<PAGE>
As filed with the Securities and Exchange Commission on July 26, 2000
Registration No. 333-37014
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 3
To
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
STANDARD PACIFIC CORP.
(Exact name of registrant as specified in its charter)
---------------
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<S> <C> <C>
Delaware 1531 33-0475989
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
15326 Alton Parkway
Irvine, California 92618
(949) 789-1600
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
---------------
CLAY A. HALVORSEN, ESQ.
Vice President, General Counsel and Secretary
Standard Pacific Corp.
15326 Alton Parkway
Irvine, California 92618
(949) 789-1600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
LEONARD J. MCGILL, ESQ. BRIAN D. FITZGERALD, ESQ.
Gibson, Dunn & Crutcher LLP Clanahan, Tanner, Downing and Knowlton, PC
4 Park Plaza 730 Seventeenth St., Suite 500
Irvine, California 92614 Denver, Colorado 80202
(949) 451-3800 (720) 359-9500
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement and the
satisfaction or waiver of all other conditions to the merger described in the
proxy statement/prospectus.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
THE WRITER CORPORATION
----------------
Notice of Special Meeting of Shareholders
----------------
To be held on August 25, 2000
MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT
To all Writer shareholders:
Notice is hereby given that a Special Meeting of Shareholders of The Writer
Corporation will be held at the offices of The Writer Corporation, 6061 S.
Willow Drive, #232, Englewood, CO, 80111, on August 25, 2000 at 9:00 a.m. local
time for the following purposes:
1. To consider and vote upon the proposal to approve and adopt the Agreement
and Plan of Merger, dated as of April 14, 2000, by and between Writer, Standard
Pacific Corp., a Delaware corporation, and TWC Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Standard Pacific, that provides,
among other things, for the merger of Writer into TWC Acquisition so that
Writer effectively becomes a wholly owned subsidiary of Standard Pacific, and
2. To transact any other business that properly comes before the meeting or
any adjournment or postponement of the meeting.
If the merger agreement is not adopted, the annual meeting of The Writer
Corporation will be scheduled after this special meeting of shareholders.
The close of business on July 25, 2000 has been fixed as the record date for
determining those shareholders entitled to vote at the special meeting and any
adjournments or postponements of the special meeting. Therefore, only
shareholders of record on July 25, 2000 are entitled to notice of, and to vote
at, the special meeting and any adjournments or postponements of the special
meeting.
By order of the board of directors
of The Writer Corporation,
George S. Writer, Jr.
Chairman of the Board
and Chief Executive Officer
July 27, 2000
Regardless of the number of shares you own or whether or not you plan to
attend the meeting, it is important that your shares be represented and voted.
The merger cannot be completed unless the holders of two-thirds of the Writer
common stock entitled to vote adopt the merger agreement. Please complete,
sign, date and promptly return the accompanying blue proxy card in the enclosed
self-addressed, stamped envelope. Returning the proxy card does NOT deprive you
of your right to attend the meeting and to vote your shares in person. YOUR
VOTE IS VERY IMPORTANT. If you fail to return the proxy card or vote in person
at the special meeting, it will have the same effect as a vote against the
merger agreement.
Your board of directors unanimously recommends that you vote FOR adoption of
the merger agreement.
Please DO NOT return your Writer common stock certificates with your
enclosed proxy.
<PAGE>
[LOGO OF WRITER CORPORATION APPEARS HERE]
[LOGO OF STANDARD PACIFIC APPEARS HERE]
<TABLE>
<S> <C>
THE WRITER CORPORATION STANDARD PACIFIC CORP.
PROXY STATEMENT PROSPECTUS
</TABLE>
Standard Pacific has agreed to acquire Writer through a merger. If the
merger is approved and completed, you will receive, at your election and for
each share of Writer common stock held by you, a combination of cash and/or
Standard Pacific common stock with an aggregate value of $3.35, subject to
adjustment as set forth below. For purposes of determining the exchange ratio,
or fractional share of Standard Pacific common stock you will receive for each
share of Writer common stock if you elect to receive shares of Standard Pacific
common stock in the merger, Standard Pacific's common stock will generally be
valued based on its average closing sale price on the New York Stock Exchange
over a twenty trading-day period ending three trading days prior to the closing
date of the merger. However, if the twenty-day average closing sale price of
Standard Pacific common stock is less than $11.00 per share, the price used for
calculating the exchange ratio will be $11.00, and if the twenty-day average
closing of Standard Pacific common stock price is more than $13.50 per share,
the price used for calculating the exchange ratio will be $13.50. Your election
may be adjusted and you may not receive the type of consideration that you
elect because the merger agreement requires that no more than 60% of the
outstanding shares of Writer common stock may be converted into shares of
Standard Pacific common stock and no more than 50% of the aggregate merger
consideration, valued at the closing date of the merger, may be paid in cash.
If the merger is completed, TWC Acquisition, which is a wholly owned subsidiary
of Standard Pacific formed for the purpose of completing the merger, will
acquire approximately $31.0 million of indebtedness of Writer. Any party may
terminate the merger agreement if the merger has not been completed, through no
fault of the terminating party, by August 31, 2000. Writer, Standard Pacific
and TWC Acquisition can agree to extend this date.
The merger cannot be completed unless the holders of two-thirds of the
outstanding shares of Writer approve the merger agreement. This proxy
statement/prospectus is being furnished to Writer shareholders in connection
with the solicitation by Writer of proxies for use at the special meeting of
shareholders to be held at The Writer Corporation, 6061 S. Willow Drive, #232,
Englewood, CO 80111, at 9:00 a.m., local time, on August 25, 2000. At this
meeting Writer shareholders will vote on the proposed merger. This proxy
statement/prospectus also constitutes the prospectus of Standard Pacific for up
to 1,487,012 shares of Standard Pacific common stock and associated rights to
be issued to Writer shareholders in the merger. This proxy statement/prospectus
provides you with detailed information concerning Standard Pacific and the
merger. Please give all of the information contained in this proxy
statement/prospectus your careful attention. In particular, you should
carefully consider the discussion in the section entitled "RISK FACTORS"
beginning on page 14 of this proxy statement/prospectus.
Share Information:
<TABLE>
<C> <S>
Standard Pacific (trading symbol "SPF"): The closing price on the New York
Stock Exchange the last trading
day before the transaction was
announced was $9.00 per share.
The closing price on the New York
Stock Exchange on [July 24],
2000, was [$11.38] per share.
Writer (trading symbol "WRTC.OB"): The closing price on the Over-
The-Counter Bulletin Board the
last trading day before the
transaction was announced, was
$2.25 per share. The closing
price on the Over-The-Counter
Bulletin Board on [July 24],
2000, was [$3.19] per share.
</TABLE>
Shareholders of Writer will be able to obtain an estimate of the exchange
ratio prior to voting on the merger beginning August 23, 2000 by calling (800)
322-2885. Because the actual exchange ratio will not be determined until after
the date of this proxy statement/prospectus and the vote of the shareholders,
the exchange ratio provided will assume that the merger is completed
immediately after the shareholders' special meeting, and if this is not the
case, may change. Even after the exchange ratio is determined you will not know
the value of the Standard Pacific common stock Writer shareholders electing
stock will receive because the price of the Standard Pacific shares at
completion of the merger is likely to be different than the twenty-day average
price used to calculate the exchange ratio. If the share price of Standard
Pacific at the time of completion of the merger is less than the price used to
calculate the exchange ratio, this will decrease the value that Writer
shareholders electing stock will receive.
Neither the Securities and Exchange Commission nor any state securities
commission has approved the securities to be issued in this transaction or
determined that this proxy statement/prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated July 27, 2000, and is first being
mailed to Writer shareholders on or about July 27, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 1
SUMMARY................................................................... 3
SELECTED FINANCIAL DATA................................................... 10
COMPARATIVE PER SHARE DATA................................................ 12
COMPARATIVE MARKET PRICES AND DIVIDENDS................................... 13
RISK FACTORS.............................................................. 14
Risk Factors Relating to the Merger..................................... 14
Risk Factors Relating to Standard Pacific............................... 16
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION............... 20
WRITER SPECIAL MEETING.................................................... 21
General................................................................. 21
Purpose of the Special Meeting.......................................... 21
Recommendation of Writer's Board of Directors........................... 21
Required Vote for Adoption of the Merger Agreement...................... 21
Record Date............................................................. 21
Quorum.................................................................. 22
Proxies................................................................. 22
Revocation of Proxies................................................... 22
Solicitation of Proxies................................................. 23
Appraisal Rights........................................................ 23
Accountants............................................................. 23
THE MERGER................................................................ 24
General................................................................. 24
Background of the Merger................................................ 24
Certain Projected Information (Unaudited)............................... 29
Joint Reasons for the Merger............................................ 30
Recommendation of the Writer Board of Directors and Writer's Reasons for
the Merger............................................................. 31
The Engagement of Writer's Financial Advisor............................ 34
Opinion of Writer's Financial Advisor................................... 34
Merger Consideration.................................................... 39
The Exchange Ratio...................................................... 44
Election Procedure...................................................... 46
Material Federal Income Tax Consequences of the Merger.................. 47
Treatment of Existing Writer Stock Options.............................. 51
The Writer Management Group............................................. 51
Interests of Writer's Management in the Merger and Potential Conflicts
of Interests........................................................... 52
Regulatory Approvals Required for the Merger............................ 55
Delisting and Deregistering of Writer Common Stock; Listing of Standard
Pacific Common Stock Issued in Connection With the Merger.............. 55
Receipt of Merger Consideration; Procedures for Exchange of
Certificates........................................................... 55
Transfers of Shares..................................................... 56
Fractional Shares....................................................... 56
Accounting Treatment.................................................... 56
Restrictions on Resales by Affiliates................................... 57
THE MERGER AGREEMENT...................................................... 58
Structure of the Merger................................................. 58
Closing; Effective Time................................................. 58
Surviving Corporation................................................... 58
Election................................................................ 58
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Conversion of Shares.................................................... 59
Stock Options........................................................... 60
Representations and Warranties.......................................... 60
Covenants............................................................... 61
Conduct of Business of Writer Prior to the Merger....................... 62
No Solicitation of Transactions......................................... 64
Conditions to Completing the Merger..................................... 65
Termination of the Merger Agreement..................................... 67
Extension, Waiver and Amendment of the Merger Agreement................. 68
Employee Benefits and Plans............................................. 69
Management of TWC Acquisition After the Merger.......................... 69
INFORMATION ABOUT THE COMPANIES........................................... 70
Standard Pacific........................................................ 70
Writer.................................................................. 75
TWC Acquisition......................................................... 76
DESCRIPTION OF CAPITAL STOCK.............................................. 77
Standard Pacific Capital Stock.......................................... 77
Standard Pacific Rights Plan............................................ 78
Anti-takeover Effects of Delaware Law and Relevant Provisions of
Standard Pacific's Certificate of Incorporation........................ 81
COMPARISON OF STOCKHOLDERS' RIGHTS........................................ 83
General................................................................. 83
Voting Groups........................................................... 83
Cumulative Voting....................................................... 83
Amendments to the Writer Articles of Incorporation and the Standard
Pacific Certificate of Incorporation................................... 84
Amendments to Bylaws.................................................... 85
Vote Required for Merger and Other Transactions......................... 85
Directors............................................................... 85
Classification of Board of Directors.................................... 85
Removal of Directors.................................................... 86
Newly Created Directorships and Vacancies............................... 86
Limitation of Director's Liability...................................... 87
Indemnification of Directors and Officers............................... 87
Special Meeting of Shareholders; Action by Consent...................... 87
Business Combinations Involving a Change of Control..................... 88
Dissenters' Rights...................................................... 88
Dividends............................................................... 89
Stock Repurchases....................................................... 90
Corporate Records; Shareholder Inspection............................... 90
Preemptive Rights....................................................... 91
Rights Plan............................................................. 91
DISSENTERS' APPRAISAL RIGHTS.............................................. 92
ADDITIONAL INFORMATION.................................................... 95
Legal Matters........................................................... 95
Independent Public Accountants.......................................... 95
Stockholder Proposals................................................... 95
Other Matters........................................................... 95
REFERENCE TO ADDITIONAL INFORMATION....................................... 96
WHERE YOU CAN FIND MORE INFORMATION....................................... 97
</TABLE>
ii
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<TABLE>
<CAPTION>
Page
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<S> <C>
APPENDIX A--THE MERGER AGREEMENT........................................ A-1
APPENDIX B--WRITER'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999...................................................... B-1
APPENDIX C--WRITER'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 2000......................................................... C-1
APPENDIX D--SECTIONS 7-113-101 THROUGH 7-113-302 OF THE COLORADO
BUSINESS CORPORATION ACT............................................... D-1
APPENDIX E--OPINION OF THE SEIDLER COMPANIES............................ E-1
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. What is the proposed transaction?
A. Standard Pacific will acquire Writer through a merger. In the merger,
Writer will merge into TWC Acquisition, a wholly owned subsidiary of
Standard Pacific.
Q. What will I receive in the merger?
A. The merger agreement provides that upon completion of the merger you will
receive, at your election, a combination of cash and/or Standard Pacific
common stock with an aggregate value of $3.35. However, you may not receive
the type of consideration that you elect because the merger agreement
requires that no more than 60% of the outstanding shares of Writer common
stock may be converted into shares of Standard Pacific common stock, and no
more than 50% of the aggregate merger consideration may be paid in cash.
You will not know at the time of your vote or election exactly what form of
consideration you will receive in exchange for your shares.
Q. How will I know the actual ratio of Standard Pacific shares I will receive
for my Writer shares?
A. We will issue a press release two trading days before the special meeting
that will provide an estimate of the adjusted twenty-day average price for
Standard Pacific common stock and the fraction of a Standard Pacific share
that you will receive for each Writer share you own. These numbers will
assume that the merger is completed immediately after the shareholders'
meeting. You can also call (800) 322-2885 after August 23, 2000, to obtain
this information.
Q. When do you expect the merger to be completed?
A. We expect to complete the merger promptly after receiving the approval of
Writer shareholders at the special meeting.
Q. What do I need to do now?
A. After carefully reading and considering the information contained in this
document, please fill out and sign the enclosed blue proxy card, and then
mail your signed proxy card in the enclosed postage-paid envelope as soon
as possible so that your shares of Writer common stock may be voted at the
special meeting. Your proxy card must be received prior to or at the
special meeting. Your proxy card will instruct the persons named on the
card to vote your shares of Writer common stock at the special meeting as
you direct the shares to be voted on the card. If you sign and send in your
proxy card and do not indicate how you want to vote, your proxy will be
voted FOR adoption of the merger agreement. If you do not vote or you
abstain, the effect will be a vote against the merger. Your vote is very
important.
Q. May I change my vote after I have mailed my signed proxy card?
A. You may change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send
a written notice stating that you want to revoke your proxy. Second, you
can complete and submit a new proxy card. If you choose either of these two
methods, you must submit your notice of revocation or your new proxy card
to The Writer Corporation, 6061 S. Willow Drive, #232, Englewood, Colorado
80111, Attn: Secretary. Third, you can attend the Writer special meeting
and vote in person. Simply attending the meeting, however, will not revoke
your proxy; you must vote at the meeting. If you have instructed a broker
to vote your shares of Writer common stock, you must follow directions
received from your broker to change your vote.
Q. If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A. Your broker will vote your shares of Writer common stock only if you
provide instructions on how to vote. You should follow the directions
provided by your broker to vote your shares of Writer common stock. If you
do not instruct your broker on how to vote, your
1
<PAGE>
shares will not be voted and the effect will be a vote against the merger.
You cannot vote shares of Writer common stock held in "street name" by
returning a proxy card to us.
Q. How do I make an election?
A. We will send to you within five days of mailing this proxy
statement/prospectus a form of election and letter of transmittal in a
separate mailing. If you desire to elect the form of merger consideration
you will receive in the merger for your shares of Writer common stock, you
will need to complete the election form and send it to First Chicago Trust
Company of New York at one of the addresses provided on the election form.
The election form must be returned by August 24, 2000. If you do not return
a form of election you will be deemed to make a non-election and you will
receive shares of Standard Pacific common stock or cash, or a combination of
the two, as determined by the terms of the merger agreement. For detailed
information on the procedure for electing to receive cash or Standard
Pacific shares in the merger, see "THE MERGER--Election Procedure" beginning
on page 45. To make a valid election, you must send in your certificates
with your election form. For those shareholders that do not send in an
election form, after the merger is completed you will receive written
instructions for exchanging your stock certificates.
Q. What should I do if my share certificate is lost, stolen or destroyed?
A. If you make an election with respect to shares represented by a lost, stolen
or destroyed certificate, you should notify Writer's transfer agent,
Computershare Limited at (312) 360-5492. If you do not make an election with
respect to shares represented by a lost, stolen or destroyed certificate and
if you want to receive the merger consideration after completion of the
merger, you must notify the exchange agent, First Chicago, and follow the
procedures outlined in the letter of transmittal.
Q. Who can help answer my questions?
A. If you have more questions about the merger, you should contact the
information agent:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
2
<PAGE>
SUMMARY
This brief summary highlights selected information from this proxy
statement/prospectus. It does not contain all of the information that is
important to you. We urge you to carefully read this entire proxy
statement/prospectus and the other documents to which this proxy
statement/prospectus refers to fully understand our proposed merger. See "WHERE
YOU CAN FIND MORE INFORMATION" on page 97.
The Companies
Standard Pacific Corp. (page 70)
15326 Alton Parkway
Irvine, CA 92618
(949) 789-1600
Standard Pacific is a builder of single-family homes for use as primary
residences. It has operations throughout the major metropolitan markets in
California, Texas and Arizona. Standard Pacific also offers mortgage loans to
its homebuyers through a mortgage banking subsidiary and a joint venture with a
leading financial institution.
TWC Acquisition Corp. (page 76)
TWC Acquisition is a newly formed company organized for purposes of
completing the proposed transaction. It has engaged in no business activities
and it has no assets or liabilities of any kind, other than those incident to
its formation and those incurred in connection with the merger. Immediately
prior to the merger, TWC Acquisition will be owned by Standard Pacific.
The Writer Corporation (page 75)
6061 S. Willow Drive, #232
Englewood, CO 80111
(303) 779-4100
Writer is a developer and builder of planned residential communities in the
Denver, Colorado area. It recently has expanded into the Northern Colorado
area. Writer's planned residential communities integrate single family homes
and townhomes with extensive greenbelts, bicycle and walking paths, winding
streets and family recreation facilities.
What Writer Shareholders Will Receive (page 39)
If the merger is completed you will be entitled to receive, for each of your
shares of Writer common stock outstanding at the time of the merger, at your
election, a combination of cash and/or Standard Pacific common stock with an
aggregate value of $3.35 per share of Writer common stock. Your election is
subject to adjustment under the circumstances described below. To determine the
exchange ratio, or fractional share of Standard Pacific common stock you will
receive if you elect to receive Standard Pacific common stock, Standard
Pacific's common stock will generally be valued based on its average closing
sale price on the New York Stock Exchange over a twenty trading-day period
ending three trading days prior to the closing date of the merger. However, if
the twenty-day average closing price of Standard Pacific common stock is less
than $11.00 per share, the average price used for calculating the exchange
ratio will be $11.00, and if the twenty-day average closing price is more than
$13.50 per share, the average price used will be $13.50. This average price,
including the $11.00 minimum and $13.50 maximum values, is referred to
throughout this proxy statement/ prospectus as the "adjusted twenty-day average
price for Standard Pacific common stock."
Under the following circumstances, your election may be adjusted and you may
not receive the type of consideration that you elect. An adjustment may be
necessary because the merger agreement requires that no more than 60% of the
outstanding shares of Writer common stock may be converted into shares of
Standard Pacific common stock, and no more than 50% of the aggregate merger
consideration, valued as of the closing date of the merger, may be paid in
cash. If Writer shareholders elect to receive too many shares of Standard
Pacific common stock, all shareholders electing Standard Pacific common stock
will have the number of shares of Standard Pacific common stock they receive
reduced pro rata and an amount of cash will be allocated pro rata among the
electing shareholders to ensure that the aggregate shares of Writer common
stock that will be converted into shares of Standard Pacific common stock does
not exceed 60% of the outstanding shares.
If Writer shareholders elect to receive cash in excess of 50% of the
aggregate merger consideration, valued as of the closing date of the merger,
each
3
<PAGE>
member of the Writer management group electing to receive cash will be
allocated shares of Standard Pacific common stock pro rata to ensure that the
cash consideration will be as close as possible to, without being more than,
50% of the total merger consideration. When we refer throughout this proxy
statement/prospectus to the Writer management group we mean Writer's officers,
directors and 15% shareholders. After that adjustment, if there is still an
over-election of cash, all Writer shareholders other than members of the Writer
management group who elect to receive cash for their Writer shares also will be
proportionately adjusted.
The table below shows a range of average closing prices of Standard Pacific
common stock, along with the corresponding exchange ratios and the
corresponding value of shares of Standard Pacific common stock you may receive
for each share of Writer common stock you own. The table assumes that the
entire merger consideration with respect to each share of Writer common stock
is paid in Standard Pacific common stock, and that the Standard Pacific share
price at the time of the merger equals the adjusted twenty-day average price
for Standard Pacific common stock, which is unlikely to be the case. If the
price for Standard Pacific common stock at the time of the merger is less than
the adjusted twenty-day average price, then Writer shareholders electing to
receive stock will receive Standard Pacific common stock with a value less than
that set forth in the table below:
<TABLE>
<CAPTION>
Average Value of
closing Standard Pacific
price common stock
of Standard received per
Pacific Exchange share of Writer
common stock Ratio common stock
------------ -------- ----------------
<S> <C> <C>
$8.00(1)(2) .3045 $2.44
8.25(2) .3045 2.51
9.00(2) .3045 2.74
10.00(2) .3045 3.05
11.00 .3045 3.35
11.50 .2913 3.35
11.75 .2851 3.35
12.00 .2792 3.35
12.50 .2680 3.35
13.00 .2577 3.35
13.50 .2481 3.35
14.00(3) .2481 3.47
15.00(3) .2481 3.72
15.75(3) .2481 3.91
16.00(3)(4) .2481 3.97
</TABLE>
(1) If the twenty-day average price for Standard Pacific common stock is less
than $8.25, Writer does not have to complete the merger.
(2) If the twenty-day average price for Standard Pacific common stock is less
than $11.00, the price used for calculating the exchange ratio will be $11.00.
(3) If the twenty-day average price for Standard Pacific common stock is more
than $13.50, the price used for calculating the exchange ratio shall be $13.50.
(4) If the twenty-day average price for Standard Pacific common stock is
greater than $15.75, Standard Pacific does not have to complete the merger.
For example, if a shareholder electing to receive Standard Pacific common
stock owns 100 shares of Writer common stock, the shareholder would receive the
following merger consideration (assuming that the adjustment provisions do not
require that any of the merger consideration for such shares be paid in cash,
other than for fractional Standard Pacific shares):
. if the adjusted twenty-day average price for Standard Pacific common
stock is $11.00 per share, then the exchange ratio will be .3045 and the
Writer shareholder will receive 30 shares of Standard Pacific common
stock, and cash equal to 0.45 times $11.00, or $4.95, because cash will
be paid instead of fractional shares; and
. if the twenty-day average price for Standard Pacific common stock is
[$11.38] per share, which was the closing price of Standard Pacific
common stock on the New York Stock Exchange on [July 24], 2000, the
latest practicable trading day before the printing of this proxy
statement/prospectus, then the adjusted twenty-day average price for
Standard Pacific common stock would be [$11.38] per share, the exchange
ratio would be [.2944], and the Writer shareholder would receive the
consideration set forth in the example above.
The values of shares of Standard Pacific common stock in the table above are
illustrative only and do not represent the actual value per share of Writer
common stock that you might realize on or after consummation of the merger.
4
<PAGE>
If the twenty-day average price for Standard Pacific common stock is less
than $8.25, the Writer board of directors will reevaluate the advisability of
the merger, and if they decide to proceed, the board of directors will amend
this proxy statement/prospectus and resubmit the merger agreement for approval
by the Writer shareholders.
The method for calculating the exchange ratio is explained in more detail in
"THE MERGER--The Exchange Ratio" beginning on page 44.
Structure of the Merger (page 58)
The transaction will occur as follows:
. Writer will merge with and into TWC Acquisition, a wholly owned
subsidiary of Standard Pacific.
. TWC Acquisition will be the surviving corporation and will change its
name to "The Writer Corporation."
. Each of your shares of Writer common stock will be canceled and
converted into the right to receive cash and/or a fractional share of
Standard Pacific common stock.
Following the merger, you will no longer have any interest in Writer, but if
you elect to become a stockholder of Standard Pacific, you will have an equity
stake in the parent company of Writer's operations. Immediately after the
merger, the former Writer shareholders will own approximately [3.7]% to [4.6]%
of the outstanding shares of Standard Pacific common stock assuming a twenty-
day average price for Standard Pacific common stock of [$11.38] per share,
which was the closing price of Standard Pacific common stock on the New York
Stock Exchange on [July 24,] 2000, the latest practicable trading day before
the printing of this proxy statement/prospectus, resulting in an adjusted
twenty-day average price for Standard Pacific common stock of [$11.38] per
share, and an exchange ratio of [.2944].
We have attached the merger agreement to this proxy statement/prospectus as
Appendix A. The merger agreement describes the terms of the merger. Please read
the merger agreement. It is the legal document that governs the merger and its
exact language prevails over the more general, abbreviated description in this
proxy statement/prospectus.
Reasons for the Merger (page 30)
Writer's board considered a number of factors in approving the merger
agreement and recommending it to you, including:
. the fact that the merger represents a 106.2% premium over $1.63, which
was the closing price of Writer common stock on November 2, 1999, the
last day on which Writer's common stock traded prior to Standard
Pacific's first written proposal to Writer, and a 48.9% premium over
$2.25 which was the closing price of Writer's common stock on January
28, 2000, the last trading day before the announcement of the merger, in
each case based on the merger consideration of $3.35 per Writer share;
. the opportunity for you to receive shares of Standard Pacific common
stock, which Writer's board believes will have greater liquidity than
shares of Writer common stock because it is traded on the New York Stock
Exchange rather than the Over-The-Counter Bulletin Board and because it
has a larger number of public stockholders; and
. the fact that the merger will provide a significant enhancement of the
strategic, marketing and financial position of Writer beyond that
achievable by Writer alone.
As a result, Writer's board recommends the merger to you as a shareholder.
Voting Agreement with the Writer Management Group (page 51)
Members of the Writer management group collectively own more than 50% of the
outstanding shares of Writer common stock. Members of the Writer management
group have entered into a voting agreement in which they have agreed to vote in
favor of the merger and, if they make cash elections, to subject their cash
elections to proration to allow the aggregate merger consideration to be paid
in cash to be as close as possible to, but not more than, 50% before any
adjustment would be made to the non-management shareholders' cash elections.
5
<PAGE>
The Writer Shareholders' Special Meeting (page 21)
The Writer shareholders' special meeting to adopt the merger agreement will
be held on August 25, 2000, 9:00 a.m., local time, at 6061 S. Willow Drive,
#232, Englewood, CO 80111.
Record Date (page 21)
You can vote at the special meeting if you owned shares of Writer common
stock at the close of business on July 25, 2000. You can cast one vote for each
share of Writer common stock that you owned at that time.
Required Vote (page 21)
To adopt the merger agreement, the holders of two-thirds of the outstanding
shares of Writer common stock that are entitled to vote must vote in favor of
the merger.
You may vote your shares in person by attending the meeting or by proxy. You
can revoke your proxy at any time before we take a vote at the meeting by
sending a written notice revoking the proxy or a later-dated proxy to The
Writer Corporation, 6061 S. Willow Drive, #232, Englewood, CO 80111, Attn:
Secretary, or by attending the meeting and voting in person.
Recommendation of Writer's Board to Writer Shareholders (page 21)
Writer's board of directors believes that the merger is advisable, and in
the best interests of Writer and its shareholders, and unanimously has approved
the merger. Writer's board recommends that you vote FOR adoption of the merger
agreement.
Opinion of Writer's Financial Advisor (page 34)
The Seidler Companies, Writer's financial advisor, delivered its oral
opinion, subsequently confirmed in a written opinion on May 12, 2000, to
Writer's board of directors that, as of the date of its opinion and subject to
the considerations described in its opinion, the consideration proposed to be
received by Writer's shareholders in connection with the merger is fair from a
financial point of view to Writer's shareholders. In providing the opinion The
Seidler Companies took into consideration the assumption by TWC Acquisition of
$27.7 million of Writer indebtedness. The estimate of the Writer indebtedness
to be assumed by TWC Acquisition has subsequently been updated by Writer to
$31.0 million as of May 31, 2000. The complete opinion of The Seidler Companies
is attached to this proxy statement/prospectus as Appendix E. We urge you to
read the opinion in its entirety.
Conditions to Completing the Merger (page 64)
The merger will not be completed unless a number of conditions are satisfied
or waived. Among other conditions, before the merger is completed:
. holders of two-thirds of the outstanding shares of Writer common stock
entitled to vote must approve the merger;
. Writer must have received any required consents from third parties
relating to the merger;
. the respective representations and warranties of Writer, Standard
Pacific and TWC Acquisition must be true and correct, including that no
material adverse change will have occurred with respect to any company;
. each company must have complied with its obligations and agreements in
the merger agreement;
. Writer's and Standard Pacific's law firms must issue their legal
opinions as to the tax-free nature of the merger;
. the New York Stock Exchange must have approved the listing of the shares
of Standard Pacific common stock to be issued in connection with the
merger;
. the twenty-day average price for Standard Pacific common stock must be
no less than $8.25, or Writer can choose not to complete the merger; and
. the twenty-day average price for Standard Pacific common stock must be
no more than $15.75, or Standard Pacific can choose not to complete the
merger.
Either Standard Pacific or Writer could choose to complete the merger even
though one or more of these conditions has not been satisfied.
Termination of the Merger Agreement (page 67)
Before the merger is completed, Writer and Standard Pacific can mutually
agree to terminate the
6
<PAGE>
merger agreement. Either party can decide, without the consent of the other,
to terminate the merger agreement under the following circumstances:
. if Writer's shareholders do not approve the merger;
. if the merger is not completed by August 31, 2000;
. if Writer's board recommends to its shareholders a superior proposal by
a third party to acquire Writer;
. if the other company has made significant misrepresentations or has
failed to perform its significant obligations under the merger
agreement;
. if the merger is enjoined by a court or other governmental authority; or
. if an event occurs that has a material adverse effect on the other
company.
Standard Pacific may also elect to terminate the merger agreement if
Writer's board withdraws or modifies its recommendation of the merger.
No Other Negotiations Involving Writer (page 64)
Until the merger is completed or the merger agreement terminated, Writer
and its affiliates have agreed to:
. immediately cease any discussions or negotiations with any parties with
respect to any acquisition of Writer by any person other than Standard
Pacific, TWC Acquisition or any affiliate of either of them;
. not authorize or permit any of its officers, directors, employees,
representatives or
agents to encourage, solicit, participate in or initiate any inquiries,
discussions or negotiations with or provide any information or access to
any person or group concerning a third party acquisition, or otherwise
facilitate any effort or attempt to make or implement a third party
acquisition;
. promptly notify Standard Pacific if it receives any proposal or inquiry
concerning a third party acquisition; and
. not withdraw its recommendation of the transactions contemplated by the
merger agreement or approve or recommend, or cause Writer to enter into
any agreement with respect to, any third party acquisition.
However, Writer may engage in these acts, other than solicitation,
initiation or encouragement, if all of the following occur:
. the board of directors of Writer by a majority vote determines in its
good faith judgment, after consultation with and based upon the advice
of outside legal counsel, that it is required to do so in order to
comply with its fiduciary duties;
. it provides reasonable written notice to Standard Pacific, specifically
stating that Writer intends to approve or recommend the new proposal;
. Standard Pacific does not, within ten business days of its receipt of
the notice, make an offer that Writer's board of directors by a majority
vote determines in its good faith judgment, based on the advice of a
financial advisor of nationally recognized reputation, to be as
favorable to Writer's shareholders as the new proposal; and
. it pays Standard Pacific any required termination fee.
Termination Fee and Expenses (page 68)
Writer has agreed to pay Standard Pacific a termination fee of $1.75
million and Standard Pacific's out-of-pocket expenses incurred in connection
with the transaction if the merger agreement is terminated under any of the
following circumstances and only the following circumstances:
. Writer's board of directors has received or recommends to the Writer
shareholders a proposal to acquire at least 80% of the outstanding
shares of Writer common stock or substantially all of the assets of
Writer that the board determines is more favorable to the Writer
shareholders than the Standard Pacific merger;
. Writer's board withdraws or weakens its recommendation of the merger; or
. Writer has made significant misrepresentations or has failed to perform
its significant obligations under the merger agreement, provided
however, that if the breach of warranty or covenant first occurs after
the date of the merger agreement for reasons wholly outside of the
control of
7
<PAGE>
Writer, then Writer will not be required to pay the termination fee, but
will still have to pay Standard Pacific's out-of-pocket expenses.
Interests of Writer's Management in the Merger that Differ from Your Interest
(page 52)
As you consider the recommendation of Writer's board of directors in favor
of the merger, you should be aware that the directors and officers of Writer
participate in arrangements and have continuing indemnification against
liabilities that provide them with interests in the merger that are different
from, or are in addition to, yours.
In particular, each of Writer's chief executive officer and president, in
conjunction with the merger, will enter into an employment agreement with TWC
Acquisition. These employment agreements will provide for employment with TWC
Acquisition, in substantially the same capacity as that in which they are
currently employed by Writer. Each of them will be entitled to an annual base
salary equalling $186,000 for George S. Writer, Jr. and $156,000 for Daniel J.
Nickless, and a bonus of 2% of the pre-tax net profits of TWC Acquisition
during the term of the agreement. The employment agreements are for a term of
two years, and each of Messrs. Writer and Nickless will be entitled to
severance benefits if their employment is terminated by TWC Acquisition without
cause during that period.
Each of Messrs. Writer and Nickless will also enter into an agreement with
Standard Pacific providing for payment of severance benefits to them if their
employment is terminated in connection with or within two years after a change
of control of Standard Pacific. The severance benefits generally consist of:
. a lump sum payment equal to two times the employee's annual base salary
and two times his average annual bonus;
. acceleration of the date when outstanding stock options become
exercisable;
. continuation for two years of life, health and disability insurance, car
allowance and any cash-in-lieu payments; and
. additional payments to offset any employee taxes associated with "excess
parachute payments" under the Internal Revenue Code.
The value of the severance benefits that would be payable to Mr. Writer and
Mr. Nickless if immediately after the merger they were terminated without cause
or in the event of a change in control is set forth below:
. Mr. Writer would be entitled to $372,000, which equals two times the
base salary Mr. Writer would receive during the term of his employment
agreement with TWC Acquisition.
. Mr. Nickless would be entitled to $312,000, which equals two times the
base salary Mr. Nickless would receive during the term of his employment
agreement with TWC Acquisition.
. In addition, in the event of a change in control of Standard Pacific
immediately after completion of the merger, Messrs. Writer and Nickless
would each be entitled to acceleration of any unvested stock options
granted by the board of directors of Standard Pacific, as well as
insurance and payments to offset employee taxes, each as described
above. The board of directors of Standard Pacific has not to date
committed to grant Messrs. Writer and Nickless any number of stock
options. Immediately after completion of the merger Messrs. Writer and
Nickless would not have received any annual bonus from TWC Acquisition,
and therefore no bonus payment would be due.
If applicable, the amounts due under the change in control agreements will
be paid instead of any amounts otherwise payable under the employment
agreements.
Also, all Writer employees, including Writer's officers and directors owning
unvested options benefit from accelerated vesting of those options. Unexercised
options will be canceled at the time of the merger and their holders will
receive the difference between the merger consideration and the exercise price
of the options in cash or shares of Standard Pacific common stock. There are no
issued options bearing a per share exercise price of $3.35 or more. See "THE
MERGER--Treatment of Existing Writer Stock Options" on page 51.
8
<PAGE>
These additional interests may cause these persons to have approved the
merger, when they otherwise might not. The members of Writer's board of
directors knew about these interests, and considered them when they approved
the merger.
Dissenters' Appraisal Rights (page 92)
You have the right to dissent from the merger and, subject to strict
compliance with the requirements and procedures of Colorado law, to receive
payment of the "fair value" of your shares of Writer common stock. These
rights, as well as the requirements and procedures for dissenting under
Colorado law are described under "DISSENTERS' RIGHTS" beginning on page 88. In
addition, the full text of the relevant sections of the Colorado statute is
reprinted in Appendix D to this proxy statement/prospectus.
It is a condition to completion of the merger that shareholders holding no
more than 5% of the outstanding shares of Writer common stock have perfected
their dissenter's appraisal rights.
Accounting Treatment (page 56)
Standard Pacific will account for the merger as a "purchase" transaction for
accounting and financial reporting purposes, in accordance with generally
accepted accounting principles. Accordingly, Standard Pacific will make a
determination of the fair value of Writer's assets and liabilities and allocate
the purchase price on its books to the acquired assets.
Federal Income Tax Consequences of The Merger to Writer Shareholders (page 47)
The federal income tax consequences of the merger to you will vary depending
on whether you receive cash, stock, or a combination of cash and stock in
exchange for your shares of Writer stock. At the time that you make an election
as to the form of consideration to be received in the merger and at the time
that you vote on the merger, you will not know if, or to what extent, the
proration procedures will be applicable. Therefore, you will not know at those
times the extent to which you will receive your elected form of merger
consideration and thus will not know which of the tax consequences described
below will be applicable to you. If you exchange your shares of Writer common
stock solely for shares of Standard Pacific common stock, you will not
recognize any gain or loss. If you
receive solely cash for your shares of Writer common stock, you should
recognize gain or loss equal to the difference between the amount of cash
received and your adjusted tax basis in your shares of Writer common stock. If
you receive both shares of Standard Pacific common stock and cash for your
shares of Writer common stock, you will not recognize loss but will recognize
gain in an amount equal to the lesser of:
. the cash received, or
. the excess of the sum of the fair market value of the Standard Pacific
common stock and the amount of cash received over your adjusted tax
basis in your shares of Writer common stock.
This tax treatment may not apply to every Writer shareholder. Determining
your actual tax consequences of the merger may be complicated. They will depend
on your specific situation and on variables not within our control. You should
consult your own tax advisor for a full understanding of the merger's tax
consequences to you.
Comparative Per Share Market Price Information (page 12)
Writer common stock is listed on the Over-The-Counter Bulletin Board and
Standard Pacific common stock is listed on the New York Stock Exchange. On
January 28, 2000, the last trading day before Writer and Standard Pacific
announced the merger, Writer common stock closed at $2.25 per share and
Standard Pacific common stock closed at $9.00 per share. On [July 24], 2000,
the latest practicable trading day before the printing of this proxy
statement/prospectus, the closing price of Standard Pacific common stock on the
New York Stock Exchange was [$11.38] per share and the closing price of Writer
common stock on the Over-The-Counter Bulletin Board was [$3.19] per share.
Comparison of Stockholders' Rights (page 83)
Writer and Standard Pacific are incorporated in different states having
different corporate laws. In addition, the governing documents of each company
vary. As a result, you will have different rights if you become a Standard
Pacific stockholder than the rights you currently have as a Writer shareholder.
These differences are described in more detail under "COMPARISON OF
STOCKHOLDERS' RIGHTS" beginning on page 83.
9
<PAGE>
SELECTED FINANCIAL DATA
We are providing the following selected financial data to assist you in
analyzing the financial aspects of the merger. You should read it together with
the consolidated financial statements of Standard Pacific and Writer and other
financial information contained in the most recent annual and quarterly reports
of Standard Pacific, which have been incorporated into this proxy
statement/prospectus by reference, and in the most recent annual report of
Writer and the most recent quarterly report of Writer, which are attached to
this proxy statement/prospectus as Appendices B and C, respectively. See "WHERE
YOU CAN FIND MORE INFORMATION" on page 97.
Selected Historical Consolidated Financial Data
The financial information in the following tables has been derived from
Standard Pacific's audited and unaudited consolidated financial statements and
Writer's audited and unaudited consolidated financial statements contained in
prior Securities and Exchange Commission filings.
Standard Pacific Corp.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------------ ---------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995(1)
----------- ----------- ----------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Revenues:
Homebuilding........... $ 232,120 $ 214,480 $ 1,198,831 $ 759,612 $ 584,571 $ 399,863 $ 346,263
Financial Services..... 430 590 2,257 1,403 171 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues....... $ 232,550 $ 215,070 $ 1,201,088 $ 761,015 $ 584,742 $ 399,863 $ 346,263
=========== =========== =========== =========== =========== =========== ===========
Income (loss) from
continuing operations
before income taxes
and extraordinary
charge................ $ 23,291 $ 23,579 $ 114,063 $ 80,894 $ 41,046 $ 12,948 $ (37,247)
(Provision) benefit for
income taxes.......... (9,396) (9,708) (46,492) (33,490) (17,070) (5,197) 14,890
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing operations
before extraordinary
charge................ 13,895 13,871 67,571 47,404 23,976 7,751 (22,357)
Income (loss) from
discontinued
operations, net of
income taxes.......... -- (77) (159) (199) 48 642 (5,006)
Gain on disposal of
discontinued
operations, net of
income taxes.......... -- -- 618 -- 3,302 -- --
Extraordinary charge
from early
extinguishment of
debt, net of income
taxes................. -- -- -- (1,328) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)...... $ 13,895 $ 13,794 $ 68,030 $ 45,877 $ 27,326 $ 8,393 $ (27,363)
=========== =========== =========== =========== =========== =========== ===========
Basic Net Income (Loss)
Per Share:
Income (loss) per
share from continuing
operations............ $ 0.48 $ 0.47 $ 2.28 $ 1.59 $ 0.82 $ 0.26 $ (0.73)
Income (loss) per
share from
discontinued
operations............ -- (0.00) (0.01) (0.01) -- 0.02 (0.17)
Gain on disposal of
discontinued
operations............ -- -- 0.02 -- 0.11 -- --
Extraordinary charge
from early
extinguishment of
debt.................. -- -- -- (0.04) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) per
share................. $ 0.48 $ 0.47 $ 2.29 $ 1.54 $ 0.93 $ 0.28 $ (0.90)
=========== =========== =========== =========== =========== =========== ===========
Diluted Net Income
(Loss) Per Share:
Income (loss) per
share from continuing
operations............ $ 0.48 $ 0.46 $ 2.27 $ 1.58 $ 0.81 $ 0.26 $ (0.73)
Income (loss) per
share from
discontinued
operations............ -- (0.00) (0.01) (0.01) -- 0.02 (0.17)
Gain on disposal of
discontinued
operations............ -- -- 0.02 -- 0.11 -- --
Extraordinary charge
from early
extinguishment of
debt.................. -- -- -- (0.04) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) per
share................. $ 0.48 $ 0.46 $ 2.28 $ 1.53 $ 0.92 $ 0.28 $ (0.90)
=========== =========== =========== =========== =========== =========== ===========
Weighted average common
shares outstanding.... 29,052,400 29,636,636 29,597,669 29,714,431 29,504,477 30,000,492 30,488,676
Weighted average common
and diluted shares
outstanding........... 29,168,978 29,885,871 29,795,263 30,050,078 29,807,702 30,011,595 30,488,676
Cash dividends declared
per share............. $ 0.08 $ 0.05 $ 0.20 $ 0.17 $ 0.14 $ 0.12 $ 0.12
Balance Sheet Data
Real estate
inventories........... $ 733,993 $ 751,176 $ 699,489 $ 713,446 $ 451,848 $ 372,645 $ 367,676
Total assets........... $ 881,980 $ 860,852 $ 829,968 $ 866,362 $ 547,665 $ 449,114 $ 444,603
Total homebuilding
debt.................. $ 366,373 $ 435,792 $ 325,378 $ 444,469 $ 214,305 $ 161,767 $ 163,354
Stockholders' equity... $ 388,618 $ 337,059 $ 381,885 $ 324,679 $ 283,778 $ 260,389 $ 257,926
Common shares
outstanding........... 28,738,380 29,637,480 29,208,680 29,629,480 29,637,281 29,629,981 30,060,281
Stockholders' equity
per share............. $ 13.52 $ 11.37 $ 13.07 $ 10.96 $ 9.58 $ 8.79 $ 8.58
</TABLE>
-------
(1) The 1995 loss from continuing operations before income taxes and
extraordinary charge of $37.2 million reflects the adoption of Financial
Accounting Standards No. 121 which resulted in a $46.5 million noncash
pretax charge to operations.
10
<PAGE>
The Writer Corporation
<TABLE>
<CAPTION>
Three Months
Ended March 31, Years Ended December 31,
--------------------- ------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Revenues............... $ 19,891 $ 12,213 $ 82,061 $ 64,091 $ 44,098 $ 46,284 $ 31,960
Income (loss) before
income taxes and
extraordinary gain.... $ 1,145 $ 15 $ 5,111 $ 3,012 $ 2,559 $ 1,277 $ (1,030)
Income (loss) before
extraordinary gain.... $ 710 $ 15 $ 3,652 $ 2,182 $ 3,460 $ 1,301 $ (316)
Extraordinary gain from
extinguishment of
debt, net of income
taxes................. $ -- $ -- $ -- $ -- $ -- $ -- 1,437
Net Income............. $ 710 $ 15 $ 3,652 $ 2,182 $ 3,460 $ 1,301 $ 1,121
Basic Net Income Per
Share:
Income (loss) per share
before extraordinary
gain.................. $ 0.10 $ -- $ 0.49 $ 0.29 $ 0.47 $ 0.18 $ (0.05)
Extraordinary gain from
extinguishment of
debt.................. -- -- -- -- -- -- 0.23
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income per share... $ 0.10 $ -- $ 0.49 $ 0.29 $ 0.47 $ 0.18 $ 0.18
========== ========== ========== ========== ========== ========== ==========
Diluted Net Income Per
Share:
Income (loss) per share
before extraordinary
gain.................. $ 0.09 $ -- $ 0.47 $ 0.28 $ 0.45 $ 0.18 $ (0.05)
Extraordinary gain from
extinguishment of
debt.................. -- -- -- -- -- -- 0.23
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income per share... $ 0.09 $ -- $ 0.47 $ 0.28 $ 0.45 $ 0.18 $ 0.18
========== ========== ========== ========== ========== ========== ==========
Weighted average common
shares outstanding.... 7,462,000 7,433,000 7,441,000 7,412,000 7,355,000 7,341,000 6,280,000
Weighted average common
and diluted shares
outstanding........... 7,747,000 7,825,000 7,829,000 7,836,000 7,723,000 7,403,000 6,280,000
Cash dividends declared
per share............. $ -- $ -- $ -- $ -- $ -- $ -- $ --
Balance Sheet Data
Real estate
inventories........... $ 48,988 $ 40,820 $ 49,865 $ 37,855 $ 37,100 $ 33,418 $ 38,005
Total assets........... $ 57,070 $ 48,269 $ 59,210 $ 44,478 $ 41,580 $ 36,650 $ 41,070
Total debt............. $ 25,821 $ 20,738 $ 27,495 $ 17,936 $ 19,221 $ 17,241 $ 22,419
Stockholders' equity... $ 24,038 $ 19,664 $ 23,328 $ 19,649 $ 17,381 $ 13,921 $ 12,537
Common shares
outstanding........... 7,462,480 7,432,600 7,462,500 7,432,600 7,354,600 7,354,600 7,247,100
Stockholders' equity
per share............. $ 3.22 $ 2.65 $ 3.13 $ 2.64 $ 2.36 $ 1.89 $ 1.73
</TABLE>
11
<PAGE>
COMPARATIVE PER SHARE DATA
The following table shows the historical earnings per common share and book
value per common share and corresponding unaudited pro forma information
reflecting the completion of the proposed merger using the purchase method of
accounting. The pro forma information, while helpful in illustrating the
financial characteristics of the combined company under one set of assumptions,
does not attempt to predict or suggest future results and does not necessarily
reflect what the historical results of the combined company would have been if
Standard Pacific and Writer had actually been combined during the periods
presented.
The unaudited pro forma information is presented as if the merger was
completed as of January 1, 1999 for income statement purposes and on December
31, 1999 and March 31, 2000 for balance sheet purposes for the respective
balance sheet dates. The unaudited pro forma information assumes that the total
merger consideration will be paid 50% in Standard Pacific common stock and 50%
in cash, and that the twenty-day average price for Standard Pacific common
stock equals $11.00.
The historical book value per common share is computed by dividing total
stockholders' equity by the number of shares of common stock outstanding at the
end of the period. The unaudited pro forma book value per share is computed by
dividing pro forma stockholders' equity by the pro forma number of shares of
Standard Pacific common stock outstanding at the end of the period. The
historical cash dividend per common share is computed by dividing total cash
dividends declared by the number of shares of common stock outstanding at the
end of the period. The unaudited pro forma cash dividend per common share is
computed by dividing total cash dividends declared by the pro forma number of
shares of Standard Pacific common stock outstanding at the end of the period.
The unaudited equivalent pro forma per common share data is computed by
multiplying the pro forma amounts by an assumed exchange ratio of 0.3045 shares
of Standard Pacific common stock for each share of Writer common stock.
Comparative Per Share Data
of Standard Pacific and Writer
<TABLE>
<CAPTION>
Three Months Ended Fiscal Year Ended
March 31, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Standard Pacific Corp.
Historical Per Common Share Data:
Basic earnings per share from
continuing operations................. $ 0.48 $ 2.28
Diluted earnings per share from
continuing operations................. 0.48 2.27
Book value per share................... 13.52 13.07
Cash dividends per share............... 0.08 0.20
Standard Pacific Corp.
Unaudited Pro Forma Per Common Share
Data:
Basic earnings per share from
continuing operations................. $ 0.47 $ 2.26
Diluted earnings per share from
continuing operations................. 0.47 2.24
Book value per share................... 13.42 12.99
Cash dividends declared per share...... 0.08 0.19
The Writer Corporation
Historical Per Common Share Data:
Basic earnings per share............... $ 0.10 $ 0.49
Diluted earnings per share............. 0.09 0.47
Book value per share................... 3.22 3.13
Cash dividends per share............... -- --
The Writer Corporation
Unaudited Pro Forma Per Common Share
Data:
Basic earnings per share from
continuing operations................. $ 0.14 $ 0.69
Diluted earnings per share from
continuing operations................. 0.14 0.68
Book value per share................... 4.09 3.96
Cash dividends declared per share...... 0.02 0.06
</TABLE>
12
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
Market Prices.
Standard Pacific common stock is traded on the New York Stock Exchange under
the symbol "SPF." Writer common stock is traded on the Over-The-Counter
Bulletin Board under the symbol "WRTC.OB."
The following table shows the high and low closing sale prices for the
calendar quarters shown for Standard Pacific common stock on the New York Stock
Exchange and for Writer common stock on the Over-The-Counter Bulletin Board.
The quotations are as reported in published financial sources.
<TABLE>
<CAPTION>
Standard
Pacific Writer
------------- ------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
Calendar 1998
First Quarter......................... 18 7/8 14 5/8 2 1/4 1 11/32
Second Quarter........................ 21 14 3/4 2 5/8 1 15/16
Third Quarter......................... 21 11 9/16 2 5/8 2
Fourth Quarter........................ 14 7/8 7 7/8 2 1 5/8
Calendar 1999
First Quarter......................... 15 1/8 11 11/16 2 1/32 1 5/8
Second Quarter........................ 15 12 1/8 2 1/8 1 3/4
Third Quarter......................... 14 1/8 10 2 1/4 1 7/8
Fourth Quarter........................ 12 15/16 8 7/8 2 1/8 1 3/8
Calendar 2000
First Quarter......................... 11 1/4 8 15/16 3 1/16 1 1/2
Second Quarter........................ 11 11/16 9 5/8 3 1/16 2 11/16
</TABLE>
Recent Closing Prices.
On January 28, 2000, the last trading day immediately before the public
announcement of the merger, the closing price of Standard Pacific common stock
on the New York Stock Exchange was $9.00 per share, and the closing price of
Writer common stock on the Over-The-Counter Bulletin Board was $2.25 per share.
On [July 24], 2000, the latest practicable trading day before the printing of
this proxy statement/prospectus, the closing price of Standard Pacific common
stock on the New York Stock Exchange was [$11.38] per share and the closing
price of Writer common stock on the Over-The-Counter Bulletin Board was [$3.19]
per share. Following the merger, shares of Writer common stock will cease to be
traded on the Over-The-Counter Bulletin Board and will represent only the right
to receive cash and/or shares of Standard Pacific common stock under the merger
agreement.
Because the market price of Standard Pacific common stock is subject to
fluctuation, the market value of the shares of Standard Pacific common stock
that holders of shares of Writer common stock will receive in the merger may
increase or decrease before and after the merger. See "RISK FACTORS--Risk
Factors Relating to the Merger" on page 14. If you receive shares of Standard
Pacific common stock in the merger and the market price of Standard Pacific
common stock declines before the merger, you will receive less value for your
shares of Writer common stock. Shareholders are urged to obtain current market
quotations for Standard Pacific common stock and Writer common stock.
Dividends.
In recent years, Standard Pacific has paid a regular quarterly cash dividend
on its common stock. The amount of this dividend has been $0.08 per share for
each of the last two calendar quarters. Standard Pacific's management expects
that this dividend policy will continue, but it is subject to regular review by
the Standard Pacific board of directors. Writer has not declared or paid a cash
dividend on its common stock in the past 15 years and does not anticipate
paying any cash dividends in the foreseeable future. In addition, the merger
agreement prohibits Writer from paying dividends on its common stock without
the consent of Standard Pacific until the completion of the merger or
termination of the merger agreement.
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RISK FACTORS
By voting in favor of the merger and electing to receive shares of Standard
Pacific common stock in the merger, you will be choosing to invest in Standard
Pacific common stock. An investment in Standard Pacific common stock involves a
high degree of risk. Writer shareholders should consider the following risk
factors, together with the other information included and incorporated by
reference in this proxy statement/prospectus, in deciding whether to vote to
approve the merger.
Risk Factors Relating to the Merger
Changes in the market value of Standard Pacific common stock could reduce the
value that you receive for your Writer common stock.
If you elect to receive Standard Pacific common stock in the merger, and if
the market value of Standard Pacific common stock falls below $11.00 per share
prior to the closing of the merger, you could receive Standard Pacific common
stock that is worth less than $3.35 per share of Writer common stock, which is
the amount you would receive if you elect to receive cash in the merger. The
exchange ratio will equal the quotient of $3.35 divided by the average closing
price of the Standard Pacific common stock on the New York Stock Exchange over
a twenty day trading period ending three trading days prior to the closing date
of the merger. If the twenty-day average price for Standard Pacific common
stock is between $11.00 and $13.50 per share, the exchange ratio is designed to
provide Writer shareholders with an amount of Standard Pacific common stock
equal in value to $3.35 for each share of Writer common stock.
If the twenty-day average price for Standard Pacific common stock is less
than $11.00 per share, the exchange ratio will remain the same as if the
twenty-day average price were $11.00 per share, and therefore Writer
shareholders would potentially receive shares of Standard Pacific common stock
with a value of less than $3.35 per share. Writer's board is not obligated to
close the merger if the twenty-day average price is less than $8.25 per share.
At a twenty-day average price of $8.25 per share, the value of Standard Pacific
common stock received for each share of Writer common stock would be $2.51 if
the price on the date the merger is completed equaled the twenty-day average
price. The actual price of Standard Pacific's common stock in effect on the
date of the merger may be less than $8.25 per share even if the twenty-day
average price exceeds that amount.
Until the exchange ratio is calculated shortly before the merger is
completed, you will not know the ratio of shares of Standard Pacific common
stock to be received for shares of Writer common stock. Even after the exchange
ratio is determined, you will not know the exact value of the Standard Pacific
common stock that Writer shareholders will receive when the merger is completed
because the price of shares of Standard Pacific common stock at that time is
likely to be different than the adjusted twenty-day average price for Standard
Pacific common stock used to calculate the exchange ratio. As a result, the
value of Standard Pacific common stock received in the merger may be less or
more than the value used to determine the exchange ratio. The Standard Pacific
stock price is subject to general fluctuations in the market for publicly
traded stock and has experienced significant volatility. Consequently, the
exact value that Writer's shareholders electing Standard Pacific common stock
will receive cannot be determined prior to completion of the merger.
If Standard Pacific and Writer do not successfully integrate their business
operations after the merger, Standard Pacific will not realize the benefits it
expects from the merger.
If Standard Pacific is not able to effectively integrate the operations,
technology and personnel of Standard Pacific and Writer in a timely and
efficient manner, then it will not realize the benefits it expects from the
merger. In particular, if the integration is not successful:
. Standard Pacific's costs may be higher relative to its revenues than
they were before the merger;
. the combined company may lose key personnel;
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. Standard Pacific may not be able to retain or expand Writer's market
position; and
. the market price of Standard Pacific common stock may decline as a
result of the merger.
Integrating the operations of Writer with those of Standard Pacific after
the merger may be difficult, time consuming and costly. After the merger has
been completed, Standard Pacific must successfully integrate, among other
things:
. land acquisition, development and finance functions;
. management information and accounting systems; and
. human resource, risk management and other administrative functions.
Among the challenges involved in this integration is demonstrating to our
customers that the merger will not result in an adverse change in product
quality, customer service standards or business focus and persuading our
personnel that our business cultures are compatible. In addition, Writer is
engaged in locations in which Standard Pacific has not previously had
operations, and therefore to successfully integrate the operations, Standard
Pacific will need to retain management, key employees, and business partners of
Writer. The attention and effort devoted to the integration of the two
companies may also significantly divert management's attention from other
important issues.
There is a very competitive market for experienced homebuilding executives and
if any of Writer's executives leave Standard Pacific may have difficulty
operating its business effectively.
The acquisition of Writer will bring Standard Pacific additional experienced
homebuilding company executives. If, however, a significant number of members
of Writer's senior management were to leave, Standard Pacific might have
difficulty replacing them with capable and experienced executives, and as a
result Standard Pacific might have difficulty in effectively managing its
business. There are relatively few people with the training and experience
necessary to be effective senior managers of a large homebuilding company.
Standard Pacific's success is dependent to a significant degree on the efforts
of its senior management.
Some of Writer's officers and directors have interests that could have
influenced their decision to recommend the merger to Writer shareholders.
Directors and officers of Writer could be more likely to vote to approve the
merger agreement as a result of their interests in the merger. On the record
date, directors and executive officers of Writer and their affiliates
beneficially owned approximately 50% of the voting power of outstanding Writer
common stock. In considering the recommendation of the Writer board of
directors to approve the merger, Writer shareholders should recognize that some
of Writer's directors and officers participate in arrangements and all have
continuing indemnification against liabilities that provide them with interests
in the merger that are different from, or are in addition to, the interests of
Writer shareholders. For example, the Chief Executive Officer and President of
Writer, neither of whom currently have employment agreements, will sign
employment and change in control agreements with TWC Acquisition effective upon
the completion of the merger. These agreements are described in more detail
under "THE MERGER--Interests of Writer's Management in the Merger and Potential
Conflicts of Interest" on page 52. In addition, 145,688 unvested stock options
granted under Writer's Stock Option Plan to officers of Writer will vest upon
the completion of the merger in accordance with the merger agreement.
The IRS may challenge the tax-free nature of the merger in which case any gain
realized by Writer shareholders upon receipt of Standard Pacific common stock
in the merger may be immediately subject to tax.
Standard Pacific and Writer intend the merger to be tax-free to Writer
shareholders for federal income tax purposes to the extent that they receive
shares of Standard Pacific common stock in the merger. If it is not tax-free,
however, the gain realized by Writer shareholders upon receipt of Standard
Pacific stock may be
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immediately subject to tax. Neither Standard Pacific nor Writer has requested a
ruling from the Internal Revenue Service as to the status of the merger as a
reorganization under Section 368(a) of the Code. Although Standard Pacific and
Writer have received, and will receive as a condition to the closing of the
merger, opinions from their respective tax counsel to the effect that the
merger will qualify as a reorganization, these opinions are conditioned upon
various assumptions. If any of those assumptions are not accurate or if the IRS
successfully challenges the status of the merger as a reorganization, the
merger would be a taxable event to Writer and to the Writer shareholders.
If the merger qualifies as a reorganization, the federal income tax
consequences of the merger to a Writer shareholder will vary depending on
whether the shareholder receives cash, stock, or a combination of cash and
stock in the merger. At the time that a Writer shareholder makes an election as
to the form of consideration to be received in the merger and at the time that
the shareholder votes in the merger, the shareholder will not know if, or to
what extent, the consideration proration procedures will be applicable.
Therefore, at those times, the shareholder will not know the extent to which
the shareholder's elected forms of merger consideration will be given effect
and thus will not know the tax consequences of the merger to the shareholder.
In addition, assuming that the merger qualifies as a reorganization, the
federal income tax consequences of the merger to Writer shareholders who
receive a combination of cash and Standard Pacific stock in the merger is
subject to some uncertainties. Specifically, no assurance can be provided, and
tax counsel to Standard Pacific and Writer cannot opine in their respective tax
opinions, as to whether the gain recognized by these shareholders as a result
of the merger will be treated as capital gain or ordinary income. The character
of the gain as ordinary income or capital gain will depend on the particular
facts and circumstances of each shareholder. The gain may be treated as
ordinary income, rather than capital, if the shareholder owns, either actually
or constructively, any shares of Standard Pacific stock (other than shares of
Standard Pacific stock that are received in the merger). Each shareholder who
receives a combination of cash and Standard Pacific stock in the merger should
consult its own tax advisor as to the character of the gain recognized in the
merger.
Risk Factors Relating to Standard Pacific
The following risk factors will apply to Standard Pacific and to the
combined operations of Standard Pacific and Writer after the merger.
An adverse change in the economic conditions or interest rates could affect
the demand for homes and reduce the earnings of Standard Pacific.
The homebuilding industry is highly cyclical. Changes in world, national and
local economic conditions affect Standard Pacific's business and markets. In
particular, declines in consumer confidence or employment levels in the markets
in which Standard Pacific operates may adversely affect the demand for homes
and could in turn reduce its sales and earnings.
Standard Pacific's customers typically finance their home purchase through
lenders providing mortgage financing. Increases in interest rates or decreases
in the 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 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 reduce Standard Pacific's sales
and earnings.
Standard Pacific may need additional funds for the growth and development of
its business, and if it is unable to obtain these funds, it may not be able to
expand its business as planned.
The operations of Standard Pacific require significant amounts of cash, and,
while it has no current need for additional funds, Standard Pacific may be
required to seek additional capital, whether from sales of equity or by
borrowing more money, for the future growth and development of its business. If
additional funds are
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raised through the issuance of stock, dilution to stockholders will result. If
additional funds are raised through the incurrence of debt, Standard Pacific
will occur increased debt servicing costs and may become subject to additional
restrictive financial and other covenants. Standard Pacific can give no
assurance as to the terms or availability of additional capital. Moreover, the
indentures for its outstanding debt and revolving credit facility contain
provisions that may restrict the debt it may incur in the future. If Standard
Pacific is not successful in obtaining sufficient capital, it could reduce its
sales and may adversely affect its future growth and earnings.
Standard Pacific depends on the California market. Any adverse change in the
economic climate of California could harm Standard Pacific's sales and
earnings.
Standard Pacific presently conducts a significant portion of its business
in California. Home prices in California, including some of the markets in
which Standard Pacific operates, have declined from time to time, particularly
as a result of weak economic conditions. Standard Pacific cannot be certain
that the current economic climate in California will continue. If home prices
decline in one or more of the markets in which Standard Pacific operates, its
earnings may be harmed.
Cities and counties in which Standard Pacific operates may adopt slow growth
initiatives reducing its ability to build in these areas, which could harm
its future sales and earnings.
Several cities and counties, including some in which Standard Pacific has
sold a significant number of homes, have in the past approved, or approved for
inclusion on their ballot, various "slow growth" initiatives and other ballot
measures which could impact the availability of land and building
opportunities within those localities. In addition, in Arizona a state-wide
initiative is on the November 2000 ballot which would restrict the ability of
homebuilders to build outside of designated, pre-existing urban areas and
could create additional costs and administrative requirements to build homes.
Introduction and voter approval of this or similar measures would reduce the
ability of Standard Pacific to build and sell homes in the affected markets
which in turn could harm its future sales and earnings.
The market value and availability of land may fluctuate significantly which
could limit Standard Pacific's ability to develop new communities and
decrease the value of its land-holdings.
Standard Pacific's 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 its control,
including the risk of competitive over-bidding of land prices and restrictive
governmental regulation. Should suitable land opportunities become less
available, it could limit Standard Pacific's ability to develop new
communities, increase land costs and negatively impact Standard Pacific's
sales and earnings.
In addition, the risk of owning developed and undeveloped land 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, Standard Pacific may have to write-down land
holdings, sell homes at a loss and/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.
The homebuilding industry is highly competitive and with more limited
resources than some of its current and potential competitors, Standard
Pacific may not be able to compete effectively.
The homebuilding industry is highly competitive and fragmented. Standard
Pacific competes with numerous other residential construction firms, including
large national and regional firms, for customers, undeveloped land, financing,
raw materials and skilled labor. Standard Pacific competes for customers on
the basis of the location, design, quality and price of, as well as available
mortgage financing for, its homes. Some of its competitors have substantially
greater financial resources than Standard Pacific does, and as a result may
17
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have lower costs of capital, labor and materials than Standard Pacific, and
may be able to compete more effectively for land acquisition opportunities.
Standard Pacific also competes with the resale of existing homes and, in some
cases, with rental homes. An oversupply of attractively priced resale or
rental homes in the markets in which it operates could adversely affect
Standard Pacific's ability to sell homes profitably. The mortgage lending
operations of Standard Pacific are subject to intense competition from other
mortgage lenders, many of which are substantially larger and may have a lower
cost of funds or effective overhead burden than Standard Pacific's lending
operations.
Material and labor shortages could delay or increase the cost of home
construction and reduce Standard Pacific's sales and earnings.
The residential construction industry has from time to time experienced
serious material and labor shortages, including shortages in insulation,
drywall, cement and lumber. These labor and material shortages can be more
severe during periods of strong demand for housing. Some of these materials,
including lumber, cement and drywall in particular, have experienced volatile
price swings. Similar shortages and price increases in the future could cause
delays in and increase the costs of home construction for Standard Pacific
which in turn would harm its operating results.
Standard Pacific is subject to extensive government regulation which can
increase costs and reduce profitability.
The homebuilding operations of Standard Pacific 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 where a significant
portion of the business of Standard Pacific is conducted, 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 effective prices of Standard Pacific's homes, which in turn
could reduce its sales.
During the development process, Standard Pacific must obtain the approval
of numerous governmental authorities which regulate matters such as:
. permitted land uses, levels of density and architectural designs;
. 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. Delays in the development
process can cause substantial increases to development costs, which in turn
could harm the operating results of Standard Pacific.
Standard Pacific's mortgage banking operations are subject to numerous
federal, state and local laws and regulations, including eligibility
requirements for participation in federal loan programs. Its title insurance
agency subsidiary is subject to applicable insurance laws and regulations.
Failure to comply with these requirements can lead to administrative
enforcement actions, the loss of required licenses and claims for monetary
damages.
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Adverse weather conditions and natural disasters may disrupt and delay
construction, which could harm Standard Pacific's sales and earnings.
Standard Pacific is subject to the risks associated with adverse weather
conditions and natural disasters which occur in its key markets, including:
. unusually heavy or prolonged rain;
. earthquakes;
. fires; and
. floods.
These conditions can negatively affect Standard Pacific's operations by
requiring Standard Pacific to delay or halt construction or to perform
potentially costly repairs to its projects under construction and unsold homes.
In addition, California has periodically experienced drought conditions which
result in water conservation measures and sometimes rationing by municipalities
in which Standard Pacific does business. Restrictions by governmental agencies
on construction activity as a result of limited water supplies could reduce
sales.
Anti-takeover defenses in Standard Pacific's charter could prevent an
acquisition of Standard Pacific or limit the price that investors might be
willing to pay for shares of Standard Pacific common stock.
Provisions of the Delaware General Corporation Law, Standard Pacific's
certificate of incorporation and Standard Pacific's bylaws could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of Standard
Pacific. These provisions could delay or prevent a change in control of
Standard Pacific and could limit the price that investors might be willing to
pay in the future for shares of Standard Pacific common stock. Standard
Pacific's certificate of incorporation and its bylaws provide for a board of
directors comprised of three classes of directors with staggered terms of
office, provide that directors can be removed only for cause and with
stockholder approval, and impose various procedural and other requirements that
could make it more difficult for stockholders to effect corporate actions.
Standard Pacific's certificate of incorporation also authorizes its board of
directors to issue new series of common stock and preferred stock without
stockholder approval. Depending on the rights and terms of any new series
created, and the reaction of the market to the series, your rights or the value
of your common stock could be negatively affected. For example, subject to
applicable law, the board of directors could create a series of common stock or
preferred stock with preferential rights to dividends or assets upon
liquidation, or with superior voting rights to the existing common stock. The
ability of the Standard Pacific board of directors to issue these new series of
common stock and preferred stock could also prevent or delay a third party from
acquiring Standard Pacific, even if doing so would be beneficial to its
stockholders.
Standard Pacific is also subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law, which prohibits Delaware
corporations from engaging in business combinations specified in the statute
with an interested stockholder, as defined in the statute, for a period of
three years after the date of the transaction in which the person first becomes
an interested stockholder, unless the business combination is approved in
advance by a majority of the independent directors or by the holders of at
least two-thirds of the outstanding disinterested shares. The application of
Section 203 of the Delaware General Corporation Law could also have the effect
of delaying or preventing a change of control of Standard Pacific.
Standard Pacific also has a stockholder rights plan that would make it
difficult to acquire Standard Pacific without the approval of Standard
Pacific's board of directors. See "DESCRIPTION OF CAPITAL STOCK--Standard
Pacific Rights Plan" on page 78.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement/prospectus contains forward-looking statements that are
subject to risks and uncertainties. These forward-looking statements represent
expectations or beliefs of Standard Pacific and Writer concerning future
events, and no assurance can be given that the results described will be
achieved. These forward-looking statements can generally be identified by the
use of statements that include words or phrases such as "estimate," "project,"
"believe," "expect," "anticipate," "intend," "plan," "foresee," "likely,"
"will" or other similar words or phrases.
These statements are subject to risks, uncertainties and other factors, many
of which are outside of Standard Pacific's and Writer's control, that could
cause actual results to differ significantly from those in the forward-looking
statements, including, among other things:
. unanticipated difficulties in integrating Standard Pacific's and
Writer's operations;
. competitive pressures;
. changes in the demand for single-family homes;
. changes in government regulations;
. changes in interest rates or decreases in availability of mortgage
financing;
. Standard Pacific's and Writer's ability to purchase suitable undeveloped
land at acceptable prices;
. the availability of labor and materials;
. Standard Pacific's and Writer's ability to access additional capital to
fund future growth;
. general economic conditions, particularly in states in which the
companies do business; and
. other risks described in this proxy statement/prospectus and in Standard
Pacific's and Writer's filings with the Securities and Exchange
Commission.
Forward-looking statements are not guarantees of performance. By their
nature, they involve risks, uncertainties and assumptions. The future results
and stockholder values of Standard Pacific and Writer may differ significantly
from those expressed in these forward-looking statements.
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WRITER SPECIAL MEETING
General
We are sending you this proxy statement/prospectus as part of the
solicitation of proxies by Writer for use at the special meeting of Writer
shareholders scheduled to be held on August 25, 2000 to vote on the proposed
merger. We are first mailing this proxy statement/prospectus, including a
notice of the special meeting of Writer shareholders and a form of proxy, on or
about July 27, 2000.
The special meeting is scheduled to be held on:
August 25, 2000
at 9:00 a.m, local time
at The Writer Corporation
6061 S. Willow Drive, #232
Englewood, CO 80111
Purpose of the Special Meeting
The purpose of the Writer special meeting is to allow shareholders of Writer
to consider and vote on the adoption of the merger agreement and to transact
any other business that properly comes before the special meeting or any
adjournment. We know of no other matters to be brought before the special
meeting. However, if any other matters are properly presented for action at the
Writer special meeting, including a motion to adjourn the meeting to another
time or place, the persons named in the enclosed proxy form will have the
discretion, unless otherwise noted on any proxy form, to vote on those matters,
subject to applicable law. No proxy form that is voted against the merger will
be voted in favor of any adjournment or postponement of the special meeting.
Recommendation of Writer's Board of Directors
Writer's board of directors has unanimously approved the merger agreement
and the merger. Writer's board believes that the merger agreement is advisable
and in the best interests of Writer and its shareholders and recommends that
the Writer shareholders vote FOR the adoption of the merger agreement. See "THE
MERGER--Recommendation of the Writer Board of Directors and Writer's Reasons
for the Merger" beginning on page 31.
Required Vote for Adoption of the Merger Agreement
Adopting the merger agreement requires the affirmative vote of holders of
two-thirds of the outstanding shares of Writer common stock entitled to vote at
the special meeting. Each share of outstanding Writer common stock entitles its
holder to one vote.
Record Date
Writer's board of directors has fixed July 25, 2000, as the record date for
the Writer special meeting. Only shareholders of record at the close of
business on that date will receive notice of and be able to vote at the Writer
special meeting. At the close of business on the record date, there were
7,463,480 shares of Writer common stock outstanding held by approximately 635
record holders.
As of the record date, directors, executive officers and affiliates of
Writer beneficially owned 3,801,150 shares of Writer common stock, entitling
them to exercise 50.94% of the voting power of the Writer common stock. As part
of the transaction, these shareholders have agreed to vote all of their shares
eligible to vote at the special meeting to approve the merger agreement. For
further information on the voting agreement, see "THE MERGER--The Writer
Management Group" on page 51.
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Quorum
A majority of the Writer common shares entitled to vote must be present at
the special meeting, either in person or by proxy, in order for there to be a
quorum at the special meeting. There must be a quorum in order for the vote on
the merger agreement to occur.
We will count the following shares of Writer common stock as present at the
special meeting for purposes of determining whether or not a quorum exists:
. shares held by persons who attend or are represented at the Writer
special meeting whether or not the shares are voted, and
. shares for which Writer has received properly executed proxies.
Proxies
You should complete and return the accompanying proxy card whether or not
you plan to attend the special meeting in person. All properly executed proxies
received by Writer before the special meeting that are not revoked will be
voted at the special meeting in accordance with the instructions indicated on
the proxies or, if no direction is indicated, FOR approval of the merger
agreement. Properly executed proxies, other than proxies voting against the
merger, also will be voted for any adjournment or postponement of the Writer
special meeting for the purpose of soliciting additional votes to approve the
merger agreement, if necessary.
Properly executed proxies marked "Abstain" will not be voted at the special
meeting. In addition, a broker cannot vote shares of Writer common stock it
holds in "street name" for the beneficial owners without specific instructions
from the beneficial owner. Abstentions and broker non-votes will have the same
effect as votes against adoption of the merger agreement. Writer's board of
directors urges you to complete, date and sign the accompanying proxy card and
return it promptly in the enclosed, postage-paid envelope. If your shares of
Writer common stock are held in "street name" by your broker you must follow
the directions your broker provides to you regarding how to instruct your
broker to vote your shares of Writer common stock. You cannot vote shares of
Writer common stock held in "street name" by returning a proxy card to Writer.
You should not send your stock certificates with your proxies. An election
form and letter of transmittal for your Writer common stock will be separately
mailed to you within five days of mailing this proxy statement/prospectus.
Revocation of Proxies
Your grant of a proxy on the enclosed proxy card does not prevent you from
voting in person or otherwise revoking your proxy at any time before it is
voted at the special meeting. To revoke your proxy, either:
. deliver a signed notice of revocation or a properly executed new proxy
card bearing a later date to:
The Writer Corporation
6061 S. Willow Drive, #232
Englewood, CO 80111
Attn: Secretary; or
. attend the Writer special meeting and vote your shares in person.
Attendance at the special meeting will not, in and of itself, have the
effect of revoking the proxy.
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Solicitation of Proxies
The solicitation of the enclosed proxies from Writer's shareholders is made
on behalf of Writer. Writer will pay the entire cost of soliciting proxies. In
addition to the solicitation of proxies by mail, Writer will ask banks, brokers
and other record holders to send proxies and proxy materials to the beneficial
owners of the stock and secure their voting instructions, if necessary. Writer
will reimburse these record holders for their reasonable expenses in forwarding
these proxy materials. Writer may also use several of its employees, who will
not be specially compensated, to solicit proxies from Writer's shareholders.
Appraisal Rights
You have the right to dissent from the merger and, subject to strict
compliance with the requirements and procedures of Colorado law, to receive
payment of the "fair value" of your shares of Writer common stock. These
rights, as well as the requirements and procedures for dissenting under
Colorado law are described under "DISSENTERS' APPRAISAL RIGHTS" beginning on
page 92. In addition, the full text of the relevant sections of the Colorado
statute is reprinted in Appendix D to this proxy statement/prospectus.
Accountants
Representatives of Deloitte & Touche LLP, Writer's independent auditors, are
expected to be present at the Writer special meeting and will be available to
respond to questions from Writer's shareholders.
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THE MERGER
General
The boards of directors of Standard Pacific and Writer each have
unanimously approved the merger agreement, which provides for the acquisition
by Standard Pacific of Writer through a merger. The merger will result in
Writer merging into TWC Acquisition, a wholly owned subsidiary of Standard
Pacific, and thereby Writer will effectively become a wholly owned subsidiary
of Standard Pacific. Subject to the limitations described below, upon
completion of the merger, you will receive, at your election, either:
. cash, without interest, in the amount of $3.35 per share;
. shares of Standard Pacific common stock; or
. a combination of cash and shares of Standard Pacific common stock.
Each share of Standard Pacific common stock issued to you also will
represent one preferred share purchase right issued under Standard Pacific's
rights plan. See "DESCRIPTION OF CAPITAL STOCK--Standard Pacific Rights Plan"
beginning on page 78.
You may not receive the type of consideration that you elect because the
merger agreement requires that:
. no more than 60% of the outstanding shares of Writer Corporation common
stock may be converted into shares of Standard Pacific common stock, and
. no more than 50% of the total amount paid by Standard Pacific to Writer
shareholders in connection with the merger may be paid in cash.
Background of the Merger
On April 2, 1998, Brian Norkaitis, a Senior Vice President of Standard
Pacific, contacted George S. Writer, Jr., Chairman and Chief Executive Officer
of Writer, by telephone to indicate that Standard Pacific was considering
entering the Denver market through an acquisition or start-up, and that Writer
had been recommended to Standard Pacific by a Denver-based consultant. Mr.
Writer replied that he would be agreeable to meeting with Mr. Norkaitis.
Consequently, on April 15, 1998, Messrs. Norkaitis and Writer met in Denver to
discuss the Denver market and the respective businesses of Standard Pacific
and Writer. Following that meeting, on May 7, 1998, Mr. Norkaitis met at
Standard Pacific's corporate headquarters in Orange County, California with
Mr. Roland Seidler, Chairman of the Board of The Seidler Companies, an
investment banking firm. Mr. Seidler is also a member of the Writer board. The
purpose of this meeting was to discuss the respective business profiles of
Standard Pacific and Writer.
On June 18, 1998, Messrs. Norkaitis and Seidler met with Stephen J.
Scarborough, the then President and the current President and Chief Executive
Officer of Standard Pacific, over lunch to discuss the Denver market, the
respective companies and the possibility of a combination. During June and
July 1998, there were several telephone conversations between Messrs.
Norkaitis and Writer discussing the Denver building market, Standard Pacific's
and Writer's operations and Writer's belief that at its then stock price of
$2.38 per share, Writer's common stock was significantly undervalued in the
market. On August 7, 1998, and again on September 10, 1998, Messrs. Seidler
and Norkaitis met at Standard Pacific's headquarters and exchanged information
concerning the two companies, including operating philosophies. Following
these meetings, Messrs. Norkaitis and Writer continued to explore a possible
business combination in several telephone conversations. During the course of
these conversations, Mr. Writer provided Mr. Norkaitis with updated
information as to Writer's operations and goals, including limited financial
information for 1998. On September 16, 1998, Mr. Norkaitis took a tour of
Writer's northern Colorado division.
On September 29, October 13 and November 3, 1998, Messrs. Seidler and
Norkaitis met in Southern California for a continuation of general exploratory
discussions and to exchange additional information, including historical
Writer earnings data and Writer's financial outlook. At the November 3, 1998
meeting, they also discussed a two-step transaction structure in which
Standard Pacific would initially acquire a portion
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of Writer for cash and Standard Pacific stock and the remainder of Writer at a
later date at a price based on the results of Writer's subsequent operations.
On November 16 and 17, 1998, Messrs. Norkaitis and Scarborough visited Denver
and toured Writer's facilities with Mr. Writer and Daniel J. Nickless, the then
Executive Vice President and Chief Financial Officer and the current President
of Writer. The primary purpose of this visit was to review Writer's projects
and for Messrs. Norkaitis and Scarborough to gain a better understanding of
Writer's project design and construction, land position and management
structure.
As a follow-up to the project tour, Mr. Seidler met with Messrs. Scarborough
and Norkaitis and Andrew H. Parnes, Vice President--Finance, Chief Financial
Officer and Treasurer of Standard Pacific, on November 23, 1998 at Standard
Pacific's corporate offices to continue exploratory discussions. The parties
discussed a number of alternative transaction structures, including an all
stock pooling transaction, a two-step purchase transaction (the second step
being tied to an earn-out) for cash, Standard Pacific stock or a combination of
both, and a single-step purchase transaction for cash, Standard Pacific stock
or a combination of both. No specific valuation for Writer was proposed by
either of the parties. During December 1998, there were several telephone
discussions among Messrs. Norkaitis, Scarborough, and Writer, and a meeting on
December 21, 1998 among Messrs. Scarborough, Norkaitis and Seidler, regarding
the respective interests of Standard Pacific and Writer and the possibility of
entering into more serious discussions concerning a combination of the
companies. On January 27, 1999, Messrs. Seidler, Scarborough and Norkaitis met
at Standard Pacific's corporate offices to discuss Standard Pacific's interest
in the Denver market and Writer in particular. At this meeting, there was a
discussion of economic models typically used to value potential acquisitions,
including such factors as leverage, earnings multiples, returns on capital and
equity, and earnings per share accretion. Mr. Seidler discussed an equity
valuation of Writer of approximately $40 million or roughly $5.00 per share of
common stock.
At a meeting of the Writer board of directors on February 18, 1999, the
board for the first time generally discussed Standard Pacific and a potential
merger, but took no formal action.
On February 19, 1999, Messrs. Writer and Norkaitis again met in Denver to
discuss the companies' respective interests in a business combination and the
Denver market generally. Following this meeting, there followed several
telephone conversations during March and April, 1999 between Mr. Seidler and
Standard Pacific personnel, primarily with Mr. Scarborough, to continue
exploration of the possibilities of a combination of the two companies.
On April 27, 1999, Mr. Scarborough reported to the Standard Pacific board of
directors that management was exploring potential acquisitions in the Denver
area generally, and engaged in very preliminary discussions with a Denver-area
homebuilder other than Writer. The board discussed the merits of a potential
Denver-area acquisition and the potential impact on Standard Pacific. The board
directed Mr. Scarborough to continue to explore potential Denver-area
acquisitions.
On April 29, 1999, at a meeting of the Writer board, the directors discussed
various strategic alternatives for Writer, including a sale to Standard
Pacific, going private and remaining a stand-alone public company. Mr. Seidler
was asked to lead any further discussions with Standard Pacific. Mr. Writer
advised the board that he believed that a business combination with Standard
Pacific could result in preserving jobs for Writer personnel and could
perpetuate The Writer Corporation name.
During May 1999, there were various additional telephone conversations
between Mr. Seidler and Standard Pacific personnel, again primarily with Mr.
Scarborough, to continue exploration of a possible transaction. On June 2, July
22 and August 3, 1999, Messrs. Seidler and Scarborough met in Southern
California, and on August 4, 1999 Messrs. Scarborough and Writer spoke by
telephone, primarily to update Standard Pacific on Writer's business plan, lot
position and growth opportunities.
As a result of these discussions, on August 13 and August 17, 1999, Mr.
Seidler presented to Standard Pacific Writer's budgets, Securities and Exchange
Commission reports and projections for the remainder of 1999 and 2000 and a
detailed analysis of Writer's land acquisition and government entitlements.
With this additional information, on September 1 and 2, 1999, Mr. Scarborough
toured Writer's projects and facilities with Messrs. Seidler and Writer. Mr.
Nickless met the group for a lunch meeting on September 1, 1999.
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On September 14, 1999, the Writer board held a telephonic meeting and
discussed Standard Pacific in general terms. Following the meeting Messrs.
Writer and Scarborough spoke by telephone to discuss the Writer board's
interest in a sale transaction with Standard Pacific. Subsequently, on
September 30, 1999, at a further Writer board meeting, Mr. Seidler was invited
to submit a letter agreement appointing The Seidler Companies as exclusive
financial advisor to Writer to develop a business strategy to maximize
shareholder value. Various alternative strategies were discussed, and authority
was given by the board to appoint The Seidler Companies as exclusive financial
advisor to Writer.
On October 13, 1999, Messrs. Writer, Seidler, Nickless and William J
Gillilan, a director of Writer, met with Messrs. Scarborough and Parnes and
Clay A. Halvorsen, Vice President, General Counsel and Secretary of Standard
Pacific, at Standard Pacific's corporate offices. Writer's projections and
housing products were discussed in detail and preliminary discussions were held
regarding a possible purchase price. Mr. Writer proposed an initial purchase
price of $3.00 per share of Writer common stock plus an earn-out for a
potential combined purchase price of $5.00 per share of Writer common stock. No
agreement was reached by the parties as to the purchase price or structure of
the transaction.
On November 5, 1999, Mr. Seidler visited Standard Pacific's offices and
discussed with Messrs. Scarborough and Parnes and Michael Cortney, then a
Senior Vice President and the current Executive Vice President of Standard
Pacific, the mutual benefits of a merger and the hurdles remaining in order to
enter into the transaction.
On November 8, 1999, there was a telephonic board meeting of the Writer
board at which Mr. Seidler discussed recent developments with Standard Pacific,
including in particular the parties' discussions at their October 13, 1999
meeting.
On November 8, 1999, Mr. Scarborough sent to Mr. Seidler a letter of intent
executed on behalf of Standard Pacific. Under the terms of the letter of
intent, each Writer shareholder would have the option to elect to receive, for
each share of Writer common stock held by the Writer shareholder, either an
amount equal to Writer's book value per share (assumed by the parties to equal
approximately $3.00) or 70% of book value per share (approximately $2.10) plus
an earn-out of up to approximately $1.56 if a pre-tax earnings target were
achieved post merger. The merger consideration would be payable, at the option
of each shareholder subject to prescribed limits, in a combination of cash and
Standard Pacific common stock. If the pre-tax earnings target were not
achieved, the earn-out would be reduced ratably to 75% of the target, and if
less than 75% of the target were achieved no earn-out would be paid. On
November 11, 1999, Messrs. Halvorsen and Seidler spoke by telephone to discuss
the proposed letter of intent. Mr. Seidler expressed concern with respect to
the restrictions in the letter on Writer soliciting competing transactions.
On December 10, 1999, Messrs. Scarborough and Seidler met at Standard
Pacific's corporate offices to reaffirm their mutual interests in continuing to
discuss a possible combination. On December 16, 1999, Writer's board met to
discuss The Seidler Companies' presentation of various alternative business
strategies, including remaining as a stand-alone small public company, going
private or entering into an alliance or a combination or merger with another
company. The board concluded that a combination, if consummated with the right
partner at the right price, would be in the best interests of the company's
shareholders. Standard Pacific's proposal contained in its November 8, 1999
letter of intent was rejected as inadequate, but the board was impressed with
the complementary operating philosophies of the two companies, along with
Standard Pacific's ability to retain key personnel and the quality of their
product. Because of these factors, the board felt that continued discussions
with Standard Pacific would be appropriate.
On December 29, 1999, a meeting was held at Standard Pacific's corporate
offices among Messrs. Seidler, Scarborough, Cortney, Parnes and Halvorsen to
discuss the Standard Pacific offer set forth in the November 8, 1999 letter of
intent. Mr. Seidler proposed an alternative pricing structure which would allow
each Writer shareholder to elect to receive either $3.10 per Writer common
share payable in cash or $2.40 per share plus an earn-out of up to $2.50 per
share payable in Standard Pacific common stock. The holders of not more than
50% of Writer's outstanding common shares would be permitted to elect the
second earn-out option. The parties also
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discussed the timing of the earn-out, the need to maintain the tax free nature
of the transaction, Writer's goal of selling in excess of book value, the lock-
up period for Standard Pacific shares issued in the transaction, retention of
the "Writer" name in Colorado and the confidentiality and no-shop provisions in
the letter of intent.
On January 4, 2000, a meeting was held at Standard Pacific's corporate
offices among Messrs. Seidler, Scarborough and Halvorsen to discuss a revised
pricing structure, proposed by Standard Pacific, that would offer Writer
shareholders an option of either $3.10 per Writer share payable in cash and
Standard Pacific stock or $2.40 per share plus an earn-out of up to $1.70 per
share payable in cash and Standard Pacific common stock. Each shareholder would
have the right to elect either option, but Mr. Writer and the other insiders
would be required to elect the second option. Mr. Seidler expressed concern
about the effect of industry conditions on the achievability of the earn-out
and expressed the importance of maintaining a tax-free transaction structure.
The parties discussed using a forward merger to achieve the tax-free goal and
the effect of possible impediments, such as required third-party consents,
inherent in this structure. The parties further discussed Standard Pacific's
and Writer's respective benefit plans, option plans and bonus plans, the non-
transferability of the earn-out right, and the acceptability of lock-up
provisions to be applicable to existing Writer management and directors.
On January 6, 2000, Mr. Seidler visited Standard Pacific's corporate offices
and met with Messrs. Scarborough, Cortney, Parnes and Halvorsen to further
discuss pricing and other issues. Mr. Seidler proposed keeping the two option
structure, but increasing the amount of the earn-outs from the $1.70 per share
proposed by Standard Pacific to $2.70 per share. Mr. Scarborough indicated his
willingness to accept some increase in the amount of the earn-out, but no
agreement was reached as to the amount of the earn-out or the transaction's
other terms. The parties also discussed the impact on the earn-out if the
earnings target were not achieved, Standard Pacific's proposal that its shares
be valued in the transaction at the higher of book value or market, and the
need to keep the stock consideration equal to not less than 50% of the total
consideration to preserve the tax free exchange.
On January 6, 2000, Writer's board of directors received an offer proposing
to acquire Writer for $3.00 per share in cash from a group headed by Dennis
Coughlin. The Writer board of directors rejected the Coughlin offer at a
meeting on January 10, 2000. Among the reasons for rejection of the Coughlin
offer by the board were inadequacy of price, the lack of credible financing and
the lack of any opportunity for Writer's shareholders to continue to share
directly or indirectly in Writer's potential growth. No further negotiations
were held with the Coughlin group. On July 6, 2000, Mr. Seidler received a
communication from Mr. Coughlin suggesting that if Writer was not confident the
proposed transaction with Standard Pacific would close, Mr. Coughlin believed
he could increase his prior offer by an unspecified amount and close within 60
days. Since Writer expected the merger to close within that time frame, and
since the reasons for rejecting Mr. Coughlin's proposal of January 6, 2000, had
not changed, Writer did not pursue this matter further with Mr. Coughlin.
At a meeting at Standard Pacific's corporate offices among Messrs. Writer,
Seidler, Gillilan, Scarborough, Cortney, Parnes and Halvorsen on January 11,
2000, the participants discussed Standard Pacific's offer and the Coughlin
offer. Mr. Seidler proposed revising the two-option structure to allow Writer
shareholders to elect to receive either $3.10 per Writer share in cash or $2.60
per share plus an earn-out of up to $2.40 payable in a combination in cash and
Standard Pacific common stock, provided that not less than 50% of the total
consideration would be payable in stock to preserve the tax free nature of the
transaction. Mr. Seidler also proposed that Standard Pacific's common stock
would be valued at market, instead of the higher of market or book value, for
purposes of calculating the purchase price. After meeting privately to consider
Writer's proposal, Standard Pacific's representatives suggested eliminating the
earn-out component of the purchase price and focusing on a single purchase
price payable in a combination of cash and Standard Pacific common stock. In
suggesting this simplified structure, Standard Pacific's representatives noted
the complexity of the two-option earn-out structure, Standard Pacific's
increased familiarity with Writer's business plan (lessening the need for an
earn-out from Standard Pacific's perspective), Standard Pacific's desire to
integrate Writer's operations quickly and minimize any potential areas of
friction with Writer's continuing management team, the difficulty in ensuring
tax free treatment of the transaction under the structure proposed by Writer,
and the need to make
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an all cash, or substantially all cash, offer to Writer's non-insider
shareholders in response to the Coughlin
group offer. After considerable negotiation, the parties agreed to a $3.42 per
share purchase price payable in a combination of cash and stock, subject to due
diligence, execution of a definitive agreement, board approval, and other
customary conditions. Not more than 60% and not less than 50% of the total
consideration would be payable in Standard Pacific common stock, and if the
cash option were over-elected, Writer's directors, officers and 15%
shareholders would be required to adjust their elections to accept additional
shares of Standard Pacific common stock.
On January 13, 2000, the Writer board of directors met and authorized
execution of a letter of intent for a merger at $3.42 per share, payable in
cash, stock or a combination of both, with customary terms.
At a January 19, 2000 telephone call among Messrs. Seidler, Scarborough,
Cortney and Halvorsen, the parties discussed the need to establish a collar on
Standard Pacific's stock price, limiting the highest and lowest valuations that
would be used to determine the number of Standard Pacific shares issuable as
merger consideration. During a series of telephone calls over a number of days,
the parties discussed the parameters of the proposed collar on Standard
Pacific's stock price. Initially, Mr. Seidler proposed a collar of $9.50 to
$11.50 per share and Mr. Scarborough proposed a collar of $11.00 to $14.00 per
share. The parties also discussed the advisability of entering into a
confidentiality agreement instead of a letter of intent as a means of
maintaining the confidential, non-public matter of the proposed transaction.
Standard Pacific held a meeting of its board of directors on January 25,
2000. At the meeting, Mr. Scarborough reviewed with the board the proposed
acquisition of Writer, including Writer's operations and management team, the
proposed structure and terms of transaction, projected operating results, the
impact of the transaction on Standard Pacific and the timing of transaction.
The board expressed its support for the transaction and directed management to
continue working towards execution of a definitive agreement and completion of
the transaction.
On January 28, 2000, a letter of intent between Writer and Standard Pacific
was executed. The letter of intent reflected the agreement of the parties to
establish a minimum Standard Pacific share price of $10.25 and a maximum share
price of $13.75 for purposes of valuing the Standard Pacific shares issued as
merger consideration.
On January 31, 2000, the Standard Pacific due diligence team began on-site
due diligence. Standard Pacific's due diligence efforts, both on and off-site,
continued through the execution of the definitive merger agreement, and
included an extensive review of Writer's land positions, business plan and
project pro forma financial statements, as well as various legal, insurance,
accounting, tax and human resource issues.
On February 21, 2000, Gibson, Dunn & Crutcher LLP, counsel to Standard
Pacific, distributed a draft of the proposed merger agreement to the parties
for their review. After discussing the terms of the merger agreement with
Writer personnel, on February 28 and March 8, 2000, Clanahan, Tanner, Downing &
Knowlton, PC, counsel to Writer, provided Writer's initial comments on the
merger agreement to Mr. Halvorsen. From March 8 through April 14, 2000, Mr.
Halvorsen and Gibson, Dunn & Crutcher LLP, continued to negotiate the terms of
the merger agreement with Clanahan, Tanner, Downing & Knowlton, PC. As a result
of these discussions, as well as negotiations directly between the parties, a
number of changes were made to the merger agreement, including the revisions
resulting from the March 24, 2000 meeting discussed below and the addition of a
representation and warranty that Writer would receive a satisfactory fairness
opinion.
On March 23, 2000, there was a meeting at Standard Pacific's corporate
offices among Messrs. Writer, Nickless, Seidler, Scarborough, Cortney, Parnes
and Halvorsen. Mr. Cortney reported that Standard Pacific's due diligence
review had been completed in substantial part. He then raised a number of
issues identified in the due diligence review impacting Standard Pacific's
valuation of the transaction, including the achievability of Writer's business
plan, the appropriateness of Writer's incentive compensation plan in light of
projected increased earnings, unanticipated transaction costs and the treatment
of various balance sheet items in the merger. The parties discussed theses
issues and the relative prospects and businesses of Writer and Standard Pacific
generally. The parties also discussed, without reaching any agreement, the
terms of the merger
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agreement, including in particular the lock-up to which Writer's insiders would
be subject and whether the break up fee would be payable in the event a Writer
representation or warranty became untrue despite the absence of any affirmative
action or inaction by Writer.
On March 24, 2000, there was a further meeting among Messrs. Writer,
Nickless, Seidler, Scarborough, Cortney and Halvorsen held at the Orange County
offices of Gibson, Dunn & Crutcher LLP. Mr. Scarborough discussed the issues
raised in the prior day's meeting, concluding that in his view an adjustment of
the transaction's proposed terms was appropriate, particularly in light of
additional transaction costs not originally anticipated in connection with the
transaction. These transaction costs included the investment banking fee
payable to The Seidler Companies, the cost of tail insurance policies for
Writer's pre-closing operations and the cost of bring-down title insurance
policies. Mr. Cortney proposed a revised management incentive compensation plan
with a lower overall percentage of pre-tax earnings allocated to Writer
management in light of projected higher profitability levels. Mr. Cortney also
stated that Standard Pacific would revise the break up fee provision as
requested by Writer in the prior day's meetings. In response to these
discussions, Mr. Writer proposed a $0.07 per share reduction from the proposed
purchase price, which would result in a per share price of $3.35, an increase
in the low-end collar to $11.00 per Standard Pacific share, a cap on The
Seidler Companies' fee at $700,000 including the cost of its fairness opinion
but excluding reasonable attorneys' fees, and a decrease in the upper-end of
the collar to $13.50 per share. After discussing the merits and responsiveness
of the Writer offer to Standard Pacific's concerns, Standard Pacific accepted
this offer.
On March 30, 2000, the Writer board of directors discussed the purchase
price and collar adjustments, and the rationale leading up to the adjustments
tentatively agreed to at the meetings on March 23 and 24, 2000. A revised draft
of a definitive agreement was presented to the board and the board was advised
of changes requested by Writer management. Management was authorized to execute
a definitive agreement in the form presented with the changes being discussed.
A written consent of the Executive Committee of Standard Pacific's board of
directors dated April 14, 2000 authorized execution of the merger agreement and
all acts required to close the transaction. On April 14, 2000 the definitive
merger agreement was executed by the parties.
On April 25, 2000, Standard Pacific held a board of directors meeting at
which Mr. Cortney reviewed with the board various aspects of the proposed
Writer acquisition, including the material terms of the final merger agreement.
The board ratified and approved the merger agreement and authorized all acts
required to close the transaction.
Certain Projected Information (Unaudited)
In the course of discussions giving rise to the merger agreement,
representatives of Writer furnished representatives of Standard Pacific
operating goals for Writer prepared by Writer's management for fiscal years
2000 and 2001. This information is being included in part in this proxy
statement/prospectus for the limited purpose of giving Writer's shareholders
access to the information made available to Standard Pacific in the merger
discussions. Writer does not as a matter of course make public any estimates as
to its future operating performance or earnings. The information was prepared
solely for Writer's internal management purposes, and was principally intended
to motivate Writer's management and employees to strive to achieve aggressive
financial goals. The projected information was not intended to represent the
most likely financial results for Writer and during the last several years
Writer has not achieved its annual financial goals. To achieve the 2000 and
2001 projected goals would require optimistic assumptions to be realized. The
projected goals were subjective in many respects and thus are susceptible to
various interpretations and periodic revision based upon actual experience and
business developments. The projected goals were not prepared for publication or
with a view to complying with the published guidelines of the Securities and
Exchange Commission regarding projections or with the guidelines established by
the American Institute of Certified Public Accountants. The projected goal for
Writer's pre-tax income was $10 million in 2000 and $16 million in 2001, on
sales of 456 units in 2000 and 633 units in 2001. The pre-tax income targeted
for the first quarter of fiscal 2000 was $1.73 million on sales of 110 units.
The actual pre-tax income for that period was $1.15 million on sales of 83
units.
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In evaluating the merger, Standard Pacific considered the projected
information, but developed its own financial analysis based on the information
provided by Writer as well as Standard Pacific's own experience and what it
viewed to be other appropriate information and assumptions.
The projected information necessarily reflects numerous assumptions, with
respect to general business and economic conditions and other matters, many of
which are inherently uncertain or beyond Writer's or Standard Pacific's
control, and did not take into account any changes in Writer's operations or
capital structure that may result from the merger. The projected information
was developed by Writer based on the anticipated sales and average sales price
at each property under development or then being considered for purchase and
development. Costs were derived primarily as a percentage of revenue based on
historical experience, but also took into account anticipated changes in
operations, including increases in overhead necessary to bring potential new
projects to market. It is not possible to predict whether the assumptions made
in preparing the projected goals will be valid, and actual results may prove to
be materially higher or lower than those contained in the projected
information.
Inclusion of the projected information should not be regarded as an
indication that Writer, Standard Pacific or anyone else who received this
information considered it a reliable predictor of future events, and this
information should not be relied upon as such. The projected information was
not audited or reviewed by any independent accounting firm. In light of the
uncertainties inherent in projections of any kind, the inclusion of this
information should not be regarded as a representation that the estimated
results will be realized, and as noted above, have not been achieved for the
first quarter of fiscal 2000.
The information discussed in this section includes forward-looking
statements that involve risks and uncertainties. These risks and uncertainties
are discussed in greater detail elsewhere in this proxy statement/prospectus,
including under the heading "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION" on page 20, and in Writer's periodic filings with the Securities
and Exchange Commission, which are attached to this proxy statement/prospectus
or are available for inspection in the manner set forth under the heading
"WHERE YOU CAN FIND MORE INFORMATION" on page 97.
Joint Reasons for the Merger
The board of directors of Standard Pacific and Writer have determined that
following the merger the combined company would have the potential to realize
long-term improved operating and financial results and a stronger competitive
position. Standard Pacific's and Writer's board of directors have identified
potential benefits of the merger that they believe will contribute to the
success of the combined company. These potential benefits from combining Writer
with Standard Pacific include the following:
. Writer's operations in the Colorado market would complement Standard
Pacific's operations in the California, Texas and Arizona markets.
. The merger complements each company's core strengths in developing and
building single-family homes for use as primary residences;
. Standard Pacific's financial strength and relationships will lower
Writer's cost of capital and provide Writer with additional financing
alternatives;
. The merger will provide an opportunity to achieve synergies through the
sharing of design concepts, greater land acquisition, development and
building capabilities, and centralized corporate functions, such as
financing, risk management, human resources and management information
systems; and
. Standard Pacific and Writer share a compatible business culture,
including a shared vision of growth and complementary management skills
and expertise.
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Recommendation of the Writer Board of Directors and Writer's Reasons for the
Merger
The board of directors of Writer believes that the merger is advisable and
in the best interests of Writer and its shareholders. Accordingly, the Writer
board of directors has unanimously approved the merger agreement and recommends
that Writer shareholders vote for the adoption of the merger agreement.
In approving the merger, Writer's board of directors considered the
following benefits, which, in the view of the board, supported its
determination:
. The merger will permit shareholders electing cash to realize current
consideration greater than recent market prices for Writer stock.
. The combined company, as compared to Writer on its own, will have
greater financial resources and provide increased opportunities to
expand Writer's product offerings and markets.
. The merger relieves Writer and its management team from some
administrative and management burdens, including the need to secure
project-by-project financing, allowing Writer to focus upon market
opportunities, product offerings and product execution.
. The merger may provide a more stable platform for Writer's employees and
customers.
. The merger will enable shareholders to continue to indirectly share in
Writer's growth over the long term as part of a larger company with a
more liquid trading market.
. The merger will yield for Writer shareholders an attractive exchange
ratio for their shares of Writer common stock.
. The liquidity provided by the market for Standard Pacific common stock
will reduce the risk associated with an investment in a smaller company
such as Writer.
In reaching its decision to approve the merger agreement, the board of
directors of Writer consulted with Writer's management, as well as with its
financial and legal advisors. The following discussion of factors considered by
Writer's board of directors is not intended to be exclusive but summarizes the
material factors considered:
. Writer's board of directors reviewed various historical information
concerning Writer's and Standard Pacific's respective businesses,
financial performances and conditions, operations, management teams and
competitive positions. The board of directors of Writer considered
available information about Standard Pacific, including its public
reports for its most recently completed fiscal year and subsequent
fiscal quarters as filed with the Securities and Exchange Commission. In
addition, the board of directors instructed management to conduct
additional due diligence on Standard Pacific's financial condition and
prospects, and the results of that due diligence were reported to
Writer's board of directors. The board of directors concentrated in
particular on each company's financial condition, results of operations,
businesses and prospects before and after giving effect to the merger.
In particular, Writer's board of directors noted that both companies had
significant revenue and operating profit growth over recent years and
are leaders in their respective market segments. Based in part upon
these factors, the board of directors of Writer believes that a merger
with Standard Pacific would be in the best interests of Writer and its
shareholders.
. Writer's board of directors examined current financial market conditions
and historical market prices, volatility and trading information with
respect to shares of Writer common stock and Standard Pacific common
stock. In particular, the board noted the recent fluctuations in
Writer's stock price, from lows such as $1.50 as recently as January 3,
2000, to a high of $3.00 on February 28, 2000. While Standard Pacific's
stock is also subject to fluctuations, they are not as significant on a
percentage basis as the fluctuations in Writer common stock. In
addition, the board noted that Standard Pacific's daily trading volume
reported by The New York Stock Exchange averaged approximately 56,263
shares over the three months prior to March 31, 2000, while Writer's
averaged approximately 11,460 shares over the same time period.
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. Writer's board of directors compared the consideration to be paid in the
merger, including TWC Acquisition's assumption of $27.7 million of
Writer indebtedness, as estimated at the time of the comparison, with
the consideration paid in various comparable merger transactions. The
details of this comparison are set forth below under "THE MERGER--
Opinion of Writer's Financial Advisor" on page 34. Based on this
comparison, the board of directors of Writer believes that the merger
consideration for each share of Writer common stock falls within the
range of what is reasonable and fair for Writer shareholders.
. Writer's board of directors viewed the terms of the merger agreement,
including but not limited to, the parties' representations, warranties
and covenants, the conditions to their respective obligations and the
termination provisions, as reasonable in light of the entire
transaction. Writer's board of directors also considered the terms of
the proposed merger agreement regarding Writer's rights to consider and
negotiate other acquisition proposals under prescribed circumstances, as
well as the possible effects of provisions regarding liquidated damages.
The board considered that the provisions in these agreements for the
benefit of Writer reasonably protected the interests of Writer
shareholders, and those for the benefit of Standard Pacific did not
present any significant reasons not to proceed with the transaction
considering all of the circumstances.
. Writer's board of directors considered The Seidler Companies' opinion
that the merger consideration to be paid by Standard Pacific for each
share of Writer common stock was fair to Writer shareholders from a
financial point of view.
. Writer's board of directors considered the anticipated impact of the
proposed transactions on the combined company's future performance,
financial and otherwise. In this regard, the board expected that the
combined company might be able to realize synergies in their combined
designing, planning, developing, building, administrative and finance
operations. Potential synergies considered by Writer's board of
directors included greater access to capital, expanded sales and
marketing capabilities, increased purchasing power for raw materials and
other resources, increased building and development capabilities and
increased access to designing technologies and capabilities. The board
also evaluated the potential for any cost savings. Writer's board of
directors also noted favorably that the former Writer shareholders, if
stockholders of Standard Pacific after the merger, would share the
benefits of any of these synergies.
. The Writer board of directors considered the merger's impact on Writer's
customers and employees. Generally, the board viewed the impact on
employees as positive, in that they would become part of a
geographically diversified leader in single-family home construction and
participate in a successful company that has substantially greater
resources than Writer. Writer's board of directors also generally viewed
the impact on Writer's customers as positive, in that they also would
benefit from having a much larger participant in the industry standing
behind Writer's designs and a knowledge that Writer likely will have the
resources to continue to develop planned residential communities faster
and in a broader area.
. Writer's board of directors received reports from Writer's management
and its financial advisor as to the results of their due diligence
investigation of Standard Pacific, which consisted in part of reviewing
publicly available information and research analyst reports. The
reviewed reports indicated no significant issues that would preclude
approval of the merger by Writer's board of directors.
The board of directors of Writer also identified and considered a variety of
potentially negative factors in its deliberations concerning the merger,
including, but not limited to:
. the challenges of integrating a business such as Writer with a company
such as Standard Pacific, and the associated risk that the potential
benefits sought in the merger might not be fully realized;
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. the possibility that the merger might not be consummated, and the effect
of public announcement of the merger on:
. Writer's sales, operating results and stock price;
. Writer's ability to attract and retain key management, sales and
marketing, design and other technical personnel;
. the progress of potential and actual development projects with third
parties who may view working with Standard Pacific differently than
working with Writer; and
. Writer's ability to secure financing for its operations.
. the possibility of substantial charges to be incurred in connection with
the merger, including costs of integrating the businesses and
transaction expenses arising from the merger;
. the risk that despite the efforts of the combined company, key technical
and management personnel might not remain employed with the combined
company;
. the interests of officers and directors of Writer in the merger,
including the matters described under "THE MERGER--Interests of Writer's
Management in the Merger and Potential Conflicts of Interests" on page
52:
. the effect on Writer's ability to consider competing offers prior to
consummation of the merger, including the effect of the covenant to not
solicit other bidders and the liquidated damages provisions in the
merger agreement;
. risks associated with fluctuations in Standard Pacific's stock price
prior to closing of the merger; and
. the risks described under "RISK FACTORS--Risk Factors Relating to the
Merger" beginning on page 14.
In the judgment of Writer's board, the potential benefits of the merger
outweighed these considerations.
The board of directors of Writer also considered what alternatives existed
to the merger, including reviewing the prospects for Writer as an independent
company. In light of the factors described above, the board determined that the
value and benefits available to Writer shareholders from the merger exceeded
the potential they might realize from Writer continuing as an independent
company.
Writer's board of directors also considered the potential that a third party
might be willing to enter into a strategic relationship with Writer or propose
to acquire Writer. The board did not, however, view this possibility as likely
to provide an alternative superior to the merger with Standard Pacific. The
Writer board believed that Standard Pacific was a good merger candidate for the
reasons set forth in "THE MERGER--Joint Reasons for the Merger" on page 30. The
Writer board did not believe that any other party could provide benefits that
are superior to the benefits provided by Standard Pacific described above. In
this light, the board of directors of Writer also evaluated Standard Pacific's
requirement that Writer agree to the provisions of the merger agreement
limiting Writer's rights to consider and negotiate acquisition proposals with
others. It appeared unlikely to the board that Writer would be able to enter
into a transaction with Standard Pacific without these provisions.
The above discussion of the information and factors considered by the board
of directors of Writer is not intended to be exhaustive but includes all
material factors considered by it. In reaching its determination to approve and
recommend the merger, the board of directors of Writer did not assign any
relative or specific weights to the foregoing factors, and individual directors
may have given differing weights to different factors. Writer's board of
directors is unanimous in its recommendation that Writer shareholders vote for
approval and
33
<PAGE>
adoption of the merger agreement. For a discussion of the interests of the
executive officers and directors of Writer in the merger, see "THE MERGER--
Interests of Writer's Management in the Merger and Potential Conflicts of
Interests" on page 52.
The above discussion of reasons for the merger includes forward-looking
statements about possible or assumed future results of operations of the
combined company and the performance of the combined company after the merger.
Future results and performance are subject to risks and uncertainties, which
could cause results and performance to differ significantly from those
expressed in these statements. For a discussion of these risks and
uncertainties, and other factors that could affect future results and
performance, see "RISK FACTORS" beginning on page 14.
The Engagement of Writer's Financial Advisor.
The Seidler Companies has acted as financial advisor to Writer in connection
with the merger. Roland Seidler, Jr., a director of Writer, is Chairman of the
board and Chief Executive Officer of The Seidler Companies. The Seidler
Companies has acted as financial advisor to Writer on several occasions, and
was co-underwriter of Writer's initial public offering.
The Seidler Companies is an investment banking firm and, as part of its
investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
competitive bids, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. Writer's
board of directors selected The Seidler Companies because of its expertise,
reputation and familiarity with Writer and the home building industry generally
and because its investment banking professionals have substantial experience in
transactions comparable to the merger.
As compensation for its services in connection with the merger, Writer has
agreed to pay The Seidler Companies:
. a retainer fee of $25,000;
. an opinion fee of $150,000; and
. a fee upon consummation of the merger of $550,000, against which the
retainer fee would be credited.
In addition, Writer has agreed to reimburse The Seidler Companies for
reasonable out-of-pocket expenses incurred in connection with the merger and to
indemnify The Seidler Companies for those liabilities that may arise out of its
engagement by Writer and the rendering of The Seidler Companies' opinion.
Writer believes that the compensation paid to The Seidler Companies is not
greater than that which would have been paid to a financial advisor not
affiliated with Writer.
The Seidler Companies and its affiliates may, in the ordinary course of its
business, actively trade securities of Writer and Standard Pacific for its own
account or for the accounts of its customers. Accordingly, The Seidler
Companies and its affiliates may at any time hold a long or short position in
Writer and Standard Pacific securities.
Opinion of Writer's Financial Advisor
General. The Seidler Companies rendered its oral opinion to Writer's board
of directors, subsequently confirmed in a written opinion dated May 12, 2000,
that the consideration proposed to be received by Writer's shareholders in
connection with the merger is fair from a financial point of view, to Writer's
shareholders. In providing the opinion, The Seidler Companies took into
consideration that TWC Acquisition would assume $27.7 million of Writer
indebtedness, as estimated at the time of rendering of the opinion. In
rendering its opinion, The Seidler Companies relied on Writer's determination
of the amount of consideration to be paid pursuant to the merger.
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The full text of The Seidler Companies' written opinion dated May 12, 2000
is included as Appendix E to this proxy statement/prospectus and is
incorporated herein by reference. The summary of The Seidler Companies' opinion
set forth in this proxy statement/prospectus is qualified in its entirety by
reference to the full text of The Seidler Companies' opinion. Holders of shares
of Writer common stock should read The Seidler Companies' opinion for the
procedures followed, factors considered, assumptions made and qualifications
and limitations of the review taken by The Seidler Companies in connection with
its opinion.
Although The Seidler Companies evaluated the fairness from a financial point
of view, of the consideration to be received by the holders of Writer common
stock in the merger, the exchange ratio was determined by Writer and Standard
Pacific during the course of negotiations. Writer imposed no limitations on the
scope of The Seidler Companies' investigation or the procedures to be followed
by The Seidler Companies in rendering its opinion, except that Writer did not
authorize The Seidler Companies to solicit, and The Seidler Companies did not
solicit, any indications of interest from any third party with respect to the
purchase of all or a part of Writer's business. In addition, The Seidler
Companies did not have any access to any financial forecasts or projections
prepared by the management of Standard Pacific as to the future financial
performance of Standard Pacific.
The Seidler Companies' advisory services and opinion were provided for the
information and assistance of the Writer board of directors in connection with
its consideration of the merger. The Seidler Companies' opinion is not a
recommendation to any Writer shareholder as to how that shareholder should vote
with respect to the merger. The Seidler Companies' opinion does not address
Writer's underlying business decision to proceed with or effect the merger.
In arriving at its opinion, The Seidler Companies reviewed and analyzed:
. the merger agreement and the specific terms of the merger;
. publicly available information concerning Writer and Standard Pacific
that it believed to be relevant to its analysis;
. publicly available financial and operating information with respect to
the business, operations and prospects of Writer;
. publicly available information concerning the future financial
performances of Writer and Standard Pacific;
. a trading history of Writer common stock from January 1, 1995 to the
present, and a comparison of that trading history with those of other
companies that it deemed relevant;
. a trading history of Standard Pacific common stock from January 1, 1995
to the present, and a comparison of that trading history with those of
other companies that it deemed relevant;
. a comparison of the historical financial results and present financial
condition of Writer with those of other companies that it deemed
relevant;
. a comparison of the historical financial results and present financial
condition of Standard Pacific with those of other companies that it
deemed relevant; and
. a comparison of the financial terms of the merger with the financial
terms of those other transactions that it deemed relevant.
In addition, The Seidler Companies had discussions with the management of
Writer concerning the business, operations, assets, financial condition and
prospects of Writer and undertook further studies, analyses and investigations
as The Seidler Companies deemed appropriate, all as summarized below.
In arriving at its opinion, The Seidler Companies assumed and relied upon,
without independent verification, the accuracy and completeness of the
historical and projected financial information as well as other information
used by it. The Seidler Companies also relied upon the assurances of Writer's
management that
35
<PAGE>
they are not aware of any facts or circumstances that would make the
information relied upon by The Seidler Companies inaccurate or misleading. Upon
Writer's advice, The Seidler Companies assumed that the financial projections
of Writer were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of Writer's management as to the future
financial performance of Writer. The Seidler Companies did not independently
verify the accuracy or completeness of the information supplied to it with
respect to Writer and Standard Pacific and does not assume responsibility for
it. The Seidler Companies did not make any independent appraisal of the
specific properties or assets of Writer.
The Seidler Companies did not conduct a physical inspection of the
properties and facilities of Writer or Standard Pacific. The Seidler Companies
also did not make or obtain any evaluations or appraisals of the assets or
liabilities of Writer. Upon advice of Writer and its legal and accounting
advisors, The Seidler Companies assumed that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, and therefore as a tax-free transaction to the shareholders of Writer to
the extent that shares of Standard Pacific common stock are received as merger
consideration. The written opinion of The Seidler Companies is based upon the
business, economic, market, and other conditions as they existed as of April
14, 2000.
In arriving at its opinion, The Seidler Companies did not ascribe a specific
range of values to Writer or Standard Pacific, but rather made its
determination as to the fairness, from a financial point of view, of the merger
consideration to be offered to Writer's shareholders in the merger on the basis
of the financial and comparative analyses described below. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial and comparative analyses and the application of
those methods to the particular circumstances, and therefore, a fairness
opinion is not readily susceptible to summary description. In arriving at its
opinion, The Seidler Companies specifically conducted the comparable company,
comparable transaction, discounted cash flow and market trading analyses
described below. The Seidler Companies drew no specific conclusion from these
analyses, but subjectively factored its observations from the analyses into its
qualitative assessment of the relevant facts and circumstances.
Furthermore, The Seidler Companies did not attribute any particular weight
to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, The Seidler Companies believes that its analyses must be
considered as a whole and that considering any portion of its analyses and
factors, without considering all analyses and factors as a whole, could create
a misleading or incomplete view of the process underlying its opinion. In its
analyses, The Seidler Companies made numerous assumptions with respect to
Writer, industry performance, general business, economic, market and financial
conditions and other matters, most of which are beyond Writer's control. Any
estimates contained in these analyses were not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than suggested by these analyses. In addition, analyses
relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold.
Accordingly, The Seidler Companies' analyses and estimates are inherently
subject to significant uncertainty.
The following is a summary of the material financial analyses used by The
Seidler Companies in connection with rendering its opinion to the Writer board
of directors. Some of the summaries of the financial and comparative analyses
include information presented in tabular format. In order to fully understand
the methodologies used by The Seidler Companies and the results of its
financial and comparative analyses, the tables must be read together with the
text of each summary. The tables alone do not constitute a complete description
of the financial and comparative analyses. Accordingly, the information
presented in the tables and described below must be considered as a whole.
Considering any portion of these analyses and of the factors considered,
without considering all analyses and factors as a whole, could create a
misleading or incomplete view of the process underlying The Seidler Companies'
opinion.
Comparable Company Analysis. Using publicly available information, The
Seidler Companies compared selected financial data of Writer with similar data
of selected companies engaged in businesses considered by
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<PAGE>
The Seidler Companies to be comparable to that of Writer. Specifically, The
Seidler Companies included in its review a group of developers and builders of
planned residential communities and single family homes. This group consisted
of a number of companies, including:
. Centex Corporation, . MDC Holdings, Inc.,
. Crossman Communities, Inc., . NVR, Inc.,
. D. R. Horton, Inc., . Pulte Corporation,
. Del Webb Corporation, . Ryland Group, Inc.,
. Engle Homes, Inc., . Schuler Homes, Inc.,
. Hovnanian Enterprises, Inc., . Standard Pacific Corp.,
. Kaufman & Broad Home Corporation, . Toll Brothers, Inc., and
. Lennar Corporation, . U.S. Home Corporation.
. M/I Schottenstein Homes, Inc.,
The Seidler Companies also analyzed these companies by market capitalization
after observing the high degree of correlation between share price to earnings
and book value per share relative to each company's market capitalization. The
large-cap companies were valued, as a group, relatively higher than the mid-cap
and small-cap group of comparable companies. The comparable companies listed
above were divided into three sub-groups: large-cap companies (market
capitalizations greater than $500 million), mid-cap companies (market
capitalizations greater than $200 million but less than $500 million) and
small-cap companies (market capitalizations less than $200 million). The large-
cap companies were Centex Corporation, Lennar Corporation, Pulte Corporation,
Kaufman & Broad Home Corporation, D. R. Horton, Inc., Toll Brothers, Inc. and
NVR, Inc. The mid-cap companies were U.S. Home Corporation, MDC Holdings, Inc.,
Standard Pacific Corp., Del Webb Corporation and Ryland Group, Inc. The small-
cap companies were Crossman Communities, Inc., Hovnanian Enterprises, Inc., M/I
Schottenstein Homes, Inc., Schuler Homes, Inc. and Engle Homes, Inc.
Comparable Company Median Multiples as of April 14, 2000:
<TABLE>
<CAPTION>
Calendar
Year
Latest -----------
Four Quarters 2000E 2001E
-------------- ----- -----
<S> <C> <C> <C>
Market Price to Earnings Per Share:
Total Group 4.7X 4.5X 4.4X
Small Cap Group 4.2X 3.9X 3.4X
As of
Latest Quarter
--------------
<CAPTION>
Market Price to Book Value per
Share:
<S> <C> <C> <C>
Total Group 0.8X
Small Cap Group 0.6X
As of
Latest Quarter
--------------
<CAPTION>
Enterprise Value to EBITDA:
<S> <C> <C> <C>
Total Group 5.9X
Small Cap Group 5.9X
</TABLE>
Using Writer's reported financial results for the latest four quarters ended
December 31, 1999, the comparable company analysis resulted in a range of per
share values for Writer's common stock of $1.73 to $3.51 and an enterprise
value of approximately $34.9 million.
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Comparable Transaction Analysis. The Seidler Companies analyzed those
valuation measures relating to merger and acquisition transactions involving
companies that are developers and builders of planned residential communities
and single-family homes as set forth below:
. Beazer Homes USA Inc., . Lewis Homes Corporation,
. Centex Corporation, . Pacific Realty Group,
. Continental Homes Holding Corporation, . Real Homes Inc.,
. Crossman Communities, Inc., . Saxton, Inc.,
. D. R. Horton, Inc., . Standard Pacific Corp.,
. Diamond Key Homes, Inc., . Sundance Homes, Inc.,
. Hallmark Residential Group, Inc., . Technical Olympic, S.A.,
. Homes By Huff & Co., Inc., . The Presley Companies,
. Kvaerner PLC (Trafalger House), . UDC Homes, Inc., and
. Kaufman & Broad Home Corporation, . William Lyon Homes.
In performing its analysis, The Seidler Companies considered fluctuations in
merger and acquisition activity over time resulting from changes in interest
rates and the equity markets, industry results, and growth expectations for the
residential homebuilding sector. No company or transaction examined in this
analysis was directly comparable to Writer. Therefore, the analysis of the
results of the foregoing transaction involved complex considerations and
judgments concerning differences in financial and operating factors regarding
the companies that could impact transaction value.
The median ratio of total invested capital (amount paid for common equity
plus assumption of interest-bearing debt and preferred equity) to earnings
before interest, taxes, depreciation and amortization was 6.9X for the
transactions represented by the group listed above. Based on Writer's
historical financial results for the latest four quarters ended December 31,
1999, the comparable transaction analysis resulted in an implied enterprise
value of approximately $40.8 million utilizing the median multiple indicated
above compared to an enterprise value of approximately $52.7 million for Writer
under the terms of the merger. In addition, the median premium of the offer
price per share compared to the public market price of the common stock one
business day prior to announcement of the transactions was 37.0% for the same
group. In comparison, the purchase price of $3.35 per share of Writer common
stock represents a 48.9% premium on the closing market price one business day
prior to the initial announcement of the transaction between Standard Pacific
and Writer, which occurred on January 31, 2000.
Discounted Cash Flow Analysis. The Seidler Companies performed a discounted
cash flow analysis. In conducting its analysis, The Seidler Companies utilized
financial information provided by Writer's management, discount rates of 10%-
20%, and assumptions necessary to complete its analysis. This discounted cash
flow analysis resulted in an enterprise value range of approximately $47.9
million to $71.2 million. For purposes of its fairness opinion, included as
Appendix E to this proxy statement/prospectus, The Seidler Companies utilized a
narrower discount rate range of 15%-20% to reflect the uncertainties associated
with Writer's projections, specifically mortgage rates, timing of sales and
obtaining building permits, as well as the volatility of the home-building
industry in general. This discounted cash flow analysis resulted in an
enterprise value range of approximately $47.9 million to $58.1 million.
Market Trading Analysis. The Seidler Companies reviewed current and
historical market prices of Writer's common stock over the last five years.
During the five-year period ending January 24, 2000, five business days prior
to the initial announcement of the transaction on January 31, 2000, common
stock closing prices ranged from a high of $2.625 per share to a low of $0.875
per share with an average price of $1.573 per share. The purchase price of
$3.35 per share of Writer common stock represents a 27.6%, 282.9%, and 113.0%
premium to these historical share prices, respectively. The Seidler Companies
also compared the performance
38
<PAGE>
of common stock of comparable companies listed on page 37, under the section
"Comparable Company Analysis," relative to that of Writer during the same time
period. Comparatively, the price of Writer's common stock underperformed the
average price for the comparable group during the five-year period ended
January 24, 2000.
Merger Consideration
At the effective time of the merger, each share of your Writer common stock
outstanding immediately prior to the effective time of the merger will be
canceled and converted into the right to receive, at your election, $3.35 in
cash, or a fraction of a share of Standard Pacific common stock equal to the
quotient of $3.35 divided by the adjusted twenty-day average price for Standard
Pacific common stock, or a combination of cash and Standard Pacific common
stock, subject to the election, allocation and proration provisions set forth
in the merger agreement, other than:
. shares held by any of Writer's subsidiaries,
. shares held by Standard Pacific, TWC Acquisition or any other subsidiary
of Standard Pacific, and
. dissenting shares as to which appraisal rights have been perfected in
strict accordance with Colorado law.
If the average closing sale price of Standard Pacific common stock is less
than $11.00 per share, the twenty-day average price used for calculating the
fraction of a share of Standard Pacific common stock to be received for each
share of Writer common stock will be $11.00, and if the twenty-day average
closing price is more than $13.50 per share, the average price used will be
$13.50. You may elect to receive a combination of cash and shares of Standard
Pacific common stock in exchange for your shares of Writer common stock. If you
wish to make an election of cash or Standard Pacific common stock or a
combination of cash and Standard Pacific common stock, you must make an
election in accordance with the election procedure described below.
Each share of Writer common stock owned by Standard Pacific or any direct or
indirect wholly owned subsidiary of Standard Pacific or Writer immediately
prior to the effective time of the merger will be canceled without any
conversion or payment. Each issued and outstanding share of capital stock of
TWC Acquisition will continue as a share of common stock of the surviving
corporation, and each certificate representing shares of TWC Acquisition will
continue to represent the same number of shares of common stock of the
surviving corporation.
Each share of Writer common stock that is issued and outstanding immediately
prior to the effective time of the merger and that is held by a holder who has
properly demanded and perfected his or her rights to dissent from the merger
and to be paid the "fair value" of his or her shares in accordance with
Colorado law will not be converted into or exchangeable for cash or shares of
Standard Pacific common stock. Instead, the dissenting holder will be entitled
to any rights granted by Colorado law, and the surviving corporation will make
any payments to the dissenting holders in accordance with Colorado law. If a
holder fails to perfect or loses the right to dissent and receive payment under
Colorado law, each share of Writer common stock held by that
holder will be converted, subject to the election, allocation or proration
provisions in the merger agreement, into the same combination of cash, without
interest, and shares of Standard Pacific common stock as a holder of the same
number of shares of Writer common stock with respect to which no election was
made.
Proration
The merger agreement provides that no more than 60% of the merger
consideration will be paid in shares of Standard Pacific common stock. If
Writer shareholders holding more than 60% of the outstanding shares of Writer
common stock elect to receive shares of Standard Pacific common stock, then:
. all shares of Writer common stock covered by elections to receive cash
and all shares of Writer common stock covered by non-elections will be
converted into the right to receive $3.35 per share in cash; and
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<PAGE>
. all shares of Writer common stock covered by elections to receive
Standard Pacific common stock will be converted into the right to
receive on a consistent basis, across all shares electing to receive
shares of Standard Pacific common stock, cash and shares of Standard
Pacific common stock as follows:
. a fractional share of Standard Pacific common stock equal to the
exchange ratio multiplied by the number of shares equal to 60% of
the outstanding shares of Writer common stock divided by the
aggregate number of shares of Writer common stock covered by
elections to receive shares of Standard Pacific common stock; and
. cash in an amount equal to:
. the difference between (A) one and (B) the number of shares equal
to 60% of the outstanding shares of Writer common stock divided
by the aggregate number of shares of Writer common stock covered
by elections to receive shares of Standard Pacific common stock.
. multiplied by $3.35.
The merger agreement also provides that no more than 50% of the merger
consideration will be paid in cash. In making the calculation, merger
consideration to be paid in cash will include cash amounts paid for the
following:
. fractional shares;
. an estimate of cash amounts for any dissenting shares;
. any cash amounts paid by Standard Pacific or Writer, or anyone related
to Standard Pacific or Writer within the meaning of Treasury Regulation
Sections 1.368-1(e) and 1.368-1T(e), to, or on behalf of, any
shareholder of Writer in connection with the sale or other disposition
of the shares of Writer common stock in connection with the merger for
purposes of Treasury Regulations Section 1.368-1(e) and 1.368-1T(e); and
. any extraordinary dividend distributed by Writer prior to and in
connection with the merger for purposes of Treasury Regulations Section
1.368-1T(e).
If Writer shareholders elect to receive more than 50% of the merger
consideration as cash, then:
. all shares of Writer common stock covered by elections to receive shares
of Standard Pacific common stock and all shares of Writer common stock
covered by non-elections will be converted into the right to receive
shares of Standard Pacific common stock, at the exchange ratio; and
. shares of Writer common stock covered by elections to receive cash will
be adjusted as follows:
. The shares of Writer common stock held by members of the Writer
management group who elected cash will be adjusted so that the
number of shares of Writer common stock held by the members of the
Writer management group, to the extent necessary, will be reduced to
allow each other shareholder of Writer that is not a member of the
Writer management group to receive cash for all of his or her shares
of Writer common stock covered by elections to receive cash, or as
close as possible to all cash.
. If the aggregate cash consideration to be paid in the merger
continues to exceed 50% of the aggregate merger consideration after
the adjustment to the cash elections of the Writer management group,
then each remaining share of Writer common stock covered by cash
elections will be converted on a consistent basis, across all shares
electing to receive cash held by shareholders who are not members of
the Writer management group, into cash and shares of Standard
Pacific common stock, as follows:
. cash in an amount so that the aggregate cash consideration to be
paid in the merger will equal 50% of the aggregate merger
consideration to be paid; and
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<PAGE>
. a fractional share of Standard Pacific common stock equal to (A)
the difference between $3.35 and the amount paid in cash, divided
by (B) the Standard Pacific average trading price (subject to the
minimum price of $11.00 and the maximum price of $13.50).
The merger agreement also provides that if after accounting for all
elections, no more than 50% of the merger consideration will be paid in cash
and no more than 60% of the merger consideration will be paid in shares of
Standard Pacific common stock, then:
. all shares of Writer common stock covered by elections to receive cash
will be converted into the right to receive $3.35 per share in cash.
. all shares of Writer common stock covered by elections to receive shares
of Standard Pacific common stock will be converted into the right to
receive shares of Standard Pacific common stock, at the exchange ratio.
. an appropriate allocation will be made on a consistent basis among
shares covered by non-elections so that:
. the aggregate merger consideration to be paid in cash and the
aggregate value, at the valuation price, of the Standard Pacific
common stock issued as part of the merger consideration will each
equal 50% of the aggregate merger consideration paid for all shares
of Writer common stock, so that each share covered by a non-election
will be converted into the right to receive:
. a cash amount equal to (A) the difference between 50% of the
total merger consideration and the aggregate consideration to be
paid in cash in connection with the merger, without taking into
consideration cash to be paid on the shares covered by a non-
election, divided by (B) the number of shares covered by non-
elections; and
. a fractional share of Standard Pacific common stock equal to (A)
the difference between $3.35 and the amount paid in cash for
shares covered by non-elections under the formula above, divided
by (B) the adjusted twenty-day average price for Standard Pacific
common stock.
. Notwithstanding the foregoing, if the shares covered by stock elections
are greater than 50% of the outstanding shares of Writer common stock at
the effective time of the merger, but less than 60% of those shares,
then all shares covered by non-elections will be treated as shares
covered by cash elections.
Examples of Proration
The following examples illustrate the potential effects of proration and are
summarized in the table below. Each example assumes that the price per share of
Standard Pacific common stock is the same on the effective date of the merger
as it was over the twenty trading-day measurement period although we cannot
assure you that this will be the case, and it is likely the prices will be
different.
EXAMPLE A. Holder A owns 100 shares and elects all cash.
If Holder A and the other shareholders in the aggregate elect to receive
less than 50% of the merger consideration as cash, then Holder A will receive
$335 in cash, or $3.35 for each of his or her 100 shares.
The members of the Writer management group beneficially own 3,801,150 shares
of Writer common stock, or approximately 50% of the outstanding Writer shares.
As part of the transaction these shareholders have agreed to accept an
adjustment in the cash elections of each member if Writer shareholders over-
elect to receive cash. In such a case, each member of the Writer management
group electing to receive cash will be allocated shares of Standard Pacific
common stock pro rata to ensure that the cash consideration will be as close as
possible to 50% of the total merger consideration, without being more than 50%.
Therefore, if Holder
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A and the other Writer shareholders in the aggregate elect to receive more than
50% of the merger consideration in cash, then members of the Writer management
group electing to receive cash will have each of their cash election shares
adjusted so that they receive shares of Standard Pacific common stock and cash
to the extent necessary so that the aggregate cash to be paid in the merger
will equal 50%, or as close as possible to, without being greater than, 50%, of
the aggregate merger consideration. In such a case, if Holder A is not a member
of the Writer management group, then Holder A will receive $335 in cash, or
$3.35 for each of his or her 100 shares (assuming that adequate adjustment can
be made to the elections of the Writer management group).
If after the adjustment to the cash elections of the Writer management
group, Holder A and the other Writer shareholders in the aggregate elect to
receive more than 50% of the merger consideration in cash, then the Writer
shareholders who elected to receive cash and who are not members of the Writer
management group will be required to receive some shares of Standard Pacific
common stock, on a consistent basis, so that the aggregate cash consideration
to be paid in the merger will be 50% of the aggregate merger consideration.
EXAMPLE B. Holder B owns 100 shares and elects to receive all shares of
Standard Pacific common stock.
This example assumes a twenty-day average price for Standard Pacific common
stock of $11.00 per share, which would result in an exchange ratio of 0.3045.
If the holders of no more than 60% of the outstanding shares of Writer elect to
receive shares of Standard Pacific common stock, then Holder B will receive
0.3045 shares of Standard Pacific common stock for each of his or her 100
shares, or 30 shares of Standard Pacific common stock and $4.95 for the 0.45
fractional share of Standard Pacific common stock.
If the holders of more than 60% of the outstanding shares of Writer elect to
receive shares of Standard Pacific common stock, the number of shares of
Standard Pacific common stock received by the shareholders electing to receive
Standard Pacific common stock will be reduced and they will be required to
receive some cash. For example, if in the aggregate, holders of 75% of the
outstanding Writer shares elect to receive shares of Standard Pacific common
stock, then each holder electing to receive shares, including Holder B, would
be able to receive 80% (60% / 75%) of the shares of Standard Pacific common
stock he or she would have received if there had been no over-election.
Therefore, Holder B would receive 24 shares of Standard Pacific common stock
and would receive $70.96 in cash ($67.00 plus $3.96 for the fractional share).
If all shareholders elect to receive shares, Holder B would receive 18 shares
of Standard Pacific common stock and $136.97 in cash ($134.00 plus $2.97 for
the fractional share).
EXAMPLE C. Holder C owns 100 shares and elects to receive shares of Standard
Pacific common stock for 50 shares and receive cash for 50 shares.
This example assumes a twenty-day average price for Standard Pacific common
stock of $11.00 per share, which would result in an exchange ratio of 0.3045.
If shareholders, including Holder C, do not over elect to receive cash or
shares of Standard Pacific common stock, then Holder C will be able to receive
15 shares of Standard Pacific common stock and will receive $169.98 in cash
($167.50 for 50 shares of Writer common stock at $3.35 per share, plus $2.48
for the fractional share).
If the Writer shareholders, including Holder C, in the aggregate elect to
receive cash so that more than 50% of the merger consideration would be cash,
then Holder C may receive more shares of Standard Pacific common stock and less
cash. First the cash election shares of the Writer management group would be
adjusted, and if after that adjustment there continued to be an over-election
of cash, all other shareholders electing cash would receive for each cash
election share of Writer common stock less than $3.35 in cash and a fractional
share of Standard Pacific common stock.
If the holders of more than 60% of the outstanding shares of Writer elect to
receive shares of Standard Pacific common stock, then Holder C will receive
less than 15 shares of Standard Pacific common stock and more cash. For
example, if holders of 75% of the outstanding Writer shares elect to receive
shares of Standard
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Pacific common stock in the aggregate, then each holder electing to receive
shares, including Holder C, would be able to receive only 80% of the shares he
or she would have received if there had been no over-election. Therefore,
Holder C would receive 12 shares of Standard Pacific common stock and would
receive $202.98 in cash ($167.50 for the 50 cash election shares, $33.50 as the
cash adjustment to the 50 stock election shares plus $1.98 for the fractional
share). If all shareholders, except Holder C, elect to receive shares, Holder C
would receive 9 shares of Standard Pacific common stock and $235.99 in cash
($167.50 for the cash election shares, plus $67.00 for the adjustment to Holder
C's stock election shares plus $1.49 for the fractional share).
EXAMPLE D. Holder D owns 100 shares and elects to receive shares of Standard
Pacific common stock. The twenty-day average price for Standard
Pacific common stock is $9.50 per share.
This example assumes a twenty-day average price for Standard Pacific common
stock of $9.50 per share, which would result in an exchange ratio of 0.3045.
This exchange ratio is the same as if the Standard Pacific average trading
price was $11.00 per share because if the average trading price is less than
$11.00 per share, $11.00 will be used as the adjusted average trading price for
calculating the exchange ratio. If the shareholders, including Holder D, do not
over-elect to receive cash or shares of Standard Pacific common stock, then
Holder D will receive 30 shares of Standard Pacific common stock, valued at
$285.00, and $4.95 in cash for the fractional share, or a total value of
$289.95 for his or her 100 shares.
If the holders of more than 60% of the outstanding shares of Writer elect to
receive shares of Standard Pacific common stock, then Holder D will receive
less than 30 shares of Standard Pacific common stock and more cash, prorated in
a manner similar to that described in the second paragraph of Example B.
EXAMPLE E. Holder E owns 100 shares and elects to receive shares of Standard
Pacific common stock. The twenty-day average price for Standard
Pacific common stock is $14.00 per share.
This example assumes a twenty-day average price for Standard Pacific common
stock of $14.00 per share, which would result in an exchange ratio of 0.2481.
The exchange ratio is the same as if the twenty-day average price for Standard
Pacific common stock was $13.50 per share because if the twenty-day average
price for Standard Pacific common stock is more than $13.50, $13.50 will be
used as the adjusted twenty-day average price for calculating the exchange
ratio. If the Writer shareholders, including Holder E, do not over-elect to
receive cash or shares of Standard Pacific common stock, then Holder E will
receive 24 shares of Standard Pacific common stock, valued at $336.00, and
$10.94 in cash for the fractional share, or a total value of $346.94 for his or
her 100 shares.
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<PAGE>
If the holders of more than 60% of the outstanding shares of Writer elect to
receive shares of Standard Pacific common stock, then Holder E will receive
less than 24 shares of Standard Pacific common stock and more cash, prorated in
a manner similar to that described in the second paragraph of Example B.
Summary of Examples
<TABLE>
<CAPTION>
Shareholder's 100% Election by 100% Election by all Other
Election With Respect all Other Shareholders Shareholders for Standard
to 100 Shares No Over-Elections for Cash Pacific Common Stock
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Holder A (who is $335 in cash $335 in cash $335 in cash
not a member of the
Writer management
group): All Cash at
$11.00 per share
----------------------------------------------------------------------------------------------------
Holder B: 30 shares of Standard 30 shares of Standard 18 shares of Standard
All Shares of Standard Pacific common stock Pacific common stock Pacific common stock
Pacific common and $4.95 in cash, and $4.95 in cash, and $136.97 in cash,
stock at $11.00 for a total value of for a total value of for a total value of
per share $334.95 $334.95 $334.97
----------------------------------------------------------------------------------------------------
Holder C (who is 15 shares of Standard 15 shares of Standard 9 shares of Standard
not a member of the Pacific common stock Pacific common stock Pacific common stock
Writer management and $169.98 in cash, and $167.98 in cash, and $235.99 in cash,
group): 50 shares for a total value of for a total value of for a total value of
for Cash and 50 $334.98 $334.98 $334.99
shares for Standard
Pacific common stock
at $11.00 per share
----------------------------------------------------------------------------------------------------
Holder D: 30 shares of Standard 30 shares of Standard 18 shares of Standard
All Shares of Standard Pacific common stock Pacific common stock Pacific common stock
Pacific common and $4.95 in cash, and $4.95 in cash, and $136.97 in cash,
stock at $9.50 for a total value of for a total value of for a total value of
per share $289.95 $289.95 $307.97
----------------------------------------------------------------------------------------------------
Holder E: 24 shares of Standard 24 shares of Standard 14 shares of Standard
All Shares of Standard Pacific common stock Pacific common stock Pacific common stock
Pacific common and $10.94 in cash, and $10.94 in cash, and $145.96 in cash,
stock at $14.00 for a total value of for a total value of for a total value of
per share $346.94 $346.94 $341.96
</TABLE>
The Exchange Ratio
In the merger, for each of your shares of Writer common stock outstanding at
the time of the merger you will be entitled to receive, at your election, but
subject to adjustment depending on the aggregate number of shares electing each
form of consideration, either $3.35 in cash, or a fraction of a share of
Standard Pacific common stock equal to the quotient of $3.35 divided by the
adjusted twenty-day average price for Standard Pacific common stock, or a
combination of cash and Standard Pacific common stock. The fraction of a share
of Standard Pacific common stock you would receive in the merger for each share
of Writer common stock you own if you were to make an election to receive
shares of Standard Pacific common stock, and assuming that you receive no cash
payment as a result of any adjustments, is referred to in this proxy
statement/prospectus as the "exchange ratio." In calculating this exchange
ratio, if the twenty-day average price for Standard Pacific common stock is
less than $11.00 per share, the twenty-day average price used will be $11.00
per share. However, if the actual twenty-day average price per share price is
less
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<PAGE>
than $8.25 per share over the measurement period for the Standard Pacific
common stock, the Writer board of directors may elect not to consummate the
merger. If the twenty-day average price for Standard Pacific common stock is
more than $13.50 per share, the twenty-day average price used will be $13.50.
However, if the actual twenty-day average per share price is more than $15.75
per share, the Standard Pacific board of directors may elect not to consummate
the merger. In addition to adjustments arising from proration, the per share
cash value of $3.35 or the calculation of the number of shares of Standard
Pacific common stock may be adjusted if the outstanding shares of Writer common
stock or Standard Pacific common stock are changed into a different number or
class of shares by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares between the date of
the merger agreement and the effective time of the merger agreement.
A value over a period is used for the Standard Pacific common stock price
because the market value of Standard Pacific common stock will fluctuate for
any number of reasons, including those specific to Standard Pacific and those
that influence the trading prices of equity securities generally. Also, because
the exchange ratio is calculated using Standard Pacific common stock prices
from before the merger, the actual market value of the Standard Pacific common
stock you will receive when the merger is completed may be higher or lower than
the value used to calculate the exchange ratio. Standard Pacific and Writer
intend to issue a joint press release two trading days before the special
meeting that will disclose the estimated twenty-day average price for Standard
Pacific common stock for the period selected and the corresponding exchange
ratio. The information will assume that the merger is completed immediately
after the shareholders meeting and if this is not the case, may change. You can
also obtain this information by calling (800) 322-2885 after August 23, 2000.
The following summarizes how the exchange ratio will be determined. You can
also find below a table that gives examples of the twenty-day average price for
Standard Pacific common stock, the corresponding exchange ratios, and the
corresponding values of the fractional Standard Pacific share to be received
for each Writer share.
. If the twenty-day average price for Standard Pacific common stock is
less than or equal to $11.00, the exchange ratio will be 0.3045 shares
of Standard Pacific common stock for each share of Writer common stock.
If the price of Standard Pacific common stock on the date of completion
of the merger is less than $11.00, the 0.3045 shares of Standard Pacific
common stock you receive will have a market value of less than $3.35.
. If the twenty-day average price is less than $8.25, Writer has the right
to terminate the merger agreement.
. If the twenty-day average price is greater than or equal to $13.50, the
exchange ratio will be 0.2481 shares of Standard Pacific common stock
for each share of Writer common stock. If the price of Standard Pacific
common stock on the date of completion of the merger is more than
$13.50, the 0.2481 shares of Standard Pacific common stock you receive
will have a market value in excess of $3.35.
. If the twenty-day average price is greater than $15.75, Standard
Pacific has the right to terminate the merger agreement.
. If the twenty-day average price is between $11.01 and $13.49, the
exchange ratio will be calculated so that the Standard Pacific twenty-
day average price times the exchange ratio equals $3.35 per share.
The columns in the table present the following information:
(a) examples of twenty-day average prices for Standard Pacific common
stock between $8.00 to $16.00 per share,
(b) the corresponding exchange ratio, showing the fraction of a share
of Standard Pacific common stock that would be issued for one share
of Writer common stock at each of the average closing prices
presented in the table, and
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<PAGE>
(c) the corresponding value of the Standard Pacific common stock issued
for each Writer share in the merger, assuming that the value of the
Standard Pacific common stock on the date of the merger is equal to
the adjusted twenty-day average price over the valuation period.
These numbers are determined by multiplying each of the twenty-day
average prices for Standard Pacific common stock presented in the
table by the corresponding exchange ratio.
Table of Examples of Twenty-Day Average Prices for Standard Pacific Common
Stock, Exchange Ratios and Values of Standard Pacific Common Stock to Be
Received.
<TABLE>
<CAPTION>
(a) (b) (c)
Value of
Standard Pacific
common stock
Twenty-day average received per
price for Standard Pacific Exchange share of Writer
common stock Ratio common stock*
-------------------------- -------- ----------------
<S> <C> <C>
$ 8.00.......................................... .3045 $2.44
8.25.......................................... .3045 2.51
8.50.......................................... .3045 2.59
9.00.......................................... .3045 2.74
9.50.......................................... .3045 2.89
10.00.......................................... .3045 3.05
10.50.......................................... .3045 3.20
11.00.......................................... .3045 3.35
11.50.......................................... .2913 3.35
11.75.......................................... .2851 3.35
12.00.......................................... .2792 3.35
12.50.......................................... .2680 3.35
13.00.......................................... .2577 3.35
13.50.......................................... .2481 3.35
14.00.......................................... .2481 3.47
14.50.......................................... .2481 3.60
15.00.......................................... .2481 3.72
15.50.......................................... .2481 3.85
15.75.......................................... .2481 3.91
16.00.......................................... .2481 3.97
</TABLE>
--------
* The table assumes that the Standard Pacific share price at the time of the
merger equals the twenty-day average price for Standard Pacific common stock.
We cannot assure you that this will be the case, and in fact it is likely not
to be the same.
The values of Standard Pacific common stock are only examples and do not
represent the actual value per share of Writer common stock that you will
realize on or after the date of the merger. The amount you realize if you sell
any Standard Pacific common stock you receive in the merger will depend on the
market price of Standard Pacific common stock at the time of the sale. That
price will fluctuate depending upon any number of reasons, including those
specific to Standard Pacific and those that influence the trading prices of
equity securities generally.
Election Procedure
Within five days of the date of mailing this proxy statement/prospectus,
Writer will separately mail an election form and letter of transmittal to
holders of record of its common stock as of the record date for the special
meeting. Shareholders who do not wish to make an election regarding the form of
merger consideration to be received in the merger need not submit the form of
election and those shareholders will be deemed to make a non-election. If your
shares are held in "street name" through your broker, your broker will mail
your form of election to you under separate cover, together with a letter of
instructions for making an election. You should read your form of election
together with this proxy statement/prospectus.
46
<PAGE>
Subject to the proration procedures, each election form permits you to make
an unconditional election to receive one or a combination of the following in
exchange for all of your shares of Writer common stock: cash or shares of
Standard Pacific common stock. Alternatively, each election form permits you to
indicate that you have no preference as to the receipt of cash or shares of
Standard Pacific common stock. Shareholders of Writer who become shareholders
following the record date of the Writer special meeting may contact MacKenzie
Partners, Inc. at (212) 929-5500 (by calling collect) or by calling toll-free
at (800) 322-2885, to receive a form of election.
For your form of election to be effective, you must properly complete the
form of election, and send the form, together with all of your certificates for
your electing shares, duly endorsed in blank or otherwise in a form which is
acceptable for transfer on the books of Writer or by appropriate guarantee of
delivery as described in the form of election, to First Chicago Trust Company
of New York, our exchange agent at one of the addresses provided in the
election form. First Chicago Trust Company of New York must receive the
completed form of election and share certificates by 5:00 p.m., New York City
time, on August 24, 2000.
You may revoke your form of election prior to 5:00 p.m., New York City time,
on August 24, 2000 by sending written notice executed by you to the exchange
agent. If you properly revoke your election, the exchange agent will treat your
shares as shares for which a non-election has been made, unless you thereafter
submit another properly completed election form. Share certificates submitted
with a form of election will be automatically returned to you if the merger
agreement is terminated.
Standard Pacific will determine, or delegate to the exchange agent to
determine, whether forms of election have been properly completed, signed and
submitted or revoked and may disregard immaterial defects in forms of election.
If Standard Pacific or the exchange agent determine that your purported
election was not properly made, the purported election will have no force and
effect and you will be deemed to have made a non-election. The decision of
Standard Pacific or the exchange agent in all these matters will be conclusive
and binding. Neither Standard Pacific nor the exchange agent will be under any
obligation to notify you of any defect in your form of election submitted to
the exchange agent. The exchange agent will also make all computations
regarding merger consideration to be received by holders of shares of Writer
common stock and all of the exchange agent's computations will be conclusive
and binding on the holders of shares of Writer common stock.
Material Federal Income Tax Consequences of the Merger
The following discussion represents the opinions of Gibson, Dunn & Crutcher
LLP, counsel to Standard Pacific, and Clanahan, Tanner, Downing and Knowlton,
PC, counsel to Writer, as to the material federal income tax consequences of
the merger. This summary is based upon provisions of the Internal Revenue Code,
applicable Treasury regulations promulgated under the Internal Revenue Code,
and judicial and administrative decisions currently in effect. All of these
authorities are subject to retroactive or prospective change and to possibly
differing interpretations. This discussion does not address the federal income
tax consequences applicable to holders of Writer common stock who are subject
to special treatment under the Internal Revenue Code, such as foreign holders,
holders who acquired their stock pursuant to the exercise of employee stock
options or otherwise as compensation, holders who are dealers in securities,
banks, insurance companies or tax exempt organizations, and holders who hold
their shares of Writer or Standard Pacific common stock as part of a hedge,
straddle, or other risk reduction transaction, and holders who do not hold
their shares of Writer common stock as a capital asset. In addition, this
discussion does not address the tax consequences of the merger under applicable
foreign, state or local tax laws. The tax consequences of the merger to each
shareholder may differ depending on each shareholder's particular facts and
circumstances. Shareholders are urged to consult with their own tax advisors
regarding the tax consequences of the merger.
Gibson, Dunn & Crutcher LLP, counsel to Standard Pacific, and, Clanahan,
Tanner, Downing and Knowlton, PC, counsel to Writer, are of the opinion,
subject to the limitations and qualifications described herein, that the merger
will qualify as a reorganization under Section 368(a) of the Internal Revenue
Code. As a result, subject to the limitations and qualifications described
herein, the federal income tax consequences of the merger to Standard Pacific,
Writer, and the Writer shareholders will be as follows.
47
<PAGE>
Tax Consequences of the Merger to Standard Pacific and Writer
Neither Standard Pacific nor Writer will recognize any gain or loss as a
result of the merger.
Tax Consequences of the Merger to Writer Shareholders
The federal income tax consequences of the merger to the Writer shareholders
will depend on whether the shareholders receive solely Standard Pacific common
stock, solely cash, or a combination of cash and Standard Pacific common stock
in the merger.
The Receipt of Solely Standard Pacific Common Stock by a Writer Shareholder in
Exchange for Writer Common Stock in the Merger
A Writer shareholder who exchanges all of the shares of Writer common stock
owned by the shareholder for shares of Standard Pacific common stock in the
merger will not recognize any gain or loss upon the exchange, except for any
gain or loss attributable to any cash received instead of a fractional share of
Standard Pacific common stock. The aggregate tax basis of the shares of
Standard Pacific common stock received by the shareholder in the merger will be
the aggregate tax basis of the shares of Writer common stock surrendered in the
merger. Also, the shareholder's holding period for federal income tax purposes
for the Standard Pacific common stock received in exchange for shares of Writer
common stock in the merger will include the period during which the shareholder
held shares of Writer common stock that were surrendered in exchange for the
shares of Standard Pacific.
The Receipt of a Combination of Standard Pacific Common Stock and Cash by a
Writer Shareholder in Exchange for Writer Common Stock in the Merger
A Writer shareholder who exchanges the shares of Writer common stock owned
by the shareholder for a combination of cash and shares of Standard Pacific
common stock in the merger will not recognize any loss on the exchange.
However, the shareholder will recognize gain equal to the lesser of the amount
of cash received and the gain realized. The gain realized will be the excess of
the sum of the fair market value of Standard Pacific common stock and the
amount of cash received in exchange for the shareholder's shares of Writer
common stock that were surrendered in the merger over the shareholder's
adjusted tax basis in those shares. For this purpose, a Writer shareholder must
calculate gain or loss separately for each identifiable block of shares of
Writer common stock that is surrendered in the merger, and the Writer
shareholder may not offset a loss recognized on one block of the shares against
gain recognized on another block of the shares.
Any gain recognized by a Writer shareholder who receives a combination of
Standard Pacific common stock and cash will generally be treated as capital
gain. However, if the receipt of the cash has "the effect of the distribution
of a dividend" for federal income tax purposes, any gain recognized by the
shareholder will be treated as ordinary dividend income to the extent of the
shareholder's ratable share of the accumulated earnings and profits of Standard
Pacific and/or Writer. Any gain that is treated as capital gain will be long-
term capital gain if the holding period for shares of Writer common stock that
are surrendered in the merger is greater than one year as of the date of the
merger.
For purposes of determining whether the cash received has the effect of a
distribution of a dividend for federal income tax purposes, a Writer
shareholder is treated as if the shareholder first exchanged all of the
shareholder's shares of Writer common stock solely for Standard Pacific common
stock and then Standard Pacific immediately redeemed a portion of the Standard
Pacific common stock in exchange for the cash the shareholder actually
received. This is called a "deemed redemption." Under this analysis, in
general, if the receipt of cash by the holder in the deemed redemption results
in a "substantially disproportionate" reduction in the holder's voting stock
interest in Standard Pacific or is "not essentially equivalent to a dividend,"
the receipt of the cash will not have the effect of the distribution of a
dividend. In applying this deemed redemption analysis, particular attribution
rules apply in determining a Writer shareholder's ownership interest in
Standard
48
<PAGE>
Pacific immediately after the merger, but before the deemed redemption, and
after the deemed redemption. Under those rules, a Writer shareholder is deemed
to own stock held by specific family members, estates and trusts of which the
shareholder is a beneficiary, a partnership in which the shareholder is a
partner, and a corporation in which the shareholder is a direct or indirect 50%
shareholder, as well as stock subject to options that are held by the
shareholder or the entities. Because these constructive ownership rules are
complex, each Writer shareholder who believes that he or she may be subject to
these rules should consult his or her tax advisor.
The determination of whether the deemed redemption is "substantially
disproportionate" must be made by comparing (i) the percentage of the Standard
Pacific common stock that is owned (either actually or constructively) by the
Writer shareholder after the merger with (ii) the percentage of the Standard
Pacific common stock that would have been owned (either actually or
constructively) by the Writer shareholder if the shareholder had received
solely stock, and no cash, in the merger. If the percentage described in clause
(i) of the preceding sentence is less than 80% of the percentage described in
clause (ii) of that sentence, the deemed redemption is considered to be
"substantially disproportionate." For example, a shareholder, who receives a
combination of cash and stock in the merger and who would have owned 5% of the
outstanding stock of Standard Pacific had it received solely stock in the
merger, will satisfy the "substantially disproportionate" test if the
shareholder owns less than 4% of the outstanding stock of Standard Pacific
after the merger.
The deemed redemption will not be "essentially equivalent to a dividend" if
it results in a "meaningful reduction" in the shareholder's proportionate
interest in Standard Pacific. Based on a published ruling of the Internal
Revenue Service, if a shareholder that is considered to have a relatively
minimal interest in Standard Pacific and no right to exercise control over
corporate affairs suffers a reduction in the shareholder's proportionate
interest in Standard Pacific, the shareholder should be regarded as having
suffered a meaningful reduction of its interest in Standard Pacific. For
example, a Writer shareholder whose relative stock interest in Standard Pacific
after the merger is minimal (for example, an interest of less than 1%) and who
exercises no control with respect to corporate affairs is considered to have a
"meaningful reduction" if such shareholder is considered to experience even a
very slight reduction (for example, a reduction of as little as 3.5%) in the
shareholder's percentage stock ownership in Standard Pacific by virtue of the
deemed redemption.
The determination of whether a shareholder will satisfy either the
"substantially disproportionate" or the "not essentially equivalent to a
dividend" test will depend on a shareholder's particular facts and
circumstances. The "substantially disproportionate" test will be satisfied if
the shareholder can comply with the objective numerical criteria described
above in light of its own particular facts and circumstances. The "not
essentially equivalent to a dividend" test, however, is not based on any
numerical criteria; rather it is highly subjective. Generally, the receipt of
cash by a Writer shareholder who does not actually or constructively own any
Standard Pacific stock (other than the shares of Standard Pacific stock that
are received in the merger) will satisfy those tests. However, because the
consequences of the application of those tests to each shareholder will vary
depending on each shareholder's particular facts and circumstances, there can
be no assurance that any shareholder can satisfy either test. As a result,
counsel cannot opine as to whether gain recognized by a Writer shareholder who
receives a combination of Standard Pacific common stock and cash in exchange
for shares of Writer stock in the merger will be treated as capital gain or
ordinary income. Each shareholder should consult its own tax advisor as to the
character of the gain.
The aggregate tax basis of the Standard Pacific common stock received by a
Writer shareholder who exchanges his or her shares of Writer common stock for a
combination of Standard Pacific common stock and cash in the merger will be the
same as the aggregate tax basis of the shares Writer common stock surrendered
in the merger, decreased by the amount of cash received, and increased by the
amount of gain recognized, including any portion of the gain that is treated as
a dividend. The holding period of the Standard Pacific common stock received
will include the holding period of the shares of Writer common stock
surrendered in exchange for the Standard Pacific common stock. If a Writer
shareholder has differing tax bases and/or holding periods for the
shareholder's shares of Writer common stock that the shareholder surrenders in
the merger, the shareholder should consult a tax advisor in order to identify
the particular tax bases and/or holding periods of the particular shares of
Standard Pacific common stock received in the exchange.
49
<PAGE>
The Receipt of Solely Cash by a Writer Shareholder in Exchange for Writer
Common Stock in the Merger
A Writer shareholder who exchanges all of the shares of Writer stock held by
the shareholder solely for cash in the merger will generally recognize capital
gain or loss equal to the difference between the amount of cash received and
the adjusted tax basis of Writer stock surrendered in the merger. For this
purpose, a Writer shareholder must calculate gain or loss separately for each
identifiable block of shares of Writer common stock that is surrendered in the
merger, and the Writer shareholder may not offset a loss recognized on one
block of the shares against gain recognized on another block of the shares.
Tax Consequences of the Receipt of Cash Instead of a Fractional Share
A Writer shareholder who receives cash instead of a fractional share of
Standard Pacific common stock will recognize gain or loss equal to the
difference between the amount of cash received and the portion of the adjusted
tax basis of the shareholder's shares of Writer common stock that are allocable
to the fractional interest. The gain or loss will constitute capital gain or
loss, and will generally be long-term capital gain or loss if the holding
period for the shares was greater than one year as of the date of the exchange.
Tax Consequences to Dissenting Shareholders
If a Writer shareholder exercises its dissenters' rights with respect to the
merger transaction and receives cash in exchange for its shares of Writer
stock, the cash will be treated as having been received as a distribution in
redemption of the shares of Writer stock. As a result, the consequences to the
Writer shareholder will be the same as that described above in connection with
the application of the redemption analysis to a shareholder who receives solely
cash in exchange for its shares of Writer stock in the merger.
Backup Withholding
Under the Internal Revenue Code, a Writer shareholder may be subject, under
some circumstances, to backup withholding at a 31% rate with respect to the
amount of consideration received pursuant to the merger unless the holder
provides proof of an applicable exemption or a correct taxpayer identification
number and otherwise complies with applicable requirements of the backup
withholding rules. Any amounts withheld under the backup withholding rules are
not an additional tax and may be refunded or credited against the holder's
federal income tax liability, provided the required information is furnished to
the Internal Revenue Service.
Limitations on Tax Opinion and Discussion
Neither Standard Pacific nor Writer has requested or will request a ruling
from the Internal Revenue Service with regard to the tax consequences of the
merger. However, it is a condition to the consummation of the merger that
Standard Pacific receive an opinion from its counsel, Gibson, Dunn & Crutcher
LLP, and Writer receive an opinion from its counsel, Clanahan, Tanner, Downing
and Knowlton, PC, to the effect that the merger will be treated as a
reorganization under Section 368(a) of the Internal Revenue Code and that
Standard Pacific and Writer will each be a party to the reorganization. The
opinions that have been rendered herein and the opinions to be rendered at the
closing will be conditioned upon the following assumptions:
. the truth and accuracy of the statements, covenants, representations and
warranties in the merger agreement, in the representations to be
received from Standard Pacific and Writer to support the opinions, and
in other documents related to Standard Pacific and Writer relied upon by
counsel for those opinions, including a representation to the effect
that no more than 50% of the aggregate merger consideration, valued as
of the closing date of the merger, will be paid in cash;
. the performance of all covenants contained in the merger agreement and
the tax representations without waiver or breach of any material
provision of those covenants and representations;
. the accuracy of any representation or statement made "to the best of
knowledge" or similarly qualified;
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. the reporting of the merger as a reorganization under Section 368(a) of
the Internal Revenue Code by Standard Pacific and Writer in their
respective federal income tax returns; and
. other customary assumptions as to the accuracy and authenticity of
documents provided to counsel.
The opinions that have been rendered herein and the opinions to be rendered
at the closing of the merger represent counsel's best judgment as to the tax
treatment of the merger, but will not be binding on the Internal Revenue
Service or the courts. If the Internal Revenue Service successfully challenges
the status of the merger as a reorganization or if any of the assumptions set
forth above is inaccurate, the merger may not be treated as a reorganization.
If the merger is not treated as a reorganization, each Writer shareholder
generally will be required to recognize gain or loss equal to the difference
between the sum of the fair market value of the Standard Pacific stock and cash
received in the merger and the shareholder's basis in the Writer stock
surrendered in the merger. In that case, the shareholder's basis in the
Standard Pacific stock received in the merger generally would equal the fair
market value of that stock on the day of the merger, and the holding period for
the Standard Pacific stock received in the merger generally would begin on the
day following the merger. In addition, if the merger is not treated as a
reorganization, Writer would incur gain equal to the excess of the sum of the
cash and fair market value of the Standard Pacific stock issued in the merger
over the tax basis in Writer's assets. This gain, if recognized, would give
rise to substantial tax liability and could have a material adverse effect on
the value of Standard Pacific and its stock.
The above discussion may not apply to some categories of shareholders
subject to special treatment under the Internal Revenue Code. The tax
consequences of the merger to each shareholder may differ depending on each
shareholder's particular facts and circumstances. Writer shareholders are urged
to consult their own tax advisors to determine the specific tax consequences of
the merger, including any federal, state, local or other tax consequences of
the merger.
Treatment of Existing Writer Stock Options
All outstanding stock options for Writer common stock will automatically
become vested and exercisable prior to the effective time of the merger. The
merger agreement provides that each stock option outstanding immediately prior
to the effective time will be canceled in exchange for, at the option holder's
election, either a cash payment equal to the excess, if any, of $3.35 over the
per share exercise price of each stock option, or a fractional share of
Standard Pacific common stock equal to the excess, if any, of $3.35 over the
per share exercise price of each stock option divided by the adjusted twenty-
day average price for Standard Pacific common stock, subject to any applicable
withholding taxes. Options having a per share exercise price of $3.35 or more,
if any, will be canceled for no consideration. To the extent required under any
of Writer's Stock option plans or agreements, Writer has agreed to use its
reasonable best efforts to obtain the consent of each holder to this treatment
of his or her options in connection with the merger.
The Writer Management Group
Each officer, director and holder of 15% or more of the shares of Writer
common stock, collectively referred to in this proxy statement/prospectus as
the "Writer management group," has entered into a voting agreement and proxy
with the secretary of Standard Pacific. The voting agreement and proxy provides
that the member, or his or her proxy, will vote all shares that the member has
the right to vote:
. in favor of the merger and the transactions in connection with the
merger;
. against any proposal of a third party to acquire Writer; and
. against any transaction that may impede or adversely affect the merger
or would be reasonably likely to result in the conditions to the
completion of the merger not being met.
The voting agreement and proxy also provides for an adjustment in the cash
elections of each member of the Writer management group if Writer shareholders
over-elect to receive cash. The adjustment occurs if more
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than 50% of the aggregate merger consideration is elected to be paid in cash.
In the case of an over-election of cash, the adjustment to cash elections of
the Writer management group members will be made before any adjustment in the
cash elections of shareholders who are not members of the Writer management
group. If an adjustment is required, each Writer management group member who
elected to receive cash in the merger will have the cash that member elected to
receive proportionately decreased and the number of shares of Standard Pacific
common stock received in the merger proportionately increased until the
aggregate cash consideration to be paid in the merger will be as close to
possible, but not more than, 50% of the aggregate merger consideration.
It is also a condition to the closing of the merger by Standard Pacific and
TWC Acquisition that each member of the Writer management group enter into a
lock-up agreement with Standard Pacific and TWC Acquisition. The lock-up
agreement provides that without the prior written consent of Standard Pacific,
the shares of Standard Pacific common stock received by the Writer management
group members in the merger will not be sold for a specified time after the
merger. For George S. Writer, Jr., Chief Executive Officer and Chairman of the
board of directors of Writer, Daniel J. Nickless, President, Chief Operating
Officer, Chief Financial Officer and Treasurer of Writer, and the holder of any
shares beneficially owned by either of them, the lock-up period continues for
one year after the merger. For all other members of the Writer management group
and the holder of any shares beneficially owned by any of them, the lock-up
period continues for 120 days after the merger.
Interests of Writer's Management in the Merger and Potential Conflicts of
Interests
Some members of Writer's management have interests in the merger that are in
addition to their general interests as Writer shareholders. These interests
might have made these persons more willing to support the merger than they
might have without the additional interests. The Writer board of directors was
aware of these interests and considered them in approving the merger agreement.
Writer's board determined that these interests neither supported nor detracted
from the advisability of the merger to Writer shareholders.
Agreement Regarding Key Writer Employees
Upon consummation of the merger, TWC Acquisition will enter into employment
agreements with George S. Writer, Jr., Chief Executive Officer and Chairman of
the board of directors of Writer, and Daniel J. Nickless, President, Chief
Operating Officer, Chief Financial Officer and Treasurer of Writer. Each of
these employees will commence employment with the surviving corporation after
the closing of the merger and will serve in substantially the same capacity as
he served in his current position with Writer. The employment agreements are
for a term of two years, after which the employees' employment will be at-will.
Each employee will be entitled to an annual base salary equalling $186,000 for
George S. Writer, Jr. and $156,000 for Daniel J. Nickless, and a bonus of 2% of
the pre-tax net profits of TWC Acquisition during the term of the agreement. In
comparison, in 1999 George S. Writer, Jr. earned an annual base salary of
$169,208 with a bonus of $127,728 and Daniel J. Nickless received an annual
base salary of $138,551 with a bonus of $93,515. Each of Messrs. Writer and
Nickless will also be entitled to severance benefits if their employment is
terminated by TWC Acquisition without cause during that period.
Each of Messrs. Writer and Nickless will also enter into an agreement with
Standard Pacific providing for payment of severance benefits to them if their
employment is terminated in connection with or within two years after a change
of control of Standard Pacific. The severance benefits generally consist of:
. a lump sum payment equal to two times the employee's annual base salary
and two times his average annual bonus;
. acceleration of the date when outstanding stock options become
exercisable;
. continuation for two years of life, health and disability insurance, car
allowance and any cash-in-lieu payments; and
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. additional payments to offset any employee taxes associated with "excess
parachute payments" under the Internal Revenue Code.
If applicable, the amounts due under the change in control agreements will
be paid instead of any amounts otherwise payable under the employment
agreements.
Retention of The Seidler Companies as Financial Advisor
Roland S. Seidler, Jr., a Writer director, is Chairman of the board and
Chief Executive Officer of The Seidler Companies, Writer's financial advisor in
connection with the merger. Writer will pay The Seidler Companies a net fee of
$525,000 upon consummation of the merger.
Indemnification; Directors' and Officers' Insurance
The merger agreement provides that all rights to indemnification for acts or
omissions occurring at or prior to the merger existing in favor of the current
or former Writer directors, officers, employees or agents, as provided in the
articles of incorporation, bylaws or applicable law, will survive the merger
and continue for a period of six years after the merger. All indemnification
rights in respect of any claim existing as of the end of this six-year period
will continue until final disposition. Standard Pacific will not be obligated
to provide indemnification in excess of the indemnification Writer is required
to provide under its articles of incorporation or bylaws.
The merger agreement also provides that Standard Pacific will maintain, for
a period of three years from the effective time of the merger, Writer's current
directors' and officers' insurance and indemnification policy covering those
persons who currently are covered by that policy. The policy will continue to
the extent that it provides coverage for events occurring prior to or at the
effective time of the merger. Instead of maintaining Writer's existing policy,
Standard Pacific may provide coverage under any policy maintained for the
benefit of Standard Pacific or any of its subsidiaries, as long as the terms of
that policy are substantially similar to Writer's existing insurance and
indemnification policy. If Writer's existing insurance and indemnification
policy expires, is terminated or cancelled or becomes unavailable during the
three year period, Standard Pacific will use commercially reasonable efforts to
obtain alternative insurance for the remainder of the three year period.
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Consideration to be Received by Writer Management in the Merger
At the closing of the merger, the following executive officers and directors
of Writer will receive, in exchange for their shares of Writer common stock
and/or options to purchase shares of Writer common stock, the shares of
Standard Pacific common stock as set forth below. The figures in the table are
based on stock and option ownership of Writer's management as of March 10,
2000, and assumes that their outstanding stock options remain outstanding and
they each elect to receive, and do receive, all Standard Pacific common stock
as merger consideration.
<TABLE>
<CAPTION>
Shares of Standard Pacific
Writer Shares to be
Common Stock Average Received in the
Name and Title Owned Options Held Exercise Price Merger(1)
-------------- ------------ ------------ -------------- ----------------
<S> <C> <C> <C> <C>
George S. Writer, Jr.... 1,501,306 -- -- 441,984
Chairman of the Board
of Directors and Chief
Executive Officer
Daniel J. Nickless...... 28,280 210,000 $1.96 33,975
President, Chief
Operating Officer,
Chief Financial Officer
and Treasurer
Robert R. Reid.......... 25,500 148,000 $1.67 29,355
Senior Vice President
of Operations
Dave Steinke............ 500 25,000 $2.00 3,112
Senior Vice President
Richard M. Wells........ 1,000 15,000 $2.00 2,073
Vice President and
Controller
Darwin Horan............ 7,500 27,500 $1.84 5,856
Vice President;
Northern Division
Manager
Nancy Ashley............ -- 20,000 $2.19 2,038
Vice President of Sales
Ronald S. Loser......... 39,900 -- -- 11,746
Secretary and Director
Deane J. Writer, Jr..... 209,000 -- -- 61,529
Director
Louis P. Bansbach, III.. 129,524 -- -- 38,131
Director
William J Gillilan,
III.................... 170,000 -- -- 50,048
Director
Roland S. Seidler, Jr... 300,474 -- -- 88,459
Director
Robert G. Tointon....... 1,399,166 -- -- 411,914
Director
</TABLE>
-------
(1) Based on an assumed exchange ratio of [.2944] solely for purposes of this
calculation. This exchange ratio is based on a price for Standard Pacific
common stock of [$11.38] per share which was the closing price of Standard
Pacific common stock on the New York Stock Exchange on [July 24,] 2000, the
latest practicable trading day before printing of this proxy
statement/prospectus. At a price of [$11.38] per share, the adjusted
average price would be [$11.38] per share resulting in an exchange ratio of
[.2944]. The actual number of shares of Standard Pacific common stock to be
received by Writer management is likely to be different.
In addition, Roland S. Seidler, Jr., a director of Writer is the Chairman of
the Board and Chief Executive Officer of The Seidler Companies, Writer's
financial advisor. The Seidler Companies received a fee of $175,000 for
investment banking services, including the business opinion delivered to the
Writer board of directors, and will receive a further $525,000 upon
consummation of the merger.
Writer's board recognized these interests and determined that they neither
supported nor detracted from the advisability of the merger to Writer
shareholders.
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Regulatory Approvals Required for the Merger
General
Standard Pacific and Writer have agreed to use reasonable efforts to do all
things reasonably necessary under applicable laws to complete the merger. These
things include:
. obtaining consents of all third parties and governmental authorities
necessary or advisable to complete the merger; and
. contesting any legal action adverse to the merger.
Antitrust
Standard Pacific and Writer expect that the merger will be exempt from the
requirement to file with the Federal Trade Commission and the Antitrust
Division of the U.S. Department of Justice, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the U.S. Federal Trade
Commission rules. However, at any time before or after the merger, the
Department of Justice, the Federal Trade Commission or any state or foreign
governmental authority could take action under the antitrust laws as it deems
necessary in the public interest. This action could include seeking to enjoin
the merger or seeking Standard Pacific's divestiture of Writer or Standard
Pacific's divestiture of all or part of its or Writer's businesses. Under some
circumstances, private parties, state antitrust agencies, and foreign
governmental authorities also may seek to take legal action under the antitrust
laws.
Based on information available to us, we believe that the merger will comply
with all significant federal, state and foreign antitrust laws. However, we
cannot assure you that there will not be a challenge to the merger on antitrust
grounds or that, if this type of challenge were made, we would prevail.
Filings with the Secretaries of State of the State of Delaware and the State
of Colorado
To complete the merger, a certificate of merger must be filed with the
Secretary of State of the State of Delaware and articles of merger must be
filed with the Secretary of State of the State of Colorado.
Standard Pacific and Writer are not aware of any other regulatory approvals
or actions that are required to effect the merger. If any additional
governmental approvals or actions are required, we intend to try to obtain
them. We cannot assure you, however, that we will be able to obtain any
additional approvals or actions.
Delisting and Deregistering of Writer Common Stock; Listing of Standard Pacific
Common Stock Issued in Connection With the Merger
Writer common stock is currently quoted on the Over-The-Counter Bulletin
Board under the symbol "WRTC.OB." Upon the merger's completion, Writer common
stock will be delisted from the Over-The-Counter Bulletin Board and
deregistered under the Securities Exchange Act of 1934.
Standard Pacific common stock is quoted on the New York Stock Exchange under
the symbol "SPF." Standard Pacific has agreed to cause the shares of Standard
Pacific common stock to be issued in the merger to be approved for listing on
the New York Stock Exchange.
Receipt of Merger Consideration; Procedures for Exchange of Certificates
The conversion of shares of Writer common stock, other than dissenting
shares, into the right to receive cash or shares of Standard Pacific common
stock, will occur at the effective time of the merger. Promptly after the
effective time of the merger, the exchange agent will send a letter of
transmittal to you, unless you previously made an election with respect to all
of your shares and had submitted forms of election and share certificates to
the exchange agent. The letter of transmittal will contain instructions
explaining how to exchange
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your share certificates for the merger consideration to be received. Except for
Writer common stock certificates surrendered with a form of election, you
should not send your certificates to the exchange agent until you have received
the letter of transmittal after the effective time of the merger.
No interest will be paid or accrued on any merger consideration to be
received in cash. Until a holder of Writer common stock who elects to receive
shares of common stock of Standard Pacific or who makes no election, but who is
entitled to receive shares of common stock of Standard Pacific, surrenders his
or her certificate representing shares of Writer, the holder will not receive
any shares of Standard Pacific common stock; nor will he or she receive any
dividends or other distributions with respect to those shares of common stock
of Standard Pacific the holder is entitled to receive, that are made after the
effective time of the merger. In addition, no cash payment instead of
fractional shares of Standard Pacific common stock will be paid to these
holders until they surrender their certificates representing those shares.
If you want a payment to be made to another person, the certificate
representing your shares must be properly endorsed in the proper form to
evidence and effect the transfer to the person to receive the merger
consideration, in the form reasonably required by Standard Pacific. You must
also pay any transfer or other taxes required as a result of the payment to the
person who is not the registered holder of the shares being surrendered or
establish to the satisfaction of Standard Pacific that the applicable tax has
been paid or is not applicable.
Any merger consideration made available to the exchange agent that remains
unclaimed by Writer shareholders for one year after the time the merger becomes
effective will be returned to Standard Pacific, and any Writer shareholders who
have not made an exchange by that time must then look to the surviving
corporation for payment of their claim for merger consideration, subject to
state unclaimed property laws.
Transfers of Shares
No transfers of shares of Writer common stock will be made on the share
transfer books of Writer after the merger becomes effective.
Fractional Shares
No certificates or scrip representing fractional shares of Standard Pacific
common stock will be issued in connection with the merger. Any fractional share
interests that you hold will not entitle you to vote or to any rights of a
Standard Pacific stockholder after the merger. If you would otherwise be
entitled to receive a fractional share of Standard Pacific common stock
pursuant to the merger, you will receive, instead, a cash payment, without
interest, equal to that fraction multiplied by the adjusted twenty-day average
price for Standard Pacific common stock.
Accounting Treatment
Standard Pacific will account for the merger as a "purchase" transaction for
accounting and financial reporting purposes, in accordance with generally
accepted accounting principles. Accordingly, Standard Pacific will make a
determination of the fair value of Writer's assets and liabilities in order to
allocate the purchase price to the assets acquired and the liabilities assumed.
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Restrictions on Resales by Affiliates
The shares of Standard Pacific common stock issuable to Writer shareholders
in the merger and upon cancellation of outstanding Writer stock options in
connection with the merger are being registered under the Securities Act.
Therefore, these shares of Standard Pacific common stock may be traded freely
without restriction by those Writer shareholders and holders of Writer stock
options who are not "affiliates" of Writer as defined under the Securities Act.
An "affiliate" of Writer is a person who controls, is controlled by, or is
under common control with, Writer. Any subsequent transfer of these shares by a
person who is an affiliate of Writer at the time the merger is voted on by the
Writer shareholders will require one of the following:
. the further registration of these shares under the Securities Act;
. compliance with Rule 145 under the Securities Act; or
. the availability of another exemption from registration under the
Securities Act.
These restrictions are expected to apply to Writer's directors and executive
officers and the holders of 10% or more of its outstanding shares of common
stock. Standard Pacific will give stop transfer instructions to its transfer
agent and legend certificates representing the Standard Pacific common stock to
be received by affiliated persons.
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THE MERGER AGREEMENT
This section is a summary of the material provisions of the merger
agreement. Because it is a summary, it does not include all the information
that may be important to you. We encourage you to read carefully the entire
copy of the merger agreement, which, with the exception of some schedules and
exhibits, is attached as Appendix A to this proxy statement/prospectus, before
you decide how to vote.
Structure of the Merger
Under Colorado law and the merger agreement, approval of the merger and the
adoption of the merger agreement requires the vote of holders of two-thirds of
the outstanding shares of common stock of Writer. Following the receipt of this
approval and the satisfaction or waiver of the other conditions to the merger,
Writer will be merged with and into TWC Acquisition, which is a wholly owned
subsidiary of Standard Pacific. TWC Acquisition will continue as the surviving
corporation and will change its name to The Writer Corporation. As a result of
the merger, Writer's business will be operated by and as a wholly owned
subsidiary of Standard Pacific.
Closing; Effective Time
The merger agreement provides that the closing of the merger will take place
on or about the third business day after all of the closing conditions have
been satisfied or waived, unless Standard Pacific and Writer agree upon another
time. The closing of the merger is expected to take place shortly after the
approval of the Writer shareholders at the special meeting, which is expected
to occur on August 25, 2000. On the closing date of the merger, TWC Acquisition
and Writer will file a certificate of merger or other appropriate documentation
with the Secretary of State of the State of Delaware and articles of merger
with the Secretary of State of the State of Colorado. The merger will be
completed and effective upon the filing and acceptance of the certificate of
merger with the Secretary of State of the State of Delaware and the articles of
merger with the Secretary of State of the State of Colorado. If the merger does
not occur on or before August 31, 2000, the merger agreement may be terminated
by either Standard Pacific or Writer, unless the failure to complete the merger
by that date is due to the failure of the party seeking to terminate the merger
agreement to perform its obligations under the merger agreement.
Surviving Corporation
TWC Acquisition will be the surviving corporation of the merger, and the
separate corporate existence of Writer will terminate at the effective time of
the merger. After the merger, the certificate of incorporation and bylaws of
TWC Acquisition, as in effect immediately prior to the merger, will be the
certificate of incorporation and bylaws of the surviving corporation, until
lawfully amended, except that the name of the surviving corporation will be
changed to "The Writer Corporation." The initial directors of the surviving
corporation immediately following the merger will be Arthur E. Svendsen,
Stephen J. Scarborough, Andrew H. Parnes and George S. Writer, Jr., and these
individuals will be directors until their successors are elected and qualified.
The merger agreement also provides that the Writer officers at the effective
time of the merger, along with Stephen J. Scarborough, Clay H. Halvorsen,
Andrew H. Parnes, and John M. Stephens, will be officers of the surviving
corporation following the merger, subject to change from time to time. See "THE
MERGER AGREEMENT--Management of TWC Acquisition After the Merger" on page 69.
Election
The merger agreement provides that, subject to allocation and proration
provisions, each holder of Writer common stock, other than any holder that has
perfected his or her appraisal rights, or Writer's subsidiaries or Standard
Pacific and its subsidiaries holding shares, may elect to receive in exchange
for all of his or her shares of Writer common stock outstanding at the time of
the merger: (i) cash, without interest, in the amount of $3.35 per share; (ii)
shares of Standard Pacific common stock, with accompanying preferred share
purchase rights; or (iii) a combination of cash and shares of Standard Pacific
common stock.
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The election is unconditional. If you do not make a proper election or fail
to make an election within the time specified, your shares will be designated
as non-election shares, and you will have the right to receive shares of
Standard Pacific common stock or cash in the merger as described in the merger
agreement. Prior to 5:00 p.m. New York City time, on August 24, 2000 or another
time agreed to by Standard Pacific and Writer, if you have properly submitted
an election form you may revoke or change the election. Election forms will be
revoked automatically if Standard Pacific and Writer notify the exchange agent
that the merger agreement has been terminated pursuant to its terms. Any shares
elected in a revoked election form will be considered non-election shares until
and unless a new election has been made for those shares. Additionally,
Standard Pacific has the right to determine that an election form has not been
properly submitted to the exchange agent and declare that the shares elected in
that form are non-election shares.
A holder of Writer common stock who makes a proper election may not receive
the type of consideration that he or she elects because the merger agreement
requires that:
. no more than 60% of the outstanding shares of Writer common stock may be
converted into shares of Standard Pacific common stock, and
. no more than 50% of the aggregate merger consideration may be paid in
cash.
Conversion of Shares
As soon as reasonably practicable after the effective time of the merger,
the exchange agent will mail to each holder of shares of Writer common stock
who has not made an election:
. a letter of transmittal specifying the circumstances under which the
risk of loss and title to certificate(s) evidencing Writer shares will
pass, and
. instructions for use in surrendering Writer certificates in exchange for
payment of cash or shares of Standard Pacific common stock.
Upon surrender of Writer stock certificate(s) for cancellation to the
exchange agent, together with a properly executed letter of transmittal, the
holder of the surrendered certificate(s) will be entitled to receive, following
the effective time,
. a check representing the cash amount determined in accordance with the
merger agreement, and/or
. a certificate representing that number of whole shares of Standard
Pacific common stock as determined according to the provisions of the
merger agreement.
No interest will be paid or accrued on any cash payable upon surrender of
Writer certificates. No certificates representing fractional shares of Standard
Pacific common stock will be issued. Rather, for each of your shares of Writer
common stock exchanged pursuant to the merger for which you would otherwise
have been entitled to receive a fraction of a share of Standard Pacific common
stock, you will receive instead of a fractional share, a cash payment, without
interest, equal to the share fraction multiplied by the adjusted twenty-day
average price for Standard Pacific common stock.
If you have lost your certificate representing shares of Writer common
stock, or if your certificate has been stolen or destroyed, you should notify
Writer's transfer agent, Computershare Limited at (312) 360-5492. In order for
you to make an election with respect to shares for which the certificate has
been lost, stolen or destroyed, Computershare must first issue a replacement
share certificate. Prior to issuing a replacement certificate Computershare may
require you to deliver a suitable bond or indemnity. If you do not make an
election, in order for you to receive the merger consideration after the merger
is complete, with respect to shares for which the certificate has been lost,
stolen or destroyed, you must notify the exchange agent, First Chicago, in the
appropriate space on the letter of transmittal and make an affidavit of the
fact that the certificate has been lost, stolen or destroyed. In that case,
Standard Pacific or the exchange agent may first require you to deliver a bond
or indemnity. The exchange agent, upon receiving an affidavit from you in a
form reasonably satisfactory to Standard Pacific and upon receipt of a suitable
bond or indemnity, will issue cash or shares of Standard Pacific common stock
in exchange for your lost, stolen or destroyed shares of Writer common stock.
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All cash paid and shares of Standard Pacific common stock issued in exchange
for shares of Writer common stock in connection with the merger will be paid
and issued in full satisfaction of all rights pertaining to the shares of
Writer common stock.
Stock Options
Each outstanding unexercised option to purchase shares of Writer common
stock issued under any Writer stock option plan or agreement will be canceled
immediately prior to the effective time of the merger in exchange for the right
to receive, at the holder's option:
. cash in an amount equal to the product of
. the number of shares of Writer common stock subject to each
outstanding option, and
. the excess, if any, of $3.35 over the per share exercise price of
the option; or
. the number of shares of Standard Pacific common stock as determined by
dividing
. the excess, if any, of $3.35 over the per share exercise price of
the option, by
. the adjusted twenty-day average price for Standard Pacific common
stock.
Any cash and shares of Standard Pacific common stock exchanged for
outstanding Writer options will be delivered or issued immediately following
the effective time of the merger. All applicable taxes attributable to the
exercise or payment of the options will be deducted from the cash amount
payable to the Writer option holder, or, if no amount is payable in cash, then
the option holder will pay the amount of the taxes by personal check. Any
option with an exercise price greater than $3.35 will be canceled, without any
payment being made, immediately prior to the effective time of the merger. To
the extent required under any of Writer's stock option plans or agreements,
Writer has agreed to use its reasonable best efforts to obtain the consent of
each holder to this treatment of his or her options in connection with the
merger.
Representations and Warranties
The merger agreement contains customary representations and warranties of
Writer, with respect to itself and its subsidiaries, relating to, among other
things:
. organization, standing, qualification and similar corporate matters;
. capital structure;
. authorization, execution, delivery and enforceability of the merger
agreement and approval and recommendation of its board with respect
to the merger agreement and the merger;
. proper filing of all required Securities and Exchange Commission
reports and the accuracy of information contained in those
documents;
. receipt of governmental approvals for consummation of the merger;
. noncontravention of governing documents, agreements and laws
applicable to itself or its subsidiaries as a result of the
transactions contemplated by the merger agreement;
. no current default under governing documents, agreements and laws
applicable to itself or its subsidiaries;
. absence of changes or events set forth in the merger agreement since
December 31, 1999, other than liabilities incurred in the ordinary
course of business consistent with past practice;
. absence of pending or threatened material litigation;
. compliance with applicable laws and required licenses, permits,
orders, variances, exemptions and approvals of governmental
entities;
. real property and other real estate related matters, including title
to owned real property;
. contracting and subcontracting of and entitlements to real estate
projects;
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. brokers' or finders' fees and expenses;
. receipt of an opinion of Writer's financial advisor that the
consideration proposed to be received by Writer's shareholders in
connection with the merger is fair from a financial point of view to
Writer's shareholders; and
. accuracy of information supplied by Writer in connection with the
merger agreement.
The merger agreement also contains customary representations and warranties
of Standard Pacific and TWC Acquisition relating to, among other things:
. organization, standing, qualification and similar corporate matters;
. capital structure;
. authorization, execution, delivery and enforceability of the merger
agreement;
. proper filing of all required Securities and Exchange Commission
reports by Standard Pacific and the accuracy of information
contained in those documents;
. receipt of governmental approvals for consummation of the merger;
. noncontravention of governing documents, agreements and laws
applicable to Standard Pacific and TWC Acquisition as a result of
the transactions contemplated by the merger agreement;
. no current default under governing documents, agreements and laws
applicable to Standard Pacific and TWC Acquisition;
. absence of liabilities or obligations set forth in the merger
agreement, other than liabilities incurred in the ordinary course of
business since September 30, 1999;
. absence of pending or threatened material litigation;
. compliance with applicable laws and required material licenses,
permits, orders, variances, exceptions and approvals of governmental
entities;
. brokers' or finders' fees and expenses; and
. accuracy of information supplied by Standard Pacific and TWC
Acquisition in connection with the merger agreement.
The representations and warranties in the merger agreement are not easily
summarized. In addition, many of the representations and warranties are subject
to various qualifications and limitations, including qualifications as to
materiality. You are urged to read the merger agreement sections titled
"Representations and Warranties of Company" and "Representations and Warranties
of Parent and Newco" in Appendix A of this proxy statement/prospectus. The
representations and warranties in the merger agreement do not survive the
closing of the merger or termination of the merger agreement.
Covenants
Each of Standard Pacific and Writer has undertaken covenants in the merger
agreement. The following summarizes the principal covenants.
Standard Pacific and Writer have each agreed, among other things, to:
. promptly notify the other party of any events or circumstances that
would cause any representations or warranties by the party giving notice
to become substantially untrue or any obligations to not be
substantially fulfilled;
. use all reasonable efforts to take all actions and to do all things
reasonably necessary under applicable law to complete the merger,
including cooperating to make all filings, obtaining consents of all
third parties and governmental authorities necessary to complete the
merger, contesting any legal proceedings relating to the merger and
executing any additional instruments;
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. use commercially reasonable efforts to consult with each other before
issuing press releases or public statements regarding the merger;
. each of the members of the Writer management group will enter into a
lock-up agreement with Standard Pacific, providing, among other things,
that without the consent of Standard Pacific the shares of Standard
Pacific common stock issued to each member in the merger will not be
sold for a period of time after the merger, which time varies from 120
days to one year after the closing date of the merger;
. for a period of six years after the effective time of the merger,
Standard Pacific will continue all rights to indemnification for acts or
omissions occurring at or prior to the effective time of the merger in
favor of the current or former directors, officers, employees or agents
of Writer, to the extent currently provided in the certificate of
incorporation or bylaws of Writer or applicable law;
. Standard Pacific will maintain for a period of three years from the
effective time of the merger, Writer's directors' and officers'
insurance and indemnification policy for those persons who are currently
covered by that policy and for events occurring prior to or at the
effective time of the merger;
. the surviving corporation will operate under the name "The Writer
Corporation" until at least the earlier to occur of the date on which
the employment of George S. Writer, Jr. with the surviving corporation
is terminated, and the fifth anniversary of the effective date of the
merger, however the surviving corporation may discontinue its use of the
Writer name prior to that time if Mr. Writer engages in any conduct that
the board of directors of the surviving corporation believes would have
an adverse effect on the public image of the name, and Mr. Writer may
require the surviving corporation to discontinue its use of the Writer
name if there is a change in control of Standard Pacific;
. the Writer management group will hold more than 50% of the outstanding
shares of Writer common stock, and each member will deliver an agreement
agreeing to vote in favor of the merger, and agreeing to the adjustment
of the members cash election shares, to the extent necessary, to allow
each shareholder of Writer that is not a member of the Writer management
group to receive cash for all cash election shares held by the non-
member shareholder, or as close as possible to all cash; and
. Standard Pacific will use all reasonable efforts to list the Standard
Pacific shares to be issued to Writer shareholders in the merger on the
New York Stock Exchange.
Conduct of Business of Writer Prior to the Merger
The merger agreement contains restrictions on Writer's conduct of business
pending the effective time of the merger. These restrictions are designed to
prevent major changes in Writer until the merger takes place, except to the
extent Standard Pacific or TWC Acquisition consent to the changes. In general,
Writer and each of its subsidiaries have agreed to do the following:
. conduct its business in the ordinary course consistent with past
practice;
. seek to preserve intact its current business organizations;
. keep available the services of its current officers and employees; and
. preserve its relationships with customers, suppliers and others having
business dealings with it.
Writer has agreed that neither it nor any of its subsidiaries will, without
the prior written consent of Standard Pacific and TWC Acquisition:
. amend its governing documents;
. issue or agree to issue any stock of any class or any other securities
or equity equivalents, except for shares of Writer common stock issued
and sold under previously granted options or warrants;
. split, combine or reclassify any shares of its capital stock;
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. declare, set aside or pay any dividend or other distribution in respect
of its capital stock, make any other actual, constructive or deemed
distribution in respect of its capital stock;
. redeem or otherwise acquire any of its securities or any securities of
any of its subsidiaries;
. adopt a plan of complete or partial liquidation, dissolution, merger, or
other reorganization other than the merger with TWC Acquisition;
. alter any subsidiary's corporate structure or ownership;
. incur, assume or issue any debt, except for borrowings under existing
lines of credit in the ordinary course of business;
. become liable or responsible for the obligations of any other person,
except in the ordinary course of business consistent with past practice
and except for obligations of its subsidiaries incurred in the ordinary
course of business consistent with past practice;
. make any loans, advances or capital contributions to or investments in
any other person, other than to subsidiaries or customary loans or
advances to employees, in each case in the ordinary course of business
consistent with past practice;
. pledge or encumber shares of its capital stock or the capital stock of
its subsidiaries;
. mortgage or pledge any of its material assets or create any material
lien upon its assets;
. unless required by law, adopt, amend or terminate any employee
compensation, benefit or similar plan or increase any compensation or
fringe benefits of any director, officer or employee or pay any benefit
not required by any plan as in effect on April 14, 2000;
. acquire, sell, lease or otherwise dispose of any assets in any single
transaction or series of related transactions having a fair market value
in excess of $50,000, except for contracts for sale and sale of
completed residences in the ordinary course of business and consistent
with past practice;
. change any of its accounting principles or practices, unless required by
a change in law or in generally accepted accounting principles;
. revalue in any significant way any of its assets, other than in the
ordinary course of business consistent with past practice;
. acquire any business entity or any equity interest in a business entity,
except for capital expenditures required under existing projects or
contracts consistent with past practices;
. enter into any significant agreement, other than in the ordinary course
of business consistent with past practices, except for capital
expenditures required under existing projects or contracts consistent
with past practices;
. authorize new capital expenditures that individually exceed $50,000, or
in the aggregate exceed $250,000, except for capital expenditures
required under existing projects or contracts consistent with past
practices;
. make any material tax election or settle or compromise any material
income tax liability;
. settle or compromise any legal action that relates to the merger or
would significantly harm Writer;
. pay or increase any employee compensation except in the ordinary course
of business consistent with past practice;
. make any significant change in the conduct of its business or act
otherwise than in the ordinary course of business consistent with past
practice;
. enter into or modify any transaction, agreement, arrangement or
understanding with any affiliate of Writer;
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. take any action that would prevent the merger from qualifying as a tax
free reorganization; and
. take any action that would make any of Writer's representations or
warranties contained in the merger agreement untrue or incorrect.
No Solicitation of Transactions
The merger agreement prohibits Writer from providing confidential
information to or having discussions or negotiations with anyone other than
Standard Pacific or TWC Acquisition in an effort or attempt to make or
implement a third party acquisition, unless:
. the third party submits an unsolicited bona fide proposal to acquire
more than 80% of Writer's outstanding stock or substantially all of
Writer's assets;
. Writer's board decides in good faith, after consulting with financial
and legal advisors, that the proposal is a superior proposal, by which
we mean that
. the proposal, if completed, would be more favorable than the merger
with TWC Acquisition to Writer shareholders, from a financial point
of view, and
. the proposal is reasonably capable of being completed in accordance
with its terms; and
. Writer's board decides in good faith, based on the advice of its
independent legal counsel, that the board's fiduciary duty requires the
board to supply confidential information to and negotiate with the third
party about its proposal.
Writer has agreed that it will promptly notify Standard Pacific of any
proposal concerning a third party acquisition and keep Standard Pacific advised
concerning the status of any proposal concerning a third party acquisition.
We use the term third party acquisition to mean any of the following:
. an acquisition of Writer by a party other than Standard Pacific or TWC
Acquisition;
. the acquisition of more than 30% of Writer's consolidated assets by
someone other than Standard Pacific or TWC Acquisition;
. the acquisition by someone other than Standard Pacific or TWC
Acquisition of 10% or more of the outstanding shares of Writer common
stock;
. Writer's adoption of a plan of liquidation or declaration or payment of
an extraordinary dividend;
. Writer's repurchase of more than 10% of its outstanding shares;
. Writer's acquisition of any interest or investment in any business whose
annual revenue, net income or total assets is equal to or greater than
10% of the annual revenue, net income or total assets of Writer; or
. any similar transaction involving the equity interests of Writer.
Writer's board may not withdraw or modify its recommendation of the merger
or approve or recommend any third party acquisition, or cause Writer to enter
into any agreement for a third party acquisition unless:
. Writer's board decides in its good faith judgment, after consultation
with and based upon the advice of its legal counsel, that it is required
to do so in order to comply with its fiduciary duties;
. Writer's board has received a superior proposal;
. Writer gives Standard Pacific written notice that Writer has received
and intends to approve a superior proposal, and the notice specifies the
significant terms and conditions of and identifies the person making the
proposal;
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. Writer gives Standard Pacific ten business days to make an alternative
offer and Writer's board decides in good faith, after consultation with
its financial advisors, that any alternative offer is not as favorable
to Writer shareholders as the superior proposal; and
. Writer terminates the merger agreement and pays $1.75 million in
liquidated damages to Standard Pacific and pays Standard Pacific's out-
of-pocket expenses in connection with the merger. See "THE MERGER
AGREEMENT--Termination of the Merger Agreement--Termination Fee and
Expenses" on page 68.
The merger agreement does not, however, prohibit the Writer's board of
directors from taking and disclosing to Writer's shareholders a position
contemplated by Rules 14d-9 and 14e-2 under the Securities Exchange Act with
regard to a tender or exchange offer made by someone other than Standard
Pacific.
Conditions to Completing the Merger
The obligations of Standard Pacific, TWC Acquisition and Writer to complete
the merger depend on the following conditions being fulfilled:
. Writer's shareholders will have approved and adopted the merger
agreement by the required vote;
. there will be no law or order by any United States court or governmental
entity that prohibits, restrains or enjoins the completion of the merger
or that limits TWC Acquisition from exercising all rights and privileges
pertaining to its ownership of Writer;
. the registration statement containing this proxy statement/prospectus
will not be subject to any stop order or proceeding seeking a stop order
by the Securities and Exchange Commission; and
. Standard Pacific will have received all state securities law permits and
authorizations necessary to issue shares of Standard Pacific common
stock in exchange for shares of Writer common stock in the merger.
Writer's obligation to complete the merger also depends on the following
conditions being fulfilled:
. except for insignificant defects, Standard Pacific's and TWC
Acquisition's representations and warranties in the merger agreement
will be true on the closing date of the merger;
. Standard Pacific and TWC Acquisition will have performed each of their
agreements under the merger agreement to be performed before the
effective time of the merger;
. the Standard Pacific common stock issuable to Writer shareholders in the
merger will have been authorized for listing on the New York Stock
Exchange;
. Writer will have received an opinion from Gibson, Dunn & Crutcher LLP,
counsel to Standard Pacific, as to matters reasonably agreed upon by the
parties to the merger; Standard Pacific and Writer anticipate that this
legal opinion will address such matters as due incorporation, due
authorization and execution of the merger agreement, absence of
conflicts with laws or material contracts, absence of litigation, and
other customary matters;
. Standard Pacific will have received all consents or approvals necessary
to complete the merger from third parties under significant agreements
or instruments;
. the twenty-day average price for Standard Pacific's common stock will be
at least $8.25 per share;
. TWC Acquisition will have executed and delivered employment agreements
with George S. Writer, Jr. and Daniel J. Nickless in the forms agreed to
by the parties to the merger;
. Writer will have received an opinion from Clanahan, Tanner, Downing and
Knowlton, PC, its outside tax counsel, stating that the merger
constitutes a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code; and
. there will have been no material adverse event regarding Standard
Pacific.
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Standard Pacific and TWC Acquisition will not be required to complete the
merger unless:
. except for insignificant defects, Writer's representations and
warranties contained in the merger agreement are true on the closing
date of the merger;
. Writer has performed each of its agreements under the merger agreement
to be performed before the merger;
. Standard Pacific has received lock-up letters in the form agreed to by
the parties to the merger from each member of the Writer management
group;
. the Standard Pacific common stock issuable to Writer shareholders in the
merger has been authorized for listing on the New York Stock Exchange;
. Standard Pacific has received an opinion from Clanahan, Tanner, Downing
and Knowlton, PC, counsel to Writer, as to matters reasonably agreed
upon by the parties to the merger; Standard Pacific and Writer
anticipate that this legal opinion will address such matters as due
incorporation, due authorization and execution of the merger agreement,
capitalization, absence of conflicts with laws or material contracts,
absence of litigation, and other customary matters;
. Writer has received all consents or approvals necessary to complete the
merger from third parties under significant agreements or instruments;
. Standard Pacific has received an opinion from Gibson, Dunn & Crutcher
LLP, its outside tax counsel, stating that the merger constitutes a tax-
free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code;
. no more than 5% of the total number of outstanding shares of Writer
common stock are subject to properly perfected rights to dissent from
the merger;
. Standard Pacific is reasonably satisfied with all proceedings taken and
documents produced by or on behalf of Writer and has received all
documents and other evidence it reasonably requests to establish that
all proceedings in connection with the merger are taken by Writer;
. Standard Pacific has received by the execution of the merger agreement
an agreement from each member of the Writer management group agreeing to
vote in favor of the merger and agreeing to the proration of that
member's merger consideration, to the extent necessary, to allow each
shareholder of Writer that is not a member of the Writer management
group to receive cash for all cash election shares held by the non-
member shareholder, or as close as possible to all cash.
. the Writer management group has more than 48% of the combined voting
power of the outstanding Writer shares as of the date of execution of
the merger agreement;
. the twenty-day average price for Standard Pacific's common stock is no
greater than $15.75 per share;
. there has been no event which could reasonably be expected to
significantly impair the ability of Writer to complete the merger or to
have a material adverse effect on Writer;
. George S. Writer, Jr. and Daniel J. Nickless have executed and
delivered, at the closing, employment agreements with TWC Acquisition in
the forms agreed to by the parties to the merger;
. Writer's Series 1993 A Convertible Unsecured Promissory Notes have been
prepaid by Standard Pacific at the closing and have not been converted
prior to the closing;
. TWC Acquisition has received title insurance policies, endorsements or
unconditional commitments satisfactory to Standard Pacific from title
insurance companies approved by Standard Pacific indicating that TWC
Acquisition has fee ownership of all real property owned by Writer prior
to the closing; and
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. Writer's financial advisor has not modified or withdrawn its opinion
that the consideration proposed to be received by Writer shareholders in
connection with the merger is fair to Writer shareholders from a
financial point of view.
Termination of the Merger Agreement
Termination
The merger agreement may be terminated at any time before the merger's
completion:
. by the mutual written consent of Standard Pacific, TWC Acquisition and
Writer;
. by either Standard Pacific and TWC Acquisition or Writer:
. if a U.S. court or other governmental authority issues a non-
appealable, final ruling prohibiting the merger;
. if the merger is not completed by August 31, 2000 unless the party
seeking to terminate has caused the delay; or
. if a condition to the obligation of any party to complete the merger
becomes impossible to fulfill and that party has not waived the
condition after fifteen days' written notice from the other party,
unless the party seeking to terminate has caused the condition not
to be met.
. by Writer:
. if Standard Pacific or TWC Acquisition materially breaches any
representation or warranty in the merger agreement and Standard
Pacific or TWC Acquisition does not rectify the breach within twenty
business days after notice by Writer, as long as Writer has not
breached any of its obligations under the merger agreement in a
significant way;
. if Standard Pacific or TWC Acquisition materially breaches any
covenant or agreement in the merger agreement and Standard Pacific
or TWC Acquisition does not rectify the breach within twenty
business days after notice by Writer, as long as Writer has not
breached any of its obligations under the merger agreement in a
significant way; or
. if Writer's board receives a superior proposal and recommends the
superior proposal to its shareholders or withdraws or significantly
weakens its recommendation of the merger agreement or merger, but
only if Writer complies with the merger agreement's provisions
relating to potential acquirors' superior proposals and has paid the
$1.75 million termination fee to Standard Pacific, plus Standard
Pacific's out-of-pocket expenses incurred in connection with the
transactions contemplated by the merger; or
. by Standard Pacific:
. if Writer materially breaches any representation or warranty in the
merger agreement and Writer does not rectify the breach within
twenty business days after notice by Standard Pacific or TWC
Acquisition, as long as neither Standard Pacific nor TWC Acquisition
has breached any of its obligations under the merger agreement in a
significant way;
. if Writer materially breaches any covenant or agreement in the
merger agreement and Writer does not rectify the breach within
twenty business days after notice by Standard Pacific or TWC
Acquisition, as long as Standard Pacific or TWC Acquisition has not
breached any of its obligations under the merger agreement in a
significant way;
. if Writer's board recommends to its shareholders a superior
proposal; or
. if Writer's board withdraws or materially weakens its recommendation
of the merger agreement or merger.
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Effect of Termination
Termination of the merger agreement by the parties as described above will
void the agreement without any liability or obligations to Standard Pacific,
TWC Acquisition or Writer or any of their affiliates, other than
. any liability for breach of the merger agreement;
. the obligation of the parties to keep confidential all nonpublic
information furnished in connection with the merger; and
. the termination fee and expense provisions described immediately below.
Termination Fee and Expenses
Subject to the limitation described below, Writer has agreed to pay Standard
Pacific a termination fee of $1.75 million plus Standard Pacific's out-of-
pocket expenses incurred in connection with the merger if the merger agreement
is terminated in any of the following ways:
. by Writer if Writer's board receives a superior proposal, recommends the
superior proposal or withdraws or significantly weakens its
recommendation of the merger and Writer otherwise complies with the
requirements to give prompt notice and give Standard Pacific an
opportunity to match the value of the superior proposal; or
. by Standard Pacific and TWC Acquisition because:
. Writer materially breaches any representation or warranty in the
merger agreement and Writer does not rectify the breach within
twenty business days after notice by Standard Pacific or TWC
Acquisition, as long as Standard Pacific or TWC Acquisition has not
breached any of its obligations under the merger agreement in a
significant way;
. Writer materially breaches any covenant or agreement in the merger
agreement and Writer does not rectify the breach within twenty
business days after notice by Standard Pacific or TWC Acquisition,
as long as Standard Pacific or TWC Acquisition has not breached any
of its obligations under the merger agreement in a significant way;
. Writer's board recommends a superior proposal to its shareholders;
or
. Writer's board withdraws or materially weakens its recommendation of
the merger agreement or the merger.
If the merger agreement is terminated by Standard Pacific and TWC
Acquisition because Writer breaches any of its representations, warranties or
covenants in the merger agreement, and the breach of representation, warranty
or covenant first occurs after the date of the merger agreement solely as a
result of causes outside the control of Writer or its affiliates, then Writer
will not be required to pay the $1.75 million in liquidated damages, but will
be required to pay Standard Pacific's out-of-pocket expenses incurred in
connection with the merger.
Except for the termination fees and expense reimbursements described above,
each party will pay its own expenses in connection with the merger agreement.
Extension, Waiver and Amendment of the Merger Agreement
Extension and Waiver
At any time before the merger occurs, each party may agree, in writing, to:
. extend the time for the performance of any of the obligations or other
acts of the other party;
. waive any inaccuracies in the other's representations and warranties; or
. waive the other's compliance with any of the agreements or conditions in
the merger agreement.
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Amendment
The merger agreement may be changed by written agreement of the parties at
any time before or after Writer shareholders approve the merger. Any change
after the shareholders approve the merger that by law requires the approval of
Writer shareholders, however, will require their subsequent approval to be
effective. Colorado law requires that shareholders approve any material
amendment to the merger agreement after shareholder approval.
Employee Benefits and Plans
On or before the merger, Writer will terminate The Writer Corporation 401(i)
Profit Sharing Plan. This termination will become effective on or before the
merger. For the purposes of eligibility to participate and vesting in Standard
Pacific's 401(k) plan, known as the Standard Pacific Retirement and Savings
Plan, Writer employees will be given credit for service performed for Writer
before the merger.
Management of TWC Acquisition After the Merger
Board of Directors
The persons named below will be the directors of TWC Acquisition after the
effective date of the merger:
Arthur E. Svendsen
Stephen J. Scarborough
Andrew H. Parnes
George S. Writer, Jr.
Officers
The current officers of Writer are as follows:
<TABLE>
<S> <C>
George S. Writer................ Chief Executive Officer
Daniel J. Nickless.............. President,
Chief Operating Officer,
Chief Financial Officer
and Treasurer
Robert R. Reid.................. Senior Vice President Operations
Dave Steinke.................... Senior Vice President
Richard M. Wells................ Vice President and Controller
Darwin Horan.................... Vice President; Northern Division Manager
Nancy Ashley.................... Vice President of Sales
Ronald S. Loser................. Secretary
The officers of TWC Acquisition after the merger will be the officers of
Writer at the closing, except that Mr. Halvorsen will become Secretary. In
addition, the following persons will become officers:
Stephen J. Scarborough.......... Assistant Secretary
Andrew H. Parnes................ Assistant Treasurer
John M. Stephens................ Assistant Treasurer
</TABLE>
The directors and officers of TWC Acquisition prior to completion of the
merger are current directors and officers of Standard Pacific. Information
about the current Writer directors and executive officers can be found in
Writer's annual report on form 10-K for the fiscal year ended December 31,
1999, which is attached to this proxy statement/prospectus as Appendix B.
Information about the current Standard Pacific directors and executive officers
can be found in Standard Pacific's proxy statement and in its annual report on
form 10-K for the fiscal year ended December 31, 1999, which are incorporated
by reference into this proxy statement/prospectus. See "WHERE YOU CAN FIND MORE
INFORMATION" on page 97.
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INFORMATION ABOUT THE COMPANIES
Standard Pacific
Standard Pacific operates primarily as a geographically diversified builder
of single-family homes for use as primary residences. It has operations
throughout the major metropolitan markets in California, Texas and Arizona. For
the year ended December 31, 1999, approximately 64%, 13% and 23% of its home
deliveries, including unconsolidated joint ventures, were in California, Texas
and Arizona, respectively. Standard Pacific also offers mortgage loans to its
homebuyers and others through a mortgage banking subsidiary and a joint venture
with a leading financial institution.
Standard Pacific was incorporated in the State of Delaware in 1991. Through
its predecessors, it commenced homebuilding operations in 1966 with a single
tract of land in Orange County, California. Standard Pacific's principal
executive offices are located at 15326 Alton Parkway, Irvine, California, 92618
and its telephone number is (949) 789-1600.
Strategy
Through Standard Pacific's well-established reputation for building high
quality homes, proven operating strategies and an experienced management team,
Standard Pacific seeks to grow in its existing markets and expand into selected
new markets that show strong promise for future growth. The main elements of
its strategy include:
Geographic Diversification and Growth. Standard Pacific continues to focus
on growing its California homebuilding operations. It currently has substantial
operations throughout the major metropolitan areas in the state, including
Orange, Los Angeles, Riverside, San Bernardino, San Diego and Ventura Counties
in Southern California, and in the San Francisco Bay area of Northern
California. Over the last several years it has laid the foundation for future
growth in its Texas division, which has projects in the Dallas, Houston and
Austin markets. In the third quarter of 1998, the company expanded into the
Phoenix, Arizona market with the acquisition of a portion of the homebuilding
operations of an established builder. Standard Pacific believes that it
continues to have additional opportunities to expand in our existing markets
and enter new geographic markets.
Focus on Broad Move-Up Market and Diverse Product Offerings. Standard
Pacific concentrates on the construction of single-family homes for use as
primary residences by move-up buyers throughout a broad range of products and
price points. The company expects to concentrate its efforts on acquiring land
that is suitable for the construction and sale of homes generally in the price
range of $150,000 to $700,000, which represents a broad market segment in its
market areas. It also constructs and sells homes in the $700,000 to $1,500,000
price range in some of its California markets. This diverse product platform
enables the company to take advantage of additional market opportunities and
positions it strategically with product offerings that appeal to a wide range
of customers.
Experienced Management and Decentralized Operations. Standard Pacific's
senior corporate and division operating managers average over 20 years of
experience in the homebuilding business. Each division is run by a local
manager with an 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 its corporate officers,
and thereafter, each manager conducts the operations of the division relatively
autonomously. The experience and depth of the company's management team gives
it the ability to evaluate and explore potential new market opportunities and
its decentralized operations have proven to be attractive to selected potential
acquisition candidates.
Reputation for High Quality, Single-Family Homes. Standard Pacific believes
that it has an established reputation for providing high quality homes. The
company prides itself on its ability to design unique and attractive homes and
provide its customers with a wide selection of options. Standard Pacific
believes that its long history of providing high quality homes has resulted in
many repeat buyers and word-of-mouth sales.
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Conservative Operating Strategy. Standard Pacific customarily acquires
unimproved or improved land zoned for residential use which appears suitable
for the construction of 50 to 300 homes in increments of 10 to 30 homes. The
company generally purchases entitled land when it projects commencement of
development or 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 depends to a large
extent upon sales rates experienced in the earlier increments. By developing
projects in increments, Standard Pacific has been able to respond to local
market conditions and control the number of its completed and unsold homes.
Additionally, an increasing percentage of its lots are controlled through joint
ventures. The company uses joint ventures for those land development projects
that have long lead times or that are of significant size requiring substantial
capital investments.
Strong Land Position. Standard Pacific has been operating in California for
over 30 years and has an established reputation with land owners. The company
believes that its long standing relationships with land owners and developers
gives it a competitive edge in securing quality land positions at competitive
prices in California. Standard Pacific is also continuing to build its
reputation and relationships in Texas and Arizona. In order to ensure an
adequate supply of land for future homebuilding activities, the company
generally attempts to maintain an inventory of building sites sufficient for
construction of homes over a period of approximately three to four years.
Standard Pacific believes that its 14,743 owned or controlled building sites at
December 31, 1999, in addition to any land sites for which it may enter into
negotiations, will be sufficient for its operations over this period.
Control of Overhead and Operating Expenses. Throughout its history, Standard
Pacific has sought to minimize overhead expenses in order to be more flexible
in responding to the cyclical nature of its business. The company strives to
control its overhead costs by centralizing some of its administrative functions
and by limiting the number of middle level management positions.
Operations
Standard Pacific currently builds homes in California, Texas and Arizona
through a total of eight operating divisions, with 173 projects under
development or held for future development at December 31, 1999.
Substantially all of the company's homes are single-family detached
dwellings, although during the past few years up to 10 percent have been
townhouses or condominiums generally attached in varying configurations of two,
three, four and six dwelling units.
Standard Pacific's homes are designed to suit the particular area of the
country in which they are located and are available in a variety of models,
exterior styles and materials depending upon local preferences. While they
typically range in size from approximately 2,000 to 3,500 square feet and
typically include four to five bedrooms, three or four baths, a living room,
kitchen, dining room, family room and a two or three-car garage, the company
has also built single-family attached and detached homes ranging from 1,100 to
5,500 square feet. For the years ended December 31, 1999, 1998 and 1997, the
average selling prices of its homes, including sales of the unconsolidated
joint ventures, were $346,749, $329,972 and $309,239, respectively.
Land Acquisition, Development and Construction
In considering the purchase of land for the development of a project,
Standard Pacific reviews such factors as:
.proximity to existing developed areas;
.population growth patterns;
.availability of existing community services, such as water, gas,
electricity and sewers;
.school districts;
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.employment growth rates;
.the expected absorption rates 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,
Standard Pacific enters into a conditional agreement to purchase a parcel of
land, making only a nominal deposit on the property. The company's general
policy is to complete a purchase of land only when it can reasonably project
commencement of construction within a relatively short period of time. Closing
of the land purchase is, therefore, generally made contingent upon satisfaction
of conditions relating to the property and its ability to obtain all requisite
approvals from governmental agencies within a given period of time. The company
customarily acquires unimproved or improved land zoned for residential use
which appears suitable for the construction of 50 to 300 homes. Construction is
then accomplished in smaller sized increments. The number of homes built in the
first increment of a project is based upon Standard Pacific's internal market
studies. The timing and size of subsequent increments depends on the sales
rates of earlier increments. The company's development work on a project
includes obtaining any necessary zoning, environmental and other regulatory
approvals, and constructing, as necessary, roads, sewer and drainage systems,
recreational facilities and other improvements.
Standard Pacific typically uses both its equity (internally generated funds)
and unsecured financing in the form of bank debt and other unsecured debt to
fund land acquisitions. To a lesser extent, the company also uses purchase
money trust deeds to finance the acquisition of land. It also enters 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, project specific financing is not used.
Standard Pacific essentially functions as a general contractor with its
supervisory employees coordinating all work on the project. The services of
independent architectural, design, engineering and other consulting firms are
engaged to assist in project planning, and subcontractors are employed to
perform all of the physical development and construction work on the project.
Standard Pacific does not have long-term contractual commitments with any of
its subcontractors, consultants or suppliers of materials. However, because of
its market presence and long-term relationships, the company has generally been
able to obtain sufficient materials and commitments from subcontractors and
consultants during times of market shortages. These types of agreements are
generally entered into on a phase-by-phase or project-by-project basis at a
fixed price after competitive bidding. Standard Pacific believes that the low
fixed labor expense resulting from conducting its operations in this manner has
been instrumental in enabling the company to retain the necessary flexibility
to react to increases or decreases in demand for housing.
Although the construction time for its homes varies from project to project
depending on the time of year, the size of the house, local labor situations,
related governmental approval processes, availability of materials and supplies
and other factors, Standard Pacific can typically complete the home
construction of a phase within one of its projects in approximately four to six
months.
Joint Ventures
Standard Pacific enters into land development and homebuilding joint
ventures from time to time as a means of managing its risk profile and
expanding its 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,
1999, 1998 and
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1997, the company delivered 18, 40 and 67 homes, respectively, through
unconsolidated joint ventures. Standard Pacific's more significant land
development and homebuilding joint ventures are described below.
In 1996, the company's Orange County division entered into a joint venture
to develop and deliver up to approximately 800 homes in Fullerton and Brea,
California. During 1999, 1998 and 1997, Standard Pacific delivered 18, 40 and
52 new homes, respectively, from this unconsolidated joint venture. As of
December 31, 1999, we had made investments of approximately $8.4 million in
this joint venture.
In the first half of 1997, the company's Northern California division
entered into two joint ventures to develop approximately 700 lots and a
championship golf course in Gilroy, California. Fifty percent of these lots
will be sold to Standard Pacific at cost for the construction and sale of
homes. As of December 31, 1999, the company had made investments of
approximately $19.0 million in these joint ventures.
During 1997, Standard Pacific 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 master-planned 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 community amenities and commercial and industrial components. As a
one-third participant in this long-term project, Standard Pacific may be
required to invest up to $20 million in the project and will receive rights of
first offer entitling it to purchase at fair market value up to 1,000 finished
lots from the joint venture for construction and sale of homes by the company.
As of December 31, 1999, Standard Pacific's net investment in this joint
venture was less than $1 million. Additionally, through December 31, 1999 the
company had purchased 155 lots from the joint venture on which it intends to
build and sell homes.
In July 1999, the company entered into a joint venture with Catellus
Residential Group, Inc. to acquire and develop an age-qualified community
within the Talega master-planned community in San Clemente, California (the
"Talega Village Joint Venture"). The Talega Village Joint Venture plans to
develop and deliver up to approximately 300 homes. This guard-gated community
will feature four separate product types with its own resident recreation
center that will contain various recreational amenities. Additionally, this
project is adjacent to a portion of the championship golf course within the
Talega Joint Venture. As of December 31, 1999, Standard Pacific had an
investment of approximately $1.4 million in this joint venture.
Standard Pacific's Orange County division is a participant in a homebuilding
joint venture located in the San Gabriel Valley area of Southern California.
This joint venture is scheduled to construct and deliver in excess of
300 homes, with development scheduled to commence in mid to late 2000, and
first home deliveries planned for 2001. As of December 31, 1999, the company's
investment in this joint venture totaled approximately $2.5 million.
In 1998, Standard Pacific entered into a joint venture with Centex Homes to
develop approximately 700 lots in Riverside County, California. Currently, the
company's Southern California Inland Empire division is scheduled to purchase
approximately half of these lots at cost for the construction and sale of homes
and sales of lots to other builders. As of December 31, 1999, Standard Pacific
had made an investment of approximately $7.2 million in this joint venture.
Marketing and Sales
Standard Pacific's homes are generally sold by its own sales personnel.
Furnished and landscaped model homes are typically maintained at each project
site. Homebuyers are afforded the opportunity to select, at additional costs,
various optional amenities and upgrades such as prewiring and electrical
options, upgraded flooring, cabinets, finished carpentry and countertops,
varied interior and exterior color schemes, additional appliances and some room
configurations. The company makes extensive use of advertisements in local
newspapers, illustrated brochures, billboards and on-site displays.
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Standard Pacific's homes are typically sold during or prior to construction
using sales contracts which are usually accompanied by a cash deposit, although
some of its 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 or if
other conditions are not met.
During each of the years ended December 31, 1999, 1998 and 1997, Standard
Pacific experienced cancellation rates of 24 percent, 25 percent and 22
percent, respectively. Although cancellations can delay the 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 company policy to closely monitor the progress of
prospective buyers in obtaining financing and to monitor and adjust its start
plan to continuously match the level of demand for its homes. Sales are
recorded after construction is completed, required down payments are received
and title passes. At December 31, 1999, 1998 and 1997, the company had an
inventory of completed and unsold homes of 167, 136 and 116, respectively.
Financial Services
Customer Financing
In 1998, Standard Pacific began offering conventional, FHA-insured, VA-
guaranteed and other types of mortgage loans to its California homebuyers and
others through its mortgage banking subsidiary, Family Lending Services, Inc.
In 1998, Standard Pacific also began offering conventional, FHA-insured, VA-
guaranteed and other types of mortgage loans to its Arizona homebuyers through
SPH Mortgage, a joint venture with Wells Fargo Bank. During 1999, the company
expanded this venture into its Texas operating divisions.
Family Lending sells the loans it originates in the secondary mortgage
market, generally on a non-recourse basis with servicing rights released. It
typically finances its loans held for sale with borrowings under its
warehousing line of credit (secured by the loans and, in some circumstances,
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 Wells Fargo Bank.
Both Family Lending and SPH Mortgage seek to manage interest rate risk with
respect to loan commitments and loans held for sale by preselling loans on a
best efforts basis. To enhance potential returns on the sale of mortgage loans,
Family Lending has begun selling a portion of its mortgage loans on a non-
presold mandatory delivery basis. To hedge its interest rate risk associated
with extending interest rate commitments to customers prior to selling closed
loans to investors, Family Lending has entered into forward sale commitments of
mortgage-backed securities during the first quarter ended March 31, 2000. While
its hedging strategy of buying and selling mortgage-backed securities should
assist Family Lending in mitigating risk associated with selling loans on a
mandatory delivery basis, these instruments involve elements of market risk
which could result in losses on loans sold in this manner if not hedged
properly. In January 2000, Family Lending retained a third party advisory firm
to assist with selling loans on a mandatory delivery basis and entering into
forward sale commitments of mortgage-backed securities.
The principal sources of revenues for these mortgage banking operations are:
.fees generated from loan originations;
.net gains on the sale of loans; and
.interest income earned on loans during the period they are held prior
to sale.
Title Services
During 1999, Standard Pacific began serving as a title insurance agent in
Texas by offering title examination services to its Texas homebuyers through a
new subsidiary, SPH Title, Inc. Standard Pacific assumes no underwriting risk
associated with these title policies.
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Writer
Residential Developments
Writer is a developer and builder of planned residential communities
primarily in the Denver, Colorado area and has recently expanded into the
Northern Colorado area with projects in Ft. Collins and Windsor, Colorado.
Writer's expansion into Northern Colorado provides an opportunity for it to
identify more affordable development opportunities in an expanding marketing
area. Because of these opportunities, Writer has assumed an aggressive position
relative to its overall land philosophy and current land position and is
continuously investigating community development opportunities. To fund this
growth, Writer has re-employed its available cash flow and plans to continue to
expand its borrowing relationships.
Writer has received local and national recognition for the design of its
planned residential communities which integrate single family homes and
townhomes with extensive greenbelts, bicycle and walking paths, winding streets
and family recreation facilities to create a beneficial lifestyle for our
residents. From the date of Writer's formation through December 31, 1999,
Writer has closed the sale of 10,308 homes in 35 communities.
Writer markets planned residential communities to a broad spectrum of middle
and upper middle income buyers. Sales prices for Writer homes currently range
from approximately $159,000 to $398,000. Writer designs each of its planned
residential communities to complement existing land characteristics, blending
cul-de-sacs with extensive green belts, parks, natural open space and winding
streets to create a pleasant environment compatible with its surroundings.
Typically Writer's planned communities incorporate one or more recreation
facilities such as a clubhouse, swimming pool or tennis courts. Writer
constructs model homes to assist in marketing each community, striving for
distinctive architecture and interior design. As of December 31, 1999, Writer
had homes valuing approximately $24,326,000 in planning or construction which
were under contract but not closed.
Writer uses its staff, outside consultants and subcontractors as necessary
to accomplish all stages of development through sales including acquisition of
land, land use planning and development, building design, construction, and
marketing and sales.
Writer also acquires options on land which it intends to develop in order to
further explore the suitability of properties. Writer typically engages outside
consultants to verify market expectations and to provide marketing studies
which address factors such as product design and pricing, target market
location, population growth patterns, and zoning suitability. Writer's staff
prepares preliminary cost estimates, land and site layouts, and obtains
environmental and regulatory approvals. The staff also designs preliminary
roads, sewers, water, and drainage layouts and other community amenities, in
concert with independent engineers.
As of December 31, 1999, Writer had 3,006 units in its master plan in
various stages of construction of which approximately 1,750 units were closed.
Writer currently owns or controls land that is or will be platted for
approximately 1,424 units, which is sufficient for planned construction
activities for the near future. As an additional source of lots for
construction, Writer intends to enter into purchase agreements for developed or
partially developed sites.
Writer designs its residential communities to complement the characteristics
of the land and the surrounding area to create an appealing environment.
Internal staff determines the type and mix of houses suitable for the property,
evaluates traffic patterns, designs roadways, recreational areas and
greenbelts. Physical development, including paving of streets, grading of home
sites and underground installation of utilities, is generally performed by
subcontractors under fixed price contracts, which are competitively bid, and
supervised by Writer's in-house staff.
Writer is subject to regulation by various state and local authorities,
including those administering zoning and land subdivision ordinances. Some
matters require agency approval and the homes Writer builds are subject to
inspection by local building departments during construction. Writer believes
that its relationships with the municipalities and agencies having jurisdiction
over its properties are excellent. Historically, Writer
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has experienced little difficulty in obtaining the necessary permits for
developing its properties. Some local municipalities have attempted to limit
growth through allocations of building permits or water and sewer taps. Writer
has not been directly impacted by these measures to date but may be in the
future.
Project Development
Writer typically completes construction of its homes in 120 to 150 working
days, depending on the complexity of the model. On-site construction is
performed by subcontractors and overseen by its project supervisors. Most
subcontract work is performed under fixed price contracts, which usually cover
both labor and materials. Cost savings are sought through the use of quality
standard materials and components, building on contiguous sites,
standardization of available options, limiting the types of options and
efficient use of land. Writer has long-standing relationships with many of its
subcontractors and believes that these relationships contribute to cost and
production efficiencies. Writer continually considers design innovations in its
house plans, most of which were developed internally and refined over the
years.
Writer obtains the majority of its construction financing under revolving
lines of credit with local and national banks. These agreements provide
financing for a portion of its lot purchases and substantially all material and
outside labor costs incurred in the construction of residences. In addition,
loan agreements provide model home financing and allow a specific number of
speculative homes to be built. These loans currently bear interest at rates
ranging from the prime rate of interest to prime plus 1.0% and are typically
renewed annually, at which time loan fees ranging from 0.5% to 1.0% are paid
for the loans. Writer had remaining approximately $57,793,000 available from
financing sources for construction financing as of December 31, 1999. Writer
acquires development financing through lending relationships with financial
institutions or other institutional lenders. Usually these loans require equity
contributions which Writer must provide through its working capital. The loans
are repaid by refinancing from related construction loan facilities or
ultimately by proceeds from sale. Writer obtains a portion of its working
capital through credit facilities from institutional lenders. Currently, Writer
has three of these facilities.
Sales and Marketing
Writer markets its planned residential communities to middle and upper
middle income purchasers through internally-employed, on-site, commissioned
salespersons. Many of Writer's sales involve co-operative commission
arrangements with an independent real estate broker. Writer encourages this
cooperative activity through various programs aimed at outside real estate
professionals who many times have significant influence over buyer decisions.
Writer advertises in the print media, uses various types of signage, and
maintains model home complexes at its communities to assist sales efforts.
Prospective purchasers execute contracts for its homes, making down payments
ranging from $2,000 to $5,000 which are forfeited if the home is not purchased
for any reasons other than failure to obtain financing or resolution of other
contingencies in the contract.
Mortgage Banking Operations
Writer formed a mortgage subsidiary, WRT Financial, Limited Partnership,
through which buyers may finance their home purchases. WRT Financial does not
require any specific permanent financing relationship to be used by buyers.
Most buyers obtain long term loans with down payments ranging from 5 to 30% of
the purchase price.
As of December 31, 1999, Writer employed 125 full-time employees, including
seven in executive positions, 12 in sales and marketing activities, 87 in
planning, construction or development activities, 19 in administrative
activities, and five part-time employees, primarily assisting in sales.
Writer was incorporated in Colorado on June 9, 1961 and its principal
executive offices are located at 6061 S. Willow Drive #232, Englewood, Colorado
80111, and its telephone number is (303) 779-4100.
TWC Acquisition
TWC Acquisition is a wholly owned subsidiary of Standard Pacific. It was
incorporated in Delaware solely for use in the merger and has never conducted
any other business.
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DESCRIPTION OF CAPITAL STOCK
When Standard Pacific and Writer complete the merger, Writer shareholders
will become Standard Pacific stockholders. The following is a description of
Standard Pacific's capital stock and the common stock to be issued in the
merger.
Standard Pacific Capital Stock
The authorized capital stock of Standard Pacific consists of 100,000,000
shares of common stock, $0.01 par value, and 10,000,000 shares of preferred
stock, $0.01 par value. Standard Pacific's certificate of incorporation, as
amended to date, does not authorize any other classes of capital stock. The
issued and outstanding shares of Standard Pacific common stock are, and the
shares issuable in connection with the merger, when issued will be, duly
authorized, validly issued, fully paid and nonassessable.
Standard Pacific Common Stock. Standard Pacific has one class of common
stock. As of June 26, 2000, there were approximately 28,704,480 shares of
Standard Pacific common stock outstanding held of record by approximately 1343
persons. Standard Pacific common stock is listed on the New York Stock Exchange
under the symbol "SPF." Holders of shares of Standard Pacific's existing common
stock are entitled to one vote per share on all matters to be voted upon by
Standard Pacific stockholders and may not cumulate votes for the election of
directors.
The holders of shares of Standard Pacific's existing common stock are
entitled to receive ratably dividends as may be declared from time to time by
Standard Pacific's board of directors out of funds legally available for
dividend payments, subject to any dividend preferences of any holders of any
other series of common stock and preferred stock. In the event of a
liquidation, dissolution or winding up of Standard Pacific, after full payment
of all liabilities and liquidation preferences of any other series of common
stock and preferred stock, the holders of shares of Standard Pacific's existing
common stock are entitled to share ratably in all remaining assets. Standard
Pacific's existing common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the shares of Standard Pacific's existing common stock.
Standard Pacific's certificate of incorporation authorizes its board of
directors to issue new series of common stock without stockholder approval.
Subject to Delaware corporation law, the Standard Pacific board of directors
may:
. fix or alter the designations, powers and preferences, and relative,
participating, optional or other rights, if any, of any new series of
common stock;
. fix the qualifications, limitations, or restrictions of any new series
of common stock, including, without limitation, dividend rights, and
whether dividends are cumulative;
. fix any conversion rights, voting rights, including the number of votes,
if any, per share, as well as the number of members, if any of the board
or the percentage of members, if any, of the board each new series of
common stock may be entitled to elect;
. fix the rights and terms of redemption, including any sinking fund
provisions, redemption price and liquidation preference of any unissued
series of common stock, and the number of shares constituting these
series and the designations thereof; and
. increase or decrease the number of shares of any series of common stock
if not below the number of shares of such series then outstanding.
Standard Pacific's board of directors has no power to alter the rights of
any outstanding shares of common stock.
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Standard Pacific presently does not intend to issue additional series of
common stock.
EquiServe, L.P., is the Transfer Agent and Registrar for the shares of
Standard Pacific common stock.
Standard Pacific Preferred Stock. At the date of this proxy
statement/prospectus, no shares of Standard Pacific preferred stock were
outstanding. Standard Pacific's board of directors may issue up to 10,000,000
shares of preferred stock in one or more series and, subject to Delaware
corporation law, may:
. fix or alter the designations, powers and preferences, and relative,
participating, optional or other rights, if any, of preferred stock;
. fix the qualifications, limitations, or restrictions thereof, including,
without limitation, dividend rights, and whether dividends are
cumulative;
. fix the conversion rights, if any, voting rights, including the number
of votes, if any, per share, as well as the number of members, if any of
the board or the percentage of members, if any, of the board each class
or series of preferred stock may be entitled to elect;
. fix the rights and terms of redemption, including sinking fund
provisions, if any, redemption price and liquidation preference of any
wholly unissued series of preferred stock, and the number of shares
constituting these series and the designations thereof; and
. increase or decrease the number of shares of any series of preferred
stock if not below the number of shares of the series then outstanding.
Although Standard Pacific presently does not intend to do so, its board may
issue shares of preferred stock with voting and conversion rights which could
negatively affect the voting power or other rights of Standard Pacific common
stockholders, and the board could take that action without stockholder
approval. For example, the issuance of shares of preferred stock could decrease
the amount of earnings and assets available for distribution to common
stockholders. In addition, any issuance of preferred stock could have the
effect of making removal of the present management more difficult, or result in
restrictions upon the payment of dividends and other distributions to the
common stockholders. The issuance of shares of Standard Pacific preferred stock
could delay or prevent a change in control of Standard Pacific.
Standard Pacific Rights Plan
Under Delaware law, every corporation may create and issue "rights"
entitling the holders of the rights to purchase from the corporation shares of
its capital stock of any class or classes, subject to any provisions in its
certificate of incorporation. The price and terms of the shares to be purchased
must be stated in the certificate of incorporation or in a resolution adopted
by the board of directors for the creation or issuance of rights.
General. Under a stockholders' rights plan adopted in 1991 and amended in
1999, Standard Pacific's board of directors declared a dividend of one Standard
Pacific right for each outstanding share of Standard Pacific common stock.
First Chicago Trust Company of New York has been appointed to serve as rights
agent. Each Standard Pacific right entitles the registered holder to purchase,
subject to adjustment as provided in the plan, one one-hundredth of a share of
Standard Pacific Series A Junior Participating Cumulative preferred stock, par
value $0.01 per share, at an initial price of $40. The terms of the Standard
Pacific rights are fully described in the Standard Pacific rights agreement
between Standard Pacific and the rights agent.
Distribution Date. The Standard Pacific rights attach to and trade only
together with the shares of Standard Pacific common stock. The Standard Pacific
rights will separate from shares of Standard Pacific common stock and rights
certificates will be issued and become exercisable to purchase preferred shares
upon the earliest of the following events, which we refer to as the "rights
distribution date":
. the tenth business day, or a later date designated by the board of
directors, following the date of the first public announcement that any
person, other than Standard Pacific or its related entities, has become
the beneficial owner of 15% or more of the then outstanding common
stock;
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. the tenth business day, following the date of the commencement of, or
the announcement of an intention to make, a tender offer or exchange
offer, the consummation of which would cause any person to become the
beneficial owner of 15% or more of the then outstanding common stock; or
. the first date, on or after the date on which the first public
announcement has been made that any person beneficially owns 15% or more
of the outstanding common stock, upon which Standard Pacific is acquired
in a merger or other business combination and in which Standard Pacific
is not the surviving corporation or in which the outstanding common
stock is changed into or exchanged for stock or assets of another
person, or upon which 50% or more of Standard Pacific's consolidated
assets or earning power are sold, other than in transactions in the
ordinary course of business.
In calculating the percentage of outstanding common stock that is
beneficially owned by any person, that person will be deemed to beneficially
own any common stock issuable upon the exercise, exchange or conversion of any
options, warrants or other securities beneficially owned by that person. The
common stock issuable upon the exercise, however, will not be deemed
outstanding for the purpose of calculating the percentage of common stock that
is beneficially owned by any other person. Notwithstanding the foregoing, if
any person is the beneficial owner of at least 15% of the outstanding common
stock on the date of the rights agreement, or thereafter becomes the beneficial
owner of at least 15% of the outstanding common stock as a result of any
increase in the common stock issuable upon the exercise, exchange or conversion
of outstanding securities, or any decrease in the number of outstanding common
stock resulting from any stock repurchase plan or self tender offer of Standard
Pacific, then that person will not be deemed a 15% stockholder until that
person acquires beneficial ownership of, in the aggregate, a number of
additional shares of common stock equal to 1% or more of the then outstanding
common stock.
Issuance of Rights Certificates. As soon as practicable following the rights
distribution date, separate certificates representing only rights will be
mailed to the holders of record of shares of Standard Pacific common stock as
of the close of business on the rights distribution date, and these separate
right certificates alone will represent the rights from and after the rights
distribution date.
Expiration of Rights. The rights will expire on December 31, 2001 unless
earlier redeemed or exchanged.
Exercise of the Rights. Unless the rights have expired or been redeemed or
exchanged, they may be exercised, at the option of the holders, pursuant to
paragraphs (a), (b) or (c) immediately below. No right may be exercised more
than once or pursuant to more than one of these paragraphs. From and after the
first event of the type described in paragraphs (b) or (c) below, each right
that is beneficially owned by a 15% stockholder or that was attached to a share
of Standard Pacific common stock that is subject to an option beneficially
owned by a 15% stockholder will be void. Standard Pacific rights will entitle
the holder to receive, for payment of the rights purchase price, one one-
hundredth of a Standard Pacific preferred share.
(a) Right to Purchase Preferred Shares. From and after the close of
business on the rights distribution date, each right that has not become
void will be exercisable to purchase one one-hundredth of a preferred
share, at an exercise price of $40. Prior to the rights distribution date,
Standard Pacific may substitute for all or any portion of the preferred
shares that would otherwise be issuable upon exercise of the rights, cash,
assets or other securities having the same aggregate value as the preferred
shares.
(b) Right to Purchase Shares of Standard Pacific Common Stock. From and
after the close of business on the tenth business day following the first
public announcement of a 15% stockholder, each right that has not become
void will be exercisable to purchase, at an exercise price of $40, shares
of Standard Pacific common stock with a market value equal to two times the
exercise price. If Standard Pacific does not have sufficient shares of
Standard Pacific common stock available for all rights to be exercised,
Standard Pacific will substitute for all or any portion of the shares of
Standard Pacific common stock that would otherwise be issuable upon the
exercise of the rights, cash, assets or other securities having the same
aggregate value as the shares of Standard Pacific common stock.
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(c) Right to Purchase Common Stock of a Successor Corporation. If, on or
after the first public announcement that a person has become a 15%
stockholder:
(i) Standard Pacific is acquired in a merger or other business
combination in which Standard Pacific is not the surviving corporation,
(ii) Standard Pacific is the surviving corporation in a merger or
other business combination in which all or part of the outstanding
shares of Standard Pacific common stock are changed into or exchanged
for stock or assets of another person, or
(iii) 50% or more of Standard Pacific's consolidated assets of
earning power are sold, other than in transactions in the ordinary
course of business,
then each right, other than a right that has become void, will be
exercisable to purchase, at the exercise price of $40, shares of common
stock of the surviving corporation or purchaser, respectively, with an
aggregate market value equal to two times the exercise price.
Adjustments to Prevent Dilution. The exercise price, the number of
outstanding rights and the number of preferred shares or shares of Standard
Pacific common stock issuable upon exercise of the rights are subject to
adjustment, from time to time, as set forth in the Standard Pacific rights
agreement in order to prevent dilution.
Cash Paid Instead of Issuing Fractional Securities. With some exceptions, no
adjustment in the exercise price will be required until cumulative adjustments
require an adjustment of at least 1%. No fractional securities will be issued
upon exercise of a right (other than fractions of preferred shares that are
integral multiples of one one-hundredth of a preferred share and that may, at
the election of Standard Pacific, be evidenced by depositary receipts) and
instead an adjustment in cash will be made based on the market price of those
securities on the last trading date prior to the date of exercise.
Redemption. At any time prior to the earlier of (a) the tenth business day
following the first announcement of a 15% stockholder, or (b) the first event
of the type described in paragraph (c) of "Exercise of the Rights" above, the
board of directors may, at its option, direct Standard Pacific to redeem the
rights in whole, but not in part, at a price of $0.01 per right. Immediately
upon this action by the board of directors, the right to exercise rights will
terminate and the only right of the holders of rights thereafter will be to
receive the redemption price.
Exchange. At any time after the first public announcement of a 15%
stockholder and prior to the first date thereafter upon which a 15% stockholder
becomes the beneficial owner of 50% or more of the outstanding shares of
Standard Pacific common stock, the board of directors may, at its option,
direct Standard Pacific to exchange all, but not less than all, of the then
outstanding rights for shares of Standard Pacific common stock at an exchange
ratio of one share of Standard Pacific common stock per right. Immediately upon
this action by the board of directors, the right to exercise rights will
terminate and the only right of the holders of rights thereafter shall be to
receive a number of shares of Standard Pacific common stock equal to the
exchange ratio.
No Stockholder Rights Prior to Exercise. Until a right is exercised, the
holder will have no rights as a stockholder of Standard Pacific (other than
rights resulting from the holder's ownership of common stock), including,
without limitation, the right to vote or to receive dividends.
Amendment of Rights Agreement. The board of directors may, from time to
time, without the approval of any holder of rights, direct Standard Pacific and
the Rights Agent to supplement or amend any provision of the Standard Pacific
rights agreement in any manner, whether or not the supplement or amendment is
adverse to any holder of rights. From and after the earliest of (a) the tenth
business day following the first public announcement of a 15% stockholder, (b)
the first event of the type described in paragraph (c) of "Exercise of the
Rights" above, or (c) the redemption date, the Standard Pacific rights
agreement will not be supplemented or amended in any manner that would
materially and adversely affect any holder of outstanding rights other than a
15% stockholder.
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Rights and Preferences of the Standard Pacific Preferred Shares. The
preferred shares are non-redeemable and, unless otherwise provided in
connection with the creation of a subsequent series of preferred stock, are
subordinate to any other series of Standard Pacific's preferred stock, whether
issued before or after the issuance of the preferred shares. 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 Standard Pacific common stock, or (ii) a preferential
annual dividend of $1.00 per preferred share ($0.01 per one one-hundredth 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) $1.00 per preferred share ($0.01 per one one-hundredth of a
preferred share), plus all accrued and unpaid dividends and distributions on
the preferred shares, or (2) an amount equal to 100 times the aggregate amount
to be distributed per share of Standard Pacific common stock. Each preferred
share has 100 votes, voting together with the Standard Pacific common stock. In
the event of any merger, consolidation or other transaction in which shares of
Standard Pacific common stock are exchanged, the holder of a preferred share
will be entitled to receive 100 times the amount received per share of Standard
Pacific common stock.
The rights of the preferred shares as to dividends, voting and liquidation
preferences are protected by anti-dilution provisions. Because of the nature of
the dividend, liquidation and voting rights of the preferred shares, the value
of the one one-hundredth interest in a preferred share purchasable upon
exercise of each right should approximate the value of one share of Standard
Pacific common stock.
This description of the Standard Pacific rights is qualified by reference to
the Standard Pacific rights agreement, which is incorporated by reference in
this proxy statement/prospectus. See "WHERE YOU CAN FIND MORE INFORMATION" on
page 97.
Certain Anti-takeover Effects of the Standard Pacific Rights. The Standard
Pacific rights are designed to protect and maximize the value of the
outstanding equity interests in Standard Pacific in the event of an unsolicited
attempt by an acquirer to take-over Standard Pacific, in a manner or on terms
not approved by the Standard Pacific board. The Standard Pacific rights have
been declared by the Standard Pacific board of directors to deter these types
of tactics, including a gradual accumulation in the open market of shares of
Standard Pacific common stock representing a 15% or greater position to be
followed by a merger or a partial or two-tier tender offer that does not treat
all stockholders equally and may unfairly pressure stockholders, not give
stockholders any real choice and deprive them of the full value of their
shares. The Standard Pacific rights may make more difficult or discourage an
acquisition of Standard Pacific deemed undesirable by the Standard Pacific
board of directors by causing substantial dilution to a person or group that
attempts to acquire Standard Pacific on terms or in a manner not approved by
the Standard Pacific board of directors, except for an acquisition offer
conditioned upon the negation, purchase or redemption of the Standard Pacific
rights.
Anti-takeover Effects of Delaware Law and Relevant Provisions of Standard
Pacific's Certificate of Incorporation.
In addition to the rights plan, provisions of Delaware law and Standard
Pacific's certificate of incorporation may make more difficult the acquisition
of Standard Pacific by tender offer, a proxy contest or otherwise and the
removal of officers and directors. For example:
. Delaware law prohibits a publicly-held Delaware corporation from
engaging in a business combination with an interested stockholder unless
the business combination is approved in a specified manner. Generally,
an interested stockholder is a person who, together with its affiliates
and associates, owns 15% or more of the corporation's voting stock or
owned 15% of the corporation's voting stock within three years before
the proposed business combination, or is affiliated with the
corporation.
. Standard Pacific's certificate of incorporation provides that the
Standard Pacific board of directors be divided into three classes, with
staggered three-year terms. The classification of the Standard Pacific
board of directors makes it more difficult for Standard Pacific's
stockholders to replace the Standard Pacific board of directors and for
another party to obtain control of Standard Pacific by replacing the
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board of directors. Since the Standard Pacific board of directors has
the power to retain and discharge officers of Standard Pacific, these
provisions could also make it more difficult for stockholders or another
party to effect a change in management.
. Standard Pacific's certificate of incorporation provides that
stockholder action can be taken only at an annual or special meeting of
stockholders and may not be taken by written consent without a meeting.
. Standard Pacific's certificate of incorporation authorizes its board of
directors to issue new series of common stock and preferred stock
without stockholder approval. Subject to applicable law, the board of
directors could create a series of common stock or preferred stock with
preferential rights to dividends or assets upon liquidation, or with
superior voting rights to the existing common stock. Standard Pacific
could issue a series of common stock or preferred stock with terms that
make an acquisition by a third party more difficult or less attractive.
Additionally, Standard Pacific's certificate and bylaws require the
affirmative vote of the holders of a majority of the outstanding voting stock
of Standard Pacific to amend the provisions described above.
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COMPARISON OF STOCKHOLDERS' RIGHTS
Prior to the effective time of the merger, the rights of Writer shareholders
are governed by the Colorado Business Corporation Act, or the CBCA, the Writer
articles of incorporation and the Writer bylaws, as amended. At the effective
time of the merger, the shareholders of Writer, other than Writer shareholders
electing to receive all cash in the merger and who do not receive Standard
Pacific shares in the proration process, will become stockholders of Standard
Pacific, a corporation governed by the Delaware General Corporation Law, or
DGCL, the Standard Pacific certificate of incorporation and the Standard
Pacific bylaws, as amended. The following discussion summarizes the material
differences between the rights of holders of shares of Writer common stock and
holders of shares of Standard Pacific common stock, and additionally,
summarizes relevant provisions of the CBCA, the DGCL, the Writer articles of
incorporation, the Writer bylaws, the Standard Pacific certificate of
incorporation and the Standard Pacific bylaws.
General
The DGCL and the interpretations of those laws by Delaware courts is
generally more comprehensive and more developed than the CBCA and the
interpretation of those laws by Colorado courts. The DGCL is more frequently
updated and revised to meet changes in the business environment. The CBCA
replaced the Colorado Corporation Code effective July 1, 1994 and is a modern,
updated corporation statute. Writer does not believe that it has been impeded
in operating its business under the CBCA.
Voting Groups
Under the CBCA, Writer shareholders are entitled to vote in voting groups
under given circumstances. A voting group consists of all the shares of one or
more classes or series that, under the Writer articles of incorporation or
under the CBCA, are entitled to vote and be counted together collectively on a
matter at a meeting of shareholders. If multiple voting groups are entitled to
vote on a matter, favorable action on the matter is taken only when it is duly
approved by each voting group. Although the Writer common stock is the only
issued and outstanding voting stock of Writer and the Writer articles of
incorporation do not provide for voting by voting groups, any other class or
series of capital stock that may be issued by Writer in the future is entitled
to vote separately as a voting group under the CBCA in connection with some
amendments to the Writer articles of incorporation and some plans of merger and
share exchange. See "COMPARISON OF STOCKHOLDERS' RIGHTS--Amendments to the
Writer Articles of Incorporation and the Standard Pacific Certificate of
Incorporation" on page 84. The DGCL has no equivalent provisions for voting
groups.
Cumulative Voting
In an election of directors under cumulative voting, each share of stock
normally having one vote is entitled to a number of votes equal to the number
of directors to be elected. A stockholder may then cast all of these votes for
a single candidate or may allocate them among as many candidates as the
stockholder may choose. Without cumulative voting, the holders of a majority of
the shares present at an annual meeting or any special meeting held to elect
directors would have the power to elect all the directors to be elected at that
meeting, and no person could be elected without the support of holders of a
majority of the shares voting at that meeting. Under the DGCL, cumulative
voting in the election of directors is not mandatory but is a permitted option.
The Standard Pacific certificate of incorporation and the Standard Pacific
bylaws do not provide for cumulative voting in the election of directors.
Under CBCA Section 7-102-102(3), for corporations incorporated after
December 31, 1958, if cumulative voting is not desired in the election of
directors, a statement to that effect must be made in the articles of
incorporation. If the statement is not made, cumulative voting will be
mandatory in the election of directors, subject to the cumulative voting
procedures set forth under CBCA Section 7-107-209. The Writer articles of
incorporation expressly state that cumulative voting will not be allowed in the
election of directors.
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Amendments to the Writer Articles of Incorporation and the Standard Pacific
Certificate of Incorporation
Under the CBCA, an amendment to the Writer articles of incorporation, with
exceptions for routine amendments, must be proposed by the Writer board of
directors or the holders of shares representing at least ten percent of all of
the votes entitled to be cast on the amendment, and must then be approved by
the holders of two-thirds of the votes cast within the voting groups entitled
to vote on the amendment. Under the CBCA, all of the holders of Writer common
stock, and each holder of shares of an affected class or series of stock, if
any, voting in separate voting groups, are entitled to vote on any amendment of
the Writer articles of incorporation that would:
. increase or decrease the aggregate number of authorized shares of the
class or series;
. effect an exchange or reclassification of all or part of the shares of
the class or series into shares of another class or series;
. effect an exchange or reclassification, or create the right of exchange,
of all or part of the shares of another class or series into shares of
the class or series;
. change the designation, preferences, limitations, or relative rights of
all or part of the shares of the class or series;
. change the shares of all or part of the class or series into a different
number of shares of the same class or series;
. create a new class of shares having rights or preferences with respect
to distributions or dissolution that are prior, superior or
substantially equal to the shares of the class or series;
. increase the rights, preferences, or number of authorized shares of any
class or series that, after giving effect to the amendment, have rights
or preferences with respect to distributions or to dissolution that are
prior, superior, or substantially equal to the shares of the class or
series;
. limit or deny an existing preemptive right of all or part of the shares
of the class or series; or
. cancel or otherwise affect rights to distributions or dividends that
have accumulated but have not yet been declared on all or part of the
shares of the class or series.
Under the DGCL and the Standard Pacific certificate of incorporation,
amendments to the Standard Pacific certificate of incorporation must be adopted
by the Standard Pacific board of directors and must then be approved by the
holders of a majority of the voting power of the outstanding shares of stock
entitled to vote thereon. The Standard Pacific certificate of incorporation
further provides that:
. any alteration, amendment, repeal or rescission relating to any Article
other than Articles I (name), III (registered office) or VI (annual
meeting of stockholders) of the Standard Pacific certificate of
incorporation, must also be approved either:
. by a majority of the authorized number of directors and, if one or
more interested directors exist, by a majority of the independent
directors, or
. by the affirmative vote of the holders of not less than 80% of the
shares of voting stock then outstanding; and
. if any change listed above is proposed by or on behalf of an interested
stockholder or a director who is an affiliate or associate of an
interested stockholder, the change must also be approved by the
affirmative vote of the holders of a majority of the disinterested
shares then outstanding.
The DGCL requires the approval of a majority of the outstanding shares of a
class of stock, voting as a separate class, for any amendment that changes the
number of authorized shares of that class, changes the par value of that class
or adversely affects the powers, preferences or special rights of that class.
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Amendments to Bylaws
As permitted under the CBCA, the Writer bylaws provide that the Writer
bylaws may be amended, supplemented or repealed by the Writer board of
directors or the shareholders. As permitted under the DGCL, the Standard
Pacific certificate of incorporation provides that the Standard Pacific bylaws
may be adopted, amended, or repealed either:
. by a majority of the authorized number of directors and, if one or more
interested directors exist, by a majority of the independent directors,
or
. by the affirmative vote of the holders of not less than 80% of the
shares of voting stock then outstanding and, if the change is proposed
by or on behalf of an interested stockholder or a director who is an
affiliate or associate of an interested stockholder, by the affirmative
vote of the holders of a majority of the disinterested shares then
outstanding.
Vote Required for Merger and Other Transactions
Under the CBCA, except for some specific situations, a plan of merger or
share exchange or a transaction involving the sale, lease, exchange or other
disposition of all or substantially all of a corporation's property, other than
in the usual and regular course of business, must be adopted by the board of
directors and then approved by each voting group entitled to vote separately on
the plan, share exchange or transaction by the holders of a majority of all the
votes entitled to be cast on the plan, share exchange or transaction by that
voting group; provided, however, that unless the articles of incorporation of a
corporation that was in existence on June 30, 1994 provides otherwise, a plan
of merger or share exchange which requires shareholder approval must be
approved by two-thirds of all votes entitled to be cast on the plan by that
voting group.
The CBCA requires separate voting by voting groups on: (i) a plan of merger
if the plan contains a provision that, if contained in an amendment to the
articles of incorporation, would require action by separate voting groups, and
(ii) a plan of share exchange by each class or series of shares included in the
share exchange, with each class or series constituting a separate voting group.
Under the DGCL, an agreement of merger or a sale, lease or exchange of all
or substantially all of Standard Pacific's assets must be approved by the
Standard Pacific board of directors and then adopted by the holders of a
majority of the voting power of the outstanding shares of stock entitled to
vote thereon. In addition to the affirmative vote required under the DGCL, the
Standard Pacific certificate of incorporation requires the affirmative vote of
the holders of at least two-thirds of the disinterested shares then outstanding
to approve or authorize any business combination that has not been approved in
advance by a majority of the independent directors.
Directors
The Writer articles of incorporation do not expressly provide that the
number of directors will be fixed by the Writer bylaws. The Writer bylaws
provide that the Writer board of directors will consist of eight members. The
Standard Pacific certificate of incorporation states that the Standard Pacific
bylaws, as amended from time to time, will dictate the number of directors that
shall constitute the whole board. The Standard Pacific bylaws provide that the
number of directors will be fixed from time to time by resolution of the
Standard Pacific board of directors or by the stockholders of Standard Pacific.
The Standard Pacific bylaws further provide that the Standard Pacific board of
directors will consist of nine members until a duly adopted resolution by the
board or stockholders amends this provision in accordance with Article XIV of
the Standard Pacific certificate of incorporation.
Classification of Board of Directors
A classified board is one with respect to which a designated number of
directors, but not necessarily all, are elected on a rotating basis each year.
Under the DGCL and CBCA, classification of a board of directors is permitted
but not required, pursuant to which the directors can be divided into as many
as three classes with staggered terms of office, with only one class of
directors standing for election each year. The Standard Pacific certificate of
incorporation provides that the Standard Pacific board be divided into three
classes, with staggered
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three-year terms. These classes will be as nearly equal in number of directors
as reasonably possible. Each director will serve until his or her successor
shall have been duly elected and qualified unless he or she shall resign,
become disqualified or shall otherwise be removed. See "COMPARISON OF
STOCKHOLDERS' RIGHTS--Removal of Directors" on page 86. Writer does not have a
classified board of directors. Each Writer director is elected each year at the
annual meeting of shareholders. Each director serves until a successor is duly
elected, he or she resigns, or is disqualified or otherwise removed.
Removal of Directors
Under the Writer bylaws, a member of the Writer board of directors may be
removed in any manner provided by the statutes of Colorado.
Under CBCA Section 7-108-108, the shareholders may remove one or more
directors with or without cause unless the articles of incorporation provide
that the directors may be removed only for cause. The director may be removed
only if (i) the number of votes cast in favor of removal exceeds the number of
votes cast against removal, and (ii) a meeting is called for the purpose of
removing him or her, and the meeting notice states that the purpose, or one of
the purposes, of the meeting is the removal of a director.
Under CBCA Section 7-108-109, a director may be removed by the district
court of the county in Colorado in which Writer's principal or registered
office is located, in a proceeding commenced either by Writer or by Writer
shareholders holding at least ten percent of the outstanding shares of any
class, if the court finds that the director engaged in fraudulent or dishonest
conduct or gross abuse of authority or discretion with respect to Writer and
that removal is in Writer's best interests.
Under the DGCL and the Standard Pacific certificate of incorporation,
directors of Standard Pacific may be removed only for cause and only by the
affirmative vote of the holders of a majority of Standard Pacific voting stock
then outstanding; provided, however, that if a proposal to remove a director is
made by or on behalf of an interested stockholder or a director who is an
affiliate or associate of an interested stockholder, then the removal will also
require the affirmative vote of the holders of a majority of the disinterested
shares then outstanding.
Newly Created Directorships and Vacancies
Under the CBCA and the Writer bylaws, vacancies in the Writer board of
directors may be filled by the affirmative vote of a majority of the directors
then in office, even if less than a quorum, and newly created directorships
resulting from an increase in the number of directors, including an increase
effected by the Writer board of directors, may be filled by the affirmative
vote of a majority of the directors then in office or by an election at an
annual meeting or at a special meeting of shareholders called for that purpose.
A director so chosen will hold office until the next annual meeting of
shareholders and thereafter until his or her successor shall have been elected
and qualified.
Under the DGCL, the Standard Pacific certificate of incorporation and the
Standard Pacific bylaws, newly created directorships resulting from death,
resignation, disqualification, an increase effected by the Standard Pacific
board of directors, or any other cause, may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director; provided, however, that whenever the holders of any class or classes
of stock or series thereof are entitled to elect one or more directors, any
vacancy or newly created directorship of that class or series may be filled by
a majority of the directors elected by the class or classes or series thereof
then in office, or by a sole remaining director so elected. Each director so
chosen to fill a vacancy will hold office until his or her successor shall have
been elected and shall qualify or until he or she director shall resign or
shall have been removed. No reduction of the authorized number of directors
will have the effect of removing any director prior to the expiration of his or
her term of office.
Any other vacancy on the board of directors may be filled by a majority of
the directors then in office, even if less than a quorum, or by a sole
remaining director. Whenever the holders of any one or more classes or series
of preferred stock issued by Standard Pacific shall have the right, voting
separately by class or series, to elect directors at an annual or special
meeting of the stockholders, the election, term of office, filling of vacancies
and other features of these directorships shall be governed by the terms of the
preferred stock
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designation applicable thereto. If, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute less
than a majority of the whole board (as constituted immediately prior to the
increase), the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least 10% of the total number of the
shares at the time outstanding having the right to vote for the directors,
summarily order an election to be held to fill any of these vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office.
Limitation of Director's Liability
As permitted by both the CBCA and the DGCL, both the Writer bylaws and the
Standard Pacific certificate of incorporation eliminate or limit the personal
liability of a director to Writer or its shareholders and Standard Pacific or
its stockholders, respectively, for monetary damages based on his or her breach
of fiduciary duty; provided however, that a director's liability is not
eliminated or limited for any breach of the director's duty of loyalty to the
corporation or its shareholders or stockholders, for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, for excess or prohibited distributions, or for any transaction from which
the director derived an improper personal benefit.
Indemnification of Directors and Officers
The CBCA and the DGCL contain generally similar provisions for the
indemnification of directors, officers, employees and agents. The CBCA permits
indemnification of a director only if the director conducted himself or herself
in good faith and reasonably believed, in connection with conduct in an
official capacity, that his or her conduct was in the best interests of the
corporation and, in all other cases, that his or her conduct was at least not
opposed to the corporation's best interests. The DGCL permits similar
indemnification if the director acted in good faith and reasonably believed
that his or her conduct was in or not opposed to the best interests of the
corporation.
The CBCA generally precludes indemnification if there is an adjudication of
liability that the director obtained an improper personal benefit. The DGCL
does not specifically deal with cases of improper personal benefit. Neither the
CBCA nor the DGCL permits a corporation to indemnify directors against
judgments in actions brought by or in the right of the corporation in which the
director was adjudged liable to the corporation, and the DGCL extends this
limitation to indemnification of officers. However, both the CBCA and the DGCL
permit indemnification for reasonable expenses in these situations if the
indemnification is ordered by a court.
Both the CBCA and the DGCL permit the corporation to advance expenses upon a
written undertaking for their repayment if the person receiving the advance is
not ultimately entitled to indemnification. In addition, the CBCA requires (i)
written affirmation of a good faith belief of having met his or her standard of
conduct and (ii) determination that facts known would not preclude
indemnification. The CBCA prohibits provisions in articles of incorporation,
bylaws, or contracts that are inconsistent with the statutory provisions, while
the DGCL specifies that the statutory provisions are not exclusive of other
rights to indemnification or advancement of expenses that may be provided by
bylaws, agreements, votes of stockholders or disinterested directors, or
otherwise.
Special Meeting of Shareholders; Action by Consent
Under the CBCA and the Writer bylaws, a special meeting of the shareholders
of Writer may be called for any purpose by the President or by the Writer board
of directors, and shall be called by the President at the request of the
holders of not less than ten percent (10%) of all the outstanding shares of the
corporation entitled to vote at the meeting. Under the CBCA, unless the Writer
articles of incorporation require that action be taken at a shareholders'
meeting, any action required or permitted to be taken at a shareholders'
meeting may be taken without a meeting if all of the shareholders entitled to
vote thereon consent to the action in writing. Under the Writer bylaws, the
action by consent will have the same force and effect as a unanimous vote of
the Writer shareholders.
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As permitted under the DGCL, the Standard Pacific certificate of
incorporation provides that special meetings of Standard Pacific stockholders
may be called at any time by a majority of the members of Standard Pacific's
board or by a committee of the board which has been duly designated by the
board. These special meetings of Standard Pacific stockholders may not be
called by any other person or persons in any other manner; provided, however,
that if a proposal requiring stockholder approval is made by or on behalf of an
interested stockholder or a director who is an affiliate or associate of an
interested stockholder, of if an interested stockholder otherwise seeks action
requiring stockholder approval, then the affirmative vote of a majority of the
independent directors shall also be required to call a special meeting of
stockholders for the purpose of considering the proposal or obtaining
stockholder approval; and provided further that if and to the extent that any
special meeting of stockholders may be called by any other person or persons
specified in any certificate of designations filed under Section 151(g) of the
DGCL (or its successor statute as in effect from time to time), then the
special meeting may also be called by the person or persons, in the manner, at
the times and for the purposes so specified. The Standard Pacific certificate
of incorporation also provides that any action by Standard Pacific stockholders
must be effected at an annual or special meeting of stockholders and may not be
effected by written consent without a meeting.
Business Combinations Involving a Change of Control
Neither the CBCA, the Writer articles of incorporation nor the Writer bylaws
contain any special provisions regarding business combinations involving a
change of control.
The DGCL prohibits some transactions between a Delaware corporation, the
shares of which are listed on a national securities exchange, and an
"interested stockholder," unless the certificate of incorporation of the
corporation contains a provision expressly electing not to be governed by this
prohibition. The Standard Pacific certificate of incorporation does not contain
this provision. An "interested stockholder" includes a person that is directly
or indirectly a beneficial owner of 15% or more of the voting power of the
outstanding voting stock of the corporation and the person's affiliates and
associates. The provision prohibits particular business combinations between an
interested stockholder and a corporation for a period of three years after the
date the interested stockholder became an interested stockholder, unless
. the business combination is approved by the corporation's board of
directors prior to the date the stockholder became an interested
stockholder,
. the interested stockholder acquired at least 85% of the voting stock of
the corporation in the transaction in which the stockholder became an
interested stockholder, or
. the business combination is approved by a majority of the board of
directors and the affirmative vote of two-thirds of the outstanding
stock that is not owned by the interested stockholder.
Dissenters' Rights
Under the CBCA, a shareholder who complies with Sections 7-113-202 and 7-
113-204 of the CBCA, whether or not entitled to vote, is entitled to dissent
and obtain payment for the "fair value" of the shareholder's shares, including
"interest." CBCA Section 7-113-101(4) defines the term "fair value," with
respect to a dissenter's shares, to mean the value of the shares of common
stock immediately before the effective time of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable. CBCA Section 7-113-101(5) defines the term "interest" to mean
interest from the effective time of the corporate action until the date of
payment, at the average rate currently paid by the corporation on its principal
bank loans or, if none, at the legal rate of eight percent per annum,
compounded annually, as specified by Section 5-12-101 of the Colorado Revised
Statutes. Dissenters' rights are triggered in the event of:
. consummation of a plan of merger to which Writer is a party, if approval
by Writer shareholders is required for the merger or if Writer were a
subsidiary that was merged with its parent corporation;
. consummation of a plan of share exchange to which Writer is a party as
the corporation whose shares will be acquired;
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. consummation of a sale, lease, exchange, or other disposition of all, or
substantially all, of Writer's property, if a shareholder vote is
required for the disposition under the CBCA; or
. consummation of a sale, lease, exchange, or other disposition of all, or
substantially all, of the property of an entity controlled by Writer if
Writer shareholders are entitled to vote on whether Writer will consent
to the disposition.
Shareholders lose their dissenters' rights if their shares are listed on a
national securities exchange or on the National Market System of the National
Association of Securities Dealers Automated Quotation System or are held of
record by more than 2,000 shareholders, provided, however, that this limitation
will not apply if the shareholder will receive for the shareholder's shares,
pursuant to the corporation action, anything except:
. shares of the corporation surviving the consummation of the plan of
merger or share exchange;
. shares of any other corporation which at the effective date of the plan
of merger or share exchange either will be listed on a national
securities exchange or on the National Market System of the National
Association of Securities Dealers Automated Quotation System or will be
held of record by more than 2,000 shareholders;
. cash in lieu of fractional shares; or
. any combination of the shares described in (a) and (b) or cash in lieu
of fractional shares.
A shareholder is also entitled to dissent and obtain payment of the "fair
value" of the shareholder's shares in the event of (i) a reverse split that
reduces the number of shares owned by the shareholder to a fraction of a share
or to scrip if the fractional share or scrip is to be acquired for cash or the
scrip is to be voided under the CBCA or (ii) any corporate action, to the
extent provided by the Writer bylaws or a resolution of the Writer board of
directors.
Generally, stockholders of a Delaware corporation who object to mergers or
consolidations of the corporation are entitled to appraisal rights, requiring
the surviving corporation to pay the "fair value" of the dissenting shares.
There are, however, no statutory rights of appraisal with respect to
stockholders of a Delaware corporation whose shares of stock are either (i)
listed on a national securities exchange or (ii) held of record by more than
2,000 stockholders. In addition, no appraisal rights shall be available for any
shares of stock of a surviving corporation in a merger if the merger did not
require the approval of the stockholders of the corporation. Further, the DGCL
does not provide appraisal rights to stockholders who dissent from the sale of
all or substantially all of the corporation's assets unless the certificate of
incorporation provides otherwise. The Standard Pacific certificate of
incorporation provides stockholders with statutory appraisal rights, to the
maximum extent possible under DGCL Section 262, with respect to any business
combination involving Standard Pacific which requires the affirmative vote of
the holders of at least two-thirds of the disinterested shares then
outstanding.
Dividends
Under the CBCA, a dividend may be paid on the Writer Common Stock unless,
after payment of the dividend, (i) Writer would not be able to pay its debts as
they become due in the usual course of business or (ii) Writer's total assets
would be less than the sum of its total liabilities plus the amount that would
be needed, if Writer were dissolved at the time of the distribution, to satisfy
the preferential rights of shareholders whose preferential rights are superior
to those holders receiving the dividend.
Under the DGCL, a dividend may be paid on the Standard Pacific Common Stock
out of either surplus, defined as the excess of net assets over capital, or if
no surplus exists, out of net profits for the fiscal year in which the dividend
is declared and/or the preceding fiscal year. Dividends may not be paid on the
stock out of surplus if the capital of Standard Pacific is less than the
aggregate amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets.
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Stock Repurchases
Under the CBCA, Writer may purchase, redeem or otherwise acquire its own
shares, unless after giving effect thereto, (i) Writer would not be able to pay
its debts as they become due in the usual course of business or (ii) Writer's
total assets would be less than the sum of its total liabilities plus the
amount that would be needed, if Writer were dissolved at the time of the
redemption, to satisfy the preferential rights of shareholders whose
preferential rights are superior to those holders whose shares are to be
acquired.
Under the DGCL, Standard Pacific may purchase, redeem or otherwise acquire
its own shares. However, Standard Pacific may not (i) purchase or redeem its
own shares of capital stock for cash or other property when the capital of the
corporation is impaired or when the purchase or redemption would cause any
impairment of the capital of the corporation, except that a corporation may
purchase or redeem out of capital any of its own shares which are entitled upon
any distribution of its assets, whether by dividend or in liquidation, to a
preference over another class or series of its stock, if the shares will be
retired upon their acquisition and the capital of the corporation reduced, or
(ii) purchase, for more than the price at which they may then be redeemed, any
of its shares which are redeemable at the option of the corporation.
Under the CBCA, no contract or transaction between Writer and one or more of
its directors or between Writer and any other corporation, partnership,
association, or other organization in which one or more of Writer's directors
are directors or officers, or have a financial interest, unless the contract or
transaction is between Writer and an entity that owns, directly or indirectly,
all of the outstanding shares of Writer or all of the outstanding shares or
other equity interests of which are owned, directly or indirectly, by Writer,
is void or voidable solely for that reason, or solely because the director is
present at or participates in the meeting of the Writer board of directors or
committee thereof which authorizes the contract or transaction, or solely
because the director's votes are counted for that purpose, if:
. the material facts as to the director's relationship or interest and as
to the contract or transaction are disclosed or are known to the Writer
board of directors or the committee, and the Writer board of directors
or committee in good faith authorizes, approves or ratifies the contract
or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors
constitute less than a quorum;
. the material facts as to the director's relationship or interest and as
to the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the contract or transaction
is specifically authorized, approved or ratified in good faith by a vote
of the shareholders; or
. the contract or transaction is fair to Writer.
In addition, under the CBCA, the Writer board of directors or a committee
thereof may not authorize a loan by Writer to a Writer director or to an entity
in which a Writer director is a director or officer or has a financial interest
or a guaranty by Writer of an obligation of a Writer director or of an
obligation of an entity in which a Writer director is a director or officer or
has a financial interest, unless the entity, where an entity is involved, is
one that owns, directly or indirectly, all of the outstanding shares of Writer
or all of the outstanding shares or other equity interests of which are owned,
directly or indirectly, by Writer, until at least ten days after written notice
of the proposed authorization of the loan or guaranty has been given to the
holders of the Writer common stock who would be entitled to vote on the
transaction.
The DGCL contains provisions regarding transactions with directors and
officers that are substantially similar to those of the CBCA. In addition, the
DGCL provides that Standard Pacific may loan money to, or guaranty any
obligation incurred by, its officers, including those who are also directors,
if, in the judgment of the Standard Pacific board of directors, the loan or
guarantee may reasonably be expected to benefit Standard Pacific.
Corporate Records; Shareholder Inspection
Under the CBCA, a shareholder or a shareholder's agent or attorney is
entitled to inspect and copy, upon at least five business days' written notice
and during regular business hours at Writer's principal office, the
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Writer articles of incorporation, the Writer bylaws, minutes of all
shareholders meetings and records of all actions taken by shareholders without
a meeting for the past three years, all written communications within the past
three years to shareholders as a group or to the holders of any class or series
of shares as a group, a list of the names and business addresses of current
directors and officers, the most recent corporate report delivered to the
Colorado Secretary of State, and financial statements of Writer prepared for
periods ending during the last three years. In addition, a shareholder who:
. has been a Writer shareholder for at least three months or who is a
holder of at least five percent of all of the outstanding shares of any
class of Writer capital stock,
. makes a demand in good faith and for a purpose reasonably related to the
shareholder's interest as a shareholder,
. describes with reasonable particularity the purpose and the records the
shareholder desires to inspect, and
. requests records that are directly connected with the described purpose,
or the shareholder's agent or attorney,
is entitled to inspect and copy, upon at least five business days' written
notice and during regular business hours at a reasonable location specified by
Writer; excerpts from minutes or records of any Writer board of directors
meeting or action, minutes or records of any shareholders' meeting or action,
excerpts of records of any action of a Writer board of directors committee,
waivers of notices of any shareholder, Writer board of directors or Writer
board of directors committee meeting, accounting records of Writer, and records
of the names and addresses of shareholders.
Under the DGCL, any stockholder of Standard Pacific, in person or by
attorney or other agent, may, upon written demand under oath stating the
purpose thereof, during the usual hours for business, inspect for any proper
purpose, the corporation's stock ledger, a list of its stockholders, and its
other books and records, and to make copies or extracts therefrom.
Preemptive Rights
Writer's articles of incorporation do not permit preemptive rights or
similar rights to subscribe for any additional shares of stock, or for other
securities of any class, or for rights, warrants or options to purchase stock.
Under the DGCL, the stockholders of Standard Pacific do not have preemptive
rights unless specifically granted in the certificate of incorporation. The
Standard Pacific certificate of incorporation does not grant Standard Pacific
stockholders preemptive rights.
Rights Plan
Under Delaware and Colorado law, every corporation may create and issue
"rights" entitling the holders of the rights to purchase from the corporation
shares of its capital stock of any class or classes, subject to any provisions
in its certificate of incorporation. The price and terms of the shares to be
purchased must be stated in the certificate of incorporation or in a resolution
adopted by the board of directors for the creation or issuance of rights.
Standard Pacific has adopted a rights plan. See "DESCRIPTION OF CAPITAL STOCK--
Standard Pacific Rights Plan" on page 78.
Writer does not have a rights plan.
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DISSENTERS' APPRAISAL RIGHTS
Writer shareholders have the right to dissent from the Standard Pacific
merger and to receive payment for their shares in accordance with the
provisions of Sections 7-113-101 through 7-113-302, inclusive, of the Colorado
Business Corporation Act or CBCA. The following discussion is not intended to
be a complete statement of these provisions and is qualified in its entirety
by reference to the full text of those Sections, a copy of which is attached
as Appendix D hereto.
Each Writer shareholder who desires payment for his or her shares or
appraisal and follows the procedures specified in Sections 7-113-202 and 7-
113-204 will be entitled to have the Writer common stock held of record by the
shareholder exchanged for cash or appraised by a district court in Colorado in
a proceeding conducted in accordance with Sections 7-113-301 and 7-113-302 of
the CBCA and receive a judgment for
. the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the
corporation, or
. for the fair value, plus interest, of the dissenter's shares for which
the corporation elected to withhold payment under section 7-113-208 of
the CBCA, as determined by the court.
The procedures set forth in sections 7-113-202 and 7-113-204 of the CBCA
should be complied with strictly. Failure to follow any of these procedures
may result in the termination or waiver of dissenters' rights.
Writer shareholders should note that failure to execute and return a proxy
or transmittal letter does not perfect dissenters' rights. In addition,
neither voting against the merger proposal nor abstaining from voting will
constitute a demand for payment.
However, voting in favor of the merger proposal will waive a shareholder's
dissenters' rights. If a shareholder returns a signed proxy card that does not
specify a vote, the proxy will be voted in favor of the merger proposal which
will have the effect of waiving the shareholder's dissenters' rights.
A shareholder who is entitled to dissent and obtain payment for his or her
shares of Writer common stock under these sections may not challenge the
corporate action creating this entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
Under Sections 7-113-202 and 7-113-204 of the CBCA, a Writer shareholder
who desires to exercise dissenters' rights and who does not vote in favor of
the merger may perfect these rights by delivering to Writer, for receipt
before the taking of the vote on the merger agreement, written notice of the
shareholder's intention to demand payment for the shareholder's shares if the
proposed corporate action is effectuated. The written demand is separate from
and in addition to any proxy or vote against the merger agreement. This
written demand for payment should be delivered either in person to the
corporate secretary of Writer before the Writer special meeting or at the
Writer special meeting before the vote on the merger agreement, or by mail,
certified mail, return receipt requested, being the recommended form of
transmittal, for receipt prior to the vote on the merger agreement at the
Writer special meeting, delivered to Writer at the following address: 6061 S.
Willow Drive, #232, Englewood, CO 80111, Attention: Daniel J. Nickless,
President.
Only a Writer shareholder of record on July 25, 2000, or a person duly
authorized and explicitly purporting to act on his or her behalf, is entitled
to exercise dissenters' rights for shares of Writer common stock. A Writer
shareholder of record may assert dissenters' rights as to fewer than all the
shares of Writer common stock registered in his name only if he dissents with
respect to all shares beneficially owned by any one person and notifies Writer
in writing of the dissent and the name, address, and federal taxpayer
identification number, if any, of each person on whose behalf the record
shareholder asserts dissenters' rights.
A beneficial shareholder of shares of Writer common stock may assert
dissenters' rights as to the shares of Writer common stock held on his or her
behalf only if he or she submits to Writer the written consent of the
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shareholder of record to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights and he or she does so with respect to
all shares beneficially owned by him. A person who owns shares of Writer common
stock beneficially, but not of record, and who desires to exercise his or her
dissenters' rights is, therefore, advised to consult promptly with the person
or entity that is the record holder of his common stock in order to receive and
submit his written consent to the exercise of these rights and to ensure the
timely exercise of the same.
If the merger is authorized, Writer will give a written dissenters' notice
to all shareholders who are entitled to demand payment for their shares. The
notice will be sent no later than ten days after the effective time of the
merger and will:
. state where and when the shareholder must deliver a demand for payment;
. contain a form for demanding payment, which requires the dissenting
shareholder to certify that he or she acquired beneficial ownership
before the first public announcement of the merger; and
. set a date by which the written payment demand must be received, not
fewer than 30 nor more than sixty days after the date Writer sends the
written dissenters' notice.
A Writer shareholder who receives a dissenters' notice must demand payment
in writing for his shares of Writer common stock. The Writer shareholder who
demands payment will be required to deposit his stock certificates in
accordance with the Writer dissenters' notice. A Writer shareholder who demands
payment and deposits his or her certificates retains all other rights of a
shareholder until those rights are canceled or modified by the merger. The
demand for payment and deposit of certificates is irrevocable.
A Writer shareholder who does not demand payment and deposit his or her
certificates as required by the date specified in the dissenters' notice, is
not entitled to payment for his or her shares of Writer common stock.
Upon the effective time of the merger or upon receipt of a payment demand,
whichever is later, Writer shall pay each dissenter who complied with section
7-113-204, at the address stated in the payment demand, or if the address is
not stated in the payment demand, at the address shown on Writer's current
record of shareholders for the record shareholder holding the dissenter's
shares, the amount Writer estimates to be the fair value of the dissenter's
shares, plus accrued interest. The payment will be accompanied by relevant
financial information, Writer's estimate of the fair value of the shares, and
explanations of how the interest was calculated, a statement of the dissenter's
right to demand payment under section 7-113-209, and a copy of the CBCA
sections governing dissenters' rights.
A dissenter may notify Writer in writing of his own estimate of the fair
value of his or her shares of Writer common stock and the amount of interest
due, and demand payment of his or her own estimate, less any payment made under
section 7-113-206 of the CBCA. The dissenter may also elect to reject Writer's
offer and demand payment of the fair value of the shares and interest due, if
he or she believes that the amount paid under section 7-113-206 or offered
under section 7-113-208 is less than the fair value of the shares or that the
interest due was incorrectly calculated. If a demand for payment remains
unresolved, Writer may, within sixty days after receiving the payment demand,
commence a proceeding and petition the court to determine the fair value of the
shares and accrued interest. If Writer does not commence the proceeding within
the sixty day period, it will pay to each dissenter whose demand remains
unresolved the amount demanded. The proceeding will be commenced in a district
court in Colorado, and the Court will determine the fair value of the share of
Writer common stock and accrued interest.
In determining the fair value of the shares of Writer common stock, the
court may appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. No representation can be
made as to the outcome of an appraisal proceeding. Shareholders also should be
aware that the appraisal rights process is subject to uncertainties and to the
possibility of lengthy and expensive
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litigation that could extend for a substantial period of time, without the
shareholders having received any money for their shares of Writer common stock
during this period. Shareholders also should recognize that an appraisal
proceeding could result in a determination of a fair value higher or lower than
or equal to the per share consideration which would otherwise be received in
the merger.
The costs of an appraisal proceeding may be determined by the court and
taxed upon the parties as the court deems equitable in the circumstances, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or
not in good faith in demanding payment under section 7-113-209. The court may
also assess the fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable against the corporation or one or
more dissenters.
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ADDITIONAL INFORMATION
Legal Matters
Gibson, Dunn & Crutcher LLP, Irvine, California will pass upon the validity
of the Standard Pacific common stock to be issued in connection with the
merger. Robert K. Montgomery who is a partner of Gibson, Dunn & Crutcher LLP,
and members of his family, as of the date of this proxy statement/prospectus,
hold 40,000 shares of Standard Pacific common stock.
Independent Public Accountants
The financial statements of Standard Pacific as of December 31, 1999 and for
the three years then ended, incorporated by reference in this proxy
statement/prospectus, 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
accounting and auditing.
The consolidated financial statements of Writer contained in Writer's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, and for each
of the three years ended prior to December 31, 1999, are enclosed with this
proxy statement/prospectus and have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing in the Writer Form
10-K. Members of Deloitte & Touche LLP, Writer's independent auditors, are
expected to attend the Writer special meeting, will have the opportunity to
make a statement at the meeting if they so desire and are expected to be
available to respond to appropriate questions.
Stockholder Proposals
Writer will hold a 2000 annual meeting of shareholders only if the merger is
not completed. Writer welcomes shareholder proposals on matters appropriate for
shareholder action at an annual meeting in accordance with regulations adopted
by the Securities and Exchange Commission and the provisions of Writer's
bylaws. However, for proposals by shareholders to have been included in the
proxy statement for the 2000 annual meeting of Writer shareholders, Writer
would have had to receive the proposals before March 1, 2000.
If you wish to submit a proposal to be considered for inclusion in Writer's
proxy materials for its 2001 annual meeting, and you remain a Writer
shareholder, you must submit your proposal to Writer at its offices not later
than March 1, 2001.
If the merger is consummated, the first annual meeting of the stockholders
of Standard Pacific after consummation is expected to be held on or about May
15, 2001.
If any Standard Pacific stockholder intends to present a proposal at the
2001 Standard Pacific annual meeting and wishes to have that proposal
considered for inclusion in the proxy materials for the meeting, the
stockholder must have submitted the proposal to the Secretary of Standard
Pacific in writing so as to be received at the executive offices of Standard
Pacific by December 1, 2000. These proposals must also meet the other
requirements of the rules of the Securities and Exchange Commission relating to
stockholders' proposals.
Other Matters
As of the date of this proxy statement/prospectus, Writer's board of
directors and Standard Pacific's board of directors know of no matters that
will be presented for consideration at the Writer special meeting other than as
described in this proxy statement/prospectus. If any other matters properly
come before the Writer special meeting or any adjournment or postponement of
the Writer special meeting and are voted upon, the enclosed proxies will be
deemed to confer discretionary authority on the individuals named as proxies in
the enclosed proxies to vote the shares represented by those proxies as to the
other matters. The individuals named as proxies intend to vote or not to vote
in accordance with the recommendation of Writer's management.
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REFERENCE TO ADDITIONAL INFORMATION
Writer's annual report on Form 10-K for the year ended December 31, 1999 and
its quarterly report on Form 10-Q for the quarter ended March 31, 2000 are
attached to this proxy statement/prospectus as Appendix B and Appendix C,
respectively. This proxy statement/prospectus incorporates important business
and financial information about Standard Pacific from documents that are not
included in or delivered with this proxy statement/prospectus. This information
is available to you without charge upon your written or oral request. You can
obtain documents incorporated by reference in this proxy statement/prospectus
by requesting them in writing or by telephone from Standard Pacific at the
following location:
Standard Pacific Corp.
Investor Relations
15326 Alton Parkway
Irvine, CA 92618
(949) 789-1600
To ensure timely delivery, we suggest you request the information at least
five business days before the date you must make your investment decision.
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WHERE YOU CAN FIND MORE INFORMATION
Standard Pacific has filed with the Securities and Exchange Commission a
registration statement on Form S-4 under the Securities Act, that registers the
shares of Standard Pacific common stock to be issued in exchange for shares of
Writer common stock in connection with the merger. The registration statement,
including the attached exhibits and schedules, contains additional relevant
information about Standard Pacific and its capital stock. The rules and
regulations of the Securities and Exchange Commission allow us to omit some of
the information included in the registration statement from this proxy
statement/prospectus.
In addition, Standard Pacific and Writer file annual, quarterly and special
reports, proxy statements and other information with the Securities and
Exchange Commission under the Exchange Act. You may read and copy any of these
filings at the following public reference rooms and locations of the Securities
and Exchange Commission:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. You may obtain
information on the operation of the public reference rooms by calling the
Securities and Exchange Commission at 1-800-SEC-0330.
The Securities and Exchange Commission also maintains an Internet website
that contains reports, proxy statements and other information about issuers,
like Standard Pacific and Writer, who file electronically with the Securities
and Exchange Commission. The address of that website is www.sec.gov.
The Securities and Exchange Commission allows Standard Pacific and Writer to
incorporate by reference information into this proxy statement/prospectus and
requires Writer to enclose some additional information with this proxy
statement/prospectus. This means that Standard Pacific and Writer can disclose
important business and financial information to you by referring you to another
document filed separately with the Securities and Exchange Commission and that
Writer can similarly disclose important business and financial information via
attachments to this proxy statement/prospectus. This information is considered
to be a part of this proxy statement/prospectus, except for any information
that is superseded by information that is included directly in this document.
This proxy statement/prospectus incorporates by reference the documents
listed below for Standard Pacific and either incorporates by reference or
attaches the documents listed below for Writer that have been previously filed
with the Securities and Exchange Commission. These documents contain important
information about our companies and their financial condition.
<TABLE>
<CAPTION>
Standard Pacific SEC Filings Period
---------------------------- ------
<S> <C>
Annual Report on Form 10-K.................... Year ended December 31, 1999
Quarterly Report on Form 10-Q................. Quarter ended March 31, 2000
The description of Standard Pacific common
stock set forth in Standard Pacific's
Registration Statement on Form 8-B (File No.
1-10959), and any amendments or reports filed
for the purpose of updating such
description.................................. Filed: December 17, 1991
Amendment No. 1 to Rights Agreement, effective
as of May 12, 1999, between Standard Pacific
and First Chicago Trust Company of New York,
as rights agent, incorporated by reference to
Exhibit 4.1 of Standard Pacific's Quarterly
Report on Form 10-Q for the quarter ended
March 31, 1999............................... Quarter ended March 31, 1999
Definitive Notice and Proxy Statement on Form
14A.......................................... Filed: March 30, 2000
</TABLE>
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<TABLE>
<CAPTION>
Writer SEC Filings Period
------------------ ------
<S> <C>
Annual Report on Form
10-K, as amended....... Year ended December 31, 1999, and enclosed with these materials
Quarterly Report on Form
10-Q................... Quarter ended March 31, 2000, and enclosed with these materials
Current Report on Form
8-K.................... Filed: April 26, 2000
</TABLE>
Standard Pacific and Writer incorporate by reference additional documents
that each of them may file with the Securities and Exchange Commission between
the date of this proxy statement/prospectus and the date of the Writer special
meeting. These documents include periodic reports, such as annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as
well as proxy statements.
Standard Pacific has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to Standard Pacific and
Writer has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to Writer.
You can obtain any of the documents incorporated by reference in this
document through Standard Pacific or from the Securities and Exchange
Commission through the Securities and Exchange Commission's website at the
address given above. Documents incorporated by reference are available from the
companies without charge, excluding any exhibits to those documents unless the
exhibit is specifically incorporated by reference as an exhibit in this proxy
statement/prospectus. See "REFERENCE TO ADDITIONAL INFORMATION" on page 96.
If you request any incorporated documents from Standard Pacific or Writer,
we will mail them to you by first class mail, or another equally prompt means,
within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this proxy statement/prospectus or in any of the
materials that we have incorporated into this document. Therefore, if anyone
does give you information of this sort, you should not rely on it. If you are
in a jurisdiction where offers to exchange or sell, or solicitations of offers
to exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. The information contained in this document
speaks only as of the date of this document unless the information specifically
indicates that another date applies.
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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APPENDIX A--THE MERGER AGREEMENT
Agreement and Plan of Merger
Dated as of April 14, 2000
among
Standard Pacific Corp.,
The Writer Corporation
AND
TWC acquisition Corp.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I THE MERGER.................................................... A-1
SECTION 1.1. The Merger........................................... A-1
SECTION 1.2. Effective Time....................................... A-1
SECTION 1.3. Closing of the Merger................................ A-1
SECTION 1.4. Effects of the Merger................................ A-1
SECTION 1.5. Certificate of Incorporation and Bylaws.............. A-2
SECTION 1.6. Directors............................................ A-2
SECTION 1.7. Officers............................................. A-2
SECTION 1.8. Conversion of Shares................................. A-2
SECTION 1.9. Payment for Shares and Exchange of Certificates...... A-6
SECTION 1.10. Stock Options........................................ A-8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY.................... A-8
SECTION 2.1. Organization and Qualification; Subsidiaries......... A-8
SECTION 2.2. Capitalization of Company and its Subsidiaries....... A-9
Authority Relative to this Agreement;
SECTION 2.3. Recommendation....................................... A-10
SECTION 2.4. SEC Reports; Financial Statements.................... A-10
SECTION 2.5. Consents and Approvals; No Violations................ A-11
SECTION 2.6. No Default........................................... A-11
SECTION 2.7. No Undisclosed Liabilities; Absence of Changes....... A-11
SECTION 2.8. Litigation........................................... A-12
SECTION 2.9. Compliance with Applicable Law....................... A-13
SECTION 2.10. Employee Benefit Plans; Labor Matters................ A-13
SECTION 2.11. Environmental Laws and Regulations................... A-15
SECTION 2.12. Taxes................................................ A-16
SECTION 2.13. Intellectual Property................................ A-16
SECTION 2.14. Real Property........................................ A-17
SECTION 2.15. Projects............................................. A-19
SECTION 2.16. Assets............................................... A-20
SECTION 2.17. Contracts............................................ A-20
SECTION 2.18. Insurance............................................ A-21
SECTION 2.19. Product Warranties................................... A-22
SECTION 2.20. Certain Business Practices........................... A-22
SECTION 2.21. Brokers.............................................. A-22
SECTION 2.22. Year 2000............................................ A-22
SECTION 2.23. Transactions With Affiliates......................... A-22
SECTION 2.24. Suppliers, Distributors and Subcontractors........... A-23
SECTION 2.25. Opinion of Financial Advisor......................... A-23
SECTION 2.26. Accuracy of Information.............................. A-23
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO.......... A-23
SECTION 3.1. Organization......................................... A-23
SECTION 3.2. Capitalization of Parent and its Subsidiaries........ A-23
SECTION 3.3. Authority Relative to this Agreement................. A-24
SECTION 3.4. SEC Reports; Financial Statements.................... A-24
SECTION 3.5. Consents and Approvals; No Violations................ A-24
SECTION 3.6. No Default........................................... A-25
SECTION 3.7. No Undisclosed Liabilities; Absence of Changes....... A-25
SECTION 3.8. Litigation........................................... A-25
SECTION 3.9. Compliance with Applicable Law....................... A-25
SECTION 3.10. Brokers.............................................. A-26
SECTION 3.11. Year 2000............................................ A-26
SECTION 3.12. Accuracy of Information.............................. A-26
ARTICLE IV COVENANTS.................................................... A-26
SECTION 4.1. Conduct of Business of Company....................... A-26
SECTION 4.2. Preparation of Form S-4 and the Proxy Statement...... A-28
SECTION 4.3. Other Potential Acquirers............................ A-29
SECTION 4.4. Comfort Letters...................................... A-30
SECTION 4.5. Meetings of Shareholders............................. A-30
SECTION 4.6. NYSE Listing......................................... A-30
SECTION 4.7. Access to Information; Confidentiality............... A-30
SECTION 4.8. Additional Agreements; Reasonable Efforts............ A-31
SECTION 4.9. Public Announcements................................. A-31
SECTION 4.10. Notification of Certain Matters...................... A-32
SECTION 4.11. Affiliates........................................... A-32
SECTION 4.12. Lock-up Letter Agreement............................. A-32
SECTION 4.13. Indemnification and Insurance........................ A-32
SECTION 4.14. Use of Writer Name................................... A-33
SECTION 4.15. Agreement of Management Group........................ A-34
SECTION 4.16. Consents............................................. A-34
SECTION 4.17. SEC Reports.......................................... A-34
SECTION 4.18. Taxes................................................ A-34
SECTION 4.19. Termination of Profit Sharing Plan................... A-35
SECTION 4.20. Termination of Nonqualified Profit Sharing Plan...... A-35
ARTICLE V CONDITIONS TO CONSUMMATION OF THE MERGER...................... A-35
Conditions to Each Party's Obligations to Effect the
SECTION 5.1. Merger............................................... A-35
SECTION 5.2. Conditions to the Obligations of Company............. A-35
SECTION 5.3. Conditions to the Obligations of Parent and Newco.... A-36
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE VI TERMINATION; AMENDMENT; WAIVER................................. A-38
SECTION 6.1. Termination............................................ A-38
SECTION 6.2. Effect of Termination.................................. A-38
SECTION 6.3. Fees and Expenses...................................... A-39
SECTION 6.4. Amendment.............................................. A-39
SECTION 6.5. Extension; Waiver...................................... A-39
ARTICLE VII MISCELLANEOUS................................................. A-40
SECTION 7.1. Survival of Representations and Warranties............. A-40
SECTION 7.2. Entire Agreement; Assignment........................... A-40
SECTION 7.3. Validity............................................... A-40
SECTION 7.4. Notices................................................ A-40
SECTION 7.5. Governing Law.......................................... A-41
SECTION 7.6. Descriptive Headings................................... A-41
SECTION 7.7. Parties in Interest.................................... A-41
SECTION 7.8. Certain Definitions.................................... A-41
SECTION 7.9. Specific Performance................................... A-41
SECTION 7.10. Construction Defects................................... A-41
SECTION 7.11. Counterparts........................................... A-42
</TABLE>
TABLE OF EXHIBITS
<TABLE>
<C> <S>
Exhibit A Form of Certificate of Merger
Exhibit B Form of Articles of Merger
Exhibit C Form of Management Member Agreement
Exhibit D Form of Lock-Up Letter Agreement
Exhibit E Form of Writer Employment Agreement
Exhibit F Form of Nickless Employment Agreement
</TABLE>
iii
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Cross Reference
Term in Agreement Page
---- --------------- ----
<S> <C> <C>
Acquisition Real Property.............................. Section 2.14 22
affiliate.............................................. Section 7.8(a) 51
Aggregate Cash Consideration........................... Section 1.8(d) 5
Aggregate Merger Consideration......................... Section 1.8(a)(ii) 3
Agreement.............................................. Preamble 1
Articles of Merger..................................... Section 1.2 1
business day........................................... Section 7.8(b) 51
capital stock.......................................... Section 7.8(c) 51
Cash Election Shares................................... Section 1.8(c)(i) 5
CBCA................................................... Section 1.1 1
CCIOA.................................................. Section 2.15(b) 24
Certificate of Merger.................................. Section 1.2 1
Certificates........................................... Section 1.8(a)(ii) 3
Change in Control of Parent............................ Section 4.14(b) 41
Closing Date........................................... Section 1.3 2
Closing................................................ Section 1.3 2
Code................................................... Preamble 1
Company Board.......................................... Section 2.3(a) 12
Company D&O Insurance.................................. Section 4.13(b) 40
Company Disclosure Schedule............................ Section 2.1(a) 10
Company Financial Adviser.............................. Section 2.25 28
Company Permits........................................ Section 2.9 16
Company Plans.......................................... Section 1.10 10
Company................................................ Preamble 1
Company SEC Reports.................................... Section 2.4(a) 13
Company Securities..................................... Section 2.2(a)(ii) 11
Company Stock Option................................... Section 1.10 10
Confidential Material.................................. Section 4.7(c) 38
Contracts.............................................. Section 2.17(a) 25
DGCL................................................... Section 1.1 1
Dissenting Shares...................................... Section 1.8(g) 7
Effective Time......................................... Section 1.2 1
Election Deadline...................................... Section 1.8(b)(ii) 4
Election Form Record Date.............................. Section 1.8(b)(i) 4
Election............................................... Section 1.8(b)(i) 4
Employee Plans......................................... Section 2.10(a) 16
Enforcement Exceptions................................. Section 2.3(a) 12
Entitlements........................................... Section 2.15(c) 24
Environmental Law...................................... Section 2.11(b)(i) 19
ERISA Affiliate........................................ Section 2.10(a) 16
ERISA.................................................. Section 2.10(a) 16
Exchange Act Person.................................... Section 4.14(b)(i) 41
Exchange Act........................................... Section 2.2(d) 12
Exchange Agent......................................... Section 1.9(a) 7
Exchange Ratio......................................... Section 1.8(a)(i) 3
Excluded Shares........................................ Section 1.8(a) 3
Fee Real Property...................................... Section 2.14 22
Form of Election....................................... Section 1.8(b)(i) 4
</TABLE>
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<TABLE>
<CAPTION>
Cross Reference
Term in Agreement Page
---- --------------- ----
<S> <C> <C>
Form S-4.............................................. Section 4.2(c) 35
Governmental Entity................................... Section 2.5(a) 13
Hazardous Substance................................... Section 2.11(b)(ii) 20
HSR Act............................................... Section 2.5(a) 13
Incumbent Board....................................... Section 4.14(b)(i) 41
Indemnified Parties................................... Section 4.13(a) 40
Information Systems and Equipment..................... Section 2.22(b) 28
Insurance Policies.................................... Section 2.18(a) 27
Intellectual Property................................. Section 2.13(a) 21
Investments........................................... Section 1.9(a) 7
IRS................................................... Section 2.10(b) 16
Leases................................................ Section 2.14 22
Letter of Transmittal................................. Section 1.9(b) 8
Lien.................................................. Section 2.2(c) 12
Lock Up Agreement..................................... Section 4.12) 40
Mailing Date.......................................... Section 1.8(b)(i) 4
Management Group...................................... Section 4.15 42
Management Member Agreement........................... Section 4.15 42
Material Adverse Effect on Company.................... Section 2.1(b) 11
Material Adverse Effect on Parent..................... Section 3.1(b) 29
Material Intellectual Property........................ Section 2.13(b) 21
Maximum Cash Election Amount.......................... Section 1.8(d) 5
Maximum Share Number.................................. Section 1.8(c) 5
Merger Consideration.................................. Section 1.8(a) 3
Merger................................................ Section 1.1 1
Newco................................................. Preamble 1
Non-Election Cash..................................... Section 1.8(e)(C) 6
Non-Election Shares................................... Section 1.8(b)(ii) 4
Notice of Superior Proposal........................... Section 4.3(b) 36
NYSE.................................................. Section 1.8(a)(ii) 3
Option Payment........................................ Section 1.10 10
Other Interests....................................... Section 2.1(c) 11
Parent Common Stock................................... Section 1.8(a)(i) 3
Parent Permits........................................ Section 3.9 32
Parent................................................ Preamble 1
Parent SEC Reports.................................... Section 3.4 30
Parent Securities..................................... Section 3.2(b) 30
Payment Fund.......................................... Section 1.9(a) 7
Per Share Cash Amount................................. Section 1.8(a)(i) 3
person................................................ Section 7.8(d) 51
Projects.............................................. Section 2.15(a) 23
Proration Factor...................................... Section 1.8(c)(ii) 5
Proxy Statement....................................... Section 4.2(c) 35
Real Property......................................... Section 2.14 22
Representative........................................ Section 1.8(b)(i) 4
SEC................................................... Section 2.4(a) 13
Securities Act........................................ Section 2.4(a) 13
Share and Shares...................................... Section 1.8(a) 2
Stock Election Shares................................. Section 1.8(c) 5
subsidiary or subsidiaries............................ Section 7.8(e) 51
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Cross Reference
Term in Agreement Page
---- --------------- ----
<S> <C> <C>
Subsidiary Securities................................. Section 2.2(b)(ii) 12
Superior Proposal..................................... Section 4.3(c) 37
Surviving Corporation................................. Section 1.1 1
Tax or Taxes.......................................... Section 2.12(a)(i) 20
Tax Return............................................ Section 2.12(a)(ii) 20
Third Party Acquisition............................... Section 4.3(c) 37
Third Party........................................... Section 4.3(c) 37
Valuation Period...................................... Section 1.8(a)(ii) 3
Valuation Price....................................... Section 1.8(a)(ii) 3
Writer Name........................................... Section 4.14(a) 41
Year 2000 Compliant................................... Section 2.22(b) 28
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of April
14, 2000 by and among Standard Pacific Corp., a Delaware corporation
("Parent"), TWC Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Newco"), and The Writer Corporation, a Colorado
corporation ("Company").
WHEREAS, the Boards of Directors of Parent, Newco and Company have each (i)
determined that the Merger is in the best interests of their respective
stockholders and (ii) approved the Merger in accordance with this Agreement;
WHEREAS, each of Parent, Newco and Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, for federal income Tax purposes it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and intending to be
legally bound Parent, Newco and Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. At the Effective Time and upon the terms and subject
to the conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL") and the Colorado Business Corporation Act (the
"CBCA"), Company shall be merged with and into Newco (the "Merger"). Following
the Merger, Newco shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Company shall cease.
SECTION 1.2 Effective Time. Subject to the terms and conditions set forth in
this Agreement, a Certificate of Merger substantially in the form of Exhibit A
(the "Certificate of Merger") and Articles of Merger substantially in the form
of Exhibit B (the "Articles of Merger") shall each be duly executed and
acknowledged by Newco and Company and thereafter delivered to the Secretaries
of State of the States of Delaware and Colorado, for filing pursuant to the
DGCL and the CBCA, respectively, on the Closing Date. The Merger shall become
effective at such time as a properly executed and certified copy of the
Certificate of Merger and Articles of Merger are duly filed with the
Secretaries of State of the States of Delaware and Colorado in accordance with
the DGCL and the CBCA, respectively, or such later time upon which Parent and
Company may agree and set forth in the Certificate of Merger and the Articles
of Merger (the time the Merger becomes effective being referred to herein as
the "Effective Time").
SECTION 1.3 Closing of the Merger. The closing of the Merger (the "Closing")
will take place at 10:00 a.m. California time on a date (the "Closing Date") to
be specified by the parties, which shall be no later than the third (3rd)
business day after satisfaction of the latest to occur of the conditions set
forth in Article V, at the offices of Gibson, Dunn & Crutcher LLP, 4 Park
Plaza, Irvine, California 92614, unless another time, date or place is agreed
to in writing by the parties hereto.
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the DGCL and the CBCA. Without limiting the generality of the
foregoing and subject thereto, at the Effective Time, all of the properties,
rights, privileges, powers and franchises of Company and Newco shall vest in
the Surviving
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Corporation and all debts, liabilities and duties of Company and Newco shall
become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.5 Certificate of Incorporation and Bylaws. The certificate of
incorporation of Newco in effect at the Effective Time shall be the certificate
of incorporation of the Surviving Corporation until thereafter amended as
provided therein and in accordance with applicable law; provided that Article
One of the certificate of incorporation of the Surviving Corporation shall be
amended in its entirety to read as follows: "The name of the corporation is The
Writer Corporation." The bylaws of Newco in effect at the Effective Time shall
be the bylaws of the Surviving Corporation until thereafter amended as provided
therein and in accordance with applicable law.
SECTION 1.4. Effects of the Merger. The Merger shall have the effects set
forth in the DGCL and the CBCA. Without limiting the generality of the
foregoing and subject thereto, at the Effective Time, all of the properties,
rights, privileges, powers and franchises of Company and Newco shall vest in
the Surviving Corporation and all debts, liabilities and duties of Company and
Newco shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.6 Directors. The persons named below shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the certificate of incorporation and bylaws of the Surviving Corporation until
such director's successor is duly elected or appointed and qualified:
Arthur E. Svendsen
Stephen J. Scarborough
Andrew H. Parnes
George S. Writer, Jr.
SECTION 1.7 Officers. The officers of Company at the Effective Time together
with the persons named below, shall serve as the initial officers of the
Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation until such officer's
successor is duly elected or appointed and qualified:
Stephen J. Scarborough Assistant Secretary
Clay A. Halvorsen Assistant Secretary
Andrew H. Parnes Assistant Treasurer
John M. Stephens Assistant Treasurer
SECTION 1.8 Conversion of Shares.
(a) Conversion. Subject to the election, allocation and proration provisions
set forth below, at the Effective Time, each share of common stock, $0.10 par
value per share, of Company (individually a "Share" and collectively the
"Shares") issued and outstanding immediately prior to the Effective Time (other
than (i) Shares held by any of Company's subsidiaries, (ii) Shares held by
Parent, Newco or any other subsidiary of Parent, and (iii) Dissenting Shares as
to which appraisal rights have been perfected under the CBCA (collectively, the
"Excluded Shares")) shall, by virtue of the Merger and without any action on
the part of Newco, Company or the holder thereof, be converted into the "Merger
Consideration" as follows:
(i) the right to receive a number of shares of Parent's common stock,
$0.01 par value per share, including accompanying Preferred Share Purchase
Rights issued pursuant to that certain Rights Agreement between Parent and
First Chicago Trust Company of New York, as rights agent ("Parent Common
Stock"), equal to the quotient (calculated to the nearest 0.0001) of $3.35
(the "Per Share Cash Amount") divided by the Valuation Price (the "Exchange
Ratio") ; or
(ii) the right to receive in cash, without interest, the Per Share Cash
Amount,
provided, however, that, in any event, if between the date of this Agreement
and the Effective Time the outstanding shares of Parent Common Stock or Shares
shall have been changed into a different number of
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<PAGE>
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Exchange Ratio and the Per Share Cash Amount shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares. The "Valuation
Price" means the arithmetic average of the New York Stock Exchange, Inc. (the
"NYSE") closing sale prices for Parent Common Stock (as reported in The Wall
Street Journal or, in the absence thereof, by another authoritative source) for
the twenty consecutive trading-day period ending on the third business day
immediately prior to the anticipated Closing Date (the "Valuation Period");
provided, however that if such mean is less than $11.00 per share, the
Valuation Price shall equal $11.00 per share, and if the mean is greater than
$13.50 per share, the Valuation Price shall equal $13.50 per share.
Each Share issued and outstanding immediately prior to the Effective Time
(excluding the Excluded Shares) shall at the Effective Time no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such Shares
("Certificates") shall thereafter represent the right to receive only the
Merger Consideration. The holders of Certificates shall cease to have any
rights with respect to the Shares previously represented thereby, except as
otherwise provided herein or by law. Such Certificates previously evidencing
such Shares shall be exchanged for (A) certificates evidencing whole shares of
Parent Common Stock issued in consideration therefor or (B) the Per Share Cash
Amount multiplied by the number of Shares previously evidenced by the canceled
Certificate or (C) a combination of such certificates and cash, in each case in
accordance with the allocation procedures of this Section 1.8 and upon the
surrender of such Certificates in accordance with the provisions of Section
1.9, without interest. No fractional shares of Parent Common Stock shall be
issued and, in lieu thereof, a cash payment shall be made pursuant to Section
1.9(e). The aggregate of the Merger Consideration provided in exchange for all
Shares is referred to herein as the "Aggregate Merger Consideration ."
(b) Election.
(i) Election forms in such form as mutually agreed to by the parties
(each a "Form of Election") and a Letter of Transmittal shall be mailed by
the Company with the Proxy Statement (the date of such mailing being
referred to herein as the "Mailing Date"), to each holder of record of
Shares as of ten (10) business days prior to the Mailing Date (the
"Election Form Record Date"). Each Election Form shall permit the holder
(or the beneficial owner through appropriate and customary documentation
and instructions) to make an unconditional election (an "Election") to
receive (subject to the allocation and proration procedures set forth
below) one or a combination of the following in exchange for all of such
holder's Shares: (A) cash, or (B) Parent Common Stock. Alternatively, each
Election Form will permit the holder to indicate that such holder has no
preference as to the receipt of cash or Parent Common Stock for such
holder's Shares. Holders of record of Shares who hold such Shares as
nominees, trustees or in other representative capacities (a
"Representative") may submit multiple Forms of Election, provided that such
Representative certifies that each such Form of Election covers all the
Shares held by such Representative for a particular beneficial owner.
(ii) Any Shares (excluding the Excluded Shares) with respect to which
the holder (or the beneficial owner, as the case may be) shall not have
submitted to the Exchange Agent an effective, properly completed Election
Form on or before 5:00 p.m. (New York City time) on the 25th day following
the Mailing Date (or such other time and date as Parent and Company may
mutually agree) (the "Election Deadline") shall be deemed to be Shares with
respect to which a Non-Election has been made (the "Non-Election Shares").
(iii) Parent shall make available (or shall cause the Exchange Agent to
make available) one or more separate Election Forms to all persons who
become holders (or beneficial owners) of Shares between the Election Form
Record Date and the close of business on the business day prior to the
Election Deadline upon such holder's request to the Exchange Agent, and
Company shall provide to the Exchange Agent all information reasonably
necessary for it to perform as specified herein.
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(iv) Any election shall have been properly made only if the Exchange
Agent shall have actually received a properly completed Election Form by
the Election Deadline. An Election Form shall be deemed properly completed
only if accompanied by one or more Certificates (or affidavits and
indemnification regarding the loss or destruction of such Certificates
reasonably acceptable to Parent or the guaranteed delivery of such
Certificates) representing all Shares covered by such Election Form,
together with a duly executed Letter of Transmittal. Any Election Form may
be revoked or changed by the person submitting such Election Form at or
prior to the Election Deadline. In addition, all Election Forms shall
automatically be revoked if the Exchange Agent is notified in writing by
Newco and Company that this Agreement has been terminated in accordance
with its terms and the Merger has been abandoned, and Parent shall cause
the Certificates to be promptly returned without charge to the person
submitting the Election Form upon written request to that effect from such
person. If an Election Form is revoked prior to the Election Deadline, the
Shares represented by such Election Form shall be deemed to be Non-Election
Shares (unless thereafter covered by a duly completed Election Form).
(v) Parent will have the discretion, which it may delegate in whole or
in part to the Exchange Agent, to determine whether Forms of Election have
been properly completed, signed and submitted or revoked and to disregard
immaterial defects in Forms of Election. If Parent (or the Exchange Agent)
shall determine that any purported Election was not properly made, such
purported Election shall have no force and effect and the holder making
such purported Election shall for purposes hereof be deemed to have made a
Non-Election. The decision of Parent (or the Exchange Agent) in all such
matters shall be conclusive and binding. Neither Parent nor the Exchange
Agent will be under any obligation to notify any person of any defect in a
Form of Election submitted to the Exchange Agent. The Exchange Agent shall
also make all computations contemplated by this Section 1.8 and all such
computations shall be conclusive and binding on the holders of Shares.
(c) Over-Election of Parent Common Stock. Notwithstanding anything contained
in this Agreement to the contrary, if the aggregate number of Shares covered by
Elections electing to receive Parent Common Stock (the "Stock Election Shares")
exceeds the number of Shares which equals 60% of the outstanding Shares at the
Effective Time (the "Maximum Share Number"), then:
(i) all Shares covered by Elections to receive cash (the "Cash Election
Shares") and all Non-Election Shares shall be converted into the right to
receive the Per Share Cash Amount; and
(ii) (A) a proration factor shall be determined by dividing the Maximum
Share Number by the aggregate number of Stock Election Shares (the
"Proration Factor"); and
(B) each Stock Election Share shall be converted on a consistent
basis into the right to receive (1) a fractional share of Parent Common
Stock equal to the Exchange Ratio multiplied by the Proration Factor, and
(2) the right to receive cash in an amount equal to the Per Share Cash
Amount multiplied by the difference between one and the Proration Factor.
(d) Over-Election of Cash. Notwithstanding anything contained in this
Agreement to the contrary, if the sum of (A) the aggregate number of Cash
Election Shares multiplied by the Per Cash Amount plus (B) the aggregate cash
amount to be paid pursuant to Section 1.9(e), plus (C) the number of Dissenting
Shares multiplied by the Per Share Cash Amount, plus (D) the aggregate amount
of any other amounts paid by Parent or Company (or persons related to Company
or Parent within the meaning of Treasury Regulation Sections 1.368-1(e) and
1.368-1T(e)) to, or on behalf of, any shareholder of Company in connection with
the sale or other disposition of the Shares in connection with the Merger for
purposes of Treasury Regulations Section 1.368-1(e) and 1.368-1T(e), plus (E)
any extraordinary dividend distributed by Company prior to and in connection
with the Merger for purposes of Treasury Regulations Section 1.368-1T(e)
(collectively, the "Aggregate Cash Consideration"), exceeds 50% of the
Aggregate Merger Consideration, valued as of the Closing Date (the "Maximum
Cash Election Amount"), then:
(i) all Stock Election Shares and all Non-Election Shares shall be
converted into the right to receive Parent Common Stock, at the Exchange
Ratio;
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<PAGE>
(ii) the elections of the Management Group shall be adjusted as set
forth in the Management Member Agreement substantially in the form attached
hereto as Exhibit C, which provides that the number of Cash Election Shares
held by the Management Group, to the extent necessary, shall be reduced to
allow each shareholder of the Company that is not a member of the
Management Group to receive cash for all Cash Election Shares held by such
Shareholder, or as close as possible to all cash, provided, that in no
event shall the Aggregate Cash Consideration exceed 50% of the Aggregate
Merger Consideration; and
(iii) If the Aggregate Cash Consideration continues to exceed 50% of the
Aggregate Merger Consideration after the adjustment pursuant to the
Management Member Agreement, the cash amount that each remaining Cash
Election Share shall receive shall be reduced on a pro rata basis with all
other remaining Cash Election Shares such that the Aggregate Cash
Consideration shall equal 50% of the Aggregate Merger Consideration, and
each such Cash Election Share shall be entitled to receive a fractional
share of Parent Common Stock equal to (A) the difference in the Per Share
Cash Amount and the per share amount paid in cash pursuant to this
paragraph (iii), divided by (B) the Valuation Price.
(e) No Over-Election. If neither the Aggregate Cash Consideration exceeds
the Maximum Cash Election Amount, nor the number of Stock Election Shares
exceeds the Maximum Share Number, then:
(i) all Cash Election Shares shall be converted into the right to
receive the Per Share Cash Amount;
(ii) all Stock Election Shares shall be converted into the right to
receive Parent Common Stock at the Exchange Ratio; and
(iii) an appropriate allocation will be made on a consistent basis among
Non-Election Shares so that (1) the Aggregate Cash Consideration and (2)
the aggregate value, at the Valuation Price, of the Parent Common Stock
issued as part of the Merger Consideration each equal fifty percent (50%)
of the aggregate Merger Consideration paid for all Shares, using the
following formula: each Non-Election Share will be converted into the right
to receive (y) a cash amount equal to (A) the difference between the
Maximum Cash Election Amount and the Aggregate Cash Consideration (without
taking into consideration the Non-Election Shares), divided by (B) the
number of Non-Election Shares (the "Non-Election Cash") and (z) a
fractional share of Parent Common Stock equal to (Y) the difference between
the Per Share Cash Amount and the Non-Election Cash, divided by (Z) the
Valuation Price. Notwithstanding the foregoing, if the Stock Election
Shares are greater than 50% of the Outstanding Shares at the Effective
Time, but less than 60% of such Shares, then all Non-Election Shares shall
be treated as Cash Election Shares.
(f) Each Share owned by Parent or any direct or indirect wholly owned
subsidiary of Parent or Company immediately prior to the Effective Time by
virtue of the Merger and without any action on the part of Newco, Company or
the holder thereof, shall be canceled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
(g) Notwithstanding anything in this Agreement to the contrary, each Share
that is issued and outstanding immediately prior to the Effective Time and
that is held by a shareholder who has properly demanded and perfected such
shareholder's rights to dissent from the Merger and to be paid the fair value
of such Shares in accordance with Title 7, Article 113 of the CBCA (the
"Dissenting Shares"), shall not be converted into or exchangeable for the
right to receive the Merger Consideration, but the holder thereof shall be
entitled to such rights as are granted by the CBCA and the Surviving
Corporation shall make all payments to the holders of such Shares with respect
to such demands in accordance with the CBCA; provided, however, that if such
holder shall have failed to perfect or shall have lost the right to dissent
and receive payment under the CBCA, each Share held by such holder shall
thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, solely the right to receive Merger
Consideration as follows: subject to compliance with Section 1.9, the holder
of such Dissenting Shares shall be entitled to receive the same combination of
cash (without interest) and Parent Common Stock as a holder of the same number
of Shares with respect to which a Non-Election was made. Company shall give
reasonably prompt notice to Newco and Parent of any demands received by
Company for payment under Title 7, Article 113 of the CBCA, and Newco
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and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. Company shall not, except with the
prior written consent of Newco and Parent, make any payment with respect to, or
settle or offer to settle, such demands.
(h) Each issued and outstanding share of capital stock of Newco shall
continue as a validly issued, fully paid and nonassessable share of common
stock, par value of $0.0l per share, of the Surviving Corporation. Each
certificate representing any such shares of Newco shall continue to represent
the same number of shares of common stock of the Surviving Corporation.
SECTION 1.9 Payment for Shares and Exchange of Certificates.
(a) Exchange Agent. From time to time following the Effective Time, as
required by subsections (b) and (c) below, Parent shall cause to be deposited
in trust with First Chicago Trust Company of New York, or such other agent or
agents as may be appointed by Parent (the "Exchange Agent") (i) certificates
representing the shares of Parent Common Stock issuable pursuant to Section 1.8
in exchange for Shares and (ii) the aggregate cash portion of the Merger
Consideration to which holders of Shares shall be entitled at the Effective
Time pursuant to the provisions of Section 1.8 (the "Payment Fund").
Parent shall cause the Exchange Agent to make the payments provided for in
Section 1.8 out of the Payment Fund. The Exchange Agent shall invest
undistributed portions of the Payment Fund as Parent directs ("Investments");
provided, however, that the maturities of Investments shall be such as to
permit the Exchange Agent to make prompt payment to former holders of Shares
entitled thereto as contemplated by the provisions of this Article I. All net
earnings of Investments shall be paid to Parent as and when requested by
Parent. If for any reason (including losses) the Payment Fund is inadequate to
pay the amounts to which holders of Shares shall be entitled under the
provisions of this Article I, Parent shall in any event be liable for payment
thereof.
The Payment Fund shall not be used for any purpose except as expressly
provided in this Agreement. If any Merger Consideration deposited with the
Exchange Agent for purposes of paying for the Shares pursuant to the provisions
of this Article I remains unclaimed following the expiration of one year after
the Effective Time, such Merger Consideration (together with accrued interest)
shall be delivered to Parent by the Exchange Agent, and thereafter, holders of
certificates that immediately prior to the Effective Time represented Shares
shall be entitled to look only to the Surviving Corporation (subject to
abandoned property, escheat or similar laws) as general creditors thereof.
(b) Exchange. As soon as reasonably practicable after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record of a
Certificate or Certificates that immediately prior to the Effective Time
represented outstanding Shares and which are converted into the right to
receive the Merger Consideration pursuant to the provisions of Section 1.8: (i)
a letter of transmittal (which shall specify that delivery shall be effected
and risk of loss and title to the Certificates shall pass only upon proper
delivery of the Certificates to the Exchange Agent and shall be in such form
and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration for the Shares represented thereby
(collectively, the "Letter of Transmittal"), unless such holder shall have
submitted a Letter of Transmittal together with the Form of Election pursuant
to Section 1.8(b).
Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with such Letter of Transmittal duly executed and completed in
accordance with its terms, the holder of such Certificate shall be entitled to
receive following the Effective Time in exchange therefor (i) a check
representing that amount in cash as determined pursuant to the provisions of
Section 1.8 and, if applicable, the cash consideration to which such holder
would be entitled on account of a fractional share of Parent Common Stock that
such holder has the right to receive pursuant to the provisions of Section
1.9(e), and (ii) a certificate representing that number of
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whole shares of Parent Common Stock as determined pursuant to the provisions of
Section 1.8, and the Certificate so surrendered shall forthwith be canceled.
No interest will be paid or accrued on any cash payable upon the surrender
of the Certificates. If the payment is to be made to a person other than the
person in whose name a Certificate surrendered is registered, it shall be a
condition of payment that (A) the Certificate so surrendered shall be properly
endorsed or otherwise in proper form to evidence and effect the transfer to
such person or persons as reasonably determined by Parent and (B) the person
requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. Until surrendered in accordance with
the provisions of this Section 1.9, each Certificate shall represent for all
purposes whatsoever only the right to receive the Merger Consideration
applicable thereto, without any interest thereon.
(c) Distributions with Respect to Unexchanged Shares. With respect to Stock
Election Shares and Non-Election Shares entitled to receive Parent Common
Stock, no dividends or other distributions with respect to Parent Common Stock
with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate for Shares with respect to the Parent Common Stock
represented thereby and no cash payment in lieu of fractional Shares shall be
paid to any such holder pursuant to the provisions of Section 1.9(e) until the
surrender of such Certificate in accordance with the provisions of this Section
1.9. Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be (i) issued to the holder a certificate representing
whole shares of Parent Common Stock and (ii) paid in connection therewith to
holder, without interest, (A) the amount of any cash payable in lieu of a
fractional share to which such holder is entitled pursuant to the provisions of
Section 1.9(e), (B) the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole Parent Common Stock, and (C) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
but before such surrender and a payment date after such surrender payable with
respect to such whole Parent Common Stock.
(d) No Further Ownership Rights in Shares Exchanged. All cash paid and
Parent Common Stock issued upon the surrender for exchange of Shares in
accordance with the provisions of this Article I shall be deemed to have been
paid and issued in full satisfaction of all rights pertaining to such Shares.
(e) No Fractional Shares. No certificates or scrip representing fractional
Parent Common Stock shall be issued in connection with the Merger, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of Parent. Notwithstanding any other provision of this
Agreement, each record holder of Shares exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of Parent
Common Stock (after taking into account all Shares delivered by such holder)
shall receive, in lieu thereof, a cash payment (without interest) equal to such
fraction multiplied by the Valuation Price. The parties acknowledge that
payment of the cash consideration in lieu of issuing fractional shares was not
separately bargained for consideration, but merely represents a mechanical
rounding off for purposes of simplifying the corporate and accounting
complexities that would otherwise be caused by the issuance of fractional
shares.
(f) No Transfers. After the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or Parent for any
reason, they shall be canceled and exchanged as provided in this Article I,
except as otherwise provided by law.
(g) No Liability. None of Parent, Newco, Company or the Exchange Agent shall
be liable to any person in respect of any Merger Consideration (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to seven years after the Effective Time
(or immediately prior to such earlier date on
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which any Merger Consideration payable to the holder of such Certificate
pursuant to the provisions of this Article I would otherwise escheat to or
become the property of any Governmental Entity, any such Merger Consideration
shall, to the extent permitted by applicable law, become the property of
Parent, free and clear of all claims or interest of any person previously
entitled thereto.
(h) Lost Certificate. If any Certificate for Shares shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange therefor, upon
the making of an affidavit of that fact by the holder thereof in form
reasonably satisfactory to Parent, such Merger Consideration as may be required
pursuant to the provisions of this Article I; provided, however, that Parent or
its Exchange Agent may, in its discretion, require the delivery of a suitable
bond or indemnity.
(i) Return of Merger Consideration. Any portion of the Aggregate Merger
Consideration made available to the Exchange Agent to pay for Dissenting Shares
for which appraisal rights have been perfected shall be returned to Parent,
promptly upon demand.
SECTION 1.10 Stock Options. Company shall take all action, including
delivery of, not less than 30 days' prior to the Closing Date, notice of the
Merger and cancellation of outstanding options, necessary so that each option
to purchase Shares (each, a "Company Stock Option" ) issued pursuant to the
provisions of any Company Stock Option plan or agreement (the "Company Plans" )
outstanding immediately prior to the Effective Time shall be canceled
immediately prior to the Effective Time in exchange for the right to receive,
at the holder's option: (i) cash in an amount equal to the product of (A) the
number of Shares of stock subject to such Company Stock Option immediately
prior to the Effective Time and (B) the excess, if any, of the Per Share Cash
Amount over the per share exercise price of such Company Stock Option (the
"Option Payment") or (ii) the number of Shares of Parent Common Stock
determined by dividing the value of the Option Payment by the Valuation Price.
Such cash and shares of Parent Common Stock shall be delivered or issued by the
Surviving Corporation immediately following the Effective Time. All applicable
taxes attributable to the exercise of Company Stock Options and the Option
Payment made hereunder or to distributions contemplated hereby shall be
deducted from the amounts payable under this Section 1.10 or, if no such
amounts are payable in cash, then the amount of such taxes shall be paid to the
Company by each respective option holder by personal check. Notwithstanding the
foregoing, any Company Stock Option with an exercise price greater than the Per
Share Cash Amount immediately prior to the Effective Time shall be cancelled
immediately prior to the Effective Time, without any payment being made
therefor. Company shall use its reasonable best efforts to obtain the consent
of each holder of company Stock Options to the foregoing treatment of such
Company Stock Options to the extent required under the Company Plans.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to each of Parent and Newco as
follows:
SECTION 2.1. Organization and Qualification; Subsidiaries.
(a) Section 2.1 of the Disclosure Schedule delivered by Company to Parent
dated the date of this Agreement (the "Company Disclosure Schedule") identifies
each directly and indirectly owned subsidiary of Company and its respective
jurisdiction of incorporation or organization, as the case may be and the
percentage of each subsidiary's outstanding capital stock or other equity
interests owned by Company or another subsidiary of Company. Except as set
forth in Section 2.1(a) of the Company Disclosure Schedule, each of Company and
its subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted. Company has heretofore
delivered to Newco or Parent accurate and complete copies of the charter and
bylaws (or similar governing documents, including in the case of partnerships,
the partnership agreement), as currently in effect, of Company and its
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subsidiaries. Writer Homes, Inc. and Writer Peninsula, Inc. have no assets,
liabilities or ongoing operations, other than unliquidated contingent
liabilities for infrastructure warranties and homeowner warranties.
(b) Each of Company and its subsidiaries is duly qualified or licensed and
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing
would not have a Material Adverse Effect on Company. The term "Material Adverse
Effect on Company" means any change or effect that (i) is or is reasonably
likely to be materially adverse to the business, assets, results of operations,
condition (financial or otherwise) or prospects of Company and its
subsidiaries, taken as whole, or (ii) would or would be reasonably likely to
impair the ability of Company to consummate the transactions contemplated
hereby.
(c) Section 2.1(c) of the Company Disclosure Schedule sets forth a true and
complete list of each equity investment held by Company or any of its
subsidiaries in any other person other than Company's subsidiaries
(collectively, "Other Interests"). The Other Interests are free and clear of
all Liens on any other limitation or restriction.
(d) Company is not a "foreign person" as that term is defined in Section
1445 of the Code and any applicable regulations promulgated thereunder.
SECTION 2.2. Capitalization of Company and its Subsidiaries.
(a) The authorized capital stock of Company consists solely of 10,000,000
Shares, of which 7,462,480 Shares are issued and outstanding.
(i) All of the outstanding Shares have been validly issued and are fully
paid, nonassessable and free of preemptive rights or any right of first
refusal and Company has no liability under the provisions of applicable
Federal and state securities laws by reason of the issuance or sale
thereof. 495,250 Shares are reserved for issuance and issuable upon or
otherwise deliverable in connection with the exercise of outstanding
Company Stock Options issued pursuant to Company Plans.
(ii) Set forth in Section 2.2(a) of the Company Disclosure Schedule is a
true and complete list of all outstanding or authorized Company Stock
Options, warrants, calls, rights, commitments or any other agreements of
any character that may obligate Company or its subsidiaries to issue any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Company. Except as
set forth above in this Section 2.2(a) or in Section 2.2(a) of the Company
Disclosure Schedule, there are outstanding (A) no shares of capital stock
or other voting securities of Company, (B) no securities of Company or its
subsidiaries convertible into or exchangeable for shares of capital stock
or voting securities of Company, (C) no options or other rights to acquire
from Company or its subsidiaries, and no obligations of Company or its
subsidiaries to issue any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Company, and (D) no equity equivalent interests in the ownership or
earnings of Company or its subsidiaries or other similar rights
(collectively "Company Securities"). There are no outstanding obligations
of Company or its subsidiaries to repurchase, redeem or otherwise acquire
any Company Securities. There are no shareholder agreements, voting trusts
or other agreements or understandings to which Company is a party or by
which it is bound relating to the voting or registration of any shares of
capital stock of Company.
(b) (i) Except as set forth in Section 2.2(b) of the Company Disclosure
Schedule, all of the outstanding capital stock of Company's subsidiaries (A) is
owned by Company, directly or indirectly, free and clear of any Lien or any
other limitation or restriction (including any restriction on the right to vote
or sell the same, except as may be provided as a matter of law), and (B) have
been validly issued and are fully paid, nonassessable and free of preemptive
rights or any right of first refusal and neither Company nor any subsidiary has
any liability under the provisions of applicable Federal and state securities
laws by reason of the issuance or sale thereof.
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(ii) Except as set forth above or in Section 2.2(b) of the Company
Disclosure Schedule, there are outstanding (A) no shares of capital stock or
other voting securities of any of the subsidiaries of Company, (B) no
securities of Company or its subsidiaries convertible into or exchangeable for
shares of capital stock or voting securities of Company subsidiaries, (C) no
options or other rights to acquire from Company or its subsidiaries, and no
obligations of Company or its subsidiaries to issue any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of any Company subsidiary, and (D) no equity equivalent
interests in the ownership or earnings of any Company subsidiary or other
similar rights (collectively "Subsidiary Securities"). There are no outstanding
obligations of Company or its subsidiaries to repurchase, redeem or otherwise
acquire any Subsidiary Securities. There are no shareholder agreements, voting
trusts or other agreements or understandings to which Company is a party or by
which it is bound relating to the voting or registration of any Subsidiary
Securities.
(c) "Lien" means, with respect to any asset, any security, mortgage, lien,
pledge, charge, security interest, conditional sale agreements, title retention
agreements, claims, charges, easements, licenses, rights-of-way, covenants,
conditions, restrictions, options, adverse or equitable claims, or encumbrance
of any kind in respect of such asset.
(d) The Shares constitute the only class of equity securities of Company or
its subsidiaries registered or required to be registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
SECTION 2.3. Authority Relative to this Agreement; Recommendation.
(a) Company has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Company (the "Company Board") and no other corporate
proceedings on the part of Company are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby except the approval and
adoption of this Agreement by the holders of two-thirds of the outstanding
Shares. This Agreement has been duly and validly executed and delivered by
Company and constitutes a valid, legal and binding agreement of Company
enforceable against Company in accordance with its terms except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought
(collectively, the "Enforcement Exceptions").
(b) The Company Board has unanimously resolved to recommend that the
shareholders of Company approve and adopt this Agreement and vote in favor of
the Merger.
SECTION 2.4. SEC Reports; Financial Statements.
(a) Company has filed all required forms, reports and documents
(collectively, "Company SEC Reports") with the Securities and Exchange
Commission (the "SEC"), and has complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") and the Exchange Act, each as in effect on the dates such
forms, reports and documents were filed. None of such Company SEC Reports,
including, without limitation, any financial statements or schedules included
or incorporated by reference therein, contained when filed any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not
misleading. The financial statements of Company (including the consolidated
statements of income and cash flow) included in Company SEC Reports comply as
to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC promulgated under the Exchange
Act and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the consolidated
financial position
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of Company and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and statement of cash flows for the periods
indicated (subject, in the case of unaudited interim financial statements, the
exceptions permitted by Form 10-Q under the Exchange Act).
(b) Company has heretofore made available or promptly will make available to
Parent a complete and correct copy of any amendments or modifications that are
required to be filed with the SEC, but have not yet been filed with the SEC, to
any agreements, documents or other instruments that previously had been filed
by Company with the SEC.
SECTION 2.5. Consents and Approvals; No Violations.
(a) Except for filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the filing
and recordation of the Certificate of Merger as required by the DGCL and the
CBCA, no filing with or notice to, and no material permit, authorization,
consent or approval of, any United States or foreign court or tribunal, or
administrative, governmental or regulatory body, agency or authority (each a
"Governmental Entity") is necessary for the execution and delivery of this
Agreement by Company or the consummation of the transactions contemplated
hereby by Company.
(b) Except as set forth in Section 2.5(b) of the Company Disclosure
Schedule, neither the execution, delivery and performance of this Agreement by
Company, nor the consummation by Company of the transactions contemplated
hereby, will (i) conflict with or result in any breach of any provision of the
respective charter or bylaws (or similar governing documents) of Company or any
of its subsidiaries; (ii) result in a violation or breach of or constitute
(with or without due notice or lapse of time or both) a default (or give rise
to any right of termination, amendment, cancellation or acceleration or Lien),
or impair the rights of Company or its subsidiaries under any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
Company or any of its subsidiaries is a party or by which any of them or any of
their respective properties or assets may be bound; or (iii) violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to
Company or any of its subsidiaries or any of their respective properties or
assets which violation could have a Material Adverse Effect on Company.
SECTION 2.6. No Default. None of Company or any of its subsidiaries is in
breach, default or violation (and no event has occurred that, with notice or
the lapse of time or both, would constitute a breach, default or violation) of
any term, condition or provision of (a) its charter or bylaws (or similar
governing documents), (b) any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Company or any
of its subsidiaries is now a party or by which any of them or any of their
respective properties or assets may be bound or (c) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Company or
any of its subsidiaries or any of their respective properties or assets except,
in the case of (b) or (c), for violations, breaches or defaults that would not
have a Material Adverse Effect on Company. All outstanding indebtedness of the
Company and its subsidiaries may be prepaid without penalty and without the
consent of any lender or other third party.
SECTION 2.7. No Undisclosed Liabilities; Absence of Changes.
(a) Except as reflected in Company's 1999 year end audited financial
statements included in Company's Annual Report on Form 10-K for the year ended
December 31, 1999, none of Company or its subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
that would be required by generally accepted accounting principles to be
reflected on a consolidated balance sheet of Company (including the notes
thereto), other than liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1999.
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(b) Without limiting the generality of the foregoing, except as set forth
in Section 2.7 of the Company Disclosure Schedule, since December 31, 1999,
Company and its subsidiaries have conducted their respective businesses and
operations in, and have not engaged in any transaction other than according
to, the ordinary and usual course of business consistent with past practice,
and there has not occurred any:
(i) event, change, condition or occurrence which, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse
Effect on Company;
(ii) damage, destruction or other casualty loss (whether or not covered
by insurance) with respect to any material asset or property owned, leased
or otherwise used by Company or any of its subsidiaries;
(iii) declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of Company or any of its
subsidiaries (other than wholly owned subsidiaries) or any repurchase,
redemption or other acquisition by Company or any of its subsidiaries of
any outstanding shares of capital stock or other securities of, or other
ownership interests in, Company or any of its subsidiaries;
(iv) amendment of any term of any outstanding security of Company or any
of its subsidiaries;
(v) incurrence, assumption or guarantee by Company or any of its
subsidiaries of any indebtedness for borrowed money;
(vi) creation or assumption by Company or any of its subsidiaries of any
Lien on any material asset, other than in the ordinary course of business
consistent with past practices;
(vii) loan, advance or capital contributions made by Company or any of
its subsidiaries to, or investment in, any person;
(viii) transaction or commitment made, or any contract or agreement
entered into, by Company or any of its subsidiaries relating to its assets
or business (including the acquisition or disposition of any assets) or any
relinquishment by Company or any of its subsidiaries of any contract,
agreement or other right, in either case, material to Company and its
subsidiaries, taken as a whole, other than transactions and commitments in
the ordinary course of business consistent with past practices and those
contemplated by this Agreement;
(ix) labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to
organize any employees of Company or any of its subsidiaries, or any
lockouts, strikes, slowdowns, work stoppages or, to Company's knowledge,
threats thereof by or with respect to such employees;
(x) increase in the compensation payable or that could become payable by
Company or any of its subsidiaries to (A) officers of Company or any of its
subsidiaries or (B) any employee of Company or any of its subsidiaries
whose annual cash compensation is Fifty Thousand Dollars ($50,000) or more;
(xi) liabilities being imposed upon or incurred by Company or its
subsidiaries that will equal or exceed Fifty Thousand Dollars ($50,000) for
any single instance or One Hundred Fifty Dollars ($150,000) in the
aggregate;
(xii) change by Company or any of its subsidiaries in its accounting
principles, practices or methods; or
(xiii) action or event that would have required the consent of Parent
pursuant to Section 4.1 had such action or event occurred after the date of
this Agreement.
SECTION 2.8. Litigation. Except as set forth in Section 2.8 of the Company
Disclosure Schedule, (i) there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Company, threatened against
Company or any of its subsidiaries or any of their respective properties or
assets, and (ii) no such suit, claim, action, proceeding or investigation has
been pending, whether or not since settled or otherwise resolved, at any time
since January 1, 1997, where in the case of clause (ii) above the amount in
controversy exceeded $10,000. None of Company or its subsidiaries is subject
to any outstanding order, writ, injunction or decree.
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SECTION 2.9. Compliance with Applicable Law. Company and its subsidiaries
hold all material permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"). Company and its
subsidiaries are in compliance with the terms of Company Permits, except where
the failure to comply would not have a Material Adverse Effect on Company. The
businesses of Company and its subsidiaries have not been and are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for violations of any laws, ordinances or regulations that do
not and, insofar as reasonably can be foreseen in the future, will not have a
Material Adverse Effect on Company. No investigation or review by any
Governmental Entity with respect to Company or its subsidiaries is pending or,
to the knowledge of Company, threatened, nor has any Governmental Entity
indicated an intention to conduct the same.
SECTION 2.10. Employee Benefit Plans; Labor Matters.
(a) Section 2.10(a) of the Company Disclosure Schedule lists, with respect
to Company, its subsidiaries and any trade or business which is treated as a
single employer with Company within the meaning of Section 414(b),(c), (m), or
(o) of the Code ("ERISA Affiliate") each compensation or benefit plan,
agreement, policy, practice, program, or arrangement, whether or not subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained by Company, its subsidiaries or other ERISA Affiliates, for the
benefit of any employee, former employee, independent contractor or director of
Company, its subsidiaries, or other ERISA Affiliates (including, without
limitation, any employment and/or consulting agreement, any pension, savings,
profit-sharing, bonus, medical, insurance, disability, severance, executive
compensation, fringe benefit, incentive, stock option, performance pay, loan or
loan guarantee, plant closing, change of control, equity-based or deferred
compensation plans, programs, policies and/or arrangements) (collectively, the
"Employee Plans"). Without limiting the foregoing, Schedule 2.10(a) of the
Company Disclosure Schedule lists all Company Stock Options issued and
outstanding under any Company Plan, including the employee, exercise price,
vesting schedule and expiration date of such Company Stock Options.
(b) Company has provided or made available to Parent (i) a current, accurate
and complete copy of each Employee Plan and related Plan documents (including
trust documents, insurance policies, or contracts, employee booklets, and
summary plan descriptions); (ii) any correspondence between Company, its
subsidiaries, or other ERISA Affiliates and the Department of Labor and/or the
Internal Revenue Service (the "IRS") related to such Employee Plans; and (iii)
copies of the Form 5500, including all schedules attached thereto and actuarial
reports, if any, filed for the past three Plan years.
(c) Company, its subsidiaries, and other ERISA Affiliates have complied, and
currently are in compliance, with the applicable provisions of ERISA, the Code
and all other applicable laws with respect to each of the Employee Plans,
except where such noncompliance which, individually or in the aggregate, has
not had and would not reasonably be expected to have a Material Adverse Effect
on Company. Each Employee Plan that is intended to qualify under Section 401(a)
of the Code has received, or prior to the expiration of the applicable remedial
amendment period has filed for, a favorable determination letter from the IRS
ruling that the Plan does so qualify and that the trust is exempt from taxation
pursuant to Section 501(a) of the Code, and nothing has occurred since the
issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any Employee Plan subject to Code Section
401(a).
(d) Company, its subsidiaries, or other ERISA Affiliates, have not
maintained, adopted or established, contributed or been required to contribute
to, or otherwise participated in or been required to participate in, any
employee benefit plan or other program or arrangement subject to Title IV of
ERISA (including, without limitation, a multi-employer plan (as defined in
Section 3(37) of ERISA) and a defined benefit plan (as defined in Section 3(35)
of ERISA)) or any plan otherwise subject to the minimum funding standards of
ERISA Section 302 or Code Section 412.
(e) Each Employee Plan that is a group health plan has been operated in
compliance in all material respects with Code Section 4980B and Sections 601-
609 of ERISA. No Employee Plan provides welfare benefits as
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defined in Section 3(1) of ERISA with respect to current or former employees of
Company, its subsidiaries or other ERISA Affiliates beyond their retirement or
other termination of service with Company, its subsidiaries or other ERISA
Affiliates (other than coverage mandated by Code Section 4980B or applicable
law).
(f) No audit or investigation by any Governmental Entity is pending or, to
the knowledge of Company, its subsidiaries or other ERISA Affiliates, is
threatened, nor has any reportable event (within the meaning of Section 4043 of
ERISA) (other than an event for which the 30-day notice period is waived),
prohibited transaction (within the meaning of Section 4975 of the Code or
Section 406 of ERISA), or breach of fiduciary duty occurred with respect to any
Employee Plan, or any fiduciary thereof, that has had or would be reasonably
expected to have a Material Adverse Effect on Company.
(g) All benefits due under each Employee Plan have been timely paid and no
civil or criminal action brought pursuant to the provisions of Title I,
Subtitle B, Part 5 of ERISA, or other lawsuit or claim, other than routine
uncontested claims for benefits, is pending, or to the knowledge of Company,
its subsidiaries, or other ERISA Affiliates, is threatened against any Employee
Plan or the fiduciaries of any such plan or otherwise involving or pertaining
to any such plan, and no basis exists for any such lawsuit or claim, except
where such claim or basis, if proven, would not have a Material Adverse Effect
on Company.
(h) The consummation of the transactions contemplated by this Agreement will
not (i) cause any payments or benefits under any Employee Plan to be triggered,
vested or accelerated, in whole or in part, (ii) entitle any current or former
employee or other service provider of Company, its subsidiaries, or other ERISA
Affiliates to severance benefits or any other payment, or (iii) increase the
amount of compensation due any such employee or service provider.
(i) No agreement, commitment or obligation exists to materially increase any
benefit under any Employee Plan or to adopt any new Employee Plan. There has
been no amendment to, written interpretation or announcement (whether or not
written) by Company, its subsidiaries, or other ERISA Affiliates relating to,
or change in participation or coverage under, any Employee Plan which would
materially increase the expense of maintaining such Plan above the level of
expense incurred with respect to that Plan for the most recent fiscal year
included in Company's financial statements.
(j) All material contributions required to be made by Company, its
subsidiaries, or other ERISA Affiliates to any Employee Plan have been made on
or before their due dates and a reasonable amount has been accrued for
contributions to each Employee Plan for the current Plan years. No Employee
Plan has any material unfunded accrued benefits that are not fully reflected in
Company's financial statements. The Company Nonqualified Profit Sharing Plan is
terminable as of December 31, 1999, without liability, except for $288,847
accrued thereunder through December 31, 1999.
(k) There are no controversies pending or, to the knowledge of Company or
its subsidiaries, threatened between Company or any of its subsidiaries and any
of their respective employees or former employees that have, or may reasonably
be expected to have, a Material Adverse Effect on Company. Neither Company nor
any of its subsidiaries is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by Company or its
subsidiaries, nor does Company know of any activities or proceedings of any
labor union to organize any such employees. There are no strikes, slowdowns,
work stoppages, lockouts or threats thereof by or with respect to any employees
of Company or any of its subsidiaries.
(l) Section 2.10(o) of the Company Disclosure Schedule sets forth a list of
(i) all employment agreements with officers or employees of Company; (ii) all
agreements with consultants obligating Company to make any remaining payments
in an amount exceeding $25,000; (iii) all severance agreements, programs and
policies of Company with or relating to its employees, except programs and
policies required to be maintained by law; and (iv) all plans, programs,
agreements and other arrangements of Company with or relating to its employees
that contain change-in-control provisions. Company has made available to Parent
copies (or descriptions in detail reasonably satisfactory to Parent) of all
such agreements, plans, programs and other arrangements.
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SECTION 2.11. Environmental Laws and Regulations.
(a) Except as set forth on Section 2.11 of the Company Disclosure Schedule
or as publicly disclosed by Company in Company SEC Reports:
(i) all activities, operations and conduct of the Company or its
subsidiaries, and to the knowledge of the Company, the Real Property, and
any properties formerly owned or operated by the Company or its
subsidiaries, comply and have at all times complied with Environmental Laws
in all material respects;
(ii) there has been no disposal, release, or threatened release of
Hazardous Substances by the Company, and to the knowledge of the Company
any other person, on, under, in, from or about the Real Property, or any
properties formerly owned or operated by the Company or its subsidiaries,
or otherwise related to the operations of the Company or its subsidiaries,
that has subjected or may subject the Company or its subsidiaries to
material liability under any Environmental Law;
(iii) neither the Company nor its subsidiaries have disposed of or
arranged for disposal of Hazardous Substances on any third party property
that has subjected or reasonably could subject the Company to material
liability under any Environmental Law;
(iv) neither the Company nor its subsidiaries has received any notice,
demand, letter, claim or request for information alleging violation of or
liability under any Environmental Law and there are no actions, orders,
decrees, injunctions or other proceedings, or to the knowledge of the
Company or its subsidiaries, any threatened actions or claims, relating to
or otherwise alleging liability under any Environmental Law;
(v) neither the Company nor its subsidiaries has exposed any employee or
third party to any Hazardous Substance or condition which has subjected or
reasonably could subject the Company or its subsidiaries to material
liability under any Environmental Law;
(vi) no underground storage tanks, asbestos-containing material, or
polychlorinated biphenyls have ever been located by the Company, or to the
knowledge of the Company, any other person, on the Real Property or
properties formerly owned or operated by the Company or its subsidiaries;
(vii) neither the Company nor its subsidiaries has assumed by agreement
any liability of any person for cleanup, compliance or required capital
expenditures pursuant or related to any Environmental Law;
(viii) neither the Company nor its subsidiaries is required to make any
capital or other expenditures to comply with any Environmental Law nor is
there any reasonable basis on which any governmental agency could take
action that would require such capital or other expenditure;
(ix) there are no circumstances, conditions or activities involving the
Company or its subsidiaries that could reasonably be expected to result in
any liability or costs to the Company or its subsidiaries or any
restrictions on the ownership, use or transfer of the Real Property
pursuant to any Environmental Law;
(x) the Company and its subsidiaries have delivered to Parent copies of
all environmental assessments, audits, studies, and other environmental
reports in its possession or reasonably available to it relating to the
Company or its subsidiaries or the Real Property or former properties or
operations.
(b) As used herein:
(i) "Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, or treaty; all judicial,
administrative, and regulatory orders, judgments, decrees, permits, and
authorizations; and common law relating to: (A) the protection,
investigation, remediation, or restoration of the environment or natural
resources, (B) the handling, use, storage, treatment, disposal, release or
threatened release of any Hazardous Substance, (C) noise, odor, pollution,
contamination, any injury or threat of injury to persons or property or (D)
the protection of the health and safety of employees or the public.
(ii) "Hazardous Substance" means any substance, material, or waste that
is: (A) listed, classified or regulated in any concentration pursuant to
any Environmental Law; (B) any petroleum hydrocarbon,
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asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (C) any other
substance, material, or waste which may be the subject of regulatory action
by any governmental entity pursuant to any Environmental Law.
SECTION 2.12. Taxes.
(a) For purposes of this Agreement:
(i) the term "Tax" (including "Taxes") means (A) all federal, state,
local, foreign and other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts with
respect thereto, (B) any liability for payment of amounts described in
clause (A), whether as a result of transferee liability, of being a member
of an affiliated, consolidated, combined or unitary group for any period,
or otherwise through operation of law, and (C) any liability for the
payment of amounts described in clauses (A) or (B) as a result of any tax
sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person; and
(ii) the term "Tax Return" means any return, declaration, report,
statement, information statement and other document required to be filed
with respect to Taxes.
(b) Except as set forth in Section 2.12 of the Company Disclosure Schedule:
(i) Company and its subsidiaries have accurately prepared and timely filed
(except where extensions of time to file have been obtained) all Tax Returns
they are required to have filed and (ii) such Tax Returns are accurate and
correct in all material respects and do not contain a disclosure statement
under Section 6662 of the Code (or any predecessor provision or comparable
provision of state, local or foreign law).
(c) Company and its subsidiaries have paid or adequately provided for all
Taxes (whether or not shown on any Tax Return) they are required to have paid
or to pay.
(d) No material claim for assessment or collection of Taxes is presently
being asserted against Company or its subsidiaries, and neither Company nor any
of its subsidiaries is a party to any pending action, proceeding, or
investigation by any governmental taxing authority, nor does Company have
knowledge of any such threatened action, proceeding or investigation.
(e) Neither Company nor any of its subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a tax assessment or deficiency.
(f) Neither Company nor any of its subsidiaries is a party to any agreement,
contract, arrangement or plan that has resulted or would result, separately or
in the aggregate, in connection with this Agreement or any change-of-control of
Company or any of its subsidiaries, in the payment of any "excess parachute
payments" within the meaning of Section 28OG of the Code.
SECTION 2.13. Intellectual Property.
(a) "Intellectual Property" means trademarks and service marks (registered
or unregistered), trade dress, trade names, names and slogans embodying
business or product goodwill or indications of origin, all applications or
registrations in any jurisdiction pertaining to the foregoing and all goodwill
associated therewith, as well as the following: (i) patents, patentable
inventions, trade secrets, discoveries, improvements, ideas, know-how, formula,
methodology, processes, technology and computer programs, software and
databases (including source code, object code, development documentation,
programming tools, drawings, specifications and data), and all applications or
registrations in any jurisdiction pertaining to the foregoing, including all
reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof; (ii) the right in any
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jurisdiction to limit the use or disclosure thereof; (iii) copyrights in
writings, designs, mask works or other works, and registrations or applications
for registration of copyrights in any jurisdiction; (iv) licenses; (v) Internet
Web sites, domain names and registrations or applications for registration
thereof; (vi) customer lists; (vii) books and records describing or used in
connection with any of the foregoing; and (viii) claims or causes of action
arising out of or related to infringement or misappropriation of any of the
foregoing.
(b) Section 2.13 of the Company Disclosure Schedule lists all Intellectual
Property (either registered, applied for, or common law) owned by, registered
in the name of, licensed to, or otherwise used by Company or its subsidiaries
that are material to their business or operations ("Material Intellectual
Property").
(c) All of the Material Intellectual Property is owned by Company or its
subsidiaries free and clear of any and all Liens or is used by Company or its
subsidiaries pursuant to a valid and enforceable license granting rights
sufficiently broad to permit the historical and anticipated uses of the
Intellectual Property in connection with the conduct of the Business in the
manner presently conducted.
(d) Section 2.13 of the Company Disclosure Schedule lists any licenses,
sublicenses or other agreements pursuant to which Company or its subsidiaries
grants a license to any person to use the Intellectual Property or is a
licensee of any of the Intellectual Property.
(e) The conduct of the business and operations of Company and its
subsidiaries does not conflict with valid intellectual property rights of
others. There are no conflicts with or infringements of any of the Intellectual
Property by any third party.
(f) Company has taken all commercially reasonable precautions necessary to
ensure that all Intellectual Property has been properly protected and has been
kept secret.
(g) Except as set forth in Section 2.13 of the Company Disclosure Schedule
(i) the validity of Intellectual Property and the title thereto of Company or
any subsidiary, as the case may be, is not being threatened with or questioned
in any litigation to which Company or any subsidiary is a party, and (ii) the
consummation of the transactions completed hereby will not result in the loss
or impairment of any rights of Company or its subsidiaries in the Intellectual
Property.
SECTION 2.14. Real Property. Section 2.14 of the Company Disclosure Schedule
lists: (i) a description of each parcel of real property owned by Company and
any of its subsidiaries (the "Fee Real Property"), (ii) a listing of each
lease, written or, to the knowledge of Company, oral, of real property under
which Company or any of its subsidiaries is a lessee, lessor, sublessee or
sublessor, as so designated therein (the "Leases" and together with the Fee
Real Property, the "Real Property"), (iii) all options or commitments to sell
or lease any real property interests to which Company or any of its
subsidiaries is a party, and (iv) all options or commitments to acquire any
real property interests (other than by lease) to which Company or any of its
subsidiaries is a party (collectively, such real property interests are
referred to as the "Acquisition Real Property"). The Real Property constitutes
all of the real property interests owned, leased or occupied in whole or in
part by Company or any of its subsidiaries and there are no other Leases,
licenses or other agreements affecting the occupancy of the Real Property.
Except as set forth in Section 2.14 of the Company Disclosure Schedule:
(a) Company and its subsidiaries have good and marketable (or indefeasible,
in jurisdictions where the term "marketable" is not customarily used) title in
fee simple, or will acquire good and marketable (or indefeasible, as the case
may be) title in fee simple, to the Fee Real Property owned or optioned by
them, free and clear of all Liens, except Liens for Taxes not yet due and such
Liens or other imperfections of title as do not or will not materially
interfere with the present use or intended use by Company and its subsidiaries
or affect the value or marketing of the property affected thereby and that do
not, individually or in the aggregate, have a Material Adverse Effect on
Company. Company has delivered or made available to Parent copies of the
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deeds and other instruments (as recorded) by which Company acquired such Real
Property and interests, and copies of all title insurance policies, title
insurance commitments, opinions, abstracts, and surveys relating to the Fee
Real Property or interests and the Acquisition Real Property. There are no
encumbrances or other matters of record (other than contracts for sales of
completed residences and inchoate mechanics' liens for amounts not yet due)
affecting title to any of the Fee Real Property or Acquisition Real Property
which are not disclosed in the title insurance policies and commitments.
(b) Neither Company nor any of its subsidiaries has given, nor have they
received, any notice that a breach or an event of default exists, and no
condition or event has occurred that with the giving of notice, the lapse of
time, or both would constitute a breach or event of default, by Company or any
subsidiary, or to the knowledge of Company, any other person with respect to
any agreements, arrangements, contracts, covenants, conditions, deeds, deeds of
trust, rights-of-way, easements, mortgages, restrictions, surveys, title
insurance policies, and other documents granting to Company or any subsidiary
title to or an interest in or otherwise affecting the Fee Real Property or the
Acquisition Real Property, except for such breach or event of default that
would not, individually or in the aggregate, have a Material Adverse Effect on
Company.
(c) The Fee Real Property and Acquisition Real Property to be used for
homebuilding conforms, in all material respects, to the appropriate
Governmental Entity's standards, and there is no material impediment to
approval for undeveloped Real Property or the Acquisition Real Property, such
approval to allow development in the manner in which Company currently
anticipates building thereon.
(d) The developed Fee Real Property and Acquisition Real Property has access
to streets, and is serviced, in all material respects, by all utilities and
other services as is necessary for the current and intended use of such
property. The undeveloped Fee Real Property and Acquisition Real Property has
access to streets, and such Fee Real Property and Acquisition Real Property is
serviced, in all material respects, by all utilities and other services as is
necessary for the development thereof or such utilities and other services are
or will be available, in all material respects, to such property.
(e) There is no suit, action or arbitration, or legal, administrative, or
other proceeding or Governmental Entity investigation, formal or informal,
including without limitation to eminent domain or condemnation proceeding,
proceeding to establish a new assessment district or increase the assessments
imposed by an existing assessment district, or zoning change proceeding,
pending or threatened, or any judgment, moratorium or other government policy
or practice which affects any of the Fee Real Property or the Acquisition Real
Property or Company's anticipated development of any of such properties.
(f) All Leases are in good standing, valid and effective in accordance with
their respective terms, and there is not under any of such Leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a material default).
(g) There are no material encroachments on the Fee Real Property or the
Acquisition Real Property nor any encroachments by improvements on the Fee Real
Property or the Acquisition Real Property onto any easements or any adjoining
property or which would otherwise conflict with the property rights of any
other person.
(h) All of the improvements situated on any of the Real Property and
Acquisition Real Property are in good operating condition and are adequate and
suitable for the purposes for which they are presently being used, normal wear
and tear excepted.
(i) All rights to exercise any purchase or repurchase options with respect
to any portion of the Fee Real Property (whether contained in vesting deeds or
otherwise) have expired or been extinguished in accordance with their
respective terms.
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SECTION 2.15. Projects. Except as set forth in Section 2.15 of Company's
Disclosure Schedule:
(a) Company has not developed, constructed or otherwise participated and
does not currently intend to develop, construct or otherwise participate in any
real estate projects other than the projects identified in Section 2.15 of the
Company Disclosure Schedule (the "Projects"). Section 2.15 of the Company
Disclosure Schedule includes the total number of units developed and under
development, and the total units remaining unsold.
(b) All work performed by Company or by subcontractors on Company's behalf
on or in any of the properties involved in the Projects has been or shall be
performed in substantial accordance with the plans and specifications approved
by all Governmental Entities (including VA and FHA, as applicable), in
compliance with all applicable laws, ordinances, and regulations, and in a good
and workmanlike manner, free from any defect or lien, other than inchoate
mechanics' liens for amounts not yet due. Each property involved in the
Projects complies in all material respects with all laws, including, without
limitation, applicable zoning, land use, subdivision, parking, traffic and fire
safety laws and the Colorado Common Interest Ownership Act (Colorado Revised
Statutes (S)(S) 38-33.3-101 et seq.) ("CCIOA"), and Company has not received
any notice from any Governmental Entity as to any violation of any law. Company
and its subsidiaries have filed all information required by such acts.
(c) The approvals, consents, licenses, permits, waivers or other
authorizations issued, granted or otherwise made available by any Governmental
Entity pertaining to the Projects (collectively, the "Entitlements"), and any
agreements (for example, and not in limitation, subdivision improvement
agreements) executed in connection therewith, are in full force and effect and
no party thereto is in default thereunder. All material Entitlements necessary
or appropriate for the development and construction of the Projects are in full
force and effect, without default, and are enforceable in accordance with
Colorado law. Neither Company nor to Company's knowledge, the fee owner, if
Company is not the fee owner of any property involved in any of the Projects,
is in default under, and Company has not received any notice that any event has
occurred which with the giving of notice or the passage of time, or both, would
constitute a default under any Entitlements, contract, transaction, agreement,
covenant, condition, restriction, lease, easement, encumbrance or instrument
pertaining to the property involved in any Project. All subdivision improvement
bonds and other sureties or assurances relating in any way to any such property
and required by any applicable Governmental Entity or pursuant to any
Entitlements have been posted and are being maintained in accordance with the
requirements of such applicable Governmental Entitles and/or Entitlements and
no claim has been made thereunder or thereto.
(d) (i) Company is not obligated to pay nor is it otherwise subject to any
monetary charges, assessments or fees imposed by any Governmental Entity or
quasi-governmental entity (such as special districts, improvement districts or
the like) in connection with Company's receipt of the Entitlements or otherwise
relating to the development or improvement of the Projects.
(ii) Except for obligations contained in the agreements listed in Section
2.15 of the Company Disclosure Schedule, Company does not have any development
or improvement obligations with respect to the Projects.
(e) Company (or to Company's knowledge, the fee owner, if Company is not the
fee owner) has made no oral or, except for the Entitlements, written
commitments or representations to, or understandings or agreements with, any
person, firm or entity, any adjoining property owner or any Governmental Entity
which would in any way be binding on Company or would interfere with Company's
ability to develop and improve any of the properties involved in the current
Projects with residential developments in accordance with the Entitlements, and
neither Company, the fee owner, nor Company shall make or enter into any such
commitment, representations, understandings or agreements without Parent's
written consent.
(f) No property involved in the Projects is located in an area designated as
having special flood hazards or designated as a wetland by the army Corps of
Engineers. No property involved in the Projects is located in an
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area that is designated, or in the process of being designated, as a critical
habitat for any threatened or endangered species under the endangered Species
Act of 1973, as amended, or designated under any other law for the preservation
of fish, wildlife, plants, insects, forests or wetlands, or for the
preservation of any historical or archeological site under the National
Historic Preservation Act of 1979, as amended, or any other law, which any such
designation would limit, impair, delay or prohibit the construction and
development of the Project in accordance with the existing or proposed plans
therefor.
(g) Company has not received any notice from any of Company's insurance
carriers of any defects or inadequacies in any of the properties involved in
the Projects, or any portion thereof, which would adversely affect the
insurability of any properties or the cost of any such insurance. There are no
pending insurance claims with respect to any portion of any such properties.
(h) There are no soil conditions that would require construction of
foundations different than those customarily built in residential projects, in
Colorado in the areas in which the Projects are located, nor, to the knowledge
of the Company, any seismic safety problems relating to any of the properties
involved in the Projects, any recent seismic activity affecting any such
properties or any active fault bisecting, underlying or adjacent to any such
properties. Company has installed foundations appropriate and customary for the
applicable soil conditions.
(i) Neither the Company nor any of its subsidiaries is in default under any
"Declaration" (as defined in CCIOA) to which it is a party, by which it is
bound, or under which it is, or has succeeded to the rights of, the "Declarant"
(as defined in CCIOA).
(j) Each Declaration affecting each current Project complies in all respects
to the applicable requirements of CCIOA or is exempt from such requirements.
(k) All work performed with respect to the Projects has been approved by
holders of security interests in the Projects to the extent required by the
applicable Declarations or CCIOA.
(l) Other than in connection with its sales of homes to purchasers in the
ordinary course of business, neither the Company nor any of its subsidiaries
has assigned to any third party any of its respective development or other
rights under the Declarations.
SECTION 2.16 Assets. The assets and properties of Company and its
subsidiaries, considered as a whole, constitute all of the assets and
properties that are reasonably required for the business and operations of
Company and its subsidiaries as presently conducted. Company or its
subsidiaries have good and marketable title to or a valid leasehold estate in
all personal properties and assets reflected on Company's balance sheet at
December 31, 1999 (except for properties or assets subsequently sold in the
ordinary course of business consistent with past practice), in each case, free
and clear of all Liens (other than the Liens set forth in Section 2.16 of the
Company Disclosure Schedule.
SECTION 2.17 Contracts.
(a) Section 2.17 of the Company Disclosure Schedule contains a complete and
accurate list of all material contracts (written or oral), undertakings,
commitments, arrangements or agreements to which Company or any of its
subsidiaries is a party or by which any of them is bound relating to or
affecting their securities, assets, properties, business or operations,
including, without limitation, the following categories (collectively, the
"Contracts"):
(i) Contracts, whether or not made in the ordinary course of business,
requiring annual expenditures by or liabilities of Company and its
subsidiaries in excess of Fifty Thousand Dollars ($50,000);
(ii) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments relating to the lending of money, whether
as borrower, lender or guarantor;
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(iii) Contracts containing covenants limiting the freedom of Company or
any of its subsidiaries to engage in any line of business or compete with
any person or operate at any location;
(iv) joint venture or partnership agreements or joint development or
similar agreements, including any agreement pursuant to which any third
party is entitled to develop any real property and/or facility on behalf of
Company or its subsidiaries;
(v) Contracts with any Federal, state or local Governmental Entity that
have a remaining term in excess of one (1) year or are not cancelable
(without material penalty, cost or other liability) within one (1) year;
(vi) Contracts for the sale of assets, other than homes, by the Company
or its subsidiaries with a value in excess of Fifty Thousand Dollars
($50,000);
(vii) Contracts required to be filed as "material contracts" by the
Company with the SEC pursuant to the requirements of the Securities
Exchange Act of 1934; and
(viii) any other Contract that is material to Company and its
subsidiaries, taken as a whole, not otherwise listed on the Company
Disclosure Schedule.
(b) Except as set forth in Section 2.17 of the Company Disclosure Schedule,
true and complete copies of the written Contracts and descriptions of verbal
Contracts, if any, have been delivered to Parent. Each of the Contracts is a
valid and binding obligation of Company and, to Company's knowledge, the other
parties thereto, enforceable against Company in accordance with its terms,
except as enforcement may be limited by the Enforcement Exceptions. No event,
including, without limitation, the execution and delivery of this Agreement,
has occurred which would, on notice or lapse of time or both, entitle the
holder of any indebtedness issued pursuant to a Contract identified in Section
2.17 of the Company Disclosure Schedule in response to paragraph (a) above to
accelerate, or which does accelerate, the maturity of any such indebtedness.
(c) All "participation" and similar payments due or to become due with
respect to any Project (including pursuant to any Contract that relates or
related to any indebtedness to Investors Real Estate Trust with respect to the
Northpark project or to any person or entity relating to indebtedness of Writer
Peninsula, Inc. or affecting the Southpark projects) have been paid in full and
neither the Company nor any subsidiary of the Company has any liability for or
obligation to make any such participation or similar payments with respect to
any Project.
SECTION 2.18 Insurance.
(a) Section 2.18(a) of the Company Disclosure Schedule contains a true and
complete list (including the names and addresses of the insurers, the names of
the persons to whom such policies have been issued, the expiration dates
thereof, whether the policies are currently in effect, the annual premiums and
payment terms thereof, whether it is a "claims made" or an "occurrence" policy
and a brief description of the interests insured thereby) of all liability,
property, workers' compensation, directors' and officers' liability and other
insurance policies in effect at any time since January 1, 1992 that insure or
did insure the business, operations or employees of Company or any subsidiary
of Company or affect or relate to the ownership, use or operation of any of the
assets (both past and present) of Company or any subsidiary of Company and that
(a) have been issued to Company or any subsidiary of Company or (b) have been
issued to any person (other than Company or any subsidiary of Company) for the
benefit of Company or any subsidiary of Company (the "Insurance Policies"). The
insurance coverage provided by any of the policies described in clause (a)
above will not terminate or lapse by reason of the transactions contemplated by
this Agreement. Each Insurance Policy listed is valid and binding and in full
force and effect, no premiums due thereunder have not been paid and neither
Company, any subsidiary of Company nor the person to whom such policy has been
issued has received any notice of cancellation or termination in respect of any
such policy or is in default thereunder. The Insurance Policies were placed
with financially sound and reputable insurers and, in light of the respective
business, operations and assets of Company and its subsidiaries, are or were in
amounts and have or had coverages that are reasonable and customary for persons
engaged in such businesses and operations and having such assets.
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Except as set forth in Section 2.18(a) of the Company Disclosure Schedule,
neither Company, any subsidiary of Company nor the person to whom such policy
has been issued has received notice that any insurer under any Insurance Policy
is denying liability with respect to a claim thereunder or defending under a
reservation of rights clause, or, to Company's knowledge, indicated any intent
to do so or not to renew any such policy.
(b) Section 2.18(b) of the Company Disclosure Schedule contains a listing of
all open claims made or otherwise asserted by the Company against any insurance
policy. These claims, individually or in the aggregate, if not covered by
insurance, would not have a Material Adverse Effect on Company. All material
claims under the Insurance Policies have been filed in a timely fashion.
SECTION 2.19 Product Warranties. Section 2.19 of the Company Disclosure
Schedule sets forth complete and accurate copies of the written warranties and
guaranties by Company or any of its subsidiaries currently in effect with
respect to its products. There have not been any material deviations from such
warranties and guaranties, and neither Company, any of its subsidiaries nor any
of their respective salespersons, employees and agents is authorized to
undertake obligations to any customer or to other third parties in excess of
such warranties or guaranties. Neither Company nor any of its subsidiaries has
made any oral warranty or guaranty with respect to its products.
SECTION 2.20. Certain Business Practices. None of Company, any of its
subsidiaries or any directors, officers, agents or employees of Company or any
of its subsidiaries has (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, (b)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (c)
to Company's knowledge, made any other unlawful payment.
SECTION 2.21. Brokers. Except as set forth on Section 2.21 of the Company
Disclosure Schedule, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement, based upon arrangements made by or
on behalf of Company. The aggregate fees that the Company shall be obligated to
pay to such brokers, finders or investment bankers shall not exceed $700,000.
SECTION 2.22. Year 2000.
(a) Except as set forth in Section 2.22 of the Company Disclosure Schedule,
all Information Systems and Equipment of Company and its subsidiaries are in
all material respects Year 2000 Compliant.
(b) "Year 2000 Compliant" means that all Information Systems and Equipment
accurately process date data (including, but not limited to, calculating,
comparing and sequencing), before, during and after the year 2000, as well as
same multi-century dates, or between the years 1999 and 2000, taking into
account all leap years, including the fact that the year 2000 is a leap year,
and further, that when used in combination with, or interfacing with, other
Information Systems and Equipment, shall accurately accept, release and
exchange date data, and shall in all material respects continue to function in
the same manner as it performs today and shall not otherwise materially impair
the accuracy or functionality of Information Systems and Equipment."Information
Systems and Equipment" means with respect to a person all computer hardware,
firmware and software, as well as other information processing systems, or any
equipment containing embedded microchips, whether directly owned, licensed,
leased, operated or otherwise controlled, including through third-party service
providers, and which, in whole or in part, are used, operated, relied upon, or
integral to, such person's conduct of their business.
SECTION 2.23. Transactions With Affiliates. Except to the extent disclosed
in Company SEC Reports or in Section 2.23 of the Company Disclosure Schedule,
within the last five years there have been no
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transactions, agreements, arrangements or understandings between Company or its
subsidiaries, on the one hand, and Company's affiliates (other than wholly-
owned subsidiaries of Company) or other persons, on the other hand, that would
be required to be disclosed under Item 404 of Regulation S-K under the
Securities Act.
SECTION 2.24. Suppliers and Subcontractors. The documents and information
supplied by Company to Parent or any of its representatives in connection with
this Agreement with respect to relationships and volumes of business done with
its significant suppliers and subcontractors are accurate in all material
respects. Except as set forth in Section 2.24 of the Company Disclosure
Schedule, during the last twelve (12) months, Company has received no notices
of termination or threats of termination from any of the five (5) largest
suppliers or ten (10) largest subcontractors for Company and its subsidiaries.
SECTION 2.25. Opinion of Financial Advisor. The Seidler Companies ("Company
Financial Adviser") has delivered to the Board of Directors of Company its oral
opinion to the effect that the consideration to be received by the holders of
Shares pursuant to the provisions of this Agreement is fair from a financial
point of view to such holders, a written copy of which will be received prior
to the Closing, and a copy of which will be delivered to Parent as soon as
available and prior to the Closing.
SECTION 2.26. Accuracy of Information. None of the representations or
warranties or information provided and to be provided by Company to Parent or
Newco in this Agreement (including the Company Disclosure Schedule) contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary in order to make the statements and facts
contained herein or therein not false or misleading. The descriptions set forth
in the Company Disclosure Schedule are accurate descriptions of the matters
disclosed therein. Copies of all documents heretofore or hereafter delivered or
made available by Company to Parent or Newco pursuant hereto were or will be
complete and accurate records of such documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco hereby represent and warrant to Company, except as
otherwise set forth in Parent SEC Reports, that:
SECTION 3.1. Organization.
(a) Parent and Newco are duly organized, validly existing and in good
standing under the laws of the State of Delaware and have all requisite power
and authority to own, lease and operate their properties and to carry on their
businesses as now being conducted. Parent has heretofore delivered to Company
accurate and complete copies of the certificate of incorporation and bylaws as
currently in effect of Parent and Newco.
(b) Each of Parent and Newco is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
have a Material Adverse Effect on Parent. The term "Material Adverse Effect on
Parent" means any change or effect that is (i) reasonably likely to be
materially adverse to the business, results of operations or financial
condition of Parent and its subsidiaries, taken as a whole, or (ii) that
materially impairs the ability of Parent and/or Newco to consummate the
transactions contemplated hereby.
SECTION 3.2. Capitalization of Parent and its Subsidiaries.
(a) The authorized capital stock of Parent consists of 100,000,000 shares of
Parent Common Stock, of which, as of March 1, 2000, 28,969,580 shares of Parent
Common Stock are issued and outstanding and
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10,000,000 shares of preferred stock, par value $0.01 per share, none of which
are outstanding. All of the outstanding shares of Parent Common Stock have been
validly issued and are fully paid, nonassessable and free of preemptive rights.
As of March 1, 2000, 2,409,490 shares of Parent Common Stock were reserved for
issuance and issuable upon or otherwise deliverable in connection with the
exercise of outstanding options and warrants.
(b) As of the date hereof, there are outstanding (i) no shares of capital
stock or other voting securities of Parent; (ii) no securities of Parent or its
subsidiaries convertible into or exchangeable for shares of capital stock, or
voting securities of Parent; (iii) no options or other rights to acquire from
Parent or its subsidiaries and, no obligations of Parent or its subsidiaries to
issue any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent (other than
pursuant to Parent's 1991 Employee Stock Incentive Plan and 1997 Stock
Incentive Plan; and (iv) no equity equivalent interests in the ownership or
earnings of Parent or its subsidiaries or other similar rights (collectively,
"Parent Securities"). As of the date hereof, there are no outstanding
obligations of Parent or any of its subsidiaries to repurchase, redeem or
otherwise acquire any Parent Securities. Other than as provided herein, there
are no stockholder agreements, voting trusts or other agreements or
understandings to which Parent is a party or by which it is bound relating to
the voting of any shares of capital stock of Parent.
(c) When delivered pursuant to this Agreement each share of Parent Common
Stock issued in exchange for Shares will be fully paid, validly issued and
outstanding and not subject to assessment or claim of right by any person
claiming through Parent or Newco.
SECTION 3.3. Authority Relative to this Agreement. Each of Parent and Newco
has all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the boards of
directors of Parent and Newco and by Parent as the sole stockholder of Newco,
and no other corporate proceedings on the part of Parent or Newco are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by each
of Parent and Newco and constitutes a valid, legal and binding agreement of
each of Parent and Newco enforceable against each of Parent and Newco in
accordance with its terms, except as such enforcement may be limited by the
Enforcement Exceptions.
SECTION 3.4. SEC Reports; Financial Statements. Parent has filed all
required forms, reports and documents (collectively, "Parent SEC Reports" )
with the SEC, each of which has complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, each as in
effect on the dates such forms, reports and documents were filed. None of such
Parent SEC Reports, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, contained when filed
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in
order to make the statements therein in light of the circumstances under which
they were made not misleading. The audited consolidated financial statements of
Parent (including the consolidated statements of income and cash flow) included
in the Parent SEC Reports fairly present in conformity with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
in the notes thereto) the consolidated financial position of Parent and its
consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods indicated.
SECTION 3.5. Consents and Approvals; No Violations.
(a) Except for filings, permits, authorizations, consents, and approvals as
may be required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the HSR Act and the
filing and recordation of the Certificate of Merger as required by the DGCL and
the CBCA, no filing with or notice to, and no material permit authorization
consent or approval of any Governmental Entity is necessary for the execution
and delivery by Parent or Newco of this Agreement or the consummation by Parent
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or Newco of the transactions contemplated hereby, except where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings or give such notice would not have a Material Adverse Effect on Parent.
(b) Neither the execution, delivery and performance of this Agreement by
Parent or Newco, nor the consummation by Parent or Newco of the transactions
contemplated hereby, will (i) conflict with or result in any breach of any
provision of each of the certificate of incorporation or bylaws (or similar
governing documents) of Parent and Newco or any of Parent's other subsidiaries,
(ii) result in a violation or breach of or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien) under any of the
terms, conditions or provisions of any material note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or Newco or any of Parent's other subsidiaries is a
party or by which any of them or any of their respective properties or assets
may be bound or (iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to Parent or Newco or any of Parent's
other subsidiaries or any of their respective properties or assets which
violation could have a Material Adverse Effect on Parent.
SECTION 3.6. No Default. None of Parent or any of its subsidiaries is in
breach, default or violation (and no event has occurred that, with notice or
the lapse of time or both, would constitute a breach, default or violation) of
any term, condition or provision of (a) its certificate of incorporation or
bylaws (or similar governing documents), (b) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or any of its subsidiaries is now a party or by
which any of them or any of their respective properties or assets may be bound
or (c) any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or any of its subsidiaries or any of their respective
properties or assets except, in the case of (b) or (c), for violations,
breaches or defaults that would not have a Material Adverse Effect on Parent.
SECTION 3.7. No Undisclosed Liabilities; Absence of Changes. Except as
reflected in the most recent financial statements of Parent included in the
Parent SEC Reports, none of Parent or its subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise that
would be required by generally accepted accounting principles to be reflected
on a consolidated balance sheet of Parent and its consolidated subsidiaries
(including the notes thereto), other than liabilities incurred in the ordinary
course of business since September 30, 1999.
SECTION 3.8. Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Parent threatened, against Parent
or any of its subsidiaries or any of their respective properties or assets
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Parent or could reasonably be expected to prevent or
delay the consummation of the transactions contemplated by this Agreement. None
of Parent or its subsidiaries is subject to any outstanding order, writ,
injunction or decree that, insofar as can be reasonably foreseen in the future,
could reasonably be expected to have a Material Adverse Effect on Parent or
could reasonably be expected to prevent or delay the consummation of the
transactions contemplated hereby.
SECTION 3.9. Compliance with Applicable Law. Parent and its subsidiaries
hold all material permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Parent Permits"). Parent and its subsidiaries
are in compliance with the terms of the Parent Permits, except where the
failure so to comply would not have a Material Adverse Effect on Parent. The
businesses of Parent and its subsidiaries are not being conducted in violation
of any law ordinance or regulation of any Governmental Entity except for
violations that do not and, insofar as reasonably can be foreseen in the
future, will not have a Material Adverse Effect on Parent. No investigation or
review by any Governmental Entity with respect to Parent or its subsidiaries is
pending or, to the knowledge of Parent,
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threatened nor, to the knowledge of Parent, has any Governmental Entity
indicated an intention to conduct the same, other than in each case those that
Parent reasonably believes will not have a Material Adverse Effect on Parent.
SECTION 3.10. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement, based upon arrangements made by or
on behalf of Parent or Newco.
SECTION 3.11. Year 2000. All Information Systems and Equipment of Parent and
its subsidiaries are in all material respects Year 2000 Compliant.
SECTION 3.12. Accuracy of Information. None of the representations or
warranties or information provided and to be provided by Parent or Newco to the
Company in this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary in
order to make the statements and facts contained herein or therein not false or
misleading. Copies of all documents heretofore or hereafter delivered or made
available by Parent or Newco to Company pursuant hereto were or will be
complete and accurate records of such documents.
ARTICLE IV
COVENANTS
SECTION 4.1. Conduct of Business of Company. Except as contemplated by this
Agreement or as described in Section 4.1 of the Company Disclosure Schedule,
during the period from the date hereof to the Effective Time, Company will, and
will cause each of its subsidiaries to, conduct its operations in the ordinary
course of business consistent with past practice, and, to the extent consistent
therewith and with no less diligence and effort than would be applied in the
absence of this Agreement, will seek to preserve intact its current business
organizations, keep available the service of its current officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it to the end that their goodwill and ongoing businesses
shall be unimpaired at the Effective Time. Without limiting the generality of
the foregoing, except as otherwise expressly provided in this Agreement or as
described in Section 4.1 of the Company Disclosure Schedule, prior to the
Effective Time, neither Company nor any of its subsidiaries will, without the
prior written consent of Parent and Newco (which consent shall not be
unreasonably withheld):
(a) amend its charter or bylaws (or other similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to issue
sell or deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights), except for the
issuance and sale of Shares pursuant to options previously granted under
Company Plans or pursuant to previously granted warrants;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, make any
other actual, constructive or deemed distribution in respect of its capital
stock or otherwise make any payments to shareholders in their capacity as such,
or redeem or otherwise acquire any of its securities or any securities of any
of subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization (other
than the Merger);
(e) alter, through merger, liquidation, reorganization, restructuring or any
other fashion, the corporate structure of ownership of any subsidiary;
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(f) (i) incur or assume any long-term or short-term debt or issue any debt
securities, except for borrowings under existing lines of credit in the
ordinary course of business consistent with past practices provided that notice
is provided to Parent; (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practice and except for obligations of subsidiaries of
Company incurred in the ordinary course of business consistent with past
practices provided that notice is provided to Parent; (iii) make any loans,
advances or capital contributions to or investments in any other person (other
than to subsidiaries of Company or customary loans or advances to employees in
each case in the ordinary course of business consistent with past practice);
(iv) pledge or otherwise encumber shares of capital stock of Company or its
subsidiaries; or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien thereupon (other
than tax liens for Taxes not yet due and Liens incurred in the ordinary course
of business securing borrowings permitted under clause (i) above);
(g) except as set forth in Section 4.1 of the Company Disclosure Schedule or
as may be required by law, enter into adopt or amend or terminate any bonus,
profit sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any director, officer or employee in
any manner or increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock appreciation rights or performance units);
(h) except as set forth in Section 4.1 of the Company Disclosure Schedule,
acquire, sell, lease or dispose of any assets in any single transaction or
series of related transactions having a fair market value in excess of $50,000
in the aggregate, provided that none of the foregoing shall limit contracting
for sale and sale of completed residences in the ordinary course of business
consistent with past practices;
(i) except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting principles or
practices used by it;
(j) revalue in any material respect any of its assets, including without
limitation writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business consistent with past
practices;
(k) (i) acquire (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership or other business organization or division thereof
or any equity interest therein; (ii) enter into any contract or agreement,
other than in the ordinary course of business consistent with past practice,
that would be material to Company and its subsidiaries, taken as a whole; (iii)
authorize any new capital expenditure or expenditures that individually is in
excess of $50,000 or in the aggregate are in excess of $250,000 provided that
none of the foregoing shall limit any capital expenditure required pursuant to
existing Projects or other existing contracts in the ordinary course of
business consistent with past practices;
(l) make any tax election or settle or compromise any income tax liability
material to Company and its subsidiaries taken as a whole;
(m) settle or compromise any pending or threatened suit, action or claim
that (i) relates to the transactions contemplated hereby or (ii) the settlement
or compromise of which could have a Material Adverse Effect on Company;
(n) pay, or award any increases in, any salary, wages, vacation pay, sick
pay, bonuses or other compensation except in the ordinary course of business
consistent with past practice;
(o) made any material change in the conduct of its business or operations,
or take or omit to take any actions not in the ordinary course of business
consistent with past practices;
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(p) enter into any transaction, agreement, arrangement or understanding with
any affiliate of the Company, or amend or modify the terms of any existing
agreement, arrangement or understanding with any affiliate of the Company;
(q) enter into any transaction, agreement, arrangement or understanding, or
take any other action, that would prevent the Merger from qualifying as a tax
free reorganization; or
(r) take or agree in writing or otherwise commit to take any of the actions
described in Sections 4.1(a) through 4.1(q) or any action that would make any
of the representations or warranties of Company contained in this Agreement
materially untrue or incorrect.
SECTION 4.2. Preparation of Form S-4 and the Proxy Statement.
(a) Parent shall prepare and file with the SEC and any other applicable
regulatory bodies, as soon as reasonably practicable, a Registration Statement
on Form S-4 to be filed with the SEC by Parent in connection with the issuance
of shares of Parent Common Stock in the Merger (together with any amendments or
supplements thereto, the "Form S-4") with respect to the shares of the Parent
Common Stock to be issued in the Merger. Parent and Company shall each use its
reasonable best efforts to cause the Form S-4 to be declared effective as
promptly as practical after such filing. Company and Parent shall each use
their reasonable best efforts to have a joint proxy statement of Parent and of
Company prepared by Parent and Company containing the information required by
the Exchange Act (together with any amendments or supplements thereto, the
"Proxy Statement") promptly approved by the SEC under the provisions of the
Exchange Act.
(b) Parent shall also take any action (other than qualifying to do business
in any jurisdiction in which it is now not so qualified) required to be taken
under any applicable state securities laws in connection with the issuance of
Parent Common Stock in the Merger, and Company shall furnish all information
concerning Company and the holders of Shares as may be reasonably requested in
connection with any such action.
(c) (i) The information specifically designated as being supplied by
Company for inclusion or incorporation by reference in the Form S-4 shall not,
at the time the Form S-4 is declared effective or at the time the Proxy
Statement is first mailed to holders of Shares, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
(ii) The information specifically designated as being supplied by Company
for inclusion or incorporation by reference in the Proxy Statement shall not,
at the date the Proxy Statement is first mailed to holders of Shares, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
(iii) If at any time prior to the Effective Time, any event or
circumstance relating to Company, or its officers or directors, should be
discovered by Company which should be set forth in an amendment to the Form S-4
or a supplement to the Proxy Statement, Company shall promptly inform Parent.
(iv) All documents, if any, that Company is responsible for filing with
the SEC in connection with the transactions contemplated hereby will comply as
to form and substance in all material respects with the applicable requirements
of the Securities Act and the rules and regulations thereunder and the Exchange
Act and the rules and regulations thereunder.
(d) (i) The information specifically designated as being supplied by Parent
for inclusion or incorporation by reference in the Form S-4 shall not, at the
time the Form S-4 is declared effective or at the time the Proxy Statement is
first mailed to holders of Shares, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
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(ii) The information specifically designated as being supplied by Parent
for inclusion or incorporation by reference in the Proxy Statement shall not,
at the date the Proxy Statement is first mailed to holders of Shares, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
(iii) If at any time prior to the Effective Time, any event or
circumstance relating to Parent, or its officers or directors, should be
discovered by Parent which should be set forth in an amendment to the Form S-4
or a supplement to the Proxy Statement, Parent shall promptly inform Company.
(iv) All documents that Parent is responsible for filing with the SEC in
connection with the transactions contemplated hereby will comply as to form and
substance in all material respects with the applicable requirements of the
Securities Act and the rules and regulations thereunder and the Exchange Act
and the rules and regulations thereunder.
SECTION 4.3. Other Potential Acquirers.
(a) Company, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any discussions
or negotiations with any parties with respect to any Third Party Acquisition
(defined below). Neither Company nor any of its affiliates shall, nor shall
Company authorize or permit any of its or their respective officers, directors,
employees, representatives (including, without limitation, any investment
banker, attorney or accountant) or agents to, directly or indirectly,
encourage, solicit, participate in or initiate any inquiries, discussions or
negotiations with or provide any information or access to any person or group
(other than Parent and Newco or any designees of Parent and Newco) concerning
any Third Party Acquisition, or otherwise facilitate any effort or attempt to
make or implement a Third Party Acquisition. Company shall promptly (within one
business day of receipt) notify Parent in the event it receives any proposal or
inquiry concerning a Third Party Acquisition, including the terms and
conditions thereof and the identity of the party submitting such proposal; and
shall keep Parent fully informed of the status and any material developments
concerning the same.
(b) Except as set forth in this Section 4.3(b), Company Board shall not
withdraw its recommendation of the transactions contemplated hereby or approve
or recommend, or cause Company to enter into any agreement with respect to, any
Third Party Acquisition. Notwithstanding the foregoing, if Company Board by a
majority vote determines in its good faith judgment, after consultation with
and based upon the advice of outside legal counsel, that it is required to do
so in order to comply with its fiduciary duties, Company Board may withdraw its
recommendation of the transactions contemplated hereby or approve or recommend
a Superior Proposal (defined below), but in each case only (i) after providing
reasonable written notice to Parent (a "Notice of Superior Proposal"), advising
Parent that Company Board has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal and specifically stating that Company
intends to approve or recommend such Superior Proposal in accordance with this
Section 4.3(b); and (ii) if Parent does not, within ten (10) business days of
Parent's receipt of the Notice of Superior Proposal, make an offer that Company
Board by a majority vote determines in its good faith judgment (based on the
advice of a financial adviser of nationally recognized reputation) to be as
favorable to Company's shareholders as such Superior Proposal; provided,
however, that Company shall not be entitled to enter into any agreement with
respect to a Superior Proposal unless and until this Agreement is terminated by
its terms pursuant to Section 6.1. Any disclosure that Company Board may be
compelled to make with respect to the receipt of a proposal for a Third Party
Acquisition in order to comply with its fiduciary duties or Rule 14d-9 or 14e-2
will not constitute a violation of this Section 4.3(b) provided that such
disclosure states that no action will be taken by Company Board with respect to
the withdrawal of its recommendation of the transactions contemplated hereby or
the approval or recommendation of any Third Party Acquisition, except in
accordance with this Section 4.3(b).
(c) "Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of Company by merger or otherwise by any person
(which includes a "person" as such term is defined in
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Section 13(d)(3) of the Exchange Act) other than Parent, Newco or any affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of more than
twenty percent (20%) of the total assets of Company and its subsidiaries taken
as a whole; (iii) the acquisition by a Third Party of ten percent (10%) or more
of the outstanding Shares; (iv) the adoption by Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend; (v) the
repurchase by Company or any of its subsidiaries of more than ten percent (10%)
of the outstanding Shares; (vi) the acquisition by Company or any subsidiary by
merger, purchase of stock or assets, joint venture or otherwise of a direct or
indirect ownership interest or investment in any business whose annual
revenues, net income or assets is equal or greater than ten percent (10%) of
the annual revenues, net income or assets of Company or (vii) any similar
merger, reorganization, share exchange, consolidation or similar transaction
involving the equity interests of Company. A "Superior Proposal" means any bona
fide proposal to acquire directly or indirectly for consideration consisting of
cash and/or securities more than eighty percent (80%) of the Shares then
outstanding or all of substantially all of the assets of the Company and
otherwise on terms that Company Board by a majority vote determines in its good
faith judgment (based on the written advice of a financial adviser of
nationally recognized reputation) and after consultation with its outside
counsel (A) to be more favorable to Company's shareholders than the Merger and
(B) if accepted would be reasonably capable of being consummated.
SECTION 4.4. Comfort Letters.
(a) Company shall use commercially reasonable efforts to cause Deloitte &
Touche to deliver letters dated not more than five (5) days prior to the date
on which the Form S-4 shall become effective and addressed to itself and Parent
and their respective Boards of Directors in connection with financial
statements and other information derived from financial records of the Company
and its subsidiaries, in form and substance reasonably satisfactory to Parent
and customary in scope and substance for agreed-upon procedures letters
delivered by independent public accountants in connection with registration
statements and proxy statements similar to the Form S-4 and the Proxy
Statement.
(b) Parent shall use commercially reasonable efforts to cause Arthur
Andersen LLP to deliver letters dated not more than five (5) days prior to the
date on which the Form S-4 shall become effective and addressed to itself and
Company and their respective Boards of Directors in connection with financial
statements and other information derived from financial records of Parent, in
form and substance reasonably satisfactory to Company and customary in scope
and substance for agreed upon procedures letters delivered by independent
accountants in connection with registration statements and proxy statements
similar to the Form S-4 and the Proxy Statement.
SECTION 4.5. Meetings of Shareholders. Company shall take all action
necessary in accordance with the CBCA and its charter and bylaws to duly call,
give notice of, convene, and hold a meeting of its shareholders as promptly as
practicable to consider and vote upon the adoption and approval of this
Agreement and the transactions contemplated hereby. The shareholder votes
required for the adoption and approval of the transactions contemplated by this
Agreement shall be the vote required by the CBCA and Company's certificate of
incorporation and bylaws. Company will, through its Board of Directors,
recommend to its shareholders approval of such matters subject to the
provisions of Section 4.3(b) and their fiduciary duties to shareholders under
applicable law.
SECTION 4.6. NYSE Listing. Parent shall use all reasonable efforts to cause
the shares of Parent Common Stock to be issued in the Merger to be approved for
listing on the NYSE, subject to official notice of issuance, prior to the
Effective Time.
SECTION 4.7. Access to Information; Confidentiality.
(a) Between the date hereof and the Effective Time, Company will give Parent
and its authorized representatives, reasonable access to all employees, plants,
offices, and other facilities and to all books and records of itself and its
subsidiaries; will permit Parent to make such inspections as Parent may
reasonably
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require; and will cause its officers and those of its subsidiaries to furnish
Parent with such financial and operating data and other information with
respect to the business and properties of itself and its subsidiaries as Parent
may from time to time reasonably request.
(b) Between the date hereof and the Effective Time, Company shall furnish to
Parent, as soon as available (but no later than twenty days) after the end of
each calendar month (commencing with April, 2000), an unaudited balance sheet
of Company as of the end of such month, and the related statements of earnings,
shareholders' equity (deficit); and, as soon as available (but no later than
thirty days) after the end of each calendar quarter, a statement of cash flows
for the quarter then ended each, prepared in accordance with generally accepted
accounting principles in conformity with the practices consistently applied by
Company with respect to its monthly and quarterly financial statements. All the
foregoing shall be in accordance with the books and records of Company and
shall fairly present its financial position (taking into account the
differences between the monthly and quarterly statements prepared by such party
in conformity with its past practices) as of the last day of the period then
ended.
(c) Parent and Company agree that, except as otherwise required by law, for
a period of two years from the date hereof (regardless of whether the
transactions contemplated hereby are consummated) each will hold, and will
cause its directors, officers, employees, affiliates, consultants and advisers
to hold, in confidence all documents and information furnished to it by or on
behalf of the other party in connection with the transactions contemplated by
this Agreement ("Confidential Material"). Each party agrees that it will use
the Confidential Material solely for the purpose of the transactions
contemplated by this Agreement and it will not use the Confidential Material in
any way detrimental to the other party. In the event that either party is
requested in any proceeding to disclose any Confidential Material, such party
shall give the other party prompt notice prior to disclosure of any
Confidential Material so that the other party may seek an appropriate
protective order. If, in the absence of a protective order, a party is
nonetheless compelled to disclose Confidential Material, such party may
disclose such information without liability hereunder; provided, however, that
such party will give the other party written notice of the information to be
disclosed as far in advance of its disclosure as is practicable and, upon the
request of and at the expense of such other party, such party will use
commercially reasonable efforts to obtain assurances that confidential
treatment will be accorded to such information. The term "Confidential
Material" shall not include information which was or becomes generally
available on a non-confidential basis; provided that the source of such
information was not bound by a confidentiality agreement or this Section 4.7.
SECTION 4.8. Additional Agreements; Reasonable Efforts. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take or cause to be taken all action and to do or cause
to be done all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (i)
cooperating in the preparation and filing of the Proxy Statement and the Form
S-4, any filings that may be required under the HSR Act and any amendments to
any thereof; (ii) obtaining consents of all third parties and Governmental
Entities necessary, proper or advisable for the consummation of the
transactions contemplated by this Agreement; (iii) contesting any adverse legal
proceeding relating to the Merger and (iv) executing any additional instruments
necessary to consummate the transactions contemplated hereby. If at any time
after the Effective Time any further action is necessary to carry out the
purposes of this Agreement the proper officers and directors of each party
hereto shall take all such necessary action.
SECTION 4.9. Public Announcements. Parent, Newco and Company, as the case
may be, will use commercially reasonable efforts to consult with and obtain the
approval of one another before issuing any press release or otherwise making
any public statements with respect to the transactions contemplated by this
Agreement, including, without limitation, the Merger, and shall not issue any
such press release or make any such public statement prior to such consultation
except as may be required by applicable law or the rules of any applicable
securities exchange or national market system as reasonably determined by
Parent, Newco or Company, as the case may be.
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SECTION 4.10. Notification of Certain Matters. Company shall give prompt
notice to Parent and Newco and Parent and Newco shall give prompt notice to
Company, of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Effective Time and (ii) any material failure of Company,
Parent or Newco, as the case may be, to comply with or satisfy any covenant
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
4.10 shall not cure such breach or non-compliance or limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
SECTION 4.11. Affiliates. Parent shall not be required to maintain the
effectiveness of the Form S-4 beyond the minimum period necessary to consummate
the Merger in compliance with the Securities Act.
SECTION 4.12. Lock-up Letter Agreement. Concurrently with or prior to the
consummation of the transactions contemplated by this Agreement, (i) George S.
Writer, Jr. and Daniel J. Nickless (and any holder of Shares beneficially owned
by either of them) shall enter into a lock-up letter agreement with Parent,
substantially in the form attached hereto as Exhibit D (the "Lock Up
Agreement"), providing, among other things, that without the prior written
consent of Parent the shares of Parent Common Stock issued to such persons in
the Merger will not be sold until the first anniversary of the Closing Date;
and (ii) each of the other members of the Management Group (and any holder of
Shares beneficially owned by any of them) shall enter into a Lock Up Agreement,
providing, among other things, that without the prior written consent of Parent
the shares of Parent Common Stock issued in the Merger to such persons shall
not be sold until one hundred and twenty (120) days after the Closing Date.
SECTION 4.13. Indemnification and Insurance.
(a) All rights to indemnification for acts or omissions occurring at or
prior to the Effective Time now existing in favor of the current or former
directors, officers, employees or agents of Company and its subsidiaries (the
"Indemnified Parties") as provided in their respective certificates of
incorporation or bylaws (or comparable charter or organizational documents) or
applicable law shall survive the Merger and shall continue in full force and
effect in accordance with their terms for a period of six years from the
Effective Time, provided that, in the event any claim or claims are asserted or
made within such six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until final disposition of any and all
such claims, and provided further that in no event shall the Surviving
Corporation be obligated to provide indemnification under this Section 4.13(a)
in excess of the indemnification Company is required to provide under its
certificate of incorporation or bylaws as in effect on the date hereof.
(b) Parent will cause to be maintained, for a period of three years from the
Effective Time, Company's current directors' and officers' insurance and
indemnification policy ("Company D&O Insurance") covering those persons who are
currently covered by Company D&O Insurance to the extent that it provides
coverage for events occurring prior to or at the Effective Time (through the
continuation or endorsement of the policy for Company D&O Insurance or the
purchase of a tail-end rider), provided, that Parent may, in lieu of
maintaining such existing Company D&O Insurance, cause coverage to be provided
under any policy maintained for the benefit of Parent or any of its
subsidiaries, so long as the terms thereof are substantially similar to those
of the existing Company D&O Insurance. If the existing Company D&O Insurance
expires, is terminated or cancelled or is not available during such three-year
period, Parent will use all commercially reasonable efforts to cause to be
obtained as much Company D&O Insurance as can be obtained for the remainder of
such period.
(c) Any Indemnified Party wishing to claim indemnification under
subparagraph (a) of this Section 4.13, upon learning of the claim, action,
suit, proceeding or investigation as to which indemnification is sought, shall
promptly notify the Surviving Corporation thereof, but the failure to so notify
shall not relieve the Surviving Corporation of any liability it may have to
such Indemnified Party if such failure does not materially prejudice the
Surviving Corporation. In the event of any such claim, action, suit, proceeding
or investigation (whether
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arising before or after the Effective Time), the Surviving Corporation shall
have the right to assume the defense thereof and the Surviving Corporation
shall not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if the Surviving
Corporation elects not to assume such defense or counsel for the Surviving
Corporation or for an Indemnified Party advises in good faith that there are
issues which raise conflicts of interest between the Surviving Corporation and
the Indemnified Party, the Indemnified Party may retain separate counsel
satisfactory to the Indemnified Party, and the Surviving Corporation shall pay
all reasonable fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received, provided that the Surviving
Corporation will not be required to pay fees and expenses of more than one
separate counsel for all the Indemnified Parties with respect to any matter or
group of related matters. Notwithstanding and in addition to the foregoing, any
Indemnified Party may retain separate counsel and participate in such claim at
such Indemnified Party's sole cost and expense, provided that the Surviving
Corporation shall have sole control of the defense of such claim, and all
negotiations for the compromise or settlement thereof.
(d) The Company hereby assigns to the Surviving Corporation, effective at
Closing and thereafter, all proceeds under its insurance policies listed in
Section 2.18(a) of the Company Disclosure Schedule.
SECTION 4.14 Use of Writer Name.
(a) The Surviving Corporation shall operate under the name "The Writer
Corporation" (the "Writer Name") until at least the earlier to occur of (i) the
date on which the employment of George S. Writer, Jr. with the Surviving
Corporation is terminated, and (ii) the fifth anniversary of the Effective
Date. Notwithstanding the foregoing, the Surviving Corporation shall be
entitled to discontinue use of the Writer Name should Mr. Writer engage in any
conduct, act or omission which the board of directors of the Surviving
Corporation reasonably determines has an adverse effect on the public image,
reputation or goodwill of the Writer Name. Mr. Writer in his discretion may
require the Surviving Corporation to discontinue use of the Writer Name in the
event of a Change in Control of Parent. Except as set forth herein, the
Surviving Corporation shall acquire all rights, title and interest in the
Writer Name free and clear of any Liens.
(b) "Change in Control of Parent" means and shall be deemed to occur if any
of the following events occur:
(i) Any person, entity or group within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act (excluding, for this purpose, Parent or its
subsidiaries, or any employee stock ownership or other employee benefit
plan of Parent or its subsidiaries) ("Exchange Act Person") becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of fifty percent (50%) or more of the combined voting power
of Parent's then outstanding voting securities entitled to vote generally
in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the Board of
Directors of Parent (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of Parent,
provided that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by Parent's stockholders,
is approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such person
were a member of the Incumbent Board; or
(iii) Consummation by Parent of the sale or other disposition by Parent
of all or substantially all of Parent's assets or a merger, consolidation
or other reorganization of Parent with any other person, corporation or
other entity, other than:
(A) a merger, consolidation or reorganization that would result in
the voting securities of Parent outstanding immediately prior thereto
(or, in the case of a reorganization or merger or consolidation that is
preceded or accomplished by an acquisition or series of related
acquisitions by any Exchange
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Act Person, by tender or exchange offer or otherwise, of voting
securities representing 5% or more of the combined voting power of all
securities of Parent, immediately prior to such acquisition or the
first acquisition in such series of acquisitions) continuing to
represent, either by remaining outstanding or by being converted into
voting securities of another entity, more than 50% of the combined
voting power of the voting securities of Parent or such other entity
outstanding immediately after such reorganization or merger or
consolidation (or series of related transactions involving such a
reorganization or merger or consolidation), or
(B) a merger, consolidation or other reorganization effected to
implement a recapitalization or reincorporation of Parent (or similar
transaction) that does not result in a material change in beneficial
ownership of the voting securities of Parent or its successor; or
(iv) Approval by the stockholders of Parent or an order by a court of
competent jurisdiction of a plan of liquidation of Parent.
SECTION 4.15 Agreement of Management Group. Company shall use its best
efforts to cause each officer, director and 15% or greater shareholder of
Company (collectively, the "Management Group"), who in the aggregate shall hold
more than 48% of the outstanding Shares, to execute and deliver to Parent at or
before the execution of this Agreement an agreement substantially in the form
attached hereto as Exhibit C (the "Management Member Agreement") (i) approving
and authorizing the Merger, (ii) agreeing to vote, and granting Parent (or its
assigns) an irrevocable proxy to enable Parent (or such assign) to vote, in
favor of the Merger in any vote of Company's shareholders on such matter, and
(iii) agreeing to adjust the number of Cash Election Shares held by such
member, in the same proportion as other members of the Management Group, to the
extent necessary to allow each shareholder of Company that is not a member of
the Management Group to receive cash for all Cash Election Shares held by such
shareholder, or as close as possible to all cash, provided that in no event
shall the Aggregate Cash Consideration exceed 50% of the Aggregate Merger
Consideration.
SECTION 4.16 Consents. Company shall use its best efforts prior to Closing
to obtain all consents and approvals listed in Section 2.5(b) of the Company
Disclosure Schedule as may be required, pursuant to the terms of the Contracts
listed on Section 2.17 of the Company Disclosure Schedule or otherwise, to
consummate the transactions contemplated by this Agreement and to enable
Surviving Corporation to continue the operations of the Company following the
Closing substantially as such operations are conducted at the date hereof.
Section 4.17 SEC Reports. From the date hereof until Closing, Company will
file all required forms, reports and documents with the SEC and will comply in
all material respects with all applicable requirements of the Securities Act
and the Exchange Act, each as in effect on the dates such forms, reports and
documents are filed. None of such forms, reports and documents, including,
without limitation, any financial statements or schedules included or
incorporated by reference therein, will contain when filed any untrue statement
of a material fact or omit to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein in light of the circumstances under which they are made not misleading.
The financial statements of Company (including the consolidated statements of
income and cash flow) included in such forms, reports and documents will comply
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC promulgated under the Exchange
Act and will have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and will fairly present the
consolidated financial position of Company and its consolidated subsidiaries as
of the dates thereof and their consolidated results of operations and cash
flows for the periods indicated (subject, in the case of unaudited interim
financial statements, the exceptions permitted by Form 10-Q under the Exchange
Act).
Section 4.18 Taxes. Company covenants that it will file all Tax Returns
applicable to its 1999 fiscal year on or before May 31, 2000.
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Section 4.19 Termination of Profit Sharing Plan. Company shall terminate or
cause to be terminated The Writer Corporation 401(i) Profit Sharing Plan prior
to the date on which Company and/or its subsidiaries and ERISA Affiliates
become member of a "controlled group" with or under "common control" with
Parent as such terms are defined in Section 414(b) and 414(c) of the Code.
Company employees employed by the Surviving Corporation will be credited for
time employed at Company for purposes of participation and vesting in the
Standard Pacific Retirement and Savings Plan.
Section 4.20 Termination of Nonqualified Profit Sharing Plan. Company shall
terminate or cause to be terminated the Company Nonqualified Profit Sharing
Plan effective as of December 31, 1999, except for the obligation to pay
amounts accrued and unpaid as of December 31, 1999.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) this Agreement and any other matters submitted for the purpose of
approving the transactions contemplated hereby shall have been approved and
adopted by the requisite vote of the shareholders of Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States Governmental Entity which prohibits,
restrains, enjoins or restricts the consummation of the Merger or which would
prohibit or limit the Surviving Corporation from exercising all rights and
privileges pertaining to its ownership or operation of the assets and business
of Company taken as a whole;
(c) any waiting period applicable to the Merger under the HSR Act shall have
terminated or expired; and
(d) the Form S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order that remains in effect, and no
proceeding seeking such an order shall be pending or threatened, and Parent
shall have received all state securities laws or "blue sky" permits and
authorizations necessary to issue shares of Parent Common Stock in exchange for
Shares in the Merger.
SECTION 5.2. Conditions to the Obligations of Company. The obligation of
Company to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) the representations of Parent and Newco contained in this Agreement or
in any other document delivered pursuant hereto shall be true and correct in
all material respects at and as of the Effective Time with the same effect as
if made at and as of the Effective Time (except to the extent such
representations expressly related to an earlier date, in which case such
representations shall be true and correct as of such earlier date) and, at the
Closing, Parent and Newco shall have delivered to Company a certificate to that
effect;
(b) each of the covenants and obligations of Parent and Newco to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed at or before the Effective Time and,
at the Closing, Parent and Newco shall have delivered to Company a certificate
to that effect;
(c) the shares of Parent Common Stock issuable to Company shareholders
pursuant to this Agreement and such other shares required to be reserved for
issuance in connection with the Merger shall have been authorized for listing
on the NYSE upon official notice of issuance;
(d) Company shall have received the opinion of legal counsel to Parent as to
the matters reasonably agreed upon by the parties;
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(e) Parent shall have obtained the consent or approval of each person whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease, or other agreement or instrument, except those for which
failure to obtain such consents and approvals would not, in the reasonable
opinion of Company, individually or in the aggregate, have a Material Adverse
Effect on Parent;
(f) the average price of Parent's common stock over the Valuation Period
shall be no less than $8.25 per share;
(g) the Surviving Corporation shall have executed and delivered at the
Closing, each dated the Closing Date, an employment agreement substantially in
the form attached hereto as Exhibit E with George S. Writer, Jr., and an
employment agreement substantially in the form attached hereto as Exhibit F
with Daniel J. Nickless;
(h) Company shall have received an opinion from its outside tax counsel to
the effect that the Merger will constitute a tax-free reorganization within the
meaning of Section 368(a) of the Code, dated the Closing Date, which opinion
may be based upon reasonable representations of fact provided by officers of
Parent and Company; and
(i) there shall have been no events, changes or effects with respect to
Parent or its subsidiaries having or which could reasonably be expected to have
a Material Adverse Effect on Parent.
SECTION 5.3. Conditions to the Obligations of Parent and Newco. The
respective obligations of Parent and Newco to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) the representations of Company contained in this Agreement or in any
other document delivered pursuant hereto shall be true and correct in all
material respects at and as of the Effective Time with the same effect as if
made at and as of the Effective Time (except to the extent such representations
expressly related to an earlier date, in which case such representations shall
be true and correct as of such earlier date) and, at the Closing, Company shall
have delivered to Parent and Newco a certificate to that effect;
(b) each of the covenants and obligations of Company to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed at or before the Effective Time and, at the Closing,
Company shall have delivered to Parent and Newco a certificate to that effect;
(c) Parent shall have received from each member of the Management Group an
executed copy of the lock-up letter referred to in Section 4.12 substantially
in the form attached hereto as Exhibit D;
(d) the shares of Parent Common Stock issuable to Company shareholders
pursuant to this Agreement and such other shares required to be reserved for
issuance in connection with the Merger shall have been authorized for listing
on the NYSE upon official notice of issuance;
(e) Parent shall have received the opinion of legal counsel to Company as to
the matters reasonably agreed upon by the parties;
(f) Company shall have obtained the consent or approval of each person in
form reasonably satisfactory to Parent, whose consent or approval shall be
required in order to permit the succession by the Surviving Corporation
pursuant to the Merger to any obligation right or interest of Company or any
subsidiary of Company under any other agreement or instrument, except for those
for which failure to obtain such consents and approvals would not, in the
reasonable opinion of Parent, individually or in the aggregate, have a Material
Adverse Effect on Company;
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(g) Parent shall have received an opinion from its outside tax counsel or
accountants to the effect that the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code, dated the
Closing Date, which opinion may be based upon reasonable representations of
fact provided by officers of Parent and Company;
(h) the aggregate number of Dissenting Shares shall not exceed 5% of the
total number of Shares;
(i) all proceedings to be taken by or on behalf of Company in connection
with the transactions contemplated by this Agreement and all documents incident
thereto shall be reasonably satisfactory in form and substance to Parent, and
Parent shall have received copies of all such documents and other evidences as
Parent may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith;
(j) Parent shall have received at or before execution of this Agreement from
each member of the Management Group an agreement substantially in the form
attached hereto as Exhibit C;
(k) as of the date of execution of this Agreement, in the aggregate the
Management Group shall have the right to vote Shares representing more than
forty-eight percent (48%) of the combined voting power of the outstanding
Shares;
(l) the average price of Parent's common stock over the Valuation Period
shall be no greater than $15.75 per share;
(m) there shall have been no events, changes or effects with respect to
Company or its subsidiaries which could or which could reasonably be expected
to (i) materially impair the ability of Company to consummate the transactions
contemplated hereby or (ii) when considered in the aggregate with breaches of
representations (ignoring for the purposes of this clause any qualifications by
Material Adverse Effect or otherwise by material adversity and any materiality
qualification or words or similar import contained in such representations or
warranties), result in a Material Adverse Effect on Company;
(n) George S. Writer, Jr. shall have executed and delivered at the Closing
an employment agreement, dated the Closing Date, substantially in the form
attached hereto as Exhibit E, and Daniel J. Nickless shall have executed and
delivered at the Closing an employment agreement, dated the Closing Date,
substantially in the form attached hereto as Exhibit F;
(o) The Company's Series 1993 A Convertible Unsecured Promissory Notes shall
be prepaid by Parent at Closing, and shall not have been converted prior to
Closing;
(p) Newco shall have received title insurance policies, endorsements to
existing title insurance policies held by Company, or unconditional commitments
to issue such title policies or endorsements (subject to Newco's payment of the
premiums therefor) in form and substance satisfactory to Parent, from title
insurance companies approved by Parent, indicating that fee ownership of all
Fee Real Property is vested in Newco; and
(q) the opinion from Company Financial Advisor referred to in Section 2.25
shall not have been modified or withdrawn and a copy of the written opinion
shall have been delivered to Parent.
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ARTICLE VI
TERMINATION; AMENDMENT; WAIVER
SECTION 6.1 Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
approval and adoption of this Agreement by the shareholders of Company:
(a) by mutual written consent of Parent, Newco and Company;
(b) by Parent and Newco or Company if (i) any court of competent
jurisdiction in the United States or other United States Governmental Entity
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become nonappealable,
(ii) the Merger has not been consummated by August 31, 2000, or (iii) a
condition to the obligation of either party to close the transaction becomes
impossible to fulfill and the party or parties in whose favor the condition
exists has not waived the condition after fifteen (15) days written notice from
the other party; provided that no party may terminate this Agreement pursuant
to clauses (ii) or (iii) if such party's failure to fulfill any of its
obligations under this Agreement shall have been the reason that the Effective
Time shall not have occurred on or before said date or the condition not met;
(c) by Company if (i) there shall have been a breach of any representation
or warranty on the part of Parent or Newco set forth in this Agreement or if
any representation or warranty of Parent or Newco shall have become untrue, and
such breach shall not have been cured or such representation or warranty shall
not have been made true within twenty (20) business days after notice by
Company thereof except for any breach or inaccuracies that, individually or in
the aggregate, have not had, and would not reasonably be expected to have a
Material Adverse Effect on Parent, (ii) there shall have been a breach by
Parent or Newco of any of their respective covenants or agreements hereunder
having a Material Adverse Effect on Parent or materially adversely affecting
(or materially delaying) the consummation of the Merger, and Parent or Newco,
as the case may be, has not cured such breach within twenty (20) business days
after notice by Company thereof, or (iii) the Company Board has received a
Superior Proposal and has complied with the provisions of Section 4.3(b) and
concurrently complies with the provisions Section 6.3; provided that Company
may not terminate this Agreement pursuant to clauses (i) or (ii) if Company has
breached any of its obligations hereunder in any material respect; or
(d) by Parent and Newco if (i) there shall have been a breach of any
representation or warranty on the part of Company set forth in this Agreement
or if any representation or warranty of Company shall have become untrue, and
such breach shall not have been cured or such representation or warranty shall
not have been made true within twenty (20) business days after notice by Parent
or Newco thereof except for any breach or inaccuracies that individually or in
the aggregate have not had, and would not reasonably be expected to have, a
Material Adverse Effect on Company; (ii) there shall have been a breach by
Company of its covenants or agreements hereunder having a Material Adverse
Effect on Company or materially adversely affecting (or materially delaying)
the consummation of the Merger, and Company has not cured such breach within
twenty (20) business days after notice by Parent or Newco thereof; (iii) the
Company Board shall have recommended to Company's shareholders a Superior
Proposal; (iv) the Company Board shall have withdrawn or materially weakened
its recommendation of this Agreement or the Merger, provided that neither
Parent nor Newco may terminate this Agreement pursuant to clauses (i) or (ii)
if either Parent or Newco has breached any of its obligations hereunder in any
material respect.
SECTION 6.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders other
than the provisions of this Section 6.2 and Sections 4.7 and 6.3. Nothing
contained in this Section 6.2 shall relieve any party from liability for any
breach of this Agreement.
A-38
<PAGE>
SECTION 6.3 Fees and Expenses.
(a) If this Agreement is terminated pursuant to Section 6.1(c)(iii) or
Section 6.1(d)(i), (ii), (iii) or (iv), then Parent and Newco will suffer
direct and substantial damages, which damages cannot be determined with
reasonable certainty. To compensate Parent and Newco for such damages, and in
recognition of the time, efforts and expenses incurred by Parent with respect
to Company and the opportunity that the Merger represents to Parent, Company
shall pay to Parent the amount of One Million Seven Hundred Fifty Thousand
Dollars ($1,750,000) as liquidated damages immediately upon the occurrence of
the event described in this Section 6.3(a) giving rise to such damages, plus
Parent's out-of-pocket expenses incurred in connection with the transactions
contemplated by this Agreement, provided, however, that in the event of a
termination pursuant to Section 6.1(d)(i) or (ii), if the breach of
representation or warranty or covenant first occurs (i.e. in the case of a
breach of representation or warranty, such representation or warranty first
becomes inaccurate) after the date of this Agreement for reasons wholly outside
of the control of Company, then Company shall not be required to pay the
foregoing liquidated damages but shall be required to pay to Parent the amount
of Parent's out-of-pocket expenses incurred in connection with the transactions
contemplated by this Agreement. It is specifically acknowledged that the amount
to be paid pursuant to this Section 6.3(a) represents liquidated damages and
not a penalty, and that the agreements contained in this Section 6.3(a) are an
integral part of the transactions contemplated by this Agreement and that,
without these agreements, Parent and Newco would not enter into this Agreement.
(b) The liquidated damages and expense reimbursement payable pursuant to
Section 6.3(a) shall be paid within one business day after the first to occur
of the events described therein.
(c) Except as otherwise provided in this Section 6.3, above, each of the
parties hereto shall bear its own costs and expenses.
(d) Company expressly acknowledges that the amount of the liquidated damages
is reasonable and that Company has received advice of counsel with respect to
the reasonableness thereof. If, however, the amount of the liquidated damages
is determined by a court or tribunal of competent jurisdiction to be excessive,
thereby rendering the provisions of this Agreement requiring payment of the
liquidated damages to be unenforceable, it is the intent of the parties that
the amount of the liquidated damages shall be judicially reformed and
interpreted to reduce such liquidated damages to the minimum extent necessary,
but only to the minimum extent necessary, to cause the provisions of this
Agreement requiring payment of the liquidated damages to thereby become
enforceable.
SECTION 6.4 Amendment. This Agreement may be amended by action taken by
Company, Parent and Newco at any time before or after approval of the Merger by
the shareholders of Company but after any such approval no amendment shall be
made which requires the approval of such shareholders under applicable law
without such approval. This Agreement (including the Company Disclosure
Schedule) may be amended only by an instrument in writing signed on behalf of
all the parties hereto.
SECTION 6.5 Extension; Waiver. At any time prior to the Effective Time, each
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document certificate or writing delivered pursuant hereto or (c) waive
compliance by the other party with any of the agreements or conditions
contained herein. Any agreement on the part of any party hereto to any such
extension or waiver shall be valid only if set forth in an instrument, in
writing, signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
A-39
<PAGE>
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Survival of Representations and Warranties. The representations
and warranties made herein shall terminate upon the Effective Time or upon the
termination of this Agreement pursuant to Article VI above. This Section 7.1
shall not limit any covenant or agreement of the parties hereto which by its
terms requires performance after the Effective Time.
SECTION 7.2. Entire Agreement; Assignment. This Agreement (including the
Company Disclosure Schedule) (a) constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings both written and oral and all
contemporaneous oral agreements and understandings between the parties with
respect to the subject matter hereof (including, without limitation, that
certain letter agreement between Company and Parent dated January 28, 2000),
and (b) shall not be assigned by operation of law or otherwise; provided,
however, that Newco may assign any or all of its rights and obligations under
this Agreement to any subsidiary of Parent, but no such assignment shall
relieve Newco of its obligations hereunder if such assignee does not perform
such obligations.
SECTION 7.3. Validity. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a part
of this Agreement a legal, valid and enforceable provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible.
SECTION 7.4. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given upon
personal delivery or three (3) business days after being mailed by certified or
registered mail, postage prepaid, return receipt requested, or one (1) business
day after being sent via a nationally recognized overnight courier service if
overnight courier service is requested from such service or upon receipt of
electronic or other confirmation of transmission if sent via facsimile, to the
parties, their successors in interest or their assignees at the following
addresses and telephone numbers, or at such other addresses or telephone
numbers as the parties may designate by written notice in accordance with this
Section 7.4:
if to Parent or Newco: Standard Pacific Corp.
15326 Alton Parkway
Irvine, California 92618
Facsimile: (949) 789-1609
Attention: Clay A. Halvorsen
with a copy to: Gibson, Dunn & Crutcher LLP
4 Park Plaza
Irvine, California 92614
Facsimile: (949) 451-4220
Attention: Leonard J. McGill
if to Company to: The Writer Corporation
6061 S. Willow Drive, #232
Englewood, CO 80111
Facsimile: (303) 779-1199
Attention: George S. Writer, Jr.
A-40
<PAGE>
with a copy to: Clanahan, Tanner, Downing and
Knowlton, PC
730 Seventeenth Street, Suite 500
Denver, Colorado 80202-3580
Facsimile: (720) 359-9501
Attention: Brian D. Fitzgerald
SECTION 7.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to the principles of conflicts of law thereof.
SECTION 7.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
SECTION 7.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except as provided in Section 7.2, nothing in this
Agreement express or implied is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 7.8. Certain Definitions. For the purposes of this Agreement the
term:
(a) "affiliate" means a person that, directly or indirectly, through one or
more intermediaries controls, is controlled by or is under common control with
the first-mentioned person;
(b) "business day" means any day other than a day on which the NYSE is
closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(e) "subsidiary" or "subsidiaries" of Company, Parent, the Surviving
Corporation or any other person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other
legal entity of which Company, Parent, the Surviving Corporation or any such
other person, as the case may be (either alone or through or together with any
other subsidiary), owns, directly or indirectly, more than 50% of the capital
stock the holders of which are generally entitled to vote for the election of
the board of directors or other governing body of such corporation or other
legal entity. Notwithstanding the foregoing, subsidiaries of the Company shall
be deemed to include WRT Financial L.P.
SECTION 7.9. Specific Performance. The parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations, to the granting by any court of the remedy of specific
performance of its obligations hereunder, and to the waiver of any bond
requirement that might otherwise be imposed upon the party seeking such
injunctive relief; provided, however, that if a party hereto is entitled to
receive any payment or reimbursement of expenses pursuant to Section 6.3 it
shall not be entitled to specific performance to compel the consummation of the
Merger.
SECTION 7.10. Construction Defects. Notwithstanding anything contained
elsewhere herein, the Company shall indemnify and hold harmless Parent and
Newco against any and all claims, actions, suits,
A-41
<PAGE>
proceedings, demands, assessments, judgments, costs and expenses (including
attorneys' fees) relating to or arising out of the construction or sale of
homes built or delivered by the Company prior to Closing. The terms of this
Section 7.10 shall survive the Closing.
SECTION 7.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
STANDARD PACIFIC CORP., a Delaware corporation
By: /s/ Stephen J. Scarborough
------------------------------------------
Name: Stephen J. Scarborough
----------------------------------------
Title: CEO and President
---------------------------------------
By: /s/ Andrew H. Parnes
------------------------------------------
Name: Andrew H. Parnes
----------------------------------------
Title: Vice President-Finance
---------------------------------------
TWC ACQUISITION CORP., a Delaware corporation
By: /s/ Stephen J. Scarborough
------------------------------------------
Name: Stephen J. Scarborough
----------------------------------------
Title: CEO and President
---------------------------------------
By: /s/ Andrew H. Parnes
------------------------------------------
Name: Andrew H. Parnes
----------------------------------------
Title: Treasurer
---------------------------------------
THE WRITER CORPORATION, a Colorado corporation
By: /s/ George S. Writer, Jr.
------------------------------------------
Name: George S. Writer, Jr.
----------------------------------------
Title: Chairman of the Board
---------------------------------------
By: /s/ Daniel J. Nickless
------------------------------------------
Name: Daniel J. Nickless
----------------------------------------
Title: President
---------------------------------------
A-42
<PAGE>
APPENDIX B--WRITER'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition Period From to
Commission file number 0-08305.
THE WRITER CORPORATION
<TABLE>
<S> <C>
Colorado 84-0510478
(State of incorporation) (IRS Employer Identification No.)
</TABLE>
6061 S. Willow Drive #232, Englewood, Colorado 80111
(303) 779-4100
----------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
$.10 PAR VALUE COMMON STOCK
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of The Writer Corporation common shares on March
10, 2000 (based upon the average between the reported bid and asked prices of
these shares traded over-the-counter) held by non-affiliates was approximately
$10,927,000.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. As of March 24,
2000, 7,462,480 shares of The Writer Corporation's $.10 par value common stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(NONE)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS.
THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS (DENOTED
WITH AN ASTERISK (*) AT THE END OF SUCH STATEMENT) THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH IN THIS BUSINESS SECTION AND UNDER "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
BELOW.
We are a developer and builder of planned residential communities primarily
in the Denver, Colorado area and we have recently expanded into the Northern
Colorado area with projects in Ft. Collins and Windsor, Colorado. Our expansion
into Northern Colorado provides an opportunity for us to identify more
affordable development opportunities in an expanding marketing area. Because of
these opportunities, we have assumed an aggressive position relative to our
overall land philosophy and current land position. We have purchased 106 acres
in Southeast Ft. Collins, the zoning regulations of which require the
development of no less than 470 lots. This parcel will allow us to plan and
develop a significant community consistent with our historical developments. We
are continuously investigating community development opportunities. To fund
this growth, we have re-employed our available cash flow and will continue to
expand our borrowing relationships.
We have received local and national recognition for the design of our
planned residential communities which integrate single family homes and
townhomes with extensive greenbelts, bicycle and walking paths, winding streets
and family recreation facilities to create a beneficial lifestyle for our
residents. From the date of our formation through December 31, 1999, we have
closed the sale of 10,308 homes in 35 communities.
RESIDENTIAL DEVELOPMENTS
We market our planned residential communities to a broad spectrum of middle
and upper middle income buyers. Sales prices for our homes currently range from
approximately $159,000 to $398,000.
The following table presents historical data relating to sales of our homes
and homes under contract.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Revenues From Closed Sales
(in thousands)(1)............... $ 82,061 $ 64,091 $ 44,098 $ 46,284 $ 31,960
Average Sale Price (per home).... $208,158 $219,048 $220,913 $215,274 $194,878
Number of Homes Closed........... 383 286 196 215 164
Backlog as of December 31,
(number of homes)............... 107 166 73 54 66
Backlog as of December 31, (in
thousands)...................... $ 24,326 $ 31,653 $ 16,183 $ 11,885 $ 14,766
</TABLE>
--------
(1) 1999, 1998 and 1997 Revenue includes $2,337,000, $1,433,000 and $799,0000
from 33, 27 and 14 finished lot sales and the related water and sewer tap
sales, respectively.
Backlog is defined as the number of homes in planning or construction which
are under contract but not closed. Backlog contracts are cancelable upon
forfeiture of $2,000 to $5,000 deposits or without forfeiture if permanent
financing cannot be obtained or other contingencies included in the contract
have not been resolved. We expect the majority of the December 31, 1999 backlog
to close within 2000.* The backlog at March 23, 2000 was 123 homes,
representing $30,618,000 in potential revenue.
B-2
<PAGE>
Planned Residential Communities
We design each of our planned residential communities to complement existing
land characteristics, blending cul-de-sacs with extensive green belts, parks,
natural open space and winding streets to create a pleasant environment
compatible with its surroundings. Typically our planned communities incorporate
one or more recreation facilities such as a clubhouse, swimming pool or tennis
courts. We construct model homes to assist in marketing each community,
striving for distinctive architecture and interior design. We have built in 35
communities, 26 of which have been completed. We had sales or closing in eleven
communities during 1999, some of which have more than one product line,
including Greenbrook, Northpark, Lowry, Castle Pines North, Highlands Ranch
SummerHill, and Settler's Village (all located in metropolitan Denver), and
Water Valley and River West in Windsor, Colorado, and Stetson Creek in Ft.
Collins, Colorado.
The following table summarizes information with respect to all of our
current residential communities.
<TABLE>
<CAPTION>
Under Construction
------------------------------------------------------------------------------------
Not Units
Year Opened Units In Units Under Under Not Current or Projected
PROJECT for Sale Master Plan Closed Contract Contract Started Models Base Price Range
------- ----------- ----------- ------ -------- -------- ------- ------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GREENBROOK (1)
Townhomes............. 1983 212 211 1 0 0 0 $138,000 -- $141,000
NORTHPARK
Townhomes (2)......... 1984 453 445 8 0 0 0 $176,900 -- $192,900
LOWRY
Townhomes............. 1998 120 89 27 1 0 3 $200,900 -- $218,500
CASTLE PINES NORTH
Single Family
Royal Hill/Kings.... 1985 338 338 0 0 0 0
Crossing Noble
Ridge.............. 1997 169 98 8 19 41 3 $288,600 -- $369,900
Knights Bridge...... 1985 238 179 12 5 40 2 $244,700 -- $263,600
Townhomes
Canterbury Park..... 1999 97 15 9 37 33 3 $190,500 -- $219,000
Clusters 2000 30 0 0 0 30 0 to be determined
HIGHLANDS RANCH
Single Family
SummerHill.......... 1993 139 139 0 0 0 0 $200,900 -- $234,050
Townhomes
Settler's Village
(2)................ 1995 199 178 21 0 0 0 $163,500 -- $194,900
Birkdale............ 2000 81 0 0 0 81 0 to be determined
Clusters
Turnbury............ 2000 66 0 0 0 66 0 to be determined
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
Under Construction
--------------------------------------------------------------------------
Year Units
Opened in Not Units
for Master Units Under Under Not Current or Projected
PROJECT Sale Plan Closed Contract Contract Started Models Base Price Range
------- ------ ------ ------ -------- -------- ------- ------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUNRISE RIDGE
Single Family
Talvera............. 2000 50 0 0 9 39 2 $338,900 -- $398,100
Townhomes
Townhomes at
Talavera............. 2000 90 0 0 0 90 0 to be determined
TALLYN'S REACH(3)
Single Family
Branches............. 2000 14 0 0 0 14 0 to be determined
RIVER WEST
Single Family......... 1998 49 21 4 7 15 2 $241,000 -- $313,400
STETSON CREEK
Single Family (4)..... 1997 82 31 8 5 36 2 $216,500 -- $262,600
Townhomes
Saddlebrook......... 1999 102 0 3 18 78 3 $158,800 -- $177,000
WATER VALLEY
Single Family......... 1997 6 6 0 0 0 0 $230,000 -- $262,500
FOSSIL LAKE RANCH(5)
Single Family......... 2000 1 0 0 0 0 1 to be determined
REUNION
Single Family......... 2000 317 0 0 0 317 0 to be determined
Duplex................ 2000 74 0 0 0 74 0 to be determined
Townhomes............. 2000 79 0 0 0 79 0 to be determined
----- ----- --- --- ---- ---
Total as of December 31,
1999................... 3,006 1,750 101 101 1033 21
</TABLE>
-------
See footnotes below.
(1) We re-opened this community in 1997, and it is now complete.
(2) In 1997 three of the models at each community were sold and leased back to
us; the leases expired in 2000 and were turned over to the owners.
(3) We hold an option agreement to acquire an additional 72 lots to be
purchased in 2000 and 2001.
(4) We acquired an additional 35 platted but undeveloped lots in 1999.
(5) We hold an option agreement to acquire an additional 21 lots to be
purchased in 2000.
Operations
We use our staff, outside consultants and subcontractors as necessary to
accomplish all stages of development and sale including acquisition of land,
land use planning and development, building design, construction, marketing and
sales.
Land Acquisition and Development
We acquire options on land which we intend to develop in order to further
explore the suitability of the property. We typically engage outside
consultants to verify market expectations. They provide marketing studies which
address factors such as product design and pricing, target market location,
population growth patterns, and zoning suitability. Our staff prepares
preliminary cost estimates, land and site layouts, and obtains environmental
and regulatory approvals. The staff also designs preliminary roads, sewers,
water, and drainage layouts and other community amenities, in concert with
independent engineers.
B-4
<PAGE>
We currently have an inventory of unplatted land which will be platted into
470 single family sites. In addition, we have land under development sufficient
for planned construction activities for the near future. As an additional
source of lots for construction, we intend to enter into purchase agreements
for developed or partially developed sites.
We design our residential communities to complement the characteristics of
the land and the surrounding area to create an appealing environment. Internal
staff determines the type and mix of houses suitable for the property,
evaluates traffic patterns, designs roadways, recreational areas and
greenbelts. Physical development, including paving of streets, grading of home
sites and underground installation of utilities, is generally performed by
subcontractors under fixed price contracts, which are competitively bid, and
supervised by in-house staff.
We are subject to regulation by various state and local authorities,
including those administering zoning and land subdivision ordinances. Certain
matters require agency approval and the homes we build are subject to
inspection by local building departments during construction. We believe that
our relationships with the municipalities and agencies having jurisdiction over
our properties are excellent. We historically have experienced little
difficulty in obtaining the necessary permits for developing our properties.
Some local municipalities have attempted to limit growth through allocations of
building permits or water and sewer taps. We have not been directly impacted by
these measures to date but may be in the future.
Land Acquisition and Development Financing
We acquire development financing through lending relationships with
financial institutions or other institutional lenders. Usually these loans
require equity contributions which we must provide through our working capital.
The loans are repaid by refinancing from related construction loan facilities
and/or ultimately by proceeds from sale.
Home Construction
We typically complete construction of our homes in 120 to 150 working days,
depending on the complexity of the model. On-site construction is performed by
subcontractors and overseen by our project supervisors. Most subcontract work
is performed under fixed price contracts, which usually cover both labor and
materials. Cost savings are sought through the use of quality standard
materials and components, building on contiguous sites, standardization of
available options, limiting certain types of options and efficient use of land.
We have many long standing relationships with our subcontractors and we believe
that these relationships contribute to cost and production efficiencies. We
continually consider design innovations in our house plans, most of which were
developed internally and refined over the years.
Construction Financing
We obtain the majority of our construction financing under revolving lines
of credit with local and national banks. These agreements provide financing for
a portion of our lot purchases and substantially all material and outside labor
costs incurred in the construction of residences. In addition, loan agreements
provide model home financing and allow a specific number of speculative homes
to be built. These loans currently bear interest at rates ranging from the
prime rate of interest to prime plus 1.0% and are typically renewed annually,
at which time loan fees ranging from 0.5% to 1.0% are paid for the loans.
The Company has remaining approximately $57,793,000 available from financing
sources for construction financing as of December 31, 1999.
B-5
<PAGE>
Marketing and Sales
We market our planned residential communities to middle and upper middle
income purchasers through internally-employed, on-site, commissioned
salespersons. Many of our sales involve co-operative commission arrangements
with an independent real estate broker. We encourage this cooperative activity
through various programs aimed at outside real estate professionals who many
times have significant influence over buyer decisions. We advertise in the
print media, use various types of signage, and maintain model home complexes at
our communities to assist sales efforts. Prospective purchasers execute
contracts for our homes, making a down payment of $2,000 to $5,000 which is
forfeited if the home is not purchased for any reasons other than failure to
obtain financing or resolution of other contingencies in the contract.
Customer Financing
We formed a mortgage subsidiary, WRT Financial, Limited Partnership ("WRT").
Buyers receive an incentive to finance their home purchases through WRT. See
ITEM 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. We do not require any specific permanent financing relationship
to be used by buyers. Most buyers obtain long term loans with down payments
ranging from 5 to 30% of the purchase price.
Working Capital Facilities
We obtain a portion of our working capital through credit facilities from
institutional lenders. Currently we have three such facilities having the
following terms.
<TABLE>
<CAPTION>
Maximum Principal Amount Interest
Security Rate
------------------------ ------------
<S> <C>
$1,424,000 (Revolving) Prime + 1%
Portions of Castle Pines
North
$2,000,000 (Revolving) Prime
Unsecured
$2,500,000 (Revolving) Prime + 1.0%
Unsecured
</TABLE>
See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Other Factors Influencing Our Business
Most raw materials and other construction materials or products that we use
are readily available and are carried by major suppliers. However, periods of
high inflation can have a negative impact on our operations. Land prices and
housing demand are affected by inflation, which also impacts interest rates.
Interest rates are a significant factor that impact the real estate development
and home building industry. Rate increases affect construction and financing
costs negatively and mortgage rates directly impact the number of purchasers
who are willing to buy houses and who qualify for mortgage financing. We
compete with other companies in the home building business which may have
substantially greater financial resources.
Metro-Denver, Colorado has pockets of soils which can cause damage to home
testing conducted by such engineers. foundations resulting from expansion due
to moisture in those soils. We hire soils engineers who advise us with respect
to foundation structures designed to control expansion of soils which are
discovered as a result of pre-construction testing conducted by such engineers.
We (and other home builders in Colorado) have been the subjects of lawsuits
claiming, in addition to costs of repair, damages for mental distress, punitive
damages, and treble damages under the Colorado Consumer
B-6
<PAGE>
Protection Act arising out of failure to properly design and construct
foundations, to properly disclose hazards due to the existence of expansive
soils and to promptly repair damages caused by expansive soils.
We maintain liability insurance which covers design and manufacturing
defects in our products. Our Management believes that such insurance is
adequate to cover our loss exposure for such defects.
Employees
As of December 31, 1999, we employed 125 full time employees, including 7 in
executive positions, 12 in sales and marketing activities, 87 in planning,
construction or development activities, 19 in administrative activities, and 5
part-time employees, primarily assisting in sales. We consider our employee
relations to be good and none of our employees are unionized.
Merger Discussions
In January 2000, we signed a nonbinding letter of intent under which Writer
may merge into a newly created subsidiary of Standard Pacific Corp., a company
listed on the New York Stock Exchange under the symbol "SPF." The letter of
intent proposes that if we reach agreement with Standard Pacific Corp. and our
shareholders approve, shareholders of Writer would receive in either cash or
Standard Pacific Corp. common stock or a combination of both, having a value of
$3.42 in exchange for each share of Writer common stock. Following the merger
we expect that the new subsidiary would operate under the Writer name, but the
stock of Writer would not be publicly traded. Not more than sixty percent of
the aggregate exchange consideration is proposed to be paid in Standard Pacific
Corp.'s stock and not more than fifty percent is proposed to be paid in cash.
Consummation of the proposed merger transaction is subject to many
conditions, including negotiation of a definitive acquisition agreement in form
satisfactory to both Writer and Standard Pacific Corp., satisfactory completion
of Standard Pacific Corp.'s due diligence review of our business and
operations, and the approval of two thirds of our stockholders; failure of any
one of which could result in the merger not being consummated. Due diligence
conducted by Standard Pacific Corp. and further discussion between the parties
could result in modification of the proposed terms of the transaction,
including, among other things, increased portion of transaction costs and fees
being born by Writer's shareholders. Accordingly, there is no assurance that a
definitive agreement will be reached on the same or different terms than those
contained in the letter of intent or that the merger will take place. If a
satisfactory agreement is negotiated with Standard Pacific Corp., we will send
proxy materials to our shareholders describing in detail the terms of the
proposed merger.
ITEM 2. PROPERTIES.
Our principal offices are in the Atrium Building located at 6061 S. Willow
St., Englewood, Colorado. We have leased approximately 14,000 square feet for a
five year term ending June 2004 with renewal options. Our Northern Division has
its office at 5200 Hahns Peak Drive, Loveland, Colorado. We have leased
approximately 1200 square feet for a three year term ending May 2001.
We own various parcels of real estate in metropolitan Denver and Northern
Colorado which we hold for development as residential property.
ITEM 3. LEGAL PROCEEDINGS.
We have no material pending legal proceedings other than ordinary routine
litigation incidental to our business.
B-7
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common stock is traded over-the-counter under the symbol WRTC. The
following table presents the "highest bid" and "lowest ask" quotations (as
supplied by the National Quotation Bureau, Inc.) and our dividend information.
The approximate number of holders of record of our common stock as of March 10,
2000 was 400.
Stock Price and Dividends
<TABLE>
<CAPTION>
Dividends
Low High Paid
"Bid Price" "Ask Price" Per Share
----------- ----------- ---------
<S> <C> <C> <C>
1999
First Quarter.............................. $1.50 $2.03 None
Second Quarter............................. 1.75 2.22 None
Third Quarter.............................. 1.88 2.35 None
Fourth Quarter............................. 1.41 2.06 None
1998
First Quarter.............................. $1.31 $2.25 None
Second Quarter............................. 1.88 2.63 None
Third Quarter.............................. 1.75 2.69 None
Fourth Quarter............................. 1.63 2.38 None
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial and other data relating to us set forth below should
be read in conjunction with our Consolidated Financial Statements and the notes
thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
(Dollar amounts in thousands other than per share
data)
<S> <C> <C> <C> <C> <C>
Revenues................... $ 82,061 $ 64,091 $ 44,098 $ 46,284 $ 31,960
Income (loss) from
continuing operations
(1)....................... $ 3,652 $ 2,182 $ 3,460 $ 1,301 $ (316)
Income (loss) from
continuing operations per
share
Basic.................... $ .49 $ .29 $ .47 $ .18 $ (.05)
Diluted.................. $ .47 $ .29 $ .46 $ .18 $ (.05)
Net income (1)............. $ 3,652 $ 2,182 $ 3,460 $ 1,301 $ 1,121
Net income per share (1)
Basic.................... $ .49 $ .29 $ .47 $ .18 $ .18
Diluted.................. $ .47 $ .29 $ .46 $ .18 $ .18
Weighted average shares
outstanding (Basic)....... 7,441,000 7,412,000 7,355,000 7,341,000 6,280,000
Dividends paid per share... 0 0 0 0 0
Total assets............... $ 59,210 $ 44,478 $ 41,580 $ 36,650 $ 41,070
Notes payable.............. $ 27,495 $ 17,936 $ 19,221 $ 17,241 $ 22,419
</TABLE>
--------
(1) Included in 1997 Income is $1,185,000 of non-recurring income.
B-8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Our Management's Discussion and Analysis of Financial Condition and Results
of Operations for the year ended December 31, 1999 follows.
Forward Looking Statements
In connection with, and because we desire to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, we
caution readers regarding certain forward looking statements contained in the
following discussion and elsewhere in this report and in any other statements
made by or on our behalf whether or not in future filings with the Securities
and Exchange Commission. Forward looking statements are statements not based on
historical information and which relate to the future operations, strategies,
financial results, or other developments. In particular, statements using verbs
such as, "expected", "anticipate", "believe", or words of similar import
generally involve forward looking statements. Without limiting the foregoing,
forward looking statements include statements which represent our beliefs
concerning future, or projected levels of sales of the our homes, investments
in land or other assets, projected absorption rates, or our ability to attract
needed financing, or the continued earnings or profitability of our activities.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic, and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by or on behalf of us. Whether or not actual results differ
materially from forward looking statements may depend on numerous foreseeable
and unforeseeable events or developments, some of which may be national in
scope, such as general economic conditions and interest rates; some of which
may be related to the homebuilding industry generally, such as price,
competition, regulatory developments, and industry consolidation; and others of
which may relate to us specifically, such as credit availability and the
liquidity necessary to provide equity into land acquisition and development
transactions and other factors.
Results of Operations
In 1999 we recorded the highest levels of revenue, gross profit, and income
from residential operations in the last decade of our history. Total 1999
revenue of $82,061,000 represents a 28% increase over the previous year total.
This $17,970,000 increase in revenue was accompanied by a $14,771,000 or 29%
increase in cost of sales but resulted in a $15,739,000 total gross profit. Our
backlog of homes sold but not yet completed at December 31, 1999 decreased from
166 to 107, a decrease of 36% from December 31, 1998.
This improved performance reflects our continued efforts to maximize the
efficiencies in purchasing, construction and development processes. In
addition, we have focused on increasing sales prices as high as product
acceptance and resulting market demand will prudently support. Our marketing
area continues to provide strong demand.
During 1999, we closed 383 units, including 43 from our Northern Colorado
Division. The 1999 closings represent a 33.9% increase in unit closings over
the prior year, a percent change consistent with revenue growth. However, there
was a slight drop in the price from $219,000 in 1998 to $208,000 in 1999. In
1997 the average sales price was $220,900.
We continued our trend of product mix weighting toward attached single
family, as illustrated in the table below.
<TABLE>
<CAPTION>
Single Cluster
Closings Townhomes Family Homes Total
-------- --------- ------ ------- -----
<S> <C> <C> <C> <C>
Year ended December 31, 1999.................. 264 119 -- 383
Year ended December 31, 1998.................. 149 115 22 286
Year ended December 31, 1997.................. 84 98 14 196
</TABLE>
B-9
<PAGE>
Our only cluster home project, the Peninsula, was completed in 1998.
Our gross profit of $15,739,000 is a $3,199,000 or 25.5% increase over 1998
results, and a 47.0% increase over 1997. As a percentage of sales, our gross
profit was 19.2% in 1999, 19.6% in 1998, and 18.9% in 1997.
As a percentage of revenues, all of our expenses improved over the previous
year. We have focused on maximizing our economies of scale and controlling
expenses as revenue increased. This successful effort reflects the stability of
our fixed costs, notwithstanding our revenue growth which increased variable
costs, particularly those associated with sales and marketing.
Sales and marketing costs increased in 1999 by $622,000 or 12.2%; however,
as a percentage of revenue, the costs decreased to 7.0% versus 8.0% in 1998.
These costs for the current year are also less than levels in 1997 when 8.4% of
revenue was expended on these activities. Sales commissions are a significant
portion of these costs.
General and administrative costs increased by $1,016,000 in 1999 and were
5.8% of revenue versus 5.8% in 1998 and 6.1% in 1997. The dollar increase in
1999 reflects more aggressive compensation programs necessitated by market
pressure on salaries and incentive programs for qualified industry personnel.
In addition, we increased expenditures on architectural and engineering
consultants commensurate with new product development. We also incurred rental
charges for office space in 1999, 1998 and the last half of 1997. Previously,
occupancy cost was recorded as interest on debt service and minor depreciation
expense included in general and administrative costs, as we owned our own
building until May 1997.
Interest expense as a percentage of revenue improved in 1999 to 0.4% versus
1.4% in 1998 and 1.5% in 1997. This reflects more competitive interest rates
which we have obtained from our lenders. Almost all interest is capitalized as
a cost of homes under construction and is included in cost of sales when homes
are sold. In 1998, we completed our last significant lender related profit
sharing interest arrangement which will lower our effective borrowing rate in
the future.* We incurred $2,756,000 of interest in 1999 compared to $3,050,000
in 1998 and $2,303,000 1997. Our improved performance has enabled us to repay
higher coupon debt, structure more favorable credit facilities and borrow less
over the last three years.
As a result of these items and the increased revenues discussed above, our
income from residential operations grew to $4,913,000, a 75.4% increase from
1998 income from residential operations of $2,801,000. This follows a 112.4%
increase in 1998 from 1997. Interest and other income of $198,000 in 1999 is
consistent with $211,000 in 1998.
In 1997, we reported $1,240,000 of interest and other income which included
three non-recurring transactions. A sale of our office property and retirement
of related debt resulted in a gain of $648,000 and two refunds from protests
and litigation of impact fees and property taxes resulted in income of
$537,000.
Due to the improved results discussed above, we recorded an increase in
income before tax of $5,111,000 versus $3,012,000 in 1998 and $2,559,000 in
1997.
In previous years, we recorded expenses via valuation reserves to properly
reflect the fair market value of our holdings. During 1999, a portion of these
previously recorded deductions was used to offset taxable income because some
of the underlying property was sold to third parties through normal operations.
This reduced our recorded tax liability in 1999 and increased the deferred tax
asset to $1,410,000 at December 31, 1999. The income tax expense was calculated
at statutory rates, reflecting the impact of the deferred asset.
All of the factors discussed above resulted in net income of $3,652,000, net
of $1,459,000 of tax expense for 1999 versus net income of $2,182,000 net of a
tax expense of $830,000 in 1998. Net income in 1997 was $3,460,000, net of a
tax benefit of $901,000.
B-10
<PAGE>
Financial Condition
At December 31, 1999, we had 202 homes under construction ranging from
foundation stage to final completion as compared to 188 at December 31, 1998.
The higher inventory levels are predicated on market conditions, low mortgage
rates, and our sales growth. We received 324 new orders in 1999, which was a
55 unit decrease from 1998's total of 379, but a 50.7% increase over 1997
results of 215. The decrease in 1999 is partly attributable to a winddown
and/or completion of several projects, including Greenbrook, Lowry, Settler's
Village, Northpark and Water Valley. We have several new projects in various
stages of entitlement or development scheduled to open in 2000. See discussion
below. Since year end the backlog has grown an additional 16 units to 123 units
at March 23, 2000. Our backlog expressed in projected sales revenue at
March 23, 2000 grew by $6,292,000 to over $30,618,000 from $24,326,000 at
December 31, 1999. This backlog provides a foundation for strong results in
2000, but is tempered by extended construction time caused by the tight labor
market in our marketing areas.* This lack of available labor continues to
pressure construction schedules and increase construction costs. Because of
market demand, our management currently believes that more in process inventory
could translate to greater market share by providing more available and more
timely deliveries to home buyers who desire shorter closing dates from initial
contract execution and continues to press this growth.* Because of this, we
continue to quickly re-employ our resources back into production.
Work In Process Inventory
At December 31, 1999 and 1998, our work in process included a mix as
follows.
<TABLE>
<CAPTION>
Year Ended
Dec. 31
------------
1999 1998
----- -----
<S> <C> <C>
Total....................................................... 208 219
Presold..................................................... 107 166
Speculative................................................. 101 53
</TABLE>
Our inventory of homes under construction increased by $5,717,000 or 32.4%.
In 1999 and 1998, 6 and 31 inventory presold units respectively, were in the
permitting or engineering process at year end and, therefore, carried small
balances. The average inventory amount per unit (net of units in the permitting
or engineering process) is $115,589 and $93,787 at December 31, 1999 and
December 31, 1998. This average increase of $21,802 per inventory unit is
primarily responsible for the inventory increase. In addition, we are
consciously increasing inventory at our existing projects in an attempt to
mitigate the impact of the timing of new project starts versus the
aforementioned project winddowns (net of units in the permitting or engineering
process).
Model homes and furnishings increased by $570,000 during 1999, which
reflects a 13.6% increase in the carrying value of these assets. During the
year we opened three model homes at Canterbury Park in Castle Pines North. This
marketing investment will grow in 2000. * In the Northern division three new
models opened in February 2000 at Saddlebrook in Stetson Creek and one detached
single family model in Fossil Lake Ranch is under construction, which is
expected to open in May 2000. * In the Denver division two detached single
family models opened in February 2000 at Talavera in Sunrise Ridge, a new
project in Arvada, Colorado (north metro-Denver). At Tallyn's Reach in Aurora,
Colorado three detached single family models are under construction as of
January 2000. We are processing plans for models in the following communities,
all of which are expected to open in 2000: *
<TABLE>
<CAPTION>
Division Community Type Number
-------- --------- --------- ------
<C> <S> <C> <C>
Denver Castle Pines North Cluster One
Denver Highlands Ranch Golf Course Cluster Two
Denver Highlands Ranch Golf Course Townhouse Three
Denver Talavera at Sunrise Ridge Townhouse Three
Denver Legacy Ridge Detached Two
Northern Reunion Clusters Two
Northern Reunion Detached Seven
</TABLE>
B-11
<PAGE>
During 1999 14 models were shut down and moved into "for sale" status. Of
those 14 models six were in an active sale and lease back transactions as of
December 31, 1999. During January and February 2000 the leases were concluded
and the units were turned over to the owners.
Our investment in land and land development increased by $2,643,000, or
17.4% over the prior year end balance. During the year we continued development
at Settler's Village, Greenbrook, Northpark, Lowry and Canterbury Part at
Castle Pines North. In addition, we began development at Sunrise Ridge for both
single family detached homes and townhomes. Also, 20 lots in Noble Ridge and 52
lots in Knights Bridge both at Castle Pines North were developed this year. We
purchased and began development of 102 townhouse lots for Saddlebrook and 35
single family detached lots both in the Stetson Creek project. We have
purchased 14 finished lots at Tallyn's Reach as part of an 86 lot option
contract and two platted parcels at The Highlands Ranch Golf Course that will
be developed into 81 townhouse and 66 cluster lots during 2000.* These
expenditures less the cost of lots transferred to production account for the
net increase.
Our unplatted land account holds one parcel of approximately 106 acres of
ground in Ft. Collins, Colorado. We have platted the site into 470 single
family lots and are finalizing development agreements. We are also finalizing
the planning and engineering process for the product lines to be marketed at
this traditional neighborhood development.
Our office property and equipment decreased by $93,000, or approximately
15.6% from the previous year. Purchases of $181,000 reflect the set up of the
new sales office at Canterbury Park at Castle Pines North and the ongoing need
to upgrade computer equipment.
Our cash, cash equivalents, and restricted cash increased $1,663,000 during
the year from the December 31, 1998 balance. The increases related primarily to
the relatively high level of closings which we had in December 1999. The
increase in accounts payable and accrued expenses was caused primarily by the
estimated accrual of expenses related to the completion of inventory closed in
December, for which bills had not been received at year end, and to overall
increased activity.
The carrying value of our deferred tax asset was adjusted to $1,410,000
during 1999. A significant portion of our deferred tax asset represents
temporary differences between deductions for financial reporting and tax
reporting, primarily from land basis differences. As of December 31, 1999 our
valuation allowance was eliminated because we believe it is more likely than
not to be realized.*
Our notes payable related to construction activities increased $3,099,000,
or 21.8% and such increase is consistent with the increased homes under
construction inventory levels. Overall committed construction loan amounts are
higher than last year and will generate larger balances as many of the
commitments are for inventory which had not been started at year end.* We
finance virtually all of our construction activities through our loan
facilities. Our loan facilities generally require annual commitment fees of up
to 1.0% and accrue interest at prime to prime plus 1.0%. Certain facilities
also allow us to select a rate indexed on the LIBOR rate.
Our notes payable related to land debt increased by $4,540,000, or
approximately 162.5% during 1999. This increase is reflective of our efforts to
secure land for future building. (See discussion at Recent Acquisitions below).
Our other notes payable account increased $1,920,000 during the year as
revolving lines of credit were used to finance the purchase of unplatted land.
Once the underlying parcel is platted, the existing debt will be replaced with
a traditional acquisition and development loan.* At December 31, 1999, we had
remaining $900,000 from our unsecured convertible debt offering which was
entered into in 1993; this debt was paid off in February 2000. See ITEM 13,
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We issued 29,900 shares of stock during the year pursuant to exercises of
stock option grants previously made to employees.
B-12
<PAGE>
Liquidity and Capital Resources
During 1999, we used $7,787,000 of cash in operating activities, primarily
to increase inventory. Cash provided by operating activities includes
$1,494,000 related to increases in trade payables. In addition, $9,559,000 of
debt was added in 1999. We also upgraded computer facilities and other office
equipment with $181,000 of expenditures during the year. These results are
consistent with management's objective of re-employing all available working
capital into operations.
With the sustained, improved operating performance that we have shown, our
relationships with our lenders have continued to solidify. This has provided us
with more financing opportunities to leverage our cash and has provided greater
opportunities to negotiate more favorable rates and terms. We have also
attracted lenders who will provide working capital facilities to supplement our
liquidity and capital resources generated by operations.
We intend to use these working capital facilities for some or all of our
equity investment in new project acquisition and development.* The facilities
have available commitments of $4,424,000 at December 31, 1998, with $1,948,000
outstanding at year end. The available commitment has been raised to $5,924,000
as of March 2000. These funds may not provide all of the necessary equity which
traditional lending relationships will require for leveraged financing of
acquisition and development costs of projects. Therefore, we expect to continue
to re-employ our working capital generated from operations to support growth
and or debt retirement.*
We have offered profit or revenue participation to land sellers as part of
the acquisition price negotiation. Because of strong buyer demand for improved
and undeveloped land, many sellers in our market area are demanding profit
participation and requesting more stringent purchase terms; which include cash
at closing, closings prior to full entitlement, specific performance contracts,
and shorter due diligence periods. We weigh all of these risk factors against
perceived opportunity as new projects are analyzed. Notwithstanding these
factors, land acquisition costs and risk continue to increase because of demand
generated by competing builders.
Recent Acquisitions
We have executed sales contracts for all of our homes in our Northpark,
Settler's Village, Summerhill, Greenbrook and Park Square communities. All of
the contracts will close in the first two quarters of 2000. We have been
actively seeking replacement opportunities and to that end have recently
completed ten land acquisitions.
In December 1998, we purchased a 140 unit single family parcel in Arvada,
Colorado. The sites were zoned and platted. We recently completed a re-platting
of a portion for our townhome product. Financing was provided by a $1,500,000
unsecured line of credit. In April 1999, $500,000 of the line was repaid and
the same lender provided a $3,650,000 development facility. In October 1999,
the balance of the unsecured line of credit was repaid. Construction financing
for the single family detached models and the first phase of construction has
been provided by the same lender and construction has commenced. Construction
financing for the townhouse models and the first phase of construction was
provided by the same lender in February 2000.
In January 1999, we purchased a 102 unit single family attached parcel in
Ft. Collins, Colorado. This is a continuation of our Stetson Creek project.
Financing was provided through an existing $15,000,000 acquisition, development
and construction facility. Platting was completed in May 1999 and development,
sales and construction are in progress.
In July 1999, we closed on our purchase of 106 acres in Ft. Collins, which
is in the final stage of being entitled under the Ft. Collins City Plan. The
site is planned for approximately 470 single family units with three single
family detached products and two attached products. Financing was provided from
working capital and the use of an unsecured working capital line. We are in the
process of finalizing the acquisition, development and construction financing
to repay the working capital line.
B-13
<PAGE>
In December 1999, we closed on our purchase of two luxury attached lifestyle
communities in Highlands Ranch, Colorado planned for 81 and 66 units. We have
secured acquisition, development and construction financing through one of our
existing lending relationships.
We have executed a contract for a 39 acre parcel in Castle Rock, Colorado.
The parcel is zoned for approximately 180 units, but must be platted through
the city of Castle Rock. We are planning the area for both single family
attached and detached. The contract calls for a three phase take down beginning
at final plat, and annually thereafter.
In July 1999, we executed a purchase agreement to acquire 86 finished single
family sites in south Aurora, Colorado. The sites are part of a 2,400 lot
master planned community currently under development. The lots will be acquired
over a two year period, on a quarterly basis, beginning in December 1999.*
In June 1999, we contracted to purchase approximately 63 acres in three
parcels of partially developed land located in the City of Westminster,
Colorado. We are currently platting phase one of the site and anticipate
development of 45 lots for a newly designed single family product. The
agreement provides for a three phase take down beginning at final plat
approval, but in no event later than May 1, 2000. We are analyzing the second,
third, and fourth parcels to determine the final product mix for those areas.
In August 1999, we acquired 35 platted single family lots in Ft. Collins,
Colorado. This is a continuation of our Stetson Creek project. Acquisition
financing was provided by the seller. Development and construction financing
will be through an existing $25,000,000 loan facility.
In August 1999, we executed a purchase agreement to acquire 22 developed
single family lots in Ft. Collins, Colorado. The lots will be acquired over the
next year,* and are currently being developed by the seller.
In October 1999, we executed an agreement which secures the right to acquire
14 acres in Loveland, Colorado. Under the agreement, we will be responsible to
plat the site so that no less than 126 townhomes can be built. No closing is
anticipated until the final plat is approved. We are currently in a due
diligence period, and have begun the entitlement process, but no assurance can
be provided that this transaction will close.
Both executed and potential acquisitions will require equity investments,
which our management expects to obtain from working capital generation and
through additional borrowing from our working capital facilities. The balance
will be financed through traditional lending relationships.*
New Joint Venture
In June 1999, we entered into a joint venture agreement to form a mortgage
subsidiary, WRT Financial, Limited Partnership (WRT) with an affiliate of a
Houston, Texas based bank holding company with assets of over $1,000,000,000.
We provided $40,000 for estimated start up costs.
We are a limited partner, and own fifty percent of the limited partnership.
The holding company affiliate is the general partner and manages the day to day
operations through a locally staffed office. WRT sub-leases approximately 2,200
square feet from us adjacent to our primary office.
WRT is a full service mortgage brokerage operation and will fund loans with
a warehouse financing facility provided by the holding company affiliate. All
loans closed will simultaneously be sold into the secondary markets, primarily
through the holding company affiliate's mortgage banking operation. Under this
process, WRT will not be exposed to interest rate risks.*
WRT will provide a variety of mortgage products to our home buyers. Our
buyers will receive an incentive to finance their home purchase with WRT. WRT's
primary marketing goal is to enhance customer satisfaction by facilitating the
mortgage process, in addition to profit generation.*
B-14
<PAGE>
Merger Discussions
We are discussing a potential merger of Writer into a newly created
subsidiary of Standard Pacific Corporation, a company listed on the New York
Stock Exchange. See ITEM 1. BUSINESS, Merger Discussions.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary risk facing us is interest rate risk on debt obligations.* We
enter into debt obligations primarily to finance the development and
acquisition of land, and to support our homebuilding and general corporate
operations. All of our debt has variable interest rates, which exposes us to
interest rate risk. Our business strategy has been to accept the interest rate
risk associated with variable rate debt which allows us to participate in the
increased earnings and cash flows associated with decreases in interest rates.
Under our current policies, we do not use interest rate derivative
instruments to manage our exposure to interest rate changes.
At December 31, 1999 and 1998, we had variable rate debt outstanding of
approximately $27,000,000 and $17,000,000 respectively. The annual increase
(decrease) in cash requirements for interest at this level of borrowing should
the market rates increase (decrease) by 10% compared to the interest rates in
effect at December 31, 1999 and 1998 would be approximately $270,000 ($270,000)
and $132,000 ($132,000) respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements are included on pages F-1 through F-14.
B-15
<PAGE>
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors
<TABLE>
<CAPTION>
Name, Age, and Other Positions, if Period Served as Director and Business
any, with Registrant Experience During Past 5 Years
---------------------------------- --------------------------------------
<C> <S>
George S. Writer, Jr., 64 Chief Executive Officer, Chairman of the
Chief Executive Officer, Board.
Chairman of the Board of
Directors
Roland Seidler, Jr.(1), 71 Elected a director in 1971. Mr. Seidler is
the Chairman and Chief Executive Officer of
The Seidler Companies Incorporated, a Los
Angeles based investment banking firm. Mr.
Seidler also is a member of the Board of
Directors for Mellon Financial Group West.
Ronald S. Loser(2), 66 Elected a director in 1973. Our Secretary
since our inception. Mr. Loser is a
Principal of Brega & Winters, P.C., a
Denver law firm.
Deane J. Writer, Jr., 66 Elected a director in 1975. Since January
1992, Mr. Writer has been an account
executive with HRH Insurance, a national
insurance agency. Prior to that he was the
owner of The Writer Agency, since 1956.
Louis P. Bansbach, III(3), 59 Elected a director in 1989. Mr. Bansbach is
President of Columbine Realty, Inc., and a
Director of United Bancorp of Wyoming.
Robert G. Tointon(4), 66 Elected a director in 1992. Mr. Tointon is
the President and Chief Executive Officer
of Phelps-Tointon, Inc. a manufacturer of
structural and architectural pre-stress
components, detention equipment, safes, and
architectural woodwork. Mr. Tointon is also
a director of New Century Energies.
William J Gillilan, III, 53 Appointed a director in 1999. Mr. Gillilan
is the former President of Centex
Corporation. During his 24 years with
Centex he also served as Chairman of Centex
Corporation's real estate and mortgage
banking operations. Currently he has been
involved in real estate opportunities both
as an investor and as an advisor.
</TABLE>
Directors Fees and Transactions--In 1996, we adopted a plan by which the
outside directors receive an annual retainer fee of $5,000 and a per meeting
fee of $750, for either full Board or Executive Committee meetings. These fees
were paid in 1999. The Executive Committee includes Directors George S. Writer,
Jr., who receives no fees for service, Louis Bansbach, III, Ronald S. Loser,
and Robert G. Tointon. This committee meets with our Senior Management during
months when a full Board meeting is not convened.
In 1999, 1998 and 1997, Brega and Winters, the law firm in which Ronald S.
Loser is a principal, was paid attorney fees. Additionally, insurance is placed
with a company with which Mr. Deane J. Writer, Jr. is employed and receives a
commission. We place substantially all of our insurance coverage through this
agency. In the opinion of management, the amounts charged in these transactions
are less than or comparable to charges which would have been made by
unaffiliated parties. Deane J. Writer, Jr. is a first cousin of George S.
Writer, Jr.
B-16
<PAGE>
Executive Officers--Set forth below are the names, ages and offices held by
each of the our executive officers.
<TABLE>
<CAPTION>
Positions Held and Business Experience During Past 5
Name and Age Years
------------ ----------------------------------------------------
<C> <S>
George S. Writer, Jr., 64 Chief Executive Officer, Chairman of our Board of
Directors since 1964.
Daniel J. Nickless, 44 President since April 1999. Executive Vice
President, Chief Operating Officer, Chief Financial
Officer and Treasurer since April 1998. Senior Vice
President, Chief Financial Officer and Treasurer
since June 1994. Mr. Nickless served as Vice
President of Finance and Treasurer from July 1993 to
June 1994, and Vice President Controller since
November 1989. Mr. Nickless joined us as Controller
in February 1989.
Robert R. Reid, 51 Senior Vice President Operations since August 1992.
Mr. Reid has been employed by us since 1977 and
served as Vice President-Construction, Vice
President-Southwest Region, Construction Manager and
Project Manager prior to his present position.
Dave Steinke, 44 Senior Vice President since October 1998. From
October 1996 to October 1998 he served as Executive
Vice President for Miles Advertising. From November
1989 to June 1996 he was Vice President of Sales and
Marketing for Falcon Homes.
Richard M. Wells, 42 Vice President and Controller since June 1998. From
April 1996 to May 1998 he served as Assistant
Controller--Finance for Natkin Contracting, a
national mechanical contractor. From July 1995 to
March 1996 he served, in a temporary capacity, as
Controller for Encore Media International, a
division of TCI providing cable television
programming internationally. From December 1993 to
June 1995 he served as Controller for Fiber Optic
Technologies, a division of ICG Communications
providing design and installation of communication
networks.
Darwin Horan(5), 35 Vice President; Northern Division Manager since
January, 1998. Mr. Horan also serves as Vice
President of Land Acquisition and Development and
has been employed by us since 1986 in several
capacities in our construction, warranty and
service, and development departments. Mr. Horan
served as our Development Manager, since 1994, prior
to his present position.
Nancy Ashley, 56 Vice President of Sales since January, 1998. Ms.
Ashley joined us in June, 1997 as Sales Manager.
From November 1994 to April, 1997 she served as
Director of Sales and Marketing for Carmel Homes, a
local Denver builder. From 1992 to 1994, Ms. Ashley
was employed by Centex Homes as a community sales
manager.
</TABLE>
Other than as disclosed below, we are not aware of any officer, director or
holder of 10% or more of our securities who has failed to comply with the
reporting requirements under Section 16, of the Securities Exchange Act of
1934.
Section 16(a) Beneficial Ownership Reporting Compliance
(1) Mr. Seidler filed one late Form 4 report representing one transaction.
(2) Mr. Loser filed one late Form 4 report representing one transaction.
(3) Mr. Bansbach filed one late Form 4 report representing one transaction.
(4) Mr. Tointon filed four late Form 4 reports representing six transactions.
(5) Mr. Horan filed one late Form 4 report representing one transaction.
B-17
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
The information in the following table is given for our Chief Executive
Officer and the four other Executive Officers whose total compensation and
remuneration from the corporation was more than $100,000 during each of the
three years ended December 31, 1999.
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
<CAPTION>
Name and Principal Other Annual Position Year Salary Bonus Compensation(1)
---------------------------------------- ---- -------- ------- ---------------
<S> <C> <C> <C> <C>
George S. Writer, Jr. ................... 1999 $169,208 $22,628 $ 38,485
Chief Executive Officer 1998 $159,412 $60,000 $141,297
1997 $139,800 -0- $223,465
Daniel J. Nickless....................... 1999 $138,551 $34,312 $ 6,102
President, Chief Operating Officer, 1998 $118,583 $18,556 $ 4,881
Chief Financial Officer and Treasurer 1997 $ 89,800 $15,113 $ 3,792
Robert R. Reid........................... 1999 $128,100 $29,784 $ 10,518
Sr. Vice President of Operations 1998 $107,718 $18,758 $ 22,574
1997 $ 94,800 $15,125 $ 28,702
Nancy Ashley............................. 1999 $ 74,800 $59,382 $ 2,781
Vice President of Sales 1998 $ 74,800 $91,696 $ 960
Dave Steinke............................. 1999 $128,100 $ 6,788 $ 0
Sr. Vice President
</TABLE>
--------
(1) Amounts disclosed represent earnings and contributions on the individual
vested portion of our qualified profit sharing retirement plan account
balances during the years presented.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of March 10, 2000, to our knowledge, the following persons owned
beneficially and of record more than 5 percent of the Company's common stock:
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
-------------- ------------------- -------------------- --------
<S> <C> <C> <C>
Common Stock......... George S. Writer, Jr.(1) 1,490,306 19.97%
Littleton, Colorado
Common Stock......... Phelps-Tointon, Inc.(2) 1,399,166 18.75%
Greeley, Colorado
Common Stock......... Polaris Capital Corporation 389,500 5.22%
Denver, Colorado
</TABLE>
--------
(1) A control person.
(2) Phelps-Tointon, Inc. is a company which is partly owned by Robert G.
Tointon, one of our directors. The shares listed include shares owned
directly by Mr. Tointon.
B-18
<PAGE>
Security Ownership of Management--The following information indicates our
common stock beneficially owned, directly or indirectly, by our directors and
executive officers as of March 10, 2000.
<TABLE>
<CAPTION>
Title of Amount and Nature of Percent
Class Beneficiary Ownership of Class
------------ --------------------- --------
<S> <C> <C> <C>
George S. Writer, Jr.............. Common Stock 1,490,306 19.97%
Robert G. Tointon................. Common Stock 1,399,166(1) 18.75%
Roland Seidler, Jr................ Common Stock 300,474(2) 4.03%
Deane J. Writer, Jr............... Common Stock 209,000 2.80%
William J Gillilan, III........... Common Stock 170,000 2.28%
Louis P. Bansbach, III............ Common Stock 129,524 1.74%
Daniel J. Nickless................ Common Stock 28,280 (3)
Robert R. Reid.................... Common Stock 25,500 (3)
Ronald S. Loser................... Common Stock 39,900 (3)
Darwin Horan...................... Common Stock 7,500 (3)
Richard M. Wells.................. Common Stock 1,000 (3)
Dave Steinke...................... Common Stock 500 (3)
All Directors & Officers as a
group (12)....................... Common Stock 3,801,150 50.94%
</TABLE>
--------
(1) Reflects shares held by Phelps-Tointon, Inc., of which Mr. Tointon is the
President and part owner.
(2) Does not include shares in varying amounts owned as a market maker by a
broker-dealer with which Mr. Seidler is affiliated.
(3) Less than 1% of shares outstanding.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The following information is furnished with respect to certain transactions
in which the amount involved exceeded $60,000 and which involved an officer,
director, beneficial holder of more than five percent of our voting stock or a
person or entity affiliated with such persons.
Transactions With Affiliates of Directors
Brega and Winters, the law firm in which Ronald S. Loser (a director) is a
principal, was paid attorney's fees that do not exceed five percent of Brega
and Winters gross revenue for their last fiscal year.
H.R.H. Insurance Company, the insurance agency that employs Deane J. Writer,
Jr., (a director) was paid insurance premiums of $257,329 during 1999.
Certain officers and directors, directly and indirectly, provided financial
assistance to us in several transactions through December 31, 1999 as set forth
below.
Subdivision Loan Participations
On January 14, 1992 we executed a loan agreement with a real estate
investment trust under which $1,500,000 was committed to us for development of
our Northpark project. George S. Writer, Jr. and Roland Seidler, Jr.
participated in this transaction by advancing 20% of the committed funds and
have received 20% of the loan payments, including 20% of a $1,600 per Northpark
lot additional interest payment. Principal and interest on principal of this
loan was repaid as of December 31, 1997. The $1,600 per lot additional interest
payment continues through the balance of the project. During 1999 we paid
$12,800 under this agreement to the directors.
B-19
<PAGE>
Peninsula Acquisition and Development Financing
On August 12, 1992, we acquired 22 acres of vacant ground from our Chairman
and Chief Executive Officer George S. Writer, Jr. The land was transferred at
Mr. Writer's out-of-pocket cost. The acquisition was financed by a loan from
several of our affiliates. Principal and interest on principal related to this
facility was fully repaid at December 31, 1997. The loan agreement entitles the
lenders to an additional interest payment equal to 50% of the net profit from
the project, which we continued to pay throughout 1998. The project was
completed in 1998 and $28,000 remains owed to the lending group. Certain wind
down expenses have been incurred in 1999 and will continue in 2000, which will
offset most if not all of the remaining profit sharing accrued at year end.
During 1999 we paid nothing under this agreement to the directors.
Series 1993 A Convertible Unsecured Promissory Notes
As of December 31, 1999, we had outstanding unsecured convertible debt of
$900,000. The total debt is held by Phelps-Tointon, Inc. in the amount of
$500,000; George S. Writer, Jr. in the amount of $312,500; Roland Seidler, Jr.,
in the amount of $87,500. We paid off this debt in February 2000 in full.
B-20
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Financial Statements
Our consolidated financial statements are included in Part II, Item 8.
The Writer Corporation and Subsidiaries Consolidated Financial Statements:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report............................................. F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998............. F-2
Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and 1997..................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997........................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997..................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Reports on Form 8-K...................................................... None
Exhibits Required by Item 601 of Regulation S-K..........................
</TABLE>
EXHIBIT TABLE
(27) Financial Data Schedule. See below.
B-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of The Writer Corporation:
We have audited the accompanying consolidated balance sheets of The Writer
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of The Writer Corporation and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted
in the United States of America.
Deloitte & Touche LLP
Denver, Colorado
February 25, 2000
B-22
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Residential Real Estate Held For Sale, Net (Note 1):
Homes under construction............................. $23,349,000 $17,632,000
Model homes and furnishings, less accumulated
depreciation of $791,000 and $511,000............... 4,760,000 4,190,000
Land and land development............................ 17,859,000 15,216,000
Unplatted land....................................... 3,897,000 817,000
----------- -----------
Total.............................................. 49,865,000 37,855,000
----------- -----------
Office Property And Equipment, Less Accumulated
Depreciation Of $845,000 And $586,000................. 504,000 597,000
----------- -----------
Other Assets:
Cash and cash equivalents............................ 4,996,000 3,363,000
Restricted cash...................................... 589,000 541,000
Accounts receivable.................................. 296,000 374,000
Other................................................ 1,550,000 582,000
Deferred tax asset (Note 3).......................... 1,410,000 1,166,000
----------- -----------
Total.............................................. 8,841,000 6,026,000
=========== ===========
Total.................................................. $59,210,000 $44,478,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable (Note 2):
Construction, including $0 and $128,000 to related
parties........................................... $17,314,000 $14,215,000
Land............................................... 7,333,000 2,793,000
Other, including $900,000 and $900,000 to related
parties........................................... 2,848,000 928,000
----------- -----------
Total............................................ 27,495,000 17,936,000
----------- -----------
Other Liabilities:
Accounts payable and accrued expenses................ 8,179,000 6,716,000
Accrued interest..................................... 208,000 177,000
----------- -----------
Total.............................................. 8,387,000 6,893,000
----------- -----------
Commitments and Contingencies (Notes 2 and 6)
Stockholders' Equity (Notes 2 and 4):
Common stock, $.10 par value; 10,000,000 shares
authorized; 7,462,500 and 7,432,600 shares issued
and outstanding..................................... 746,000 743,000
Additional paid-in capital........................... 12,454,000 12,430,000
Retained earnings.................................... 10,128,000 6,476,000
----------- -----------
Stockholders' equity............................... 23,328,000 19,649,000
----------- -----------
Total.................................................. $59,210,000 $44,478,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
B-23
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Residential Operations:
Revenues.............................. $82,061,000 $64,091,000 $44,098,000
----------- ----------- -----------
Costs and expenses:
Cost of sales....................... 66,322,000 51,551,000 35,761,000
Sales and marketing................. 5,743,000 5,121,000 3,703,000
General and administrative.......... 4,735,000 3,719,000 2,675,000
Interest (Note 2)................... 348,000 899,000 640,000
----------- ----------- -----------
Total............................. 77,148,000 61,290,000 42,779,000
----------- ----------- -----------
Income from residential
operations....................... 4,913,000 2,801,000 1,319,000
INTEREST AND OTHER INCOME, NET (Note
6)..................................... 198,000 211,000 1,240,000
----------- ----------- -----------
INCOME BEFORE INCOME TAXES.............. 5,111,000 3,012,000 2,559,000
----------- ----------- -----------
INCOME TAX (EXPENSE) BENEFIT (Note 3)... (1,459,000) (830,000) 901,000
----------- ----------- -----------
NET INCOME.............................. $ 3,652,000 $ 2,182,000 $ 3,460,000
=========== =========== ===========
Earnings Per Share (Notes 1 and 5):
Basic................................. $ 0.49 $ 0.29 $ 0.47
=========== =========== ===========
Diluted............................... $ 0.47 $ 0.29 $ 0.46
=========== =========== ===========
Weighted Average Number of Shares
Outstanding:
Basic................................. 7,441,000 7,412,000 7,355,000
=========== =========== ===========
Diluted............................... 7,829,000 7,836,000 7,723,000
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
B-24
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Common Stock Additional Retained
------------------ Paid-In Earnings
Shares Amount Capital (Deficit)
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1996.......... 7,354,600 $735,000 $12,352,000 $ 834,000
Net income.......................... -- -- -- 3,460,000
--------- -------- ----------- -----------
Balance, December 31, 1997.......... 7,354,600 735,000 12,352,000 4,294,000
Issuance of common stock............ 78,000 8,000 78,000 --
Net income.......................... -- -- -- 2,182,000
--------- -------- ----------- -----------
Balance, December 31, 1998.......... 7,432,600 743,000 12,430,000 6,476,000
Issuance of common stock............ 29,900 3,000 24,000 --
Net income.......................... -- -- -- 3,652,000
--------- -------- ----------- -----------
Balance, December 31, 1999.......... 7,462,500 $746,000 $12,454,000 $10,128,000
========= ======== =========== ===========
</TABLE>
See notes to consolidated financial statements.
B-25
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 3,652,000 $ 2,182,000 $ 3,460,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization...... 657,000 546,000 387,000
Deferred income taxes.............. (244,000) 85,000 (901,000)
Gain on disposal of property and
model home furnishings............ ( 15,000) (25,000) (546,000)
Changes in operating assets and
liabilities:
Homes under construction........... (5,717,000) (828,000) (3,920,000)
Model homes and furnishings........ (952,000) (990,000) (284,000)
Land and land development.......... (2,643,000) 825,000 (5,349,000)
Unplatted land..................... (3,080,000) (78,000) 5,664,000
Restricted cash.................... (48,000) 181,000 (55,000)
Other assets....................... (891,000) 66,000 (406,000)
Accounts payable and accrued
expenses.......................... 1,494,000 1,915,000 (510,000)
------------ ------------ ------------
Net cash provided by (used in)
operating activities............. (7,787,000) 3,879,000 (2,460,000)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of office property and
equipment........................... (181,000) (372,000) (347,000)
Proceeds from sales of property and
equipment........................... 15,000 40,000 847,000
------------ ------------ ------------
Net cash provided by (used in)
investing activities............. (166,000) (332,000) 500,000
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable.......... 59,539,000 41,520,000 32,964,000
Proceeds from notes payable from
related parties..................... 236,000 1,135,000
Principal payments and other
reductions on notes payable......... (49,852,000) (42,569,000) (28,857,000)
Principal payments and other
reductions on notes payable to
related parties..................... (128,000) (472,000) (3,262,000)
Proceeds from sale of common stock... 27,000 86,000 --
------------ ------------ ------------
Net cash provided by (used in)
financing activities............. 9,586,000 (1,199,000) 1,980,000
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS..................... 1,633,000 2,348,000 20,000
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR.............................. 3,363,000 1,015,000 995,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF
YEAR................................. $ 4,996,000 $ 3,363,000 $ 1,015,000
============ ============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
The Company paid $317,000, $905,000 and $897,000 in interest (net of amounts
capitalized) and $191,000, $365,000 and $61,000 in income taxes during the
years ended December 31, 1999, 1998 and 1997, respectively.
See notes to consolidated financial statements.
B-26
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999, 1998 and 1997
1. Organization and Summary of Significant Accounting Policies
The Writer Corporation (the Company) is a developer and builder of planned
residential communities primarily in the Denver, Colorado metropolitan area.
The Company's operations constitute a single business segment. The accompanying
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Residential real estate sales and costs of sales are recorded at the time of
closing. Cost of sales includes land and land development costs, direct and
indirect construction costs, capitalized interest and taxes and estimated
warranty costs. The Company provides a two year structural warranty to home
buyers.
Land costs are allocated to filings based on the relative pre-construction
market value of each filing to the total pre-construction market value of an
entire parcel. Individual home sites within each filing are generally
homogeneous and are considered to be similar in value. Land development costs
that are specific to individual home sites are allocated to those home sites.
Land development costs that cannot be specifically identified to individual
home sites are allocated to home sites (including estimates to complete, if
applicable) based on the identified costs of each home site.
Inventory that is substantially complete and ready for its intended use is
carried at the lower of cost or fair value less costs to sell. Land under
development and land held for future development and sale are evaluated for
impairment whenever events or changes in circumstances indicate that the
carrying value of the asset may not be recoverable. An asset will be identified
as impaired if the undiscounted estimated cash flows from development and
ultimate sale of such asset is less than its carrying value. If a long-lived
asset is identified as impaired, the carrying amount of the asset is reduced to
its fair value.
Office property and equipment and model home furnishings are recorded at
cost. Depreciation is provided by the straight-line method over estimated
useful lives ranging from two to thirty years. The Company does not depreciate
model homes because estimated future sales prices are expected to exceed cost.
A current or deferred income tax liability or asset is recognized for
temporary differences which exist due to the recognition of certain income and
expense items for financial reporting purposes in periods different than for
tax reporting purposes. The provision for income taxes is based on the amount
of current and deferred income taxes payable or refundable at the date of the
financial statement as measured by the provisions of current tax laws.
The Company's cash and cash equivalents consist of demand deposits and money
market funds.
The Company uses the intrinsic value method to account for stock options
granted to employees.
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. SFAS 133 requires that an entity
B-27
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. The accounting for changes in the
fair value of a derivative (gains and losses) depends on the intended use of
the derivative and the resulting designation. The Company is required to adopt
SFAS 133 on January 1, 2001. The Company has not completed the process of
evaluating the impact that will result from adopting SFAS 133.
For the periods presented, the Company's comprehensive income, as defined by
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, is equal to its net income.
Certain items in 1998 and 1997 have been reclassified to conform with the
1999 presentation.
2. NOTES PAYABLE
Notes payable for construction related debt obligations at December 31
consist of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
$16,000,000 loan facility with a financial
institution, interest at prime rate, interest
payable monthly, collateralized by a first deed of
trust, due June 1, 2001........................... $ 1,228,000 $ 4,904,000
The loan facility has $14,772,000 unused and
available at December 31, 1999. $2,967,000 loan
commitment with a financial institution, interest
at prime rate plus 0.5%, interest payable monthly,
collateralized by a first deed of trust, due June
1, 2000........................................... 2,502,000 3,944,000
The loan facility has $465,000 unused and available
at December 31, 1999. $37,000,000 loan facility
with a financial institution, interest at prime
rate plus 1%, interest payable monthly,
collateralized by a deed of trust, due at various
dates as follows: March 1, 2000, February 28,
2001, and December 20, 2002....................... 6,317,000 2,681,000
The loan facility has $30,683,000 unused and
available December 31, 1999. $14,250,000 loan
facility with a financial institution, interest at
the lessor of LIBOR plus 225 basis points or
prime, interest payable monthly, collateralized by
residential real estate, due April 1, 2001. The
loan facility has $8,494,000 unused and available
at December 31, 1999.............................. 5,756,000 2,558,000
Note payable to a related party for the
construction of a home, paid during 1999. $680,000
loan facility with a financial institution,
interest at prime rate plus .75%, interest payable
monthly, collateralized by deed of trust, due
September 22, 2000................................ -- 128,000
The loan facility has $284,000 unused and available
at December 31, 1999. $4,210,000 loan facility
with a financial institution, interest at prime
rate plus .75%, interest payable monthly,
collateralized by deed of trust, due October 19,
2000.............................................. 396,000 --
The loan facility has $3,095,000 unused and
available at December 31, 1999.................... 1,115,000 --
----------- -----------
Total.............................................. $17,314,000 $14,215,000
=========== ===========
</TABLE>
B-28
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
Notes payable for land and land development related debt obligations at
December 31 consist of the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
$8,750,000 loan facility with a financial institution,
interest at the lower of LIBOR plus 225 basis points or
prime, interest payable monthly, collateralized by
residential real estate, due April 1, 2001. The loan
facility has $8,061,000 unused and available at
December 31, 1999...................................... $ 689,000 $1,179,000
$3,650,000 loan facility with a financial institution,
interest at prime rate plus 1% interest payable
monthly, collateralized by deed of trust, due June 1,
2000. The loan facility has $2,411,000 unused and
available at December 31, 1999......................... 1,239,000 1,356,000
Loan with a financial institution, reserved for lot
takedowns, paid during 1999............................ -- 155,000
Loan with a financial institution reserved for lot
takedowns, paid during 1999............................ -- 86,000
Loan with a financial institution to refinance an
encumbrance, paid during 1999.......................... -- 17,000
$6,300,000 loan facility with a financial institution,
interest at prime rate plus 1%, interest payable
monthly, collateralized by deed of trust, due June 9,
2002. The loan facility has $3,250,000 unused and
available at December 31, 1999......................... 3,050,000 --
$1,020,000 loan facility with a lot developer, interest
at 4%, interest payable annually, collateralized by
deed of trust, due January 10, 2000. The loan facility
has $0 unused and available at December 31, 1999....... 1,020,000 --
$4,000,000 loan facility with a financial institution,
interest at prime rate, interest payable monthly,
collateralized by a deed of trust on the finished lots,
due June 1, 2001. The loan facility has $2,996,000
unused and available at December 31, 1999.............. 1,004,000 --
$331,000 loan facility with a lot developer to finance
lot premiums, principal due upon the closing of the
sale of the lot or December 27, 2004. The loan facility
has $0 unused and available at December 31, 1999....... 331,000 --
---------- ----------
Total................................................... $7,333,000 $2,793,000
========== ==========
</TABLE>
B-29
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
Notes payable for other debt obligations at December 31 consist of the
following:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
$900,000 unsecured convertible debt to certain members of
the board of directors. Interest at prime rate plus 3%,
payable monthly, convertible into common stock at a rate
of $3 per share, due October 1, 2000, paid in February
2000...................................................... $ 900,000 $900,000
Loan with a financial institution, paid during 1999........ -- 28,000
$1,424,000 revolving line of credit for working capital,
interest at prime plus 1%, interest payable monthly,
collateralized by residential real estate, due
December 30, 2000. The revolving line of credit has
$1,326,000 unused and available at December 31, 1999...... 98,000 --
$1,850,000 unsecured revolving line of credit, interest at
rate of the lesser of LIBOR plus 225 basis points or
prime, interest payable monthly, interest due April 1,
2001.
The revolving line of credit has $0 unused and available at
December 31, 1999......................................... 1,850,000 --
---------- --------
Total...................................................... $2,848,000 $928,000
========== ========
</TABLE>
The Company has an unsecured working capital line of credit in the amount of
$1,000,000. The line of credit bears interest at prime plus 1% and matures
April 1, 2000. No amounts were outstanding under this line of credit at
December 31, 1999.
At December 31, 1999, the Company's debt maturity schedule, excluding
construction related debt is as follows:
<TABLE>
<S> <C>
2000......................................................... $ 3,257,000
2001......................................................... 3,874,000
2002......................................................... 3,050,000
-----------
Total........................................................ $10,181,000
===========
</TABLE>
The Company's construction related debt has due dates in 2000; however,
principal and interest are generally due upon sale of the respective
collateral, which is expected to occur in 2000. Construction related financing
arrangements are generally renewed in the ordinary course of business.
During the years ended December 31, 1999, 1998 and 1997, interest of
$2,756,000, $3,050,000, and $2,303,000 was incurred, of which $101,000,
$648,000 and $578,000 was to related parties. Interest totaling $2,408,000,
$2,152,000 and $1,663,000 was capitalized in each of the respective years.
Interest paid, net of amounts capitalized, totaled $317,000, $905,000 and
$897,000 in 1999, 1998 and 1997, respectively. The weighted average interest
rate for the years ended December 31, 1999, 1998 and 1997 was 9.75%, 12.06% and
12.25%, respectively.
The Company's notes payable and revolving credit facilities bear interest at
variable rates based on prime. As a result, the carrying amount of these
instruments approximates their fair value.
3. INCOME TAXES
The Company computes deferred income taxes based on the difference between
the financial statement and income tax bases of assets and liabilities and
operating loss and tax credit carryforwards, using enacted tax rates.
B-30
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
The components of income tax (expense) benefit are as follows for the year
ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
----------- --------- --------
<S> <C> <C> <C>
Current..................................... $(1,928,000) $(745,000) $ --
Deferred.................................... 469,000 (85,000) 901,000
----------- --------- --------
Tax (expense) benefit....................... $(1,459,000) $(830,000) $901,000
=========== ========= ========
</TABLE>
Reconciliations of the expected tax at the statutory tax rate to the actual
tax (expense) benefit are as follows for the year ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Expected tax (expense) benefit at
the statutory rate................. $(1,738,000) $(1,024,000) $ (870,000)
State taxes, net of federal
benefit............................ (179,000) (105,000) (90,000)
Change in the valuation allowance... 464,000 276,000 1,330,000
Utilization of NOL carryforwards and
tax credits........................ -- 45,000 467,000
Other............................... (6,000) (22,000) 64,000
----------- ----------- ----------
Actual tax (expense) benefit........ $(1,459,000) $ (830,000) $ 901,000
=========== =========== ==========
</TABLE>
The tax effects of significant items comprising the Company's net deferred
tax asset as of December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Residential real estate............................... $1,191,000 $1,710,000
Warranty reserve...................................... 196,000 233,000
Other................................................. 227,000 106,000
---------- ----------
1,614,000 2,049,000
---------- ----------
Deferred tax liabilities:
Capitalized interest.................................. (161,000) (286,000)
Depreciation.......................................... (43,000) (133,000)
(204,000) (419,000)
Total................................................. 1,410,000 1,630,000
Less valuation allowance.............................. -- (464,000)
---------- ----------
Net deferred tax asset.................................. $1,410,000 $1,166,000
========== ==========
</TABLE>
The net change in the total valuation allowance during the years ended
December 31, 1999, 1998 and 1997 was a reduction of $464,000, $276,000 and
$1,330,000, respectively, as a result of the utilization of tax credits and net
operating loss carryforwards and the reevaluation of the expected results of
future operations. The amount of the deferred tax assets considered realizable,
however, could be decreased in the near term if estimates of future taxable
income are changed.
4. COMMON STOCK
The Company has stock option plans giving certain officers and employees the
right to purchase shares of its common stock at quoted market value at date of
grant. At December 31, 1999, 760,000 shares have been
B-31
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
reserved under the plans. The plans allow the options to be exercised in four
equal annual installments, beginning one year after the date of grant, and have
a maximum term of ten years. Changes in options outstanding under the plans for
the three years ended December 31, 1999, are as follows:
<TABLE>
<CAPTION>
Weighted-Average Number of
Exercise Price Shares
---------------- ---------
<S> <C> <C>
Options outstanding, December 31, 1996.............. $1.31 604,140
Forfeited......................................... 2.50 (500)
--------
Options outstanding, December 31, 1997.............. 1.30 603,640
Granted........................................... 2.22 228,250
Forfeited......................................... 1.18 (215,750)
Exercised......................................... 1.10 (78,000)
--------
Options outstanding, December 31, 1998.............. 1.77 538,140
Forfeited......................................... 1.26 (12,990)
Exercised......................................... 0.90 (29,900)
--------
Options outstanding, December 31, 1999.............. 1.84 495,250
========
Total exercisable at December 31, 1999.............. 1.75 296,563
========
</TABLE>
As of December 31, 1999, the 495,250 options outstanding under the plans
have exercise prices which range from $.65 to $2.50 and a weighted-average
remaining contractual life of 6.12 years.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). Accordingly, no compensation cost has been recognized
for options granted by the Company. Had compensation expense for the options
granted been determined based on the fair value at the grant dates, consistent
with the provisions of SFAS 123, the Company's net income and net income per
share would have been changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net income:
As reported............................ $3,652,000 $2,182,000 $3,460,000
Pro forma.............................. 3,652,000 1,985,000 3,460,000
Net income per share--basic:
As reported............................ $ 0.49 $ 0.29 $ 0.47
Pro forma.............................. 0.49 0.27 0.47
Net income per share--diluted:
As reported............................ $ 0.47 $ 0.29 $ 0.46
Pro forma.............................. 0.47 0.26 0.46
</TABLE>
The fair value of the options for disclosure purposes was estimated on the
dates of grant in 1998 using the Black-Scholes Model with the following
assumptions:
<TABLE>
<CAPTION>
1998
-------
<S> <C>
Expected dividend yield............................................ 0%
Expected price volatility.......................................... 42%
Risk-free interest rate............................................ 4.5%
Expected life of options........................................... 4 years
</TABLE>
B-32
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
5. EARNINGS PER SHARE
Basic net income per share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted income per share
includes the effects of convertible debt described in Note 2 and includes the
potential dilution that could occur upon the exercise of the stock options
described in Note 4, computed using the treasury stock method, which assumes
that the increase in the number of shares is reduced by the number of shares
which could have been repurchased by the Company with the proceeds from the
exercise of the options (which were assumed to have been made at the average
market price of the common shares during the reporting period).
The following table reconciles the income and share amount used in the
calculation of net income per share.
<TABLE>
<CAPTION>
Net Income
Net Income Shares Per Share
---------- --------- ----------
<S> <C> <C> <C>
For the year ended December 31, 1999:
Basic...................................... $3,652,000 7,441,000 $0.49
Effect of options.......................... 88,000
Effect of convertible debt................. 62,000 300,000
---------- ---------
Diluted...................................... $3,714,000 7,829,000 $0.47
========== =========
For the year ended December 31, 1998:
Basic...................................... $2,182,000 7,412,000 $0.29
Effect of options.......................... 124,000
Effect of convertible debt................. 75,000 300,000
---------- ---------
Diluted...................................... $2,257,000 7,836,000 $0.29
========== =========
For the year ended December 31, 1997:
Basic...................................... $3,460,000 7,355,000 $0.47
Effect of options 68,000
Effect of convertible debt................. 94,000 300,000
---------- ---------
Diluted...................................... $3,554,000 7,723,000 $0.46
========== =========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES AND OTHER MATTERS
The Company leases property, equipment and model homes under operating
leases. Total rental expense under all operating leases was approximately
$434,000, $359,000 and $250,000 for 1999, 1998 and 1997, respectively.
As of December 31, 1999, the Company's future minimum payments under
operating leases are as follows:
<TABLE>
<S> <C>
2000......................................................... $ 368,000
2001......................................................... 313,000
2002......................................................... 262,000
2003......................................................... 247,000
2004......................................................... 125,000
----------
Total minimum lease payments............................... $1,315,000
==========
</TABLE>
B-33
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
In March 1997, the Company sold its office building to an unrelated party
and recognized a gain on the sale (included in other income) of $542,000.
The Company has a profit sharing retirement plan (the Plan) which includes a
401(k) feature under which eligible employees may contribute up to 12% of their
salaries. Company contributions are at the discretion of the Company's board of
directors unless required by ERISA regulations. Total Company contributions to
the Plan for the years ended December 31, 1999, 1998 and 1997 were $100,000,
$57,000 and $64,000, respectively.
The Company has a profit sharing plan whereby pretax profit is shared with
key employees based on formulas as defined in the agreement. Approximately
$578,000, $289,000 and $90,000 has been incurred as of December 31, 1999, 1998
and 1997 with respect to this plan.
The Company has arranged letters of credit of $617,000 at December 31, 1999
related to its obligations to local governments to warrant roads and other
improvements in various developments. The Company does not believe that any
letters of credit are likely to be drawn upon.
The Company incurred $68,000, $115,000 and $61,000 in the years ended
December 31, 1999, 1998 and 1997 respectively, for legal fees with a firm
having a principal who is also a director of the Company.
7. LEGAL PROCEEDINGS
The Company is involved in various legal matters of a nature incidental to
its business which, in the opinion of management, should not have a material
adverse effect on the Company.
8. SUBSEQUENT EVENT
In January 2000, Standard Pacific Corporation offered to purchase all of The
Writer Corporation's outstanding stock for $3.42 per share. As of February 25,
2000, the sale had not yet occurred.
B-34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE WRITER CORPORATION
(Registrant)
/s/ George S. Writer, Jr.
By: _________________________________
George S. Writer, Jr.
Chairman of the Board of
Directors, Principal Executive
Officer
/s/ Daniel J. Nickless
By: _________________________________
Daniel J. Nickless
President, Chief Operating
Officer, Chief Financial Officer
and Treasurer
Date: March 27, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ George S. Writer, Jr. Chairman of the Board of March 27, 2000
____________________________________ Directors and Principal
George S. Writer, Jr. Executive Officer
/s/ Ronald S. Loser Secretary and Director March 27, 2000
____________________________________
Ronald S. Loser
/s/ Deane J. Writer, Jr. Director March 27, 2000
____________________________________
Deane J. Writer, Jr.
/s/ Roland Seidler, Jr. Director March 27, 2000
____________________________________
Roland Seidler, Jr.
/s/ Louis P. Bansbach, III Director March 27, 2000
____________________________________
Louis P. Bansbach, III
/s/ Robert G. Tointon Director March 27, 2000
____________________________________
Robert G. Tointon
/s/ William J Gillilan, III Director March 27, 2000
____________________________________
William J Gillilan, III
</TABLE>
B-35
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
B-36
<PAGE>
APPENDIX C
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 0-08305
----------------
THE WRITER CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-0510478
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.
6061 S. Willow Drive, #232, Englewood, Colorado 80111
(Address of principal executive offices)
(303) 779-4100
(Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
during the preceding 12 months (or for such shorter period that the registrant
is required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
The number of shares outstanding of the registrant's common stock as of May
5, 2000 was 7,462,480.
===============================================================================
C-1
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets March 31, 2000 and December 31, 1999
(Unaudited)......................................................... C-3
Condensed Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999 (Unaudited)........................... C-4
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 (Unaudited)........................... C-5
Notes to Consolidated Financial Statements (Unaudited)............... C-6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... C-7
Item 3. Quantitative and Qualitative Disclosures about Market Risk..... C-11
PART II. OTHER INFORMATION............................................... C-12
</TABLE>
C-2
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December
2000 31, 1999
----------- -----------
<S> <C> <C>
ASSETS
------
Residential real estate held for sale, net:
Homes under construction............................. $22,519,000 $23,349,000
Model homes and furnishings.......................... 5,704,000 4,760,000
Land and land development............................ 16,808,000 17,859,000
Raw land............................................. 3,957,000 3,897,000
----------- -----------
Subtotal........................................... 48,988,000 49,865,000
Office property and equipment, less accumulated
depreciation of $856,000 and $653,000................. 549,000 504,000
Other assets:
Cash and cash equivalents............................ 3,186,000 4,996,000
Restricted cash...................................... 1,227,000 589,000
Accounts receivable.................................. 228,000 296,000
Deferred tax asset................................... 1,324,000 1,410,000
Other................................................ 1,568,000 1,550,000
----------- -----------
Total.............................................. $57,070,000 $59,210,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Notes payable........................................ $25,821,000 $27,495,000
Accounts payable and accrued expenses................ 7,030,000 8,179,000
Accrued interest..................................... 181,000 208,000
----------- -----------
Total.............................................. 33,032,000 35,882,000
Stockholders' Equity:
Common stock, $.10 par value; authorized, 10,000,000
shares; 7,462,480 and 7,432,600 shares issued and
outstanding......................................... 746,000 746,000
Additional paid-in capital........................... 12,454,000 12,454,000
Retained earnings.................................... 10,838,000 10,128,000
----------- -----------
Total Stockholders' Equity, net.................... 24,038,000 23,328,000
----------- -----------
Total.............................................. $57,070,000 $59,210,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
C-3
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------
2000 1999
------------ -----------
<S> <C> <C>
Residential operations:
Revenue............................................ $ 19,891,000 $12,213,000
Cost of sales...................................... (15,800,000) (9,952,000)
Expenses........................................... (3,041,000) (2,276,000)
------------ -----------
Income from residential operations................... 1,050,000 (15,000)
Interest and other income, net....................... 95,000 30,000
------------ -----------
Net income before income taxes....................... 1,145,000 15,000
Income tax expense................................... (435,000) --
------------ -----------
Net income........................................... $ 710,000 $ 15,000
============ ===========
Earnings per share:
Basic.............................................. $ 0.10 $ 0.00
============ ===========
Diluted............................................ $ 0.09 $ 0.00
============ ===========
Weighted average number of shares outstanding:
Basic.............................................. 7,462,000 7,433,000
============ ===========
Diluted............................................ 7,747,000 7,825,000
============ ===========
</TABLE>
See notes to consolidated financial statements.
C-4
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------
2000 1999
------------ -----------
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES: ............. $ (80,000) $(3,124,000)
------------ -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of office property and equipment ....... (56,000) (54,000)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable....................... 11,018,000 9,655,000
Principal payments on notes payable............... (12,692,000) (6,853,000)
------------ -----------
Net cash provided in financing activities....... (1,674,000) 2,802,000
------------ -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS........... (1,810,000) (376,000)
CASH AND CASH EQUIVALENTS, beginning of period ..... 4,996,000 3,363,000
------------ -----------
CASH AND CASH EQUIVALENTS, end of period ........... $ 3,186,000 $ 2,987,000
============ ===========
</TABLE>
See notes to consolidated financial statements.
C-5
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Accounting Policies:
The consolidated balance sheet as of March 31, 2000 and the related
condensed consolidated statements of operations and cash flows for the three
month period ended March 31, 2000 and 1999 are unaudited, but in management's
opinion, include all adjustments necessary for a fair presentation of such
financial statements. Such adjustments consisted only of normal recurring
items. Interim results are not necessarily indicative of results for a full
year.
The consolidated financial statements include the accounts of The Writer
Corporation and its wholly owned subsidiaries (the Company). All significant
inter-company transactions and balances have been eliminated in consolidation.
The financial statements should be read in conjunction with the audited
Consolidated Financial Statements included in the annual report on Form 10-K
for the year ended December 31, 1999. Except as described herein, the
accounting policies utilized in the preparation of these financial statements
are the same as those set forth in the Company's annual financial statements
except as modified for interim accounting treatment.
Adoption of SFAS 130 and SFAS 131 had no effect on the Company's financial
statements. The Company has no derivative instruments and does not engage in
hedging activities, therefore, the adoption of SFAS 133 will not impact its
financial statements.
Certain items in 1999 have been reclassified to conform with the 2000
presentation.
Earnings per share
The following table reconciles income and the number of shares outstanding
used in the calculation of basic and diluted earnings per share.
<TABLE>
<CAPTION>
Income Shares Per Share
-------- --------- ---------
<S> <C> <C> <C>
For the Three Months Ended March 31, 2000:
Net Income....................................... $710,000 7,462,000 $0.10
Effect of options................................ 0 149,000
Effect of convertible debt....................... 8,000 136,000
-------- ---------
Net income per share--assuming dilution........ $718,000 7,747,000 $0.09
======== ========= =====
For the Three Months Ended March 31, 1999:
Net Income....................................... $ 15,000 7,433,000 $0.00
Effect of options................................ 0 92,000
Effect of convertible debt....................... 16,000 300,000
-------- ---------
Net income per share--assuming dilution........ $ 31,000 7,825,000 $0.00
======== ========= =====
</TABLE>
C-6
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS
(DENOTED WITH AN ASTERISK (*) AT THE END OF SUCH STATEMENT) THAT INVOLVE RISKS
AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" BELOW.
Forward Looking Statement
In connection with, and because we desire to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, we
caution readers regarding certain forward looking statements contained in the
following discussion and elsewhere in this report and in any other statements
made by or on our behalf whether or not in future filings with the Securities
and Exchange Commission. Forward looking statements are statements not based on
historical information and which relate to the future operations, strategies,
financial results, or other developments. In particular, statements using verbs
such as, "expected", "anticipate", "believe", or words of similar import
generally involve forward looking statements. Without limiting the foregoing,
forward looking statements include statements which represent our beliefs
concerning future, or projected levels of sales of our homes, investments in
land or other assets, projected absorption rates, or our ability to attract
needed financing, or the continued earnings or profitability of our activities.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic, and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by or on behalf of us. Whether or not actual results differ
materially from forward looking statements may depend on numerous foreseeable
and unforeseeable events or developments, some of which may be national in
scope, such as general economic conditions and interest rates; some of which
may be related to the homebuilding industry generally, such as price,
competition, regulatory developments and industry consolidation; and others of
which may relate to the us specifically, such as credit availability and the
liquidity necessary to provide equity into land acquisition and development
transactions and other factors.
Financial Condition
At March 31, 2000 we had a backlog of 108 homes under contract. This backlog
represents $27,861,000 of potential revenue. At December 31, 1999 we had a
backlog of 107 homes representing $24,326,000 in potential revenue. This
increase in potential revenue of 15% or $3,535,000 above the December 1999
level, reflects sales of a new product line that has an average sales price of
approximately $375,000.
Our inventory of homes under construction decreased $830,000 or 4% during
the three months ending March 2000. This decrease is due in part to the above,
mentioned start up of our new product line.
Model homes and furnishings increased by $944,000 or 20% during the three
months ending March 2000. During the quarter we opened three new townhome
models at Saddlebrook in Stetson Creek and one detached single family model in
Fossil Lake Ranch opened April 15, 2000. In our Denver Division, two detached
single family models opened at Talavera in Sunrise Ridge, a project in Arvada,
Colorado. At Tallyn's Reach in Aurora, Colorado, three detached single family
models are under construction which are expected to open in July 2000.*
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<PAGE>
Our investment in land and land development decreased $1,051,000 or 6%
during the three months ending March 2000. Development continues at Settler's
Village, Northpark, Sunrise Ridge and Canterbury Park at Castle Pines North in
the Denver Division. In the Northern Division, development continues at
Saddlebrook townhomes and on 35 single family detached lots both at Stetson
Creek in Ft. Collins, Colorado. We have begun development on 147 single family
attached lots at the Highlands Ranch Golf Course. These expenditures less the
cost of lots transferred to production account for the net decrease.
Our raw land account holds one parcel of approximately 106 acres of ground
in Ft. Collins, Colorado. We have platted the site into 470 single family lots
and are finalizing development agreements. We are also finalizing the planning
and engineering process for the product lines to be marketed at this
traditional neighborhood development.
Our office property and equipment account increased $45,000 or 9% during the
three months ending March 2000. The increase is primarily due to the set up of
new sales offices at Talavera, Saddlebrook and Fossil Lake Ranch.
Cash balances have decreased by $1,810,000 or 36% during the three months
ending March 2000. The decrease reflects the pay down of debt in the amount of
$1,674,000, our efforts to accelerate payments to subcontractors and vendors,
and the need to provide equity contribution in recent acquisitions of land. Our
restricted cash account has increased $638,000 or 108% during the three months
ending March 2000. The increase is attributable to the timing of release
payments associated with higher levels of closings versus advances on these
same acquisition and development loans.
Accounts receivable balances have decreased by $68,000 or 23% during the
three months ending March 2000. The decrease is due to a reduction in deposits
that secure the performance of development work.
Our notes payable balance decreased by $1,674,000 or 6% during the three
months ending March 2000, which reflects the wind down of Settler's Village,
Lowry, Northpark and the payoff of convertible debt to related parties.
Accounts payable, accrued expenses and accrued interest have decreased by
$1,176,000 or 14% during the three months ending March 2000, again reflecting
the wind down of older projects.
Liquidity and Capital Resources
During the first three months of 2000 we used $80,000 of cash in operating
activities. We also used cash to decrease our debt by $1,674,000.
With the sustained and improved operating performance that we have shown,
our relationships with our lenders have continued to solidify. This has
provided us with more financing opportunities to leverage our cash and has
provided greater opportunities to negotiate more favorable rates and terms. We
have also attracted lenders who will provide working capital facilities to
supplement our liquidity and capital resources generated by operations.
The credit facilities have available commitment of $5,924,000 at March 31,
2000, with $2,447,000 outstanding at that time. In April we used another
$2,500,000 to purchase a parcel of land (see further discussion below at Recent
Acquisitions) bringing the total outstanding to $4,947,000. These funds may not
provide all of the necessary equity, which traditional lending relationships
will require for leveraged financing of acquisition and development costs of
projects. Therefore, we expect to continue to re-employ our working capital
generated from operations to support growth and or debt retirement.*
We have offered profit or revenue participation to land sellers as part of
the acquisition price negotiation. Because of strong buyer demand for improved
and undeveloped land, many sellers in our market area are demanding profit
participation and requesting more stringent purchase terms, which include cash
at closing,
C-8
<PAGE>
closings prior to full entitlement, specific performance contracts and shorter
due diligence periods. We weigh all of these risk factors against perceived
opportunity as new projects are analyzed. Notwithstanding these factors, land
acquisition costs and risk continue to increase because of demand generated by
competing builders.
Recent Acquisitions
We have executed sales contracts for all of our homes in our Northpark,
Settler's Village, Summerhill, Greenbrook and Park Square communities. The
remaining contracts will close in the second quarter of 2000. We have been
actively seeking replacement opportunities and to that end have recently
completed ten land acquisitions.
In December 1998, the Company purchased a 140 unit single family parcel in
Arvada, Colorado. The sites were zoned and platted. We recently completed a re-
platting of a portion for our townhome product. Financing was provided by a
$1,500,000 unsecured line of credit. In April 1999, $500,000 of the line was
repaid and the same lender provided a $3,650,000 development facility. In
October 1999, the balance of the unsecured line of credit was repaid.
Construction financing for the single family detached models and the first
phase of construction has been provided by the same lender and construction has
commenced. Construction financing for the townhouse models and the first phase
of construction was provided by the same lender in February 2000.
In January 1999, we purchased a 102 unit single family attached parcel in
Ft. Collins, Colorado. This is a continuation of our Stetson Creek project.
Financing was provided through an existing $15,000,000 acquisition, development
and construction facility. Platting was completed in May 1999 and development,
sales and construction are in progress.
In July 1999, we closed on our purchase of 106 acres in Ft. Collins, which
is in the final stage of being entitled under the Ft. Collins City Plan. The
site is planned for approximately 470 single family units with three single
family detached products and two attached products. Financing was provided from
working capital and the use of an unsecured working capital line. We are in the
process of finalizing the acquisition, development and construction financing
to repay the working capital line.
In December 1999, we closed on our purchase of two luxury attached lifestyle
communities in Highlands Ranch, Colorado planned for 81 and 66 units. We have
secured acquisition, development and construction financing through one of our
existing lending relationships.
We have executed a contract for a 39 acre parcel in Castle Rock, Colorado.
The parcel is zoned for approximately 180 units, but must be platted through
the city of Castle Rock. We are planning the area for both single family
attached and detached. The contract calls for a three phase take down beginning
at final plat, and annually thereafter.
In July 1999, we executed a purchase agreement to acquire 86 finished single
family sites in south Aurora, Colorado. The sites are part of a 2,400 lot
master planned community currently under development. The lots will be acquired
over a two year period, on a quarterly basis, beginning in December 1999.*
In June 1999, we contracted to purchase approximately 63 acres consisting of
three parcels of partially developed land located in the City of Westminster,
Colorado. During April 2000 we closed the purchase of phase one using our lines
of credit. An acquisition and development loan is in process for this 45 lot
site. At the same time we contracted for a fourth parcel containing
approximately ten acres which is zoned for attached single family.
In August 1999, we acquired 35 platted single family lots in Ft. Collins,
Colorado. This is a continuation of our Stetson Creek project. Acquisition
financing was provided by the seller. Development and construction financing
will be through an existing $25,000,000 loan facility.
C-9
<PAGE>
In August 1999, we executed a purchase agreement to acquire 22 developed
single family lots in Ft. Collins, Colorado. The lots will be acquired over the
next year,* and are currently being developed by the seller.
In October 1999, we executed an agreement which secures the right to acquire
14 acres in Loveland, Colorado. Under the agreement, we will be responsible to
plat the site so that no less than 126 townhomes can be built. No closing is
anticipated until the final plat is approved. We are currently in a due
diligence period, and have begun the entitlement process, but no assurance can
be provided that this transaction will close.
Both executed and potential acquisitions will require equity investments,
which our management expects to obtain from working capital generation and
through additional borrowing from our working capital facilities. The balance
will be financed through traditional lending relationships.*
Results of Operations
During the three months ending March 2000, we closed 83 units versus 59 for
same period in 1999.
The average sales price was $238,494 for the first three months of 2000
compared to $191,934 for the same period in 1999. The mix of products sold
during the two time periods is illustrated below.
<TABLE>
<CAPTION>
Single
Closings Townhomes Family Total
-------- --------- ------ -----
<S> <C> <C> <C>
3 month period ended Mar. 31, 2000.................... 59 24 83
3 month period ended Mar. 31, 1999.................... 41 18 59
</TABLE>
Revenue for the three month period ended March 31, 2000 was $19,891,000, as
compared to $12,213,000 for the same period in 1999. The increase of $7,678,000
or 63% is the result of additional unit closings and higher average unit
prices. Gross profit related to home sales increased by $1,913,000 or 90% from
$2,151,000 to $4,082,000 for the first three months of 1999 and 2000. During
the three months ended March 31, 2000 and 1999 revenue from lots and tap sales
was $96,000 and $889,000 contributing $9,000 and $110,000 of gross profit
respectively. As a percentage of sales, our gross profit was 20.6% in the first
three months of 2000 as compared to 18.5% for the same period in 1999.
Operating expenses increased $765,000 or 34% for the three month period
ended March 31, 2000 as compared to the same period a year ago. The increases
is due to an increase in interest expense, net of capitalization, of $186,000
from $6,000 to $192,000, an increase in sales marketing expense of $191,000
from $1,313,000 to $1,504,000 and an increase in general and administrative
expense of $388,000 from $957,000 to $1,345,000. As a percentage of sales,
interest expense net of capitalization remains at less than 1%, sales and
marketing has decreased 3.2% from 10.8% to 7.6% and general and administrative
expense has decreased 1.0% from 7.8% to 6.7%.
Interest and other income, net increased $65,000 or 217% for the three month
period ended March 31, 2000 over the same period a year ago. The increase is
primarily made up of three items; interest income of $34,000, $27,000 in gains
on sales of model home furnishings and $18,000 of income from our mortgage
subsidiary WRT Financial, Limited Partnership.
We have recorded $710,000 in net income for the first quarter of 2000 an
increase of $695,000 over the first quarter of 1999.
Plan of Merger with Standard Pacific Corp.
We have been working over the last several months to finalize our merger
into TWC Corp., a wholly owned subsidiary of Standard Pacific Corp. We executed
a definitive merger agreement on Friday, April 14, 2000. The transaction will
not be finalized until additional requirements are met. We expect the merger to
be completed during the second or third quarter of this year.*
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Under the terms of the proposed acquisition, our stockholders will receive,
at their election, a combination of cash and/or Standard Pacific common stock
valued at $3.35 per share of our common stock. Not more that 60% and not less
that 50% of the aggregate consideration will be paid in shares of Standard
Pacific common stock. Standard Pacific's shares will be valued based on their
average trading price for a 20 day period prior to consummation of the merger,
provided that in no event will the shares be valued at less than $11.00 per
share or more than $13.50 per share. In the event the option to elect cash is
oversubscribed, our directors, officers and 10% shareholders have agreed to
accept shares of Standard Pacific common stock. See the Agreement and Plan of
Merger in our Form 8-K dated April 14, 2000, which is hereby incorporated by
reference.
Consummation of the transaction is subject to customary conditions,
including registration with the Securities and Exchange Commission and approval
of Writer's stockholders.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The primary market risk facing the Company is interest rate risk on debt
obligations.* We enter into debt obligations primarily to finance the
development and acquisition of land, and to support our homebuilding and
general corporate operations. All of our debt has variable interest rates,
which exposes us to interest rate risk. Our business strategy has been to
accept the interest rate risk associated with variable rate debt which allows
us to participate in the increased earnings and cash flows associated with
decreases in interest rates.
Under our current policies, we do not use interest rate derivative
instruments to manage our exposure to interest rate changes.
At March 31, 2000, we had variable rate debt outstanding of approximately
$26,000,000. The annual increase (decrease) in cash requirements for interest
at this level of borrowing, should the market rates increase or (decrease) by
10% compared to the interest rates in effect at March 31, 2000, would be
approximately $260,000 or ($260,000) respectively.
C-11
<PAGE>
THE WRITER CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(b) There were no reports on Form 8-K filed for the three months ended March
31, 2000.
C-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WRITER CORPORATION
(Registrant)
Date: May 11, 2000
By: /s/ Daniel J. Nickless
------------------------------
Daniel J. Nickless
President, Chief Operating and
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
C-14
<PAGE>
APPENDIX D--SECTIONS 7-113-101 THROUGH 7-113-302
OF THE COLORADO BUSINESS CORPORATION ACT
7-113-101--Definitions.
For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held
in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or
foreign corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at
the time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effective date of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action except to the extent that exclusion
would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares that are registered in the name of a nominee to the extent such
owner is recognized by the corporation as the shareholder as provided in
section 7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102--Right to dissent.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event
of any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party
if:
(I) Approval by the shareholders of that corporation is required for
the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation; or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102 (1); and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to section
7-112-102 (2).
(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any class or
series of shares which either were listed on a national securities exchange
registered under the federal "Securities Exchange Act of 1934", as amended, or
on the national
D-1
<PAGE>
market system of the national association of securities dealers automated
quotation system, or were held of record by more than two thousand
shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action;
or
(c) The effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall
not apply if the shareholder will receive for the shareholder's shares,
pursuant to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) Shares of any other corporation which at the effective date of the
plan of merger or share exchange either will be listed on a national
securities exchange registered under the federal "Securities Exchange Act
of 1934", as amended, or on the national market system of the national
association of securities dealers automated quotation system, or will be
held of record by more than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu of
fractional shares.
(2) (Deleted by amendment, L. 96, p. 1321, (S) 30, effective June 1, 1996.)
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in
the event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103--Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number, if
any, of each person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1) are
determined as if the shares as to which the record shareholder dissents and
the other shares of the record shareholder were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
D-2
<PAGE>
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders,
each such beneficial shareholder must certify to the corporation that the
beneficial shareholder and the record shareholder or record shareholders of all
shares owned beneficially by the beneficial shareholder have asserted, or will
timely assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such requirement
shall be stated in the dissenters' notice given pursuant to section 7-113-203.
7-113-201--Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is submitted to a vote at a shareholders' meeting, the notice of the
meeting shall be given to all shareholders, whether or not entitled to vote.
The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of
this article and the materials, if any, that, under articles 101 to 117 of this
title, are required to be given to shareholders entitled to vote on the
proposed action at the meeting. Failure to give notice as provided by this
subsection (1) shall not affect any action taken at the shareholders' meeting
for which the notice was to have been given, but any shareholder who was
entitled to dissent but who was not given such notice shall not be precluded
from demanding payment for the shareholder's shares under this article by
reason of the shareholder's failure to comply with the provisions of section 7-
113-202 (1).
(2) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized without a meeting of shareholders pursuant to section
7-107-104, any written or oral solicitation of a shareholder to execute a
writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or
may be entitled to assert dissenters' rights under this article, by a copy of
this article, and by the materials, if any, that, under articles 101 to 117 of
this title, would have been required to be given to shareholders entitled to
vote on the proposed action if the proposed action were submitted to a vote at
a shareholders' meeting. Failure to give notice as provided by this subsection
(2) shall not affect any action taken pursuant to section 7-107-104 for which
the notice was to have been given, but any shareholder who was entitled to
dissent but who was not given such notice shall not be precluded from demanding
payment for the shareholder's shares under this article by reason of the
shareholder's failure to comply with the provisions of section 7-113-202 (2).
7-113-202--Notice of intent to demand payment.
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is submitted to a vote at a shareholders' meeting and if notice of
dissenters' rights has been given to such shareholder in connection with the
action pursuant to section 7-113-201 (1), a shareholder who wishes to assert
dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken, written
notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized without a meeting of shareholders pursuant to section
7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201 (2), a
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1) or
(2) of this section is not entitled to demand payment for the shareholder's
shares under this article.
7-113-203--Dissenters' notice.
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized, the corporation shall give a written dissenters'
notice to all shareholders who are entitled to demand payment for their shares
under this article.
D-3
<PAGE>
(2) The dissenters' notice required by subsection (1) of this section shall
be given no later than ten days after the effective date of the corporate
action creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated
shares must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be
less than thirty days after the date the notice required by subsection (1)
of this section is given;
(f) State the requirement contemplated in section 7-113-103 (3), if such
requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204--Procedure to demand payment.
(1) A shareholder who is given a dissenters' notice pursuant to section 7-
113-203 and who wishes to assert dissenters' rights shall, in accordance with
the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in section 7-113-203 (2) (d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to transfer
the shares, until the effective date of the proposed corporate action giving
rise to the shareholder's exercise of dissenters' rights and has only the
right to receive payment for the shares after the effective date of such
corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209 (1) (b), the
demand for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the shareholder's
share certificates as required by the date or dates set in the dissenters'
notice is not entitled to payment for the shares under this article.
7-113-205--Uncertificated shares.
(1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the
transfer thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206--Payment.
(1) Except as provided in section 7-113-208, upon the effective date of the
corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is later,
the corporation shall pay each dissenter who complied with section 7-113-204,
at the address
D-4
<PAGE>
stated in the payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, the
amount the corporation estimates to be the fair value of the dissenter's
shares, plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet
as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, and, if the
corporation customarily provides such statements to shareholders, a
statement of changes in shareholders' equity for that year and a statement
of cash flow for that year, which balance sheet and statements shall have
been audited if the corporation customarily provides audited financial
statements to shareholders, as well as the latest available financial
statements, if any, for the interim or full-year period, which financial
statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under section
7-113-209; and
(e) A copy of this article.
7-113-207--Failure to take action.
(1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after the date
set by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set
by the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new
dissenters' notice, as provided in section 7-113-203, and the provisions of
sections 7-113-204 to 7-113-209 shall again be applicable.
7-113-208--Special provisions relating to shares acquired after announcement of
proposed corporate action.
(1) The corporation may, in or with the dissenters' notice given pursuant to
section 7-113-203, state the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action creating dissenters'
rights under section 7-113-102 and state that the dissenter shall certify in
writing, in or with the dissenter's payment demand under section 7-113-204,
whether or not the dissenter (or the person on whose behalf dissenters' rights
are asserted) acquired beneficial ownership of the shares before that date.
With respect to any dissenter who does not so certify in writing, in or with
the payment demand, that the dissenter or the person on whose behalf the
dissenter asserts dissenters' rights acquired beneficial ownership of the
shares before such date, the corporation may, in lieu of making the payment
provided in section 7-113-206, offer to make such payment if the dissenter
agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206 (2).
7-113-209--Procedure if dissenter is dissatisfied with payment or offer.
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any
payment made under section 7-113-206, or reject the corporation's offer under
section 7-113-208 and demand payment of the fair value of the shares and
interest due, if:
(a) The dissenter believes that the amount paid under section 7-113-206
or offered under section 7-113-208 is less than the fair value of the
shares or that the interest due was incorrectly calculated;
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<PAGE>
(b) The corporation fails to make payment under section 7-113-206 within
sixty days after the date set by the corporation by which the corporation
must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by section 7-113-207 (1).
(2) A dissenter waives the right to demand payment under this section unless
the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
7-113-301--Court action.
(1) If a demand for payment under section 7-113-209 remains unresolved, the
corporation may, within sixty days after receiving the payment demand, commence
a proceeding and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay to each dissenter whose demand
remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection
(1) of this section in the district court of the county in this state where the
corporation's principal office is located or, if the corporation has no
principal office in this state, in the district court of the county in which
its registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding commenced
under subsection (2) of this section as in an action against their shares, and
all parties shall be served with a copy of the petition. Service on each
dissenter shall be by registered or certified mail, to the address stated in
such dissenter's payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, or as
provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced under
subsection (2) of this section is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend a decision
on the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to such order. The parties to the
proceeding are entitled to the same discovery rights as parties in other civil
proceedings.
(5) Each dissenter made a party to the proceeding commenced under subsection
(2) of this section is entitled to judgment for the amount, if any, by which
the court finds the fair value of the dissenter's shares, plus interest,
exceeds the amount paid by the corporation, or for the fair value, plus
interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302--Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under section 7-113-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation; except that the court may assess
costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the court
finds the corporation did not substantially comply with the requirements of
part 2 of this article; or
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<PAGE>
(b) Against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to said counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefited.
D-7
<PAGE>
APPENDIX E
[The Seidler Companies Letterhead]
May 12, 2000
The Board of Directors of
The Writer Corporation
6061 S. Willow Drive, #232
Englewood, Colorado 80111
Dear Board Members:
We understand that The Writer Corporation ("Writer" or the "Company") has
entered into an Agreement and Plan of Merger (the "Agreement") dated April 14,
2000 with Standard Pacific Corp. ("Standard Pacific") in which Writer shall be
merged with and into a wholly-owned subsidiary of Standard Pacific. Under the
terms of the Agreement, each share of Writer Common Stock will be converted, at
each shareholder's election, into (i) shares of Standard Pacific Common Stock
equal to $3.35 divided by the Valuation Price, or (ii) cash, without interest,
of $3.35. Standard Pacific will also assume approximately $27.7 million of
Writer indebtedness. The Valuation Price is the arithmetic average of the
closing sale prices of Standard Pacific's Common Stock on the New York Stock
Exchange for the twenty consecutive trading-day period ending on the third
business day immediately prior to the anticipated closing date; provided
however, that if such average is less than $11.00 per share the Valuation Price
shall equal $11.00 per share and if the average is greater than $13.50 per
share, the Valuation Price shall equal $13.50 per share. If shareholders
representing more than 60% of the outstanding shares of Writer Common Stock
elect to receive Standard Pacific Common Stock there will be a pro rata cutback
of Standard Pacific Stock, with the balance of the consideration received in
cash. Likewise, if more than 50% of the aggregate merger consideration is
elected to be received in the form of cash, there will be a pro rata cutback of
cash, with the balance of the consideration received in Standard Pacific Common
Stock. The transaction as summarized above is hereinafter referred to as the
"Transaction."
You have requested our opinion (the "Opinion") with respect to the fairness,
from a financial point of view, of the consideration to be received by Writer's
shareholders in the Transaction outlined above. In connection with this
Opinion, we have made such reviews, analyses and inquiries, as we have deemed
necessary and appropriate under the circumstances. Among other things, we have:
1. reviewed certain publicly available business and historical information
in Writer's 10-K and 10-Q filings with the Securities and Exchange
Commission;
2. reviewed internal financial information and other data prepared by
management of Writer that are not publicly available, relating to the
business and financial prospects of Writer, including estimates and
financial projections of operating statements, cash flow statements and
balance sheets for the years ending December 31, 2000 and 2001;
3. discussed with members of the senior management of Writer the business,
operations and financial condition of the Company;
4. reviewed the Agreement and Plan of Merger dated April 14, 2000 among
Standard Pacific Corp., The Writer Corporation and TWC Acquisition
Corp.;
5. reviewed a draft of the preliminary proxy statement/prospectus filed May
12, 2000 (draft dated May 3, 2000) in substantially the form that it
will be distributed to the Company's shareholders;
6. reviewed publicly available financial and stock market data with respect
to certain other companies engaged in business we believe to be
generally comparable to that of Writer and Standard Pacific (the
"Comparables");
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<PAGE>
7. discounted the projected cash flows of Writer at rates ranging from 15%
to 20% to consider the risk of the cash flows and the time value of
money;
8. reviewed the historical market prices and trading volume of Writer's
Common Stock and the Common Stock of the Comparables;
9. reviewed comparable publicly available financial and stock market data
regarding Standard Pacific;
10. considered potential alternative business combinations and strategic
options involving Writer; and
11. conducted such other financial studies, analyses and investigations and
considered such other information, as we deemed appropriate.
Our engagement and the Opinion expressed herein are for the benefit of the
shareholders and the Board of Directors of Writer (the "Board"), and our
Opinion is rendered in connection with the Company's shareholders and Board's
consideration of the Transaction. It is further understood that this Opinion
may not be used for any other purpose, nor may it be reproduced, disseminated,
quoted or referred to at any time, in whole or in part, in any manner or for
any purpose, without our prior written consent; provided, however, that this
Opinion may be included in its entirety in any proxy statement distributed to
the Company's shareholders in connection with the Transaction and we consent to
the filing of this Opinion as part of Standard Pacific's registration
statement. Notwithstanding the foregoing, this Opinion is not intended and does
not constitute a recommendation to any such shareholder as to whether such
shareholder should vote to approve the Transaction, or elect to receive cash or
securities.
In arriving at our Opinion, we have not performed any appraisals or
valuations of specific assets or liabilities of either the Company or Standard
Pacific and have not been furnished with any such appraisals or valuations, and
express no opinion regarding the liquidation value of the Company or Standard
Pacific. Without limiting the generality of the foregoing, we have undertaken
no independent analysis of any pending or threatened litigation, possible
unasserted claims or other contingent liabilities to which either the Company
or Standard Pacific is a party or may be subject and our Opinion makes no
assumption concerning, and therefore does not consider, the possible assertion
of claims, outcomes or damages arising out of any such matters.
We have relied upon and assumed, without independent verification, that the
financial information provided to us has been reasonably prepared and reflects
the best currently available estimates of the financial results and condition
of the Company, and that there has been no material change in the assets,
financial condition, business or prospects of the Company or Standard Pacific
since the date of the most recent financial statements made available to us.
Without limiting the generality of the foregoing, for the purpose of this
Opinion, we have assumed that neither the Company nor Standard Pacific is a
party to any pending transactions, including external financing,
recapitalizations, acquisitions, or merger discussions, other than the
Transaction or in the ordinary course of business. We have also assumed that
the Transaction will be consummated in accordance with the Agreement referred
to above including, but not limited to, that the Transaction will qualify for
the tax consequences described in the draft preliminary proxy
statement/prospectus referred to above.
Events occurring after the date hereof could materially affect the
assumptions used in preparing this Opinion, however, we do not have any
obligation to update, revise or reaffirm this Opinion. We are not expressing
any opinion herein as to the prices at which shares of the Company's or
Standard Pacific's common stock have traded or at which such shares may trade
at any future time. We were not requested to opine as to, and this Opinion does
not in any manner address, the Company's underlying decision to proceed with or
effect the Transaction or structure thereof.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company or Standard Pacific and
do not assume any responsibility with respect to it. We have not made any
physical inspection or independent appraisal of any of the properties or assets
of the Company. Our opinion is necessarily based on business, economic, market
and other conditions as they exist and can be evaluated by us at the date of
this letter.
E-2
<PAGE>
For our services in rendering this Opinion, the Company will pay us a fee
and indemnify us against certain liabilities. We are also entitled to
additional fees that are contingent upon consummation of the Transaction. We
have, in the past, provided financing and financial advisory services to the
Company and have received fees and other compensation for the rendering of such
services. In the ordinary course of our business, we and our affiliates may
actively trade securities of the Company and Standard Pacific for our own
account or for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration proposed to be received by Writer's shareholders
in connection with the Transaction is fair, from a financial point of view, to
such shareholders.
Very truly yours,
THE SEIDLER COMPANIES INCORPORATED
/s/ Joseph C. Sherwood
By: ______________________________________
Joseph C. Sherwood, III
Managing Director of
Investment Banking Group
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law makes provision for the
indemnification of officers and directors in terms sufficiently broad to
indemnify officers and directors of Standard Pacific under certain
circumstances from liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933. Standard Pacific's Certificate of
Incorporation and Bylaws provide, in effect, that, to the fullest extent and
under the circumstances permitted by Section 145 of the DGCL, Standard Pacific
will indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is a director or officer of Standard Pacific or is or was
serving at the request of Standard Pacific as a director or officer of another
corporation or enterprise. Standard Pacific has entered into indemnification
agreements with its officers and directors. Standard Pacific may, in its
discretion, similarly indemnify its employees and agents. Standard Pacific's
Certificate relieves its directors from monetary damages to Standard Pacific or
its stockholders for each of such director's fiduciary duty as a director to
the fullest extent permitted by the DGCL. Under Section 102(b)(7) of the DGCL,
a corporation may relieve its directors from personal liability to such
corporation or its stockholders for monetary damages for any breach of their
fiduciary duty as directors except (i) for a breach of the duty of loyalty,
(ii) for failure to act in good faith, (iii) for intentional misconduct or
knowing violation of law, (iv) for willful or negligent violations of certain
provisions in the DGCL imposing certain requirements with respect to stock
repurchases, redemptions and dividends, or (v) for any transactions from which
the director derived an improper personal benefit. Depending upon the character
of the proceeding, under Delaware law, Standard Pacific may indemnify against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with any action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interest of the
company.
Standard Pacific currently maintains an insurance policy which, within the
limits and subject to the terms and conditions thereof, covers certain expenses
and liabilities that may be incurred by directors and officers in connection
with actions, suits or proceedings that may be brought against them as a result
of an act or omission committed or suffered while acting as a director or
officer of Standard Pacific.
Item 21. Exhibits.
See the Exhibit Index attached to this Registration Statement and
incorporated by reference.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
II-1
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and where applicable each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934), that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report, to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(d) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(e) The undersigned registrant undertakes that every prospectus: (i) that
is filed pursuant to paragraph (d) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Securities Act of
1933 and is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the proxy
statement/prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise,
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<PAGE>
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Irvine, State of California on July 25, 2000.
STANDARD PACIFIC CORP.
/s/ Stephen J. Scarborough
By: _________________________________
Name: Stephen J. Scarborough
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by or on behalf of the
following persons in the capacities indicated below and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board of July 25, 2000
____________________________________ Directors
(Arthur E. Svendsen)
/s/ Stephen J. Scarborough Chief Executive Officer, July 25, 2000
____________________________________ President and Director
(Stephen J. Scarborough) (Principal Executive
Officer)
* Vice President--Finance, July 25, 2000
____________________________________ Treasurer and Chief
(Andrew H. Parnes) Financial Officer (Principal
Financial Officer)
* Director July 25, 2000
____________________________________
(James L. Doti)
* Director July 25, 2000
____________________________________
(Ronald R. Foell)
* Director July 25, 2000
____________________________________
(Douglas C. Jacobs)
* Director July 25, 2000
____________________________________
(Keith D. Koeller)
* Director July 25, 2000
____________________________________
(Larry McNabb)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Director July , 2000
____________________________________
(Michael C. Cortney)
Director July , 2000
____________________________________
(Jeffrey V. Peterson)
/s/ Stephen J. Scarborough
*By: ______________________________
Stephen J. Scarborough
Attorney-in-fact
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of April 14, 2000 among Standard
Pacific Corp., The Writer Corporation, and TWC Acquisition Corp.
attached as Appendix A to the proxy statement/prospectus which is a
part of this Registration Statement on Form S-4.**
3.1 Certificate of Incorporation of the Registrant, incorporated by
reference to Exhibit 3.1 of the Registrant's Registration Statement on
Form S-4 (file no. 33-42293).*
3.2 Certificate of Correction of Certificate of Incorporation of the
Registrant, incorporated by reference to Exhibit 3.2 of the
Registrant's Registration Statement on Form 8-B filed with the
Securities and Exchange Commission on December 17, 1991.*
3.3 Form of Certificate of Amendment to Certificate of Incorporation of
the Registrant, incorporated by reference to Exhibit 3.3 of the
Registrant's Registration Statement on Form 8-B filed with the
Securities and Exchange Commission on December 17, 1991.*
3.4 Form of Certificate of Merger of the Registrant, incorporated by
reference to Exhibit 3.4 of the Registrant's Registration Statement on
Form 8-B filed with the Securities and Exchange Commission on December
17, 1991.*
3.5 Amended and Restated Bylaws of the Registrant.**
4.1 Rights Agreement, dated as of December 31, 1991, between the
Registrant and Manufacturers Hanover Trust Company of California, as
Rights Agent, incorporated by reference to Exhibit 4.1 of Amendment
No. 2 to the Registration Statement on Form S-4 (file no. 33-42293).*
4.2 Amendment No. 1 to Rights Agreement, effective as of May 12, 1999,
between the Registrant and First Chicago Trust Company of New York, as
rights agent, incorporated by reference to Exhibit 4.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1999.*
4.3 Standard Pacific Corp. Officers' Certificate dated March 5, 1993 with
respect to the Registrant's 10 1/2% Senior Notes due 2000,
incorporated by reference to Exhibit 4 of the Registrant's Current
Report on Form 8-K dated March 5, 1993.*
4.4 Standard Pacific Corp. Officers' Certificate dated June 17, 1997 with
respect to the Registrant's 8 1/2% Senior Notes due 2007, incorporated
by reference to Exhibit 4.1 of the Registrant's Current Report on Form
8-K dated June 17, 1997.*
4.5 Standard Pacific Corp. Officers' Certificate dated February 5, 1998
with respect to the Registrant's 8% Senior Notes due 2008,
incorporated by reference to Exhibit 4.4 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.*
4.6 Registration Rights Agreement dated as of February 5, 1998 between the
Registrant and SBC Warburg Dillon Read Inc., BancAmerica Robertson
Stephens and Donaldson Lufkin & Jenrette Securities Corporation,
incorporated by reference to Exhibit 4.5 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.*
4.7 Indenture, dated as of April 1, 1992, by and between the Registrant
and United States Trust Company of New York, as Trustee, incorporated
by reference to Exhibit 4 to the Registrant's Current Report on Form
8-K dated February 24, 1993.*
4.8 Indenture, dated as of April 1, 1999, by and between the Registrant
and The First National Bank of Chicago, as Trustee, incorporated by
reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-
K dated April 16, 1999.*
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.9 First Supplemental Indenture, dated as of April 13, 1999, by and
between the Registrant and The First National Bank of Chicago, as
Trustee, with Form of Note attached, incorporated by reference to
Exhibit 4.2 of the Registrant's Current Report on Form 8-K dated April
16, 1999.*
5.1 Opinion of Gibson, Dunn & Crutcher LLP.**
8.1 Tax Opinion of Gibson, Dunn & Crutcher LLP.**
8.2 Tax Opinion of Clanahan Tanner Downing & Knowlton, PC.**
10.1 Eighth Amended and Restated Revolving Credit Agreement dated as of
August 11, 1999, among the Registrant, Bank of America, National
Association, The First National Bank of Chicago, Guaranty Federal
Bank, F.S.B., Bank United, Fleet National Bank, PNC Bank, National
Association, Comerica Bank, Credit Lyonnais Los Angeles Branch, Sanwa
Bank California, Union Bank of California, NA, First American Bank
Texas, SSB and SunTrust Bank, incorporated by reference to Exhibit
10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.*
10.2 Standard Pacific Corp. 1991 Employee Stock Incentive Plan,
incorporated by reference to Annex B of the Registrant's prospectus
dated October 11, 1991, filed with the Securities and Exchange
Commission pursuant to Rule 424(b).*
10.3 Form of Stock Option Agreement to be used in connection with the
Standard Pacific Corp. 1991 Employee Stock Incentive Plan,
incorporated by reference to Exhibit 28.2 of the Registrant's
Registration Statement on Form S-8 filed on January 3, 1992.*
10.4 Standard Pacific Corp. 1997 Stock Incentive Plan, incorporated by
reference to Exhibit 99.1 of the Registrant's Registration Statement
on Form S-8 filed on August 21, 1997.*
10.5 Form of Non-Qualified Stock Option Agreement to be used in
Registrant's 1997 Stock Incentive Plan, incorporated by reference to
Exhibit 99.2 of the Registrant's Registration Statement on Form S-8
filed on August 21, 1997.*
10.6 Form of Non-Qualified Director's Stock Option Agreement to be used in
connection with the Registrant's 1997 Stock Incentive Plan,
incorporated by reference to Exhibit 99.3 of the Registrant's
Registration Statement on Form S-8 filed on August 21, 1997.*
10.7 Form of Incentive Stock Option Agreement to be used in connection with
the Registrant's 1997 Stock Incentive Plan, incorporated by reference
to Exhibit 99.4 of the Registrant's Registration Statement on Form S-8
filed on August 21, 1997.*
10.8 Standard Pacific Corp. 2000 Stock Incentive Plan incorporated by
reference to Appendix A of the Registrant's Proxy Statement on
Schedule 14A filed March 30, 2000.*
10.9 Stock Purchase Agreement, dated as of September 30, 1997, by and
between the Registrant, Duc Development Company and Daniel A. Duc,
incorporated by reference to Exhibit 10.9 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.*
10.10 Asset Purchase Agreement, dated August 13, 1998, by and among UDC
Homes, Inc., UDC Homes Construction, Inc., Shea Homes Limited
Partnership, Standard Pacific of Arizona, Inc., Standard Pacific
Construction, Inc., and the Registrant, incorporated by reference to
Exhibit 2.1 of the Registrant's Form 8-K dated August 28, 1998.*
10.11 Stock Purchase Agreement, dated as of August 26, 1998, between the
Registrant and American General Finance, Inc., as amended on March 11,
1999, incorporated by reference to Exhibit 10.2 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.*
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.12 Industrial Lease between The Irvine Company and the Registrant,
incorporated by reference to Exhibit 10.1 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1999.*
21.1 Subsidiaries of the Registrant, incorporated by reference to
Exhibit 21.1 of the Registrant's Form 10-K for the year ended December
31, 1999.*
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).**
23.2 Consent of Clanahan, Tanner, Downing and Knowlton, PC (included in
Exhibit 8.2).**
23.3 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.4 Consent of Deloitte & Touche LLP, Independent Auditors.
23.5 Consent of The Seidler Companies Incorporated, Investment Bankers.**
24.1 Power of Attorney (included on signature page).**
99.1 Form of Writer Proxy Card.**
</TABLE>
--------
* Incorporated by reference to a previous filing with the Securities and
Exchange Commission.
** Previously filed with this Registration Statement on Form S-4.
II-8
