare
an event of default under the Senior Credit Facility and any amounts owed
thereunder would be due and payable. The occurrence of a Change of Control will
also constitute a change of control under the indenture governing the
Outstanding Notes, providing each holder of Outstanding Notes the right to
require the Company to repurchase such notes. Future Indebtedness of the
Company may also 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 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 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.
Certain Covenants
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:
. 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 2.50 to 1; or
. the Consolidated Coverage Ratio exceeds 2.0 to 1.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may Incur:
(1) Indebtedness under one or more Senior Credit Facilities in an amount
not in excess of $400 million;
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<PAGE>
(2) purchase money mortgages that are Non-Recourse Indebtedness;
(3) obligations Incurred under letters of credit, escrow agreements and
surety bonds in the ordinary course of business;
(4) 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 may not
exceed 98% of the value of the Mortgages pledged to secure Indebtedness
thereunder; and
(5) 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 ranks equally with or is junior 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.
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 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:
(1) liens existing on December 31, 1998;
(2) 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;
(3) 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;
(4) liens on or leases of model home units;
(5) Capitalized Lease Obligations entered into in the ordinary course of
business in amounts not in excess of $10 million in the aggregate;
(6) the replacement of any of the items set forth in clauses (1) through
(5) above, provided that:
(A) the principal amount of the Indebtedness secured by liens shall not
be increased;
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<PAGE>
(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;
(7) 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;
(8) liens or priorities incurred in the ordinary course of business, such
as laborers', employees', carriers', mechanics', vendors', and
landlords' liens or priorities;
(9) liens for certain taxes and certain survey and title exceptions;
(10) 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;
(11) liens on property owned by any Homebuilding Joint Venture;
(12) 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;
(13) liens to secure Senior Debt permitted under the Indenture; and
(14) 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 (1) through
(13) 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:
(1) 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;
(2) 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 March , 2009); or
(3) make any Restricted Investment;
(such payments or any other actions described in (1), (2) and (3), being
referred to herein collectively as, "Restricted Payments") unless:
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(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:
(I) 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; plus
(II) 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; plus
(III) 100% of dividends or distributions (the fair value of which,
if other than cash, to be determined by the Board of
Directors, in good faith) paid to the Company (or any
Restricted Subsidiary) by an Unrestricted Subsidiary,
Homebuilding Joint Venture or any other person in which the
Company (or any Restricted Subsidiary), directly or
indirectly, has an ownership interest but less than a 100%
ownership interest to the extent that such dividends or
distributions do not exceed the amount of loans, advances or
capital contributions made to any such entity or person
subsequent to the Original Issue Date and included in the
calculation or Restricted Payments; plus
(IV) $40 million.
The foregoing shall not prevent:
. 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;
. 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)(II) of the
immediately preceding paragraph;
. 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)(II) of the immediately preceding paragraph; or
. 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
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<PAGE>
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% of
the Company's total consolidated assets as of that date unless:
(1) 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 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
(2) 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 (the "Excess
Proceeds") to:
(A) a purchase of or an Investment in Additional Assets (other than
cash or cash equivalents);
(B) repayments of indebtedness of the Company which is Senior Debt or
indebtedness which ranks equally with the notes; and/or
(C) make an offer to acquire all or part of any Senior Debt that
requires the Company to make such an offer.
If any Excess Proceeds remain after such applications, the Company is
required, unless prohibited by the terms of its then existing Senior Debt, to
apply any such remaining Excess Proceeds to make an offer to purchase, on a
date not more than 75 days following the end of the one-year period referred to
in the previous sentence, from all holders of notes on a pro rata basis, the
principal amount of notes equal to the amount of such remaining Excess Proceeds
at a price equal to 100% of the principal amount of the notes to be purchased,
plus accrued and unpaid interest thereon to the date of purchase; provided
that:
. the Company may credit against such remaining Excess Proceeds the
principal amount of notes acquired by the Company through purchase,
optional redemption, exchange or otherwise following consummation of the
Asset Disposition and surrendered for cancellation and not previously
used as a credit against any other required payment pursuant to the
Indenture;
. if the remaining Excess Proceeds is less than $5 million, the Company
will not be required to make an offer until the amount of such remaining
Excess Proceeds, together with the remaining Excess Proceeds from one or
more subsequent Asset Dispositions, exceeds $5 million; and
. following consummation of any repurchase of notes pursuant to such an
offer, the amount of Excess Proceeds previously accumulated shall be
reduced to zero.
Any such offer to acquire 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 notes on a pro rata basis or by lot
or in such other manner as the Trustee shall deem fair and appropriate.
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Transactions with Affiliates
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
. 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
. 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,
. are set forth in writing, and
. have been approved by a majority of the disinterested members of the
Board of Directors.
The provisions of the foregoing paragraph shall not prohibit:
. any Restricted Payment permitted to be paid pursuant to the covenant
described under "--Limitation on Restricted Payments" above;
. 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;
. 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;
. loans or advances to employees in the ordinary course of business of the
Company or its Restricted Subsidiaries;
. 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
. 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:
(1) 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;
(2) to make any loans or advances to the Company; or
(3) transfer any of its property or assets to the Company;
except for:
(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 such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the
Company) and outstanding on such date;
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(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 (3) 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.
Senior Subordinated Debt
The Indenture provides that the Company shall not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the notes.
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
. incur at least $1.00 of Indebtedness pursuant to the first paragraph of
the covenant described under "--Limitation on Additional Indebtedness"
above; and
. 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., Standard
Pacific of Arizona, Inc. or Standard Pacific Construction, 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:
. 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;
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. immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing;
. the Consolidated Net Worth of the obligor of the 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
. 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 notes, the Trustee or the
holders of not less than 25% in aggregate principal amount of the 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 notes may rescind such a declaration.
Under the Indenture, an Event of Default is defined as, with respect to the
notes, any of the following:
. default in payment of the principal of any note (whether or not such
payment is prohibited by the subordination provisions of the Indenture);
. default in payment of any interest on any note when due, continuing for
30 days (whether or not such payment is prohibited by the subordination
provisions of the Indenture);
. failure by the Company to comply with its other agreements in the notes
or the Indenture for the benefit of the holders of the 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 notes and
(except in the case of a default with respect to the covenants described
in "--Mergers and Sales of Assets by the Company") the Company's failure
to cure such Default within 60 days after receipt by the Company of such
notice;
. certain events of bankruptcy or insolvency;
. 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
. 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 notes of any continuing
Default or Event of Default known to the Trustee within 90 days after the
occurrence thereof; provided, that the Trustee may withhold such notice, as to
any Default or Event of Default other than a payment Default or a payment
Event of 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 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 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
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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 notes will have any right
to pursue any remedy with respect to the Indenture or the notes, unless:
. such holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the notes;
. the holders of at least a majority in aggregate principal amount of the
notes shall have made a written request to the Trustee to pursue such
remedy;
. such holder or holders have offered to the Trustee reasonable indemnity
satisfactory to the Trustee;
. the Trustee shall have failed to comply with the request within 60 days
after receipt of such request; and
. the holders of a majority in aggregate principal amount of the notes have
not given the Trustee a direction inconsistent with such request.
Notwithstanding the foregoing, the right of any holder of any note to
receive payment of the principal of and interest in respect of such note on
the stated maturity expressed in such 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 notes may waive an existing Default or Event of
Default with respect to the notes and its consequences, other than:
. any Default or Event of Default in any payment of the principal of or
interest on any note or
. any Default or Event of Default in respect of certain covenant or
provisions in the Indenture which may not be modified without the consent
of the holder of each 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 notes:
. to add to the covenants, agreements and obligations of the Company for the
benefit of the holders of all the notes or to surrender any right or
power conferred in the Indenture upon the Company;
. 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 notes;
. to establish the form or terms of the notes as permitted by Section 2.01 or
9.01(4) of the Indenture;
. to provide for the acceptance of appointment under the Indenture of a
successor Trustee with respect to the 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;
. to provide that specific provisions of the Indenture shall not apply to a
series of securities not previously issued;
. to provide for uncertificated securities in addition to or in place of
certificated securities;
. to cure any ambiguity, omission, defect or inconsistency;
. to secure the notes; or
. 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 outstanding notes, the Company and the Trustee may
also execute a supplemental indenture to add provisions
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to, or change in any manner or eliminate any provisions of, the Indenture with
respect to the notes or modify in any manner the rights of the holders of the
notes, provided that no such supplemental indenture will, without the consent
of the holder of each such note affected thereby:
. reduce the amount of notes whose holders must consent to an amendment,
supplement or waiver;
. reduce the rate of or change the time for payment of interest, including
default interest, on any note;
. reduce the principal of or change the fixed maturity of any note or alter
the provisions (including related definitions) with respect to
redemptions described under "Optional Redemption" or with respect to
mandatory offers to repurchase notes described under "Limitations on
Asset Sales" or "Change of Control";
. make any note payable in money or at a place other than that stated in the
note;
. make any change in the "Waiver of Existing Defaults," "Rights of Holders
to Receive Payment" or the "With Consent of Holders" sections set forth
in the Indenture;
. adversely modify the ranking or priority of the notes; or
. waive a continuing Default or Event of Default in the payment of principal
of or interest on the notes.
Holders of not less than a majority in principal amount of the outstanding
notes may waive certain past Defaults or Events of Default and may waive
compliance by the Company with certain of the restrictive covenants described
above with respect to the notes.
The Trustee
The Trustee is The First National Bank of Chicago. 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 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 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
. any property or assets (other than Indebtedness and Capital Stock) in a
Related Business; or
. 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 complementary (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.
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"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:
. 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);
. all or substantially all the assets of any division, business segment or
comparable line of business of the Company or any Restricted Subsidiary;
or
. 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 (1),
(2) and (3) 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:
. 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
. the sum of all such principal payments.
"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:
. 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%
of the total voting power of the Voting Stock of the Company;
. during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved
by a majority vote of the directors of the Company then still in office
who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors then in
office; or
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. 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% 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 (2) 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
. of the person becoming a Restricted Subsidiary or
. 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
. cash dividends paid on any Preferred Stock of the Company, times
. 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,
(1) 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;
(2) the difference between capitalized interest for such period and the
interest component of cost of goods sold for such period; plus
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(3) the product of:
(A) cash dividends paid on any Preferred Stock of the Company times
(B) a fraction, the numerator of which is one and the denominator of
which is one minus the then current effective aggregate federal,
state and local tax rate of the Company, expressed as a decimal.
"Consolidated Net Income" for any period, means the aggregate of the Net
Income of the Company and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with generally accepted accounting
principles as in effect on the Original Issue Date, provided that:
(1) 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 this clause (B);
(2) 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;
(3) 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
(4) 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, 1998 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, 1998 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 notes, less:
(1) that portion of any increase of each of the Unrestricted Subsidiaries'
stockholders' equity subsequent to December 31, 1998 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
(2) 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:
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(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:
. matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
. is convertible or exchangeable, at the option of the holder thereof, for
Indebtedness or Disqualified Stock; or
. is redeemable at the option of the holder thereof, in whole or in part,
in each case on or prior to March , 2010.
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:
. income tax expense;
. depreciation expense;
. amortization expense; and
. 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:
. any Unrestricted Subsidiary; and
. 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.
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"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),
(1) 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;
(2) all Capitalized Lease Obligations of such person;
(3) 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);
(4) 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 (1) through
(3) 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);
(5) 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);
(6) all obligations of the type referred to in clauses (1) through (5) 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;
(7) all obligations of the type referred to in clauses (1) through (6) 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
(8) 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.
However, the amount outstanding at any time of any Indebtedness issued with
original issue discount shall be deemed to be the face amount of such
S-38
<PAGE>
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.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Outstanding Notes" means the Company's 8% Senior Notes due 2008 in the
original aggregate principal amount of $100,000,000 and the Company's 8 1/2%
Senior Notes due 2007 in the original aggregate principal amount of
$100,000,000.
"Original Issue Date" means the date of the original issue of the notes
pursuant to the Indenture.
"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
S-39
<PAGE>
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, $25 million for any one Homebuilding Joint
Venture or $100 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.
"Restricted Subsidiary" means any Wholly Owned Subsidiary that has not been
designated an Unrestricted Subsidiary.
"Revolving Credit Facility" means that certain Amended and Restated Credit
Agreement (the "Credit Agreement") dated as of July 28, 1998 between the
Company, Bank of America National Trust and Savings Association, The First
National Bank of Chicago, Credit Lyonnais Los Angeles Branch, and certain other
parties and the other Loan Documents (as defined in the Credit Agreement) or
other analogous documents entered into in connection with any refinancing
thereof, as any of the foregoing has been or may from time to time be amended,
renewed, supplemented or otherwise modified at the option of the parties
thereto (in whole or in part, and without limitation as to amount, terms,
conditions, covenants and other provisions) and to add any Subsidiary as
additional direct obligors thereunder.
"Savings" means Standard Pacific Savings, F.A., the Company's wholly owned
savings and loan subsidiary.
"Senior Credit Facility" means the Revolving Credit Facility, any other bank
credit agreement or credit facility entered into in the future by the Company
or any Restricted Subsidiary and any other agreement (including all related
ancillary agreements) pursuant to which any of the Indebtedness, Obligations,
commitments, costs, expenses, fees, reimbursements and other indemnities
payable or owing under the Revolving Credit Facility or any other bank credit
agreement or credit facility (or under any subsequent Senior Credit Facility)
may be refinanced, restructured, renewed, extended, refunded, replaced or
increased, as any such Revolving Credit Facility, bank credit agreement, credit
facility or other agreement may from time to time at the option of the parties
thereto be amended, renewed, supplemented or otherwise modified.
"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
. any Subsidiary in which the Company, directly or indirectly, has less
than a 100% ownership interest,
. 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
. 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 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.
S-40
<PAGE>
"Warehouse Facility" means any bank credit agreement or credit facility
entered into 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 notes initially will be represented by one or more notes in registered
global form (the "Global Notes"). The Global Notes will be deposited with the
Trustee as custodian for The Depository Trust Company ("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 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, 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 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:
. upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the underwriters with portions of the
principal amount of the Global Notes; and
. ownership of beneficial interests in the 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 Global Notes will be limited to such
extent.
Investors in the 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 Global
Notes, the Global Note Holder will be considered the sole holder of outstanding
notes under the Indenture. Except as provided below, owners of beneficial
interests in the Global Notes will not be entitled to have 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 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 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
S-41
<PAGE>
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 notes, including the 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 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 DTC. Payments by DTC's Participants and DTC's
Indirect Participants to the owners of beneficial interests in the 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 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 Global Note is exchangeable for notes
in definitive form only if:
. 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
. the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of notes in definitive form under the
Indenture. In either instance, upon surrender by the relevant Global Note
Holder of its Global Note, 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 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 Global Notes and the Company and the Trustee may 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 notes represented
by the Global Note (including principal, premium, if any, and interest) be made
in same-day funds.
S-42
<PAGE>
UNDERWRITING
Subject to the terms and conditions of our underwriting agreement with the
underwriters named below, we have agreed to sell and each underwriter has
severally agreed to purchase from us the principal amount of notes set forth
opposite its name below:
<TABLE>
<CAPTION>
Underwriters Principal Amount Of Notes
------------ -------------------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities
Corporation................................... $
Salomon Smith Barney Inc.......................
Warburg Dillon Read LLC........................
Jefferies & Company, Inc.......................
------------
Total.......................................... $100,000,000
============
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters are subject to certain conditions precedent and that the
underwriters will purchase all of the notes if any such notes are purchased.
We have been advised by the underwriters that the underwriters propose to
offer the notes to the public at the public offering price set forth on the
cover page of this prospectus supplement and to certain dealers at such price
less a concession not in excess of % of the principal amount of the notes. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of % of the principal amount of the notes to certain other dealers. After the
initial offering of the notes, the public offering price and other selling
terms may be changed by the underwriters at any time without notice.
In connection with this offering and in compliance with applicable law, the
underwriters may engage in transactions which stabilize or maintain the market
price of the notes at levels above those which might otherwise prevail in the
open market. Specifically, the underwriters may over-allot in connection with
this offering creating a short position in the notes for their own accounts.
For the purposes of covering a syndicate short position or stabilizing the
price of the notes, the underwriters may place bids for the notes or effect
purchases of the notes in the open market. Finally, the underwriters may impose
a penalty bid whereby selling concessions allowed to syndicate members or other
broker-dealers for distributing the notes in this offering may be reclaimed by
the syndicate if the syndicate repurchases previously distributed notes in
transactions to cover short positions, in stabilization transactions or
otherwise. These activities may stabilize, maintain or otherwise affect the
market price of the notes, which may be higher than the price that might
otherwise prevail in the open market, and, if commenced, may be discontinued at
any time.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act and to contribute to payments
that they may be required to make in respect thereof.
Some of the underwriters have from time to time conducted investment banking
services on our behalf for which they have received customary fees.
The notes are a new issue of securities. There is no active public trading
market for the notes. We do not intend to apply for listing of the notes on any
securities exchange or the Nasdaq National Market. The underwriters have
advised us that they currently intend to make a market in the notes, but the
underwriters are not obligated to do so and may discontinue any such market-
making at any time. There can be no assurance as to the liquidity of any market
that may develop for the notes, your ability to sell your notes or the price at
which you would be able to sell your notes.
LEGAL MATTERS
Gibson, Dunn & Crutcher LLP of Los Angeles, California will issue an opinion
about the validity of the notes. Certain legal matters will be passed upon for
the underwriters by O'Melveny & Myers LLP, Los Angeles, California.
S-43
<PAGE>
PROSPECTUS
$300,000,000
STANDARD PACIFIC CORP.
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK AND WARRANTS
---------------
Standard Pacific Corp., a Delaware corporation (the "Company"), may offer
and issue from time to time (i) its debt securities ("Debt Securities"), which
may be senior debt securities, senior subordinated debt securities or
subordinated debt securities, (ii) shares of its Preferred Stock, par value
$.01 per share ("Preferred Stock"), (iii) shares of its Common Stock, par
value $.01 per share ("Common Stock"), or (iv) warrants to purchase Debt
Securities, Preferred Stock, Common Stock or other securities of the Company
or another issuer ("Warrants"). The Debt Securities, Preferred Stock, Common
Stock and Warrants are herein collectively referred to as the "Securities."
The Securities may be offered in one or more separate classes or series, in
amounts, at prices and on terms to be determined by market conditions at the
time of sale and to be set forth in a supplement or supplements to this
Prospectus (a "Prospectus Supplement"). Any Securities may be offered with
other Securities or separately. Debt Securities or Preferred Stock may be
exchangeable for or convertible into shares of Common Stock. The aggregate
offering price of the Securities will not exceed $300,000,000.
Certain terms of any Debt Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying Prospectus Supplement
including, without limitation, the specific designation, aggregate principal
amount, purchase price, currency of payment, denomination, maturity, interest
rate (which may be fixed or variable) and time of payment of interest (if
any), terms (if any) for the subordination, redemption, purchase or conversion
thereof, listing (if any) on a securities exchange, additional or different
covenants and events of default, and any other material terms of the Debt
Securities. Certain terms of any Preferred Stock in respect of which this
Prospectus is being delivered will be set forth in an accompanying Prospectus
Supplement including, without limitation, the specific designation, number of
shares, liquidation preference, purchase price, dividends, voting, redemption
and conversion provisions (if any), any listing on a securities exchange and
any other material terms of the Preferred Stock. The purchase price of any
Common Stock in respect of which this Prospectus is being delivered will be
set forth in an accompanying Prospectus Supplement. Certain terms of any
Warrants in respect of which this Prospectus is being delivered will be set
forth in an accompanying Prospectus Supplement, including the specific
designation, number, duration, purchase price and terms thereof, any listing
of the Warrants or the underlying securities on a securities exchange and any
other terms in connection with the offering, sale and exercise of Warrants, as
well as the terms on which the securities for which such Warrants may be
exercised. The Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to the Securities covered by the Prospectus Supplement.
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "SPF."
The Securities may be sold on a negotiated or competitive bid basis to or
through underwriters or dealers designated from time to time or to other
purchasers directly or through agents designated from time to time (see "Plan
of Distribution"). Certain terms of any offering and sale of the Securities,
including, where applicable, the names of the underwriters, dealers or agents,
if any, the principal amount or number of shares to be purchased, the purchase
price of the Securities, the proceeds to the Company from such sale and any
applicable commissions, discounts and other items constituting compensation of
such underwriters, dealers or agents will also be set forth in an accompanying
Prospectus Supplement.
This Prospectus may not be used to consummate a sale of securities unless
accompanied by the applicable Prospectus Supplement.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE 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 October 23, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Registration
Statement (as defined), and exhibits and schedules forming a part thereof and
the reports, proxy statements and other information filed by the Company with
the Commission in accordance with the Exchange Act can be inspected and copied
at the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C., 20549, and at the following regional offices of the
Commission: Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Electronic filings made through the Electronic Data
Gathering, Analysis and Retrieval System are publicly available through the
Commission's Website (http://www.sec.gov). In addition, the Common Stock is
listed on the New York Stock Exchange and similar information concerning the
Company can be inspected and copied at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") (of which this Prospectus is a part) under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other documents are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all
respects by such reference and the exhibits and schedules thereto. For further
information regarding the Company and the Securities, reference is hereby made
to the Registration Statement and such exhibits and schedules which may be
obtained from the Commission at its principal office in Washington, D.C., upon
payment of the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the Exchange
Act with the Commission and are incorporated herein by reference:
a. Annual Report on Form 10-K for the year ended December 31, 1997;
b. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and
June 30, 1998;
c. Current Reports on Form 8-K, filed September 3 and October 2, 1998;
d. The following sections of the Company's Proxy Statement relating to its
Annual Meeting of Stockholders held on May 14, 1998: Election of
Directors, Security Ownership of Certain Beneficial Owners and
Management, Executive Compensation and Section 16(a) Beneficial
Ownership Reporting Compliance; and
e. The description of the Registrant's Common Stock contained in the
Company's Registration Statement on Form 8-B (File No. 1-10959) filed
December 17, 1991 and any amendments or reports filed for the purpose of
updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof from the
date of filing such documents.
2
<PAGE>
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in the applicable Prospectus Supplement) or in any other
subsequently filed document which also is or is 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.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to Clay A. Halvorsen, Secretary, Standard Pacific Corp., 1565 West
MacArthur Boulevard, Costa Mesa, California 92626 (telephone no. (714) 668-
4300).
CERTAIN PERSONS PARTICIPATING IN AN OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED SECURITIES,
INCLUDING STABILIZING AND SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OF A PENALTY BID. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING" IN
THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
THE COMPANY
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. In addition, the Company recently entered the Phoenix,
Arizona market through the acquisition of an ongoing operation, including
seven active selling communities. 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, in the Houston, Dallas and Austin markets in Texas and in
the Phoenix metropolitan area in Arizona. 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.
3
<PAGE>
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, including, among other things, acquisition,
development and construction of new residential properties, acquisition of
companies or operations in homebuilding and related businesses, and repayment
of existing indebtedness.
EARNINGS TO FIXED CHARGES RATIOS
The following table sets forth the Company's ratio of earnings to fixed
charges for the six-month periods ended June 30, 1998 and 1997 and the five
years ended December 31, 1997, 1996, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
Year ended December 31,
Six months ended Six months ended -----------------------------
June 30, 1998 June 30, 1997 1997 1996 1995 1994 1993
---------------- ---------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges(1)....... 2.89x 3.08x 3.91x 2.41x 1.96x 2.04x 1.03x
</TABLE>
- --------
(1) 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) amortization of excess of cost over net assets acquired,
(vi) nonrecurring noncash charges of approximately $46.5 million and $3.1
million in 1995 and 1993, respectively, (vii) 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.
DESCRIPTION OF DEBT SECURITIES
The following sets forth certain general terms and provisions of each
Indenture under which the Debt Securities are to be issued. The particular
terms of the Debt Securities will be set forth in a Prospectus Supplement
relating to such Debt Securities. The Debt Securities are to be issued under
one or more Indentures, as amended or supplemented from time to time (the
"Indenture"), to be entered into between the Company and a trustee chosen by
the Company and qualified to act under the Trust Indenture Act of 1939, as
amended (the "TIA") (together with any other trustee(s) chosen by the Company
and appointed in a supplemental indenture with respect to a particular series,
the "Trustee"). The forms of Indentures have been filed as exhibits to the
Registration Statement of which this Prospectus is a part and will be
available for inspection at the corporate trust office of the Trustee, or as
described above under "Available Information." The Indentures are subject to,
and governed by, the TIA. The Company will execute an Indenture if and when
the Company issues any Debt Securities. The statements made hereunder relating
to the Indentures and the Debt Securities to be issued thereunder are
summaries of certain provisions thereof and do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all
provisions of the Indentures (including those terms made a part of the
Indenture by reference to the TIA) and such Debt Securities. Capitalized terms
used but not defined herein shall have the respective meanings set forth in
the Indentures. References below to an "Indenture" are deemed to constitute a
reference to the applicable Indenture under which a particular series of Debt
Securities is issued.
General
The Debt Securities will be unsecured obligations of the Company. The Debt
Securities may be issued in one or more series. Specific terms of each series
of Debt Securities will be contained in authorizing resolutions or a
supplemental indenture relating to that series. There will be Prospectus
Supplements relating to particular series of Debt Securities. Each Prospectus
Supplement will describe, as to the Debt Securities to which it relates:
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(i) the title of the Debt Securities; (ii) any limit upon the aggregate
principal amount of a series of Debt Securities which may be issued; (iii) the
date or dates on which principal of the Debt Securities will be payable and
the amount of principal which will be payable; (iv) the rate or rates (which
may be fixed or variable) at which the Debt Securities will bear interest, if
any, as well as the dates from which interest will accrue, the dates on which
interest will be payable and the record date for the interest payable on any
payment date; (v) the currency or currencies in which principal, premium, if
any, and interest, if any, will be paid; (vi) the place or places where
principal, premium, if any, and interest, if any, on the Debt Securities will
be payable and where Debt Securities which are in registered form can be
presented for registration of transfer or exchange and the identification of
any depositary or depositaries for any global debt securities; (vii) any
provisions regarding the right of the Company to redeem or purchase Debt
Securities or of holders to require the Company to redeem Debt Securities;
(viii) the right, if any, of holders of the Debt Securities to convert them
into stock or other securities of the Company, including any provisions
intended to prevent dilution of the conversion rights or otherwise; (ix) any
provisions by which the Company will be required or permitted to make payments
to a sinking fund which will be used to redeem Debt Securities or a purchase
fund which will be used to purchase Debt Securities; (x) the percentage of the
principal amount at which Debt Securities will be issued and, if other than
the full principal amount thereof, the percentage of the principal amount of
the Debt Securities which is payable if maturity of the Debt Securities is
accelerated because of a default; (xi) the terms, if any, upon which Debt
Securities may be subordinated to other indebtedness of the Company; (xii) any
additions to, modifications of or deletions from the terms of the Debt
Securities with respect to Events of Default or covenants or other provisions
set forth in the Indenture; and (xiii) any other material terms of the Debt
Securities, which may be different than the terms set forth in this
Prospectus.
Events of Default and Remedies
An Event of Default with respect to any series of Debt Securities is defined
in the Indenture as being default in payment of the principal of or premium,
if any, on any of the Debt Securities of such series; default for 30 days in
payment of any installment of interest on any Debt Security of such series;
default by the Company for 60 days after notice in the observance or
performance of any other covenants in the Indenture relating to such series;
and certain events involving bankruptcy, insolvency or reorganization of the
Company. The Indenture provides that the Trustee may withhold notice to the
holders of any series of Debt Securities of any default (except a default in
payment of principal, premium, if any, or interest, if any, with respect to
such series of Debt Securities) if the Trustee considers it in the interest of
the holders of such series of Debt Securities to do so.
The Indenture provides that if any Event of Default has occurred and is
continuing with respect to any series of Debt Securities, the Trustee or the
holders of not less than 25% in principal amount of such series of Debt
Securities then outstanding may declare the principal of all the Debt
Securities of such series to be due and payable immediately. However, the
holders of a majority in principal amount of the Debt Securities of such
series then outstanding by written notice to the Trustee and the Company may
waive any Default or Event of Default (other than any continuing Default or
Event of Default in payment of principal or interest) with respect to such
series of Debt Securities. Holders of a majority in principal amount of the
then outstanding Debt Securities of any series may rescind an acceleration
with respect to such series and its consequences (except an acceleration due
to nonpayment of principal or interest on such series) if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
with respect to such series have been cured or waived.
The holders of a majority in principal amount of the Debt Securities of any
series then outstanding will have the right to direct the time, method and
place of conducting any proceedings for any remedy available to the Trustee
with respect to such series, subject to certain limitations specified in the
Indenture.
Defeasance of Indenture
The Indenture permits the Company to terminate all of its obligations under
the Indenture as they relate to any particular series of Debt Securities,
other than the obligation to pay interest, if any, on and the principal of the
Debt Securities of such series and certain other obligations, at any time by
(i) depositing in trust with the
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Trustee, under an irrevocable trust agreement, money or U.S. government
obligations in an amount sufficient to pay principal of and interest, if any,
on the Debt Securities of such series to their maturity, and (ii) complying
with certain other conditions, including delivery to the Trustee of an opinion
of counsel or a ruling received from the Internal Revenue Service to the
effect that holders will not recognize income, gain or loss for federal income
tax purposes as a result of the Company's exercise of such right and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case otherwise.
In addition, the Indenture permits the Company to terminate all of its
obligations under the Indenture as they relate to any particular series of
Debt Securities (including the obligations to pay interest, if any, on and the
principal of the Debt Securities of such series and certain other
obligations), at any time by (i) depositing in trust with the Trustee, under
an irrevocable trust agreement, money or U.S. government obligations in an
amount sufficient to pay principal of and interest, if any, on the Debt
Securities of such series to their maturity, and (ii) complying with certain
other conditions, including delivery to the Trustee of an opinion of counsel
or a ruling received from the Internal Revenue Service to the effect that
holders will not recognize income, gain or loss for federal income tax
purposes as a result of the Company's exercise of such right and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case otherwise, which opinion of counsel
is based upon a change in the applicable federal tax law since the date of the
Indenture.
Transfer and Exchange
A holder will be able to transfer or exchange Debt Securities only in
accordance with the provisions of the Indenture. The registrar may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents, and to pay any taxes and fees required by law or permitted by the
Indenture.
Amendment, Supplement and Waiver
Subject to certain exceptions, the Indenture or the Debt Securities may be
amended or supplemented with the consent (which may include consents obtained
in connection with a tender offer or exchange offer for Debt Securities) of
the holders of at least a majority in principal amount of the Debt Securities
of such series then outstanding, and any existing Default under, or compliance
with any provision of the Indenture relating to a particular series of Debt
Securities may be waived (other than any continuing Default or Event of
Default in the payment of interest on or the principal of such Debt
Securities) with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for Debt Securities) of the
holders of a majority in principal amount of the Debt Securities of such
series then outstanding. Without the consent of any holder, the Company and
the Trustee may amend or supplement the Indenture or the Debt Securities to
cure any ambiguity, defect or inconsistency; to provide for uncertificated
Debt Securities in addition to or in place of certificated Debt Securities; to
make any change that does not adversely affect the legal rights of any holder;
or to create a series and establish its terms.
Without the consent of each holder affected, the Company and the Trustee may
not (i) reduce the amount of Debt Securities of such series whose holders must
consent to an amendment, supplement or waiver, (ii) reduce the rate of or
change the time for payment of interest, (iii) reduce the principal of or
change the fixed maturity of any Debt Security or alter the provisions with
respect to redemptions or mandatory offers to repurchase Debt Securities
pursuant to certain covenants set forth in the Indenture, (iv) make any Debt
Security payable in money other than that stated in the Debt Security, (v)
modify the ranking or priority of the Debt Securities or (vi) waive a
continuing default in the payment of principal of or interest on the Debt
Securities.
The right of any holder to participate in any consent required or sought
pursuant to any provision of the Indenture (and the obligation of the Company
to obtain any such consent otherwise required from such holder) may be subject
to the requirement that such holder shall have been the holder of record of
any Debt Securities with respect to which such consent is required or sought
as of a date identified by the Trustee in a notice furnished to holders in
accordance with the terms of the Indenture.
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Concerning the Trustee
The Indenture provides that in case an Event of Default occurs and is not
cured, the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent person in similar circumstances in the conduct of
its own affairs. The Trustee may refuse to perform any duty or exercise any
right or power under the Indenture, unless it receives indemnity satisfactory
to it against any loss, liability or expense.
Governing Law
The Indenture and the Debt Securities will be governed by the laws of the
State of New York without giving effect to principles of conflict of laws.
DESCRIPTION OF STOCK
The summary of the terms of the stock of the Company set forth below does
not purport to be complete and is subject to and qualified in its entirety by
reference to the charter and bylaws of the Company and applicable law. See
"Available Information."
General
The Company has authorized 100,000,000 shares of Common Stock, $.01 par
value per share, and 10,000,000 shares of preferred stock, par value $.01 per
share. As of September 15, 1998, 29,767,280 shares of Common Stock were issued
and outstanding and no shares of Preferred Stock were issued and outstanding.
Preferred Stock
The Board of Directors of the Company has the authority, without further
action by the Company's stockholders, to determine the principal rights,
preferences and privileges of the unissued Preferred Stock. In connection with
the Rights Agreement (as described below), the Board of Directors of the
Company has authorized the reservation of 500,000 shares of Series A Junior
Participating Cumulative Preferred Stock, par value $0.01 per share (the
"Preferred Shares"), for issuance upon exercise of the Rights (as defined
below). For a description of the Preferred Shares, see "Rights" below.
Common Stock
Subject to the preferential rights of any series of Preferred Stock that may
be outstanding, all shares of Common Stock participate equally in any
dividends declared by the Board of Directors and in the net assets of the
Company on liquidation. Holders of shares of Common Stock are entitled to one
vote for each share held of record and have no conversion, exchange,
preemptive or cumulative voting rights. All outstanding shares of Common Stock
are fully paid and nonassessable.
The Board of Directors of the Company has the authority, without further
action by stockholders, to fix or alter the rights, powers and privileges of
any wholly unissued series of Common Stock and to increase or decrease the
number of shares of such series. The Certificate of Incorporation of the
Company (the "Charter") provides that the Board of Directors has no power to
alter the rights of any outstanding shares of Common Stock. Certain other
provisions of the Charter affect the rights of holders of Common Stock. For a
description of such provisions, see "Certain Provisions in the Charter and
Bylaws" below.
The transfer agent and registrar for the Common Stock is First Chicago Trust
Company of New York.
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Rights
In December 1991, the Board of Directors of the Company authorized a
dividend of one Preferred Share purchase right ("Right") for each outstanding
share of Common Stock. A description and terms of the Rights are set forth in
a Rights Agreement (the "Rights Agreement") between the Company and First
Chicago Trust Company of New York, as rights agent (the "Rights Agent"). The
basic concept behind all rights plans, including the Rights Agreement, is that
the rights themselves are initially evidenced by ownership of shares, no
separate rights certificates are issued, the rights may not be traded
separately from the shares and the rights will be evidenced by a notation on
the stock certificates for the shares of common stock to which they are
attached. Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company (other than rights resulting from
such holder's ownership of shares of Common Stock), including, without
limitation, the right to vote or to receive dividends.
The Rights Agreement provides that, upon the occurrence of certain events,
the Rights become exercisable and separate Right certificates will be
distributed. These events include the following:
. The tenth business day (or such later date as the Board determines)
after the date (the "15% Ownership Date") of public announcement that
any person (a "15% Stockholder") has become the beneficial owner of at
least 15% of the then outstanding shares of Common Stock.
. The tenth business day after the date of public announcement of a tender
offer or exchange offer that, if successful, would cause a person to
become a 15% Stockholder.
. The date, on or after the 15% Ownership Date, of a merger in which the
Company is not the surviving corporation or of the sale of at least 50%
of the Company's assets or earning power.
The earliest of the above three dates is referred to as the "Distribution
Date." On the Distribution Date, each Right (other than certain Rights that
become void) will become exercisable to purchase, for the "Exercise Price"
(initially $40.00), 1/100 of a Preferred Share. Thereafter, the Rights may
come to represent the right to purchase other securities or property (as
described more fully below).
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of 1/100 of a Preferred Share to be received upon
exercise of a Right will have approximately the same value as one share of
Common Stock. The Preferred Shares are non-redeemable and, unless otherwise
provided in connection with the creation of a series of Preferred Stock, are
subordinate to any other series of Preferred Stock, whether issued before or
after the issuance of Preferred Shares. The Preferred Shares may not be issued
except upon exercise of Rights. The holder of a Preferred Share is entitled to
receive when, as and if declared, the greater of (i) cash and non-cash
dividends in an amount equal to 100 times the dividends declared on each share
of Common Stock or (ii) a preferential annual dividend of $1.00 per Preferred
Share ($.0l per 1/100 of a Preferred Share). In the event of liquidation, the
holders of Preferred Shares will be entitled to receive a liquidation payment
in an amount equal to the greater of $1.00 per Preferred Share ($.01 per 1/100
of a Preferred Share), plus all accrued and unpaid dividends and distributions
on the Preferred Shares, or an amount equal to 100 times the aggregate amount
to be distributed of Common Stock. Each Preferred Share has 100 votes, voting
together with the shares of Common Stock. In the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, the holder of a Preferred Share will be entitled to receive 100
times the amount received per share of Common Stock. The rights of the
Preferred Shares as to dividends, voting and liquidation preferences are
protected by anti-dilution provisions.
Instead of being exercisable for Preferred Shares, the Rights become
exercisable for other securities or property under the following
circumstances:
. After the tenth business day following the 15% Ownership Date, each initial
Right (other than those that have become void) will come to represent the
right to purchase, for the Exercise Price, shares of Common Stock with an
aggregate market value of twice the Exercise Price.
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. After the 15% Ownership Date, upon either a merger in which the Company
is not the surviving corporation or a sale of at least 50% of the
Company's assets or earning power, each Right (other than those that
have become void) will come to represent the right to purchase, for the
Exercise Price, common shares of the surviving corporation or purchaser,
with an aggregate market value of twice the Exercise Price.
. At any time after the first public announcement that any person has
become a 15% Stockholder and prior to the first date thereafter upon
which a 15% Stockholder beneficially owns 50% or more of the outstanding
shares of Common Stock, a majority but not less than three of the
members of the Board of Directors that are not affiliated with the 15%
Stockholder (the "Independent Directors") may at their option, direct
the Company to exchange all, but not less than all, of the then
outstanding Rights (which do not include Rights that have become void)
for shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, whereupon the right to exercise Rights terminates and
the only right of the holders of Rights thereafter will be to receive a
number of shares of Common Stock equal to the exchange ratio.
. Prior to the Distribution Date, a majority but not less than three of
the Independent Directors may authorize the substitution of cash, other
securities or other property for all or any portion of the Preferred
Shares otherwise issuable upon exercise of the Rights. The reasons for
this are to give the Independent Directors flexibility in the event
that, at the time the Rights become exercisable, the Company does not
have an adequate reserve of Preferred Shares to permit the exercise in
full of the Rights. The situation might also arise where it is unlikely
that many Rightholders will exercise the Rights for Preferred Shares,
for example, if the Exercise Price exceeds the fair market value of the
stock issuable upon exercise, but a number of holders nonetheless elect
to exercise. The ability to substitute other securities, cash or
property will enable the Company to avoid the costs and administrative
inconvenience attendant to trading only a handful of Preferred Shares.
In connection with the occurrence of an event that would render the Rights
exercisable to purchase shares of Common Stock or stock of the surviving
corporation or purchaser in connection with a business combination or sale of
assets or earning power, any Rights that are or were beneficially owned by a
15% Stockholder become null and void.
The Rights may be redeemed at $.01 per Right (the "Redemption Price") at any
time prior to the Distribution Date by a majority, but not less than three,
Independent Directors. The Independent Directors may redeem the Rights in
whole, but not in part, and may elect to pay the Redemption Price in cash,
securities or other property.
The Rights Agreement may be amended by a majority, but not less than three,
of the Independent Directors, although, after the lapse of 10 business days
after the 15% Ownership Date, the Independent Directors may only amend the
Rights Agreement if such amendment is not adverse to the Rightholders (other
than Rightholders whose Rights have become void).
The Exercise Price payable and the number of Preferred Shares or other
securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution. With certain exceptions, no
adjustment in the Exercise Price will be required until cumulative adjustments
require an adjustment of at last 1% in such Exercise Price. No fractional
Preferred Shares will be issued (other than fractions which are integral
multiples of 1/100th of a Preferred Share, which may, at the election of the
Company, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based upon the market price of the Preferred
Shares on the last trading day prior to the date of exercise.
The Board of Directors determined that is in the best interests of the
Company and its stockholders to adopt the Rights Agreement and distribute the
Rights in order to protect the stockholders of the Company against coercive,
unfair or inadequate tender offers or other abusive take-over tactics. See
"Certain Provisions in the Charter and Bylaws" below. The Rights Agreement is
designed to encourage any person who desires to take
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control of and/or acquire the Company to enter into negotiations with the
Company's Board of Directors. Exercise of the Rights will substantially reduce
the ownership interest of certain persons attempting to acquire control of the
Company on terms not approved by the Board of Directors.
Neither the ownership nor the further acquisition of Common Stock by the
Company, any wholly owned subsidiary of the Company, any employee benefit plan
of the Company or a subsidiary of the Company, any person holding shares of
Common Stock pursuant to any such employee benefit plan, Arthur E. Svendsen or
any trust, trustee or beneficiary of a trust of which Mr. Svendsen is the
settlor will cause the Rights to become exercisable or non-redeemable or
trigger the other features of the Rights. Mr. Svendsen currently holds
approximately 9.4% of the outstanding Common Stock and is the Chairman of the
Board and Chief Executive Officer of the Company. He holds the shares through
a living trust. He has exercised some measure of control over the Company
since its inception (including the Company's predecessors) and is expected to
continue to do so in the foreseeable future.
The provisions in the Rights Agreement requiring the approval of a majority
but not less than three of the Independent Directors to approve certain
actions, in lieu of requiring approval of the entire Board, are intended to
prevent an Acquiring Person from undermining the protection provided by the
Rights by obtaining control of the Board of Directors and thereby obtaining
Board approval of such actions.
This summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement which is on
file with the Commission (see "Available Information") and is available upon
request from the Company.
Certain Provisions in the Charter and Bylaws
Stockholder Meeting. The Charter provides that any action required to be
taken or that may be taken at any meeting of the Company's stockholders may
only be taken at a meeting of stockholders and not by written consent. In
addition, only the Board of Directors or a designated committee of the Board
of Directors may call a special meeting of stockholders. If a stockholder
wishes to propose an agenda item for consideration at a stockholder meeting he
or she must give written notice to the Company not less than 90 days prior to
the meeting or, if later, the seventh day following the first public
announcement of such meeting, or such other date as necessary to comply with
applicable federal proxy solicitation rules or other regulations.
Classified Board of Directors. The Charter provides for three classes of
directors and directors are elected by classes to three-year terms. The
Company's Board of Directors believes that this provision promotes stability
and continuity of the Board of Directors. Classification of the Board may also
have the effect of decreasing the number of directors that could otherwise be
elected at each annual meeting of stockholders by a person who obtains a
controlling interest in the Common Stock.
Business Combination Transactions. The Charter also requires, for the
approval of any merger, consolidation or other business reorganization or
combination of the Company with any other person or entity or any of its
affiliates that individually or in the aggregate are directly or indirectly
the beneficial owners of 5% or more of the outstanding shares of Common Stock
(the "Interested Stockholder"), the affirmative vote of the holders of not
less than two-thirds (2/3) of the total voting shares of the Company other
than the shares held by the Interested Stockholder. This provision of the
Charter does not apply to a reorganization approved by the directors prior to
acquisition of the beneficial ownership of 5% of the outstanding shares by the
other corporation or its affiliates, nor does it apply to a reorganization
with a subsidiary of the Company.
When evaluating any proposed transaction that would result in a person or
entity becoming an Interested Stockholder or an Interested Stockholder
increasing his or her ownership of shares of Company stock, or any business
combination requiring the affirmative vote of two-thirds (2/3) of the total
voting shares of exclusive of those held by an Interested Stockholder, the
Board of Directors must consider all relevant factors including the
independence and integrity of the Company's operations, the social, economic
and environmental effect of the
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proposed transaction on stockholders, employees, customers, suppliers and
other constituents as well as on the communities in which the Company and its
subsidiaries operate.
Amendment of Charter and Bylaws. The Bylaws of the Company (the "Bylaws")
may not be amended without the approval of the holders of at least 80% of the
outstanding voting shares of the Company or the approval of a majority of the
directors (or a majority of the independent directors if an Interested
Stockholder exists). In addition, the provisions contained in the Charter with
respect to the prohibition against stockholder action without meetings, the
classification of the Board of Directors, the increased stockholder vote
required for certain business combinations, consideration of constituencies,
alteration of the Bylaws, and indemnification may not be amended without the
approval of the holders of at least 80% of the outstanding voting shares of
the Company or the approval of a majority of the directors (or a majority of
the independent directors if an Interested Stockholder exists).
DESCRIPTION OF WARRANTS
The Company may issue warrants to purchase Debt Securities (the "Debt
Warrants"), Preferred Stock (the "Preferred Stock Warrants"), Common Stock
(the "Common Stock Warrants") or other securities issued by the Company or
another issuer (the "Other Warrants," collectively with the Common Stock
Warrants, the Debt Warrants and the Preferred Stock Warrants, the "Warrants").
Warrants may be issued independently or together with any Securities and may
be attached to or separate from such Securities. The Warrants are to be issued
under warrant agreements (each a "Warrant Agreement") to be entered into
between the Company and a bank or trust company, as warrant agent (the
"Warrant Agent"), all as shall be set forth in the Prospectus Supplement
relating to the Warrants being offered pursuant thereto.
Debt Warrants
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the debt warrant certificates representing such Debt Warrants, including
the following: (i) the title of such Debt Warrants; (ii) the aggregate number
of such Debt Warrants; (iii) the price or prices at which such Debt Warrants
will be issued; (iv) the designation, aggregate principal amount and terms of
the Debt Securities purchasable upon exercise of such Debt Warrants, and the
procedures and conditions relating to the exercise of such Debt Warrants; (v)
the date, if any, on and after which such Debt Warrants and the related Debt
Securities will be separately transferable; (vi) the principal amount of Debt
Securities purchasable upon exercise of each Debt Warrant, and the price at
which such principal amount of Debt Securities may be purchased upon such
exercise; (vii) the date on which the right to exercise such Debt Warrants
shall commence, and the date on which such right shall expire; (viii) the
maximum or minimum number of such Debt Warrants which may be exercised at any
time; (ix) a discussion of material federal income tax considerations, if any;
and (x) any other terms of such Debt Warrants and terms, procedures and
limitations relating to the exercise of such Debt Warrants.
Debt Warrant certificates will be exchangeable for new Debt Warrant
certificates of different denominations, and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated
in the Prospectus Supplement. Prior to the exercise of their Debt Warrants,
holders of Debt Warrants will not have any of the rights of holders of the
securities purchasable upon such exercise and will not be entitled to payments
of principal of (or premium, if any) or interest, if any, on the securities
purchasable upon such exercise.
Preferred Stock Warrants, Common Stock Warrants and Other Warrants
The applicable Prospectus Supplement will describe the following terms of
Preferred Stock Warrants, Common Stock Warrants, and Other Warrants in respect
of which this Prospectus is being delivered: (i) the title of such Warrants;
(ii) the securities for which such Warrants are exercisable; (iii) the price
or prices at which
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such Warrants will be issued; (iv) if applicable, the number of such Warrants
issued with each share of Preferred Stock, Common Stock or other securities of
the Company or another issuer; (v) any provisions for adjustment of the number
or amount of shares of Preferred Stock, Common Stock or other securities of
the Company or another issuer receivable upon exercise of such Warrants or the
exercise price of such Warrants; (vi) if applicable, the date on and after
which such Warrants and the related Preferred Stock, Common Stock or other
securities of the Company or another issuer will be separately transferable;
(vii) if applicable, a discussion of material federal income tax
considerations; (viii) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants; (ix) the date on which the right to exercise such Warrants shall
commence, and the date on which such right shall expire; and (x) the maximum
or minimum number of such Warrants which may be exercised at any time.
Exercise of Warrants
Each Warrant will entitle the holder of Warrants to purchase for cash such
principal amount of Debt Securities, shares of Preferred Stock or Common
Stock, or amounts of other securities at such exercise price as shall in each
case be set forth in, or be determinable as set forth in, the Prospectus
Supplement relating to the Warrants offered thereby. Warrants may be exercised
at any time up to the close of business on the expiration date set forth in
the Prospectus Supplement relating to the Warrants offered thereby. After the
close of business on the expiration date, unexercised Warrants will become
void.
Warrants may be exercised as set forth in the Prospectus Supplement relating
to the Warrants offered thereby. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the Warrant Agent or any other office indicated in the Prospectus
Supplement, the Company will, as soon as practicable, forward the Debt
Securities, shares of Preferred Stock or Common Stock or other securities
purchasable upon such exercise. If less than all of the Warrants represented
by such warrant certificate are exercised, a new warrant certificate will be
issued for the remaining Warrants.
PLAN OF DISTRIBUTION
The Securities may be sold (i) through agents, (ii) through underwriters,
(iii) through dealers, (iv) directly to purchasers (through a specific bidding
or auction process or otherwise); or (v) through a combination of any such
methods of sale. The distribution of Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices
relating to such prevailing market prices or at negotiated prices.
Offers to purchase the Securities may be solicited by agents designated by
the Company from time to time. Any such agent involved in the offer or sale of
the Securities will be named, and any commissions payable by the Company to
such agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a
best efforts basis for the period of its appointment. Any such agent may be
deemed to be an underwriter, as that term is defined in the Securities Act, of
the Securities so offered and sold.
If an underwriter or underwriters are utilized in the sale of Securities,
the Company will execute an underwriting agreement with such underwriter or
underwriters at the time an agreement for such sale is reached. The names of
the specific managing underwriter or underwriters, as well as any other
underwriters, and the terms of the transactions, including compensation of the
underwriters and dealers, which may be in the form of discounts, concessions
or commissions, if any, will be set forth in the Prospectus Supplement, which
will be used by the underwriters to make resales of the Securities.
If a dealer is utilized in the sale of the Securities, the Company or an
underwriter will sell such Securities to the dealer, as principal. The dealer
may then resell such Securities to the public at varying prices to be
determined by such dealer at the time of resale. The name of the dealer and
the terms of the transactions will be set forth in the Prospectus Supplement
relating thereto.
12
<PAGE>
Offers to purchase the Securities may be solicited directly by the Company
and sales thereof may be made by the Company directly to institutional
investors or others. The terms of any such sales, including the terms of any
bidding or auction process, if utilized, will be described in the Prospectus
Supplement relating thereto.
Agents, underwriters and dealers may be entitled under agreements which may
be entered into with the Company to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act, or to
contribution by the Company to payments they may be required to make in
respect thereof. The terms and conditions of such indemnification or
contribution will be described in the applicable Prospectus Supplement.
Certain of the agents, underwriters or dealers, or their affiliates may be
customers of, engage in transactions with or perform services for the Company
in the ordinary course of business.
EXPERTS
The financial statements incorporated by reference in this registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
LEGAL MATTERS
Gibson, Dunn & Crutcher LLP has rendered an opinion (filed as an exhibit to
the Registration Statement) with respect to the validity of the Securities
being offered hereby. If certain legal matters in connection with offerings
made by this Prospectus are passed on by counsel for the underwriters of an
offering of those Securities, that counsel will be named in the Prospectus
Supplement relating to that offering. 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.
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, 1999
[LOGO OF STANDARD PACIFIC CORP. APPEARS HERE]
Standard Pacific Corp.
$100,000,000
% Senior Subordinated Notes due 2009
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PROSPECTUS SUPPLEMENT
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Donaldson, Lufkin & Jenrette
Salomon Smith Barney
Warburg Dillon Read LLC
Jefferies & Company, Inc.
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No person has been authorized to give any information or to make any
representations other than those contained in this prospectus supplement or
the accompanying prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized. This
prospectus supplement and the prospectus do not constitute an offer to sell or
the solicitation of an offer to buy any securities other than the securities
described in this prospectus supplement or an offer to sell or the
solicitation of an offer to buy such securities in any circumstances in which
such offer or solicitation is unlawful. Neither the delivery of this
prospectus supplement or the accompanying prospectus nor any sale made
hereunder or thereunder shall, under any circumstances, create an implication
that there has been no change in our affairs since the date hereof or that the
information contained in this prospectus supplement or the accompanying
prospectus is correct as of any time subsequent to this date.
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