1
OFFER TO PURCHASE FOR CASH
UP TO 10,678,792 OUTSTANDING SHARES OF SERIES A COMMON STOCK
OF
THE XXXXXXX COMPANIES
AT
$0.655 NET PER SHARE
BY
XXXXXXX XXXX
AND
XXXXXXX X. XXXX
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, NOVEMBER 5, 1999, UNLESS THE OFFER IS EXTENDED. XXXXXXX XXXX
AND XXXXXXX X. XXXX (COLLECTIVELY, THE "PURCHASERS") HAVE AGREED, UNDER CERTAIN
CIRCUMSTANCES AND SUBJECT TO THE TERMS AND CONDITIONS OF THE OFFER, TO EXTEND
THE OFFER FROM TIME TO TIME UNTIL THE CLOSING OF THE ACQUISITION (AS DEFINED
HEREIN).
THE OFFER IS BEING MADE AS PART OF A SERIES OF TRANSACTIONS THAT ARE
EXPECTED TO RESULT IN (I) THE ACQUISITION BY XXXXXXX HOMES, A CALIFORNIA
CORPORATION ("XXXXXXX HOMES") AND A WHOLLY OWNED SUBSIDIARY OF THE XXXXXXX
COMPANIES, A DELAWARE CORPORATION (THE "COMPANY"), OF SUBSTANTIALLY ALL OF THE
REAL ESTATE AND RELATED ASSETS AND LIABILITIES OF XXXXXXX XXXX HOMES, INC.
("WLHI"), A CALIFORNIA CORPORATION OWNED BY THE PURCHASERS, (II) THE PURCHASE BY
THE PURCHASERS OF OUTSTANDING SHARES OF THE COMPANY'S SERIES A COMMON STOCK
("SERIES A SHARES") PURSUANT TO THE OFFER AND THE PURCHASE BY WLHI (OR ONE OR
MORE OF ITS AFFILIATES) OF OUTSTANDING SHARES OF THE COMPANY'S SERIES B COMMON
STOCK ("SERIES B SHARES") PURSUANT TO THE SERIES B STOCK PURCHASE AGREEMENTS,
EACH AS DESCRIBED HEREIN, SUCH THAT FOLLOWING SUCH PURCHASES, THE PURCHASERS AND
THEIR AFFILIATES OWN UP TO 49.9% OF THE OUTSTANDING COMMON STOCK OF THE COMPANY,
AND (III) THE MERGER OF THE COMPANY WITH AND INTO XXXXXXX MERGER SUB, INC., A
NEWLY-FORMED DELAWARE CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF THE COMPANY
(THE "MERGER").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (A) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
1,989,180 SERIES A SHARES, SUBJECT TO ADJUSTMENT AS DESCRIBED HEREIN (THE
"MINIMUM CONDITION"), (B) WLHI (OR ONE OR MORE OF ITS AFFILIATES) CONTINUING TO
HAVE, AS OF THE EXPIRATION OF THE OFFER, THE LEGALLY ENFORCEABLE RIGHT TO
PURCHASE SERIES B SHARES PURSUANT TO EACH OF THE SERIES B STOCK PURCHASE
AGREEMENTS, (C) THE CONSUMMATION OF THE ACQUISITION BY XXXXXXX HOMES OF
SUBSTANTIALLY ALL OF THE REAL ESTATE AND RELATED ASSETS AND LIABILITIES OF WLHI
PURSUANT TO THE PURCHASE AGREEMENT (AS DEFINED HEREIN), AND (D) APPROVAL OF THE
MERGER BY HOLDERS OF A MAJORITY OF THE OUTSTANDING SERIES A SHARES AND SERIES B
SHARES VOTING TOGETHER AS A SINGLE CLASS.
A SPECIAL COMMITTEE OF INDEPENDENT MEMBERS OF THE BOARD OF DIRECTORS OF THE
COMPANY HAS UNANIMOUSLY DETERMINED THAT THE PURCHASE AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO AND IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS, AND IN FURTHERANCE OF THE TRANSACTIONS
CONTEMPLATED BY THE PURCHASE AGREEMENT, HAS RECOMMENDED THAT HOLDERS OF SERIES A
SHARES (OTHER THAN THE PURCHASERS AND CERTAIN HOLDERS OF SERIES B SHARES) ACCEPT
THE OFFER AND TENDER THEIR SERIES A SHARES PURSUANT TO THE OFFER; PROVIDED,
HOWEVER, THAT SUCH HOLDERS OF SERIES A SHARES SHOULD CONSULT WITH THEIR
FINANCIAL AND TAX ADVISORS PRIOR TO TENDERING THEIR SERIES A SHARES IN THE
OFFER.
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IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Series A Shares should either (i) complete and sign the Letter of Transmittal
(or a facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificate(s) representing
tendered Series A Shares and any other required documents to the Depositary or
tender such Series A Shares pursuant to the procedures for book-entry transfer
set forth in Section 3, or (ii) request such stockholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such stockholder. A stockholder whose Series A Shares are registered in the name
of a broker, dealer, commercial bank trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such Series A Shares.
A stockholder who desires to tender Series A Shares and whose certificates
representing such Series A Shares are not immediately available, or who cannot
comply on a timely basis with the procedures for book-entry transfer described
in this Offer to Purchase, may tender such Series A Shares by following the
procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance, or for additional copies of this
Offer to Purchase, the Letter of Transmittal or other tender offer materials,
may be directed to the Information Agent at its address and telephone number set
forth on the back cover of this Offer to Purchase. Stockholders may also contact
brokers, dealers, commercial banks and trust companies for assistance concerning
the Offer.
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October 7, 1999
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TABLE OF CONTENTS
PAGE
----
INTRODUCTION..................................................... 1
THE TENDER OFFER................................................. 2
1. Terms of the Offer; Expiration Date; Amendment;
Termination................................................. 2
2. Acceptance for Payment and Proration; Payment............... 4
3. Procedures for Tendering Series A Shares.................... 6
4. Withdrawal Rights........................................... 8
5. Certain Federal Income Tax Consequences..................... 9
6. Price Range of Series A Shares; Dividends................... 9
7. Certain Information Concerning the Company.................. 10
8. Certain Information Concerning the Purchasers............... 13
9. Source of Funds............................................. 15
10. Background of the Offer; The Purchase Agreement............. 16
11. Purpose of the Offer; Plans for the Company................. 25
12. Dividends and Distributions................................. 25
13. Effect of the Offer on the Market for the Series A Shares;
Stock Exchange Listing; Exchange Act Registration; Margin
Regulations................................................. 26
14. Conditions to the Offer..................................... 27
15. Certain Legal Matters....................................... 29
16. Fees and Expenses........................................... 30
17. Miscellaneous............................................... 30
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TO THE HOLDERS OF SERIES A COMMON STOCK
OF THE XXXXXXX COMPANIES:
INTRODUCTION
Xxxxxxx Xxxx and Xxxxxxx X. Xxxx (together, the "Purchasers") hereby offer
to purchase up to an aggregate of 10,678,792 shares (subject to adjustment as
described herein) of the outstanding Series A Common Stock, $0.01 par value per
share (the "Series A Shares"), of The Xxxxxxx Companies, a Delaware corporation
(the "Company"), at a price of $0.655 per Series A Share, net to the tendering
stockholder in cash, without interest thereon (the "Offer Price"), upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which, as extended or amended from time to
time, together constitute the "Offer"). Tendering stockholders of the Company
will not be obligated to pay brokerage fees or commissions or, except as set
forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes with
respect to the purchase of Series A Shares by the Purchasers pursuant to the
Offer. The Purchasers will pay all charges and expenses of ChaseMellon
Consulting Services, LLC, which is acting as Information Agent, and ChaseMellon
Shareholder Services, LLC, which is acting as Depositary in connection with the
Offer. See Section 16.
The Offer is being made pursuant to the Purchase Agreement and Escrow
Instructions dated as of October 7, 1999 (the "Purchase Agreement"), by and
among Xxxxxxx Xxxx Homes, Inc., a California corporation owned by the Purchasers
("WLHI"), the Purchasers, the Company and Xxxxxxx Homes, a California
corporation and a wholly owned subsidiary of the Company ("Xxxxxxx Homes"). The
Purchase Agreement provides for, among other things, the acquisition by Xxxxxxx
Homes of substantially all of the real estate and related assets of WLHI for the
cash purchase price of forty-eight million dollars ($48,000,000), subject to
adjustment, together with the assumption of substantially all liabilities of
WLHI (the "Acquisition"). The Purchase Agreement also contemplates that (a) the
Company will be merged with and into Xxxxxxx Merger Sub, Inc. ("New Xxxxxxx"), a
newly-formed Delaware corporation and a wholly owned subsidiary of the Company
(the "Merger"), and (b) WLHI (or one or more of its affiliates) will consummate
the purchase of up to 15,566,837 shares of the Company's Series B Common Stock,
$0.01 par value per share (the "Series B Shares"), pursuant to separate Stock
Purchase and Sale Agreements (collectively, the "Series B Stock Purchase
Agreements") between WLHI and each of GS Credit Partners, L.P., ING (U.S.)
Capital, LLC, and The Chase Manhattan Bank, as Trustee for First Plaza Group
Trust (collectively, the "Series B Stockholders"). Each Series B Share is
convertible into one Series A Share. (The Series A Shares and the Series B
Shares are collectively referred to herein as the "Common Stock.")
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
1,989,180 SERIES A SHARES, SUBJECT TO ADJUSTMENT AS DESCRIBED HEREIN (THE
"MINIMUM CONDITION"), (II) WLHI (OR ONE OR MORE OF ITS AFFILIATES) CONTINUING TO
HAVE, AS OF THE EXPIRATION OF THE OFFER, THE LEGALLY ENFORCEABLE RIGHT TO
PURCHASE SERIES B SHARES PURSUANT TO EACH OF THE SERIES B STOCK PURCHASE
AGREEMENTS, (III) THE CONSUMMATION OF THE ACQUISITION, AND (IV) APPROVAL OF THE
MERGER BY HOLDERS OF A MAJORITY OF THE OUTSTANDING SERIES A SHARES AND SERIES B
SHARES VOTING TOGETHER AS A SINGLE CLASS.
A SPECIAL COMMITTEE OF INDEPENDENT MEMBERS OF THE BOARD OF DIRECTORS OF THE
COMPANY HAS UNANIMOUSLY DETERMINED THAT THE PURCHASE AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO AND IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS, AND IN FURTHERANCE OF THE TRANSACTIONS
CONTEMPLATED BY THE PURCHASE AGREEMENT, HAS RECOMMENDED THAT HOLDERS OF SERIES A
SHARES (OTHER THAN THE PURCHASERS AND THE SERIES B STOCKHOLDERS) ACCEPT THE
OFFER AND TENDER THEIR SERIES A SHARES PURSUANT TO THE OFFER; PROVIDED, HOWEVER,
THAT SUCH HOLDERS OF SERIES A SHARES SHOULD CONSULT WITH THEIR FINANCIAL AND TAX
ADVISORS PRIOR TO TENDERING THEIR SERIES A SHARES IN THE OFFER.
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Warburg Dillon Read LLC ("Xxxxxxx Xxxxxx Read"), the financial advisor to
the Special Committee of the Board of Directors of the Company, has delivered to
the Special Committee its written opinion dated September 16, 1999, to the
effect that, after giving effect to the Acquisition, the Offer, the Merger and
the transactions contemplated under the Series B Stock Purchase Agreements, the
shares of common stock of New Xxxxxxx to be issued in the Merger to holders of
Series A Shares and, to the extent that any such holder of Series A Shares
(other than the Purchasers and the Series B Stockholders) tenders Series A
Shares in the Offer, the cash that may be received by each such tendering holder
of Series A Shares (other than the Purchasers and the Series B Stockholders),
subject to the proration provisions of the Offer, is fair to the holders of
Series A Shares (other than the Purchasers and the Series B Stockholders) from a
financial point of view. A copy of such opinion is included with the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being mailed to stockholders of the Company concurrently herewith.
Xxxxxxx Xxxxxx Read confirmed its opinion as of October 7, 1999. Stockholders
are urged to read the opinion in its entirety for a description of the
assumptions made, factors considered and procedures followed by Xxxxxxx Xxxxxx
Read.
The Merger has been proposed in order to implement restrictions on the
transfer of the Company's Common Stock. These stock transfer restrictions will
reduce, but not eliminate, the risk that an ownership change will occur with
respect to the Company that would limit the use by the Company of its
substantial tax net operating loss carryforwards to offset future taxable
income. The Merger and the transfer restrictions are described in detail in
proxy materials of the Company which have been filed with the Securities and
Exchange Commission (the "Commission"). Record holders of Common Stock as of
September 15, 1999 will receive these proxy materials in a separate mailing and
will be entitled to vote on the Merger at a special meeting of stockholders of
the Company. The Company's proxy materials contain important financial and other
information relating to the Merger and the Acquisition, and holders of Series A
Shares should review the proxy materials carefully before making any decision
with respect to the Offer.
Xxxxxxx Xxxx is presently the Chairman of the Board of Directors of the
Company. Each of the Purchasers and WLHI has agreed, and each of the Series B
Stockholders has conditionally agreed, to vote all shares of Common Stock owned
by them in favor of the Merger at the special meeting of the stockholders. As of
the date of the Offer, the Purchasers own and have the right to vote 5,439,589
of the issued and outstanding shares of Common Stock of the Company. In
addition, the Series B Stockholders have represented to WLHI in the Series B
Stock Purchase Agreements that they own an aggregate of 17,264,162 of the issued
and outstanding shares of Common Stock of the Company.
According to the Company, as of October 6, 1999, there were 34,792,732
Series A Shares and 17,402,946 Series B Shares issued and outstanding,
aggregating to 52,195,678 shares of Common Stock issued and outstanding. On
October 6, 1999, the last full trading day prior to the announcement of the
Purchase Agreement and the Purchasers' intention to commence the Offer, the
closing price per Series A Share on the New York Stock Exchange (the "NYSE") was
$0.8125.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE; AMENDMENT; TERMINATION
Upon the terms and subject to the conditions of the Offer, the Purchasers
will accept for payment and pay for all Series A Shares, up to a maximum
aggregate of 10,678,792 Series A Shares (subject to adjustment as described
below), which are validly tendered prior to the Expiration Date (as hereinafter
defined) and not properly withdrawn in accordance with Section 4. The term
"Expiration Date" means 12:00 midnight, New York City time, on Friday, November
5, 1999 (the "Initial Expiration Date"), unless and until the Purchasers, as
provided below, shall have extended the period of time for which the Offer is
open, in which event the term "Expiration Date" means the latest time and date
at which the Offer as so extended by the
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Purchasers, shall expire. Pursuant to the Purchase Agreement, the Purchasers,
subject to the terms and conditions of the Offer, have agreed to extend the
period of time during which the Offer is open if, on the Initial Expiration
Date, (i) the Minimum Condition shall not have been satisfied or waived by the
Purchasers, or (ii) the Acquisition shall not have been consummated or the
stockholders of the Company shall not have approved the Merger due to delays in
(a) obtaining necessary governmental or regulatory approvals of, or necessary
third party consents to, either of the Acquisition or the Merger, or (b)
obtaining the financing required to satisfy the conditions to the Acquisition,
or (c) obtaining the release of WLHI from certain performance bonds, guarantees
and other obligations as set forth in the Purchase Agreement. Under such
circumstances, the Purchasers have agreed to extend the Expiration Date of the
Offer from time to time and for such number of business days as may be necessary
to allow for such conditions to be satisfied and for the closing of the Offer to
be substantially coterminous with the closing of the Acquisition; provided,
however, that in no event shall the Purchasers be obligated to extend the
expiration of the Offer beyond November 30, 1999 (or thirty calendar days
thereafter in the event that the closing of the Acquisition or the stockholder
vote upon the Merger is delayed due to further delays in the process of
obtaining necessary governmental or regulatory approvals). The Purchasers
expressly reserve the right to decrease or waive the Minimum Condition and
otherwise to amend the terms and conditions of the Offer; provided that, without
the written consent of the Company, no amendment may be made which (1) decreases
the Offer Price, (2) decreases the number of Series A Shares sought, or (3)
amends the terms of the Offer in any manner adverse to the holders of Series A
Shares.
The Purchasers have agreed that if, after receiving the advice of counsel,
the Company determines that the consummation of the Offer and/or the purchases
by WLHI (or one or more of its affiliates) of Series B Shares under the Series B
Stock Purchase Agreements would result in an "ownership change" of the Company
for federal tax purposes or other adverse tax consequence to the Company, the
Purchasers will reduce the number of Series A Shares sought pursuant to the
Offer (but not below the number of Series A Shares required to satisfy the
Minimum Condition) to avoid such "ownership change" or other adverse federal tax
consequence.
If the Purchasers make a material change in the terms of the Offer or the
information concerning the Offer (including a decrease in the number of Series A
Shares sought pursuant to the Offer as required above) or waive a material
condition of the Offer, the Purchasers will disseminate additional tender offer
material and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d)
and 14e-1(b) promulgated by the Commission under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The minimum period during which the Offer
must remain open following material changes in the terms of the Offer or
information concerning the Offer, other than a change in price or a change in
the number of shares sought pursuant to the Offer, will depend upon the facts
and circumstances, including the relative materiality of the terms or
information. With respect to a change in price or a change in the number of
Series A Shares, a minimum of ten business days from the date that notice of
such change in the number of Series A Shares sought is first published or sent
or given to stockholders is generally required to allow for adequate
dissemination to stockholders and investor response. As used in this Offer to
Purchase, "business day" means any day other than Saturday, Sunday or a federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time, as computed in accordance with Rule 14d-1 under the Exchange
Act.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition, the consummation of the Acquisition, approval of the Merger
by holders of a majority of the Series A Shares and Series B Shares voting
together as a class, and the satisfaction of the other conditions set forth in
Section 14. If any such condition is not satisfied prior to the Expiration Date
of the Offer, the Purchasers may, subject to the terms of the Purchase
Agreement, (i) terminate the Offer and return all tendered Series A Shares to
tendering stockholders, (ii) extend the Offer and, subject to withdrawal rights
as set forth in Section 4, retain all such tendered Series A Shares until the
Expiration Date of the Offer as so extended, (iii) other than as described in
Section 14, waive such condition and, subject to any requirement to extend the
period of time during which the Offer is open, purchase all Series A Shares
validly tendered and not withdrawn by the Expiration Date, or (iv) delay
acceptance for payment of (whether or not the Series A Shares have
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theretofore been accepted for payment), or payment for, any Series A Shares
tendered and not withdrawn, subject to applicable law, until satisfaction or
waiver of the conditions to the Offer. Notwithstanding the foregoing, upon
consummation of the Acquisition in accordance with the terms of the Purchase
Agreement, all of the conditions to the Offer shall be deemed to have been
satisfied (other than the condition that there be no action, legislation,
regulation, ruling or judgment instituted or pending which would make illegal or
otherwise prohibit consummation of the Offer, the Merger or the purchase by WLHI
of the Series B Shares as contemplated under the Purchase Agreement and the
Series B Stock Purchase Agreements, or impose a limitation on the ability of the
Purchasers to acquire, hold or vote shares of Common Stock of the Company, or
require divestiture by the Purchasers or their respective affiliates of shares
of Common Stock or divestiture by the Company of any material portion of its
business or assets taken as a whole). In the Purchase Agreement, the Purchasers
have agreed, subject to the conditions in Section 14 and its rights under the
Offer, to accept for payment and pay for Series A Shares tendered pursuant to
the Offer as soon as the Purchasers are legally permitted to do so under
applicable law.
If the Purchasers extend the Offer, or if the Purchasers (whether before or
after their acceptance for payment of Series A Shares) are delayed in their
purchase of or payment for Series A Shares or are unable to pay for Series A
Shares pursuant to the Offer for any reason, then, without prejudice to the
Purchasers' rights under the Offer, the Depositary may retain tendered Series A
Shares on behalf of the Purchasers, and such Series A Shares may not be
withdrawn except to the extent tendering stockholders are entitled to withdrawal
rights as described in Section 4. The ability of the Purchasers to delay the
payment for Series A Shares which the Purchasers have accepted for payment is,
however, limited by Rule 14e-1(c) under the Exchange Act, which requires that a
bidder pay the consideration offered or return the securities deposited by or on
behalf of holders of securities promptly after the termination or withdrawal of
the bidder's offer.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement thereof, the announcement in the
case of an extension to be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rules 14d-4(c) and
14e-1(d) under the Exchange Act.
The Company has provided to the Purchasers a list containing the names and
addresses of the record holders of Series A Shares and lists of securities
positions of Series A Shares held in stock depositories for the purpose of
disseminating the Offer to stockholders of the Company. This Offer to Purchase
and the related Letter of Transmittal and other relevant materials will be
mailed to record holders of Series A Shares and will be furnished to brokers,
dealers, commercial banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the stockholder list or, if applicable,
who are listed as participants in a clearing agency's security position listing,
for subsequent transmittal to beneficial owners of Series A Shares.
2. ACCEPTANCE FOR PAYMENT AND PRORATION; PAYMENT
Pursuant to the terms of, and subject to the prior satisfaction or waiver
of the conditions of, the Offer (as it may be extended or amended), the
Purchasers will accept for payment and pay for all Series A Shares validly
tendered prior to the Expiration Date and not properly withdrawn as promptly as
practicable following such Expiration Date. If more than 10,678,792 Series A
Shares have been validly tendered and not withdrawn as of the Expiration Date of
the Offer, the Purchasers will accept for payment and purchase Series A Shares
from tendering stockholders on a pro rata basis, which calculation will be
adjusted downward to avoid acceptance for payment of fractional shares.
Proration for each stockholder tendering Series A Shares will be based on the
ratio of the number of Series A Shares tendered by each stockholder to the total
number of Series A Shares validly tendered and not properly withdrawn. Tendering
stockholders may designate in the Letter of Transmittal the order in which their
Series A Shares are to be purchased if proration is required. If the stockholder
does not designate an order in the Letter of Transmittal, Series A Shares will
be selected for purchase by the Depositary. In the event that proration is
required, the Purchasers will announce the final results of proration as soon as
practicable, but in no event later than five business days following the
Expiration Date. The Purchasers will not pay for any Series A Shares tendered
until after the final proration factor has been determined.
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Subject to applicable rules of the Commission, the Purchasers expressly
reserve the right to delay acceptance for payment of, or payment for, Series A
Shares in order to comply, in whole or in part, with any applicable law. See
Sections 14 and 15. Any such delays will be effected in compliance with Rule
14e-1(c) under the Exchange Act (relating to a bidder's obligation to pay for or
return tendered securities promptly after the termination or withdrawal of such
bidder's offer).
In all cases, payment for Series A Shares purchased pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) the certificates
evidencing such Series A Shares (the "Share Certificates"), or timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Series A Shares, if such procedure is available, into the Depositary's account
at The Depository Trust Company ("Book-Entry Transfer Facility") pursuant to the
procedures set forth in Section 3, (ii) the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message (as
defined below), and (iii) any other documents required by the Letter of
Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Series A Shares, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal, and
that Purchaser may enforce such agreement against the participant.
For purposes of the Offer, the Purchasers will be deemed to have accepted
for payment, and thereby purchased, Series A Shares validly tendered and not
withdrawn as, if, and when the Purchasers give oral or written notice to the
Depositary of the Purchasers' acceptance of such Series A Shares for payment.
Upon the terms and subject to the conditions of the Offer, payment for Series A
Shares accepted for payment pursuant to the Offer will be made by deposit of the
aggregate purchase price therefor with the Depositary, which will act as agent
for tendering stockholders for the purpose of receiving payment from the
Purchasers and transmitting payment to such tendering stockholders. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SERIES A SHARES BE PAID,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
Upon the deposit of funds with the Depositary for the purpose of making payments
to tendering stockholders, Purchasers' obligation to make such payment will be
satisfied and tendering stockholders must thereafter look solely to the
Depositary for payment of amounts owed to them by reason of the acceptance for
payment of Series A Shares pursuant to the Offer.
If any tendered Series A Shares are not accepted for payment for any reason
pursuant to the terms and conditions of the Offer, or if Share Certificates are
submitted evidencing more Series A Shares than are tendered, Share Certificates
evidencing unpurchased or untendered Series A Shares will be returned, without
expense to the tendering stockholder (or, in the case of Series A Shares
tendered by book-entry transfer into the Depositary's account at a Book-Entry
Transfer Facility pursuant to the procedure set forth in Section 3, such Series
A Shares will be credited to an account maintained at such Book-Entry Transfer
Facility), as promptly as practicable following the expiration, termination or
withdrawal of the Offer.
If, prior to the Expiration Date, the Purchasers increase the Offer Price
or otherwise increase the consideration offered to stockholders pursuant to the
Offer, such increased consideration will be paid to all holders whose Series A
Shares are purchased in the Offer, whether or not such Series A Shares were
tendered prior to such increase in consideration.
The Purchasers, and each of them individually, reserve the right to
transfer or assign, in whole at any time, or in part from time to time, to one
or more of their respective affiliates, the right to purchase all or any portion
of the Series A Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve the Purchasers of their obligations under the Offer
or prejudice the rights of tendering stockholders to receive payment for Series
A Shares validly tendered and accepted for payment pursuant to the Offer.
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3. PROCEDURES FOR TENDERING SERIES A SHARES
Valid Tender of Series A Shares. In order for Series A Shares to be
validly tendered pursuant to the Offer, either (a) the Letter of Transmittal or
a facsimile thereof, properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
delivery of Series A Shares, and any other required documents, must be received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date, and either the Share
Certificates evidencing tendered Series A Shares must be received by the
Depositary along with the Letter of Transmittal, or such Series A Shares must be
tendered pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary, in each case prior
to the Expiration Date, or (b) the tendering stockholder must comply with the
guaranteed delivery procedures described below.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Series A Shares at the Book-Entry Transfer Facility for purposes of the
Offer within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant of the Book-Entry Transfer
Facility's systems may make book-entry delivery of Series A Shares by causing
the Book-Entry Transfer Facility to transfer such Series A Shares into the
Depositary's account at a Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Series A Shares may be effected through book-entry transfer at a
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees, or an Agent's Message, and any other
required documents, must, in any case, be transmitted to and received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a member firm of a registered national securities exchange which
is a participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program, or by a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being referred to as
an "Eligible Institution"), unless the Series A Shares tendered thereby are
tendered (i) by a registered stockholder who has not completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal, or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate is not accepted for payment or is not tendered and is to be returned
to a person other than the registered holder(s), then the Share Certificate must
be endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Series A Shares
pursuant to the Offer and such stockholder's Share Certificates are not
immediately available or time will not permit all required documents to reach
the Depositary prior to the Expiration Date or the procedure for book-entry
transfer cannot be
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completed on a timely basis, such Series A Shares may nevertheless be tendered
if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchasers herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) the Share Certificates for all tendered Series A Shares, in
proper form for transfer, or a Book-Entry Confirmation, together with a
properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) with any required signature guarantee (or, in the
case of a book-entry delivery, an Agent's Message) and any other documents
required by such Letter of Transmittal, are received by the Depositary
within three trading days after the date of execution of the Notice of
Guaranteed Delivery. A "trading day" is any day on which the NYSE is open
for business.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Series A Shares
purchased pursuant to the Offer will, in all cases, be made only after timely
receipt by the Depositary of (i) the Share Certificates evidencing such Series A
Shares, or a Book-Entry Confirmation of the delivery of such Series A Shares,
(ii) a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) (or, in the case of a book-entry delivery, an Agent's
Message), and (iii) any other documents required by the Letter of Transmittal.
Backup Federal Withholding Tax. To prevent backup federal income tax
withholding with respect to payment of the purchase price of Series A Shares
purchased pursuant to the Offer, each such stockholder must provide the
Depositary with such stockholder's correct taxpayer identification number
("TIN") and certify that such stockholder is not subject to backup federal
income tax withholding by completing the Substitute Form W-9 included in the
Letter of Transmittal. Foreign and nonresident alien stockholders must submit a
completed Form W-8 to avoid 31% backup withholding. This form may be obtained
from the Depositary. See Instruction 11 of the Letter of Transmittal.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of the Purchasers
as such stockholder's attorneys-in-fact and proxies, in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Series A Shares tendered
by such Stockholder and accepted for payment by the Purchasers (and any and all
non-cash dividends, distributions, rights, other Series A Shares, or other
securities issued or issuable in respect of such Series A Shares on or after the
date of this Offer to Purchase). All such proxies shall be irrevocable and
considered coupled with an interest in the tendered Series A Shares. This
appointment will be effective if, when, and only to the extent that, the
Purchasers accept such Series A Shares for payment pursuant to the Offer. Upon
such acceptance for payment, all prior proxies given by such stockholder and not
yet exercised or voted with respect to such Series A Shares and other securities
will, without further action, be revoked, and no subsequent proxies may be
given. The designees of the Purchasers will, with respect to the Series A Shares
and other securities for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual, special, adjourned or postponed
meeting of stockholders, by written consent or otherwise, and in order for
Series A Shares or other securities to be deemed validly tendered, immediately
upon the Purchasers' acceptance for payment of such Series A Shares, the
Purchasers must be able to exercise full voting rights with respect to such
Series A Shares and other securities.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Series A Shares pursuant to any of the procedures described above will
be determined by the Purchasers, in their sole discretion, whose determination
will be final and
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binding on all parties. The Purchasers reserve the absolute right to reject any
or all tenders of any Series A Shares determined by them not to be in proper
form or if the acceptance for payment of, or payment for, such Series A Shares
might, in the opinion of Purchasers' counsel, be unlawful. The Purchasers also
reserve the absolute right, in their sole discretion, to waive any of the
conditions of the Offer or any defect or irregularity in any tender with respect
to Series A Shares of any particular stockholder, whether or not similar defects
or irregularities are waived in the case of other stockholders. The Purchasers'
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding. None of the
Purchasers, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in tenders
or will incur any liability for failure to give any such notification.
Binding Agreement. A tender of Series A Shares pursuant to any one of the
procedures described above will constitute the tendering stockholder's
acceptance of the terms and conditions of the Offer, as well as the tendering
stockholder's representation and warranty that said stockholder has the full
power and authority to tender and to assign the Series A Shares tendered, as
specified in the Letter of Transmittal. The Purchasers' acceptance for payment
of Series A Shares validly tendered pursuant to the Offer will constitute a
binding agreement between the tendering stockholder and the Purchasers upon the
terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS
Series A Shares tendered pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date and, unless theretofore accepted for payment by the
Purchasers pursuant to the Offer, may also be withdrawn at any time after
December 5, 1999, or at such later time as may apply if the Offer is extended.
If the Purchasers extend the Offer, are delayed in their acceptance of
Series A Shares for payment or are unable to accept Series A Shares for payment
pursuant to the Offer for any reason, then, without prejudice to the Purchasers'
rights under the Offer, the Depositary may, nevertheless, on behalf of the
Purchasers, retain tendered Series A Shares, and such Series A Shares may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as described in this Section 4. Any such delay will be by an
extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Series A Shares to be withdrawn, the number of Series A Shares to be withdrawn
and the name of the registered holder, if different from that of the person who
tendered such Series A Shares. If Share Certificates evidencing Series A Shares
to be withdrawn have been delivered or otherwise identified to the Depositary,
then, prior to the release of such Share Certificates, the serial numbers shown
on such Share Certificates must be submitted to the Depositary and the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Series A Shares have been tendered for the account of
an Eligible Institution. If Series A Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in Section 3, any notice of
withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Series A Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchasers, in their sole
discretion, whose determination will be final and binding. None of Purchasers,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Series A Shares properly withdrawn will thereafter be deemed not to
have been validly tendered for purposes of the Offer. However, withdrawn Series
A Shares may be re-tendered at any time prior to the Expiration Date by
following one of the procedures described in Section 3.
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5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the anticipated material United
States federal income tax consequences of the Offer to stockholders whose Series
A Shares are purchased pursuant to the Offer. The following discussion does not
address any tax consequences arising from or related to the Merger. Stockholders
should refer to the Company's proxy materials for the special meeting of
stockholders for a discussion of the United States federal income tax
consequences arising from or related to the Merger.
This discussion addresses only stockholders who hold their Series A Shares
as capital assets within the meaning of Section 1221 of the Internal Revenue
Code of 1986, as amended (the "Code"), and does not address all of the United
States federal income tax consequences that may be relevant to particular
stockholders in light of their individual circumstances or to stockholders who
are subject to special rules, such as:
- financial institutions,
- tax-exempt organizations,
- insurance companies,
- dealers in securities or foreign currencies,
- traders in securities who elect to apply a mark-to-market method of
accounting,
- foreign holders,
- persons who hold Series A Shares as a hedge against currency risk or as
part of a straddle, constructive sale or conversion transaction, or
- holders who acquired their shares upon the exercise of employee stock
options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Code, laws, regulations, rulings and decisions in effect as of
the date of this Offer, all of which are subject to change, possibly with
retroactive effect. Tax consequences under state, local and foreign laws are not
addressed.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY
DIFFER, STOCKHOLDERS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER
TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES.
The receipt of cash for Series A Shares pursuant to the Offer will be a
taxable transaction for federal income tax purposes (and may also be a taxable
transaction under applicable foreign, state, local and other tax laws). In
general, for federal income tax purposes, a stockholder will recognize gain or
loss equal to the difference between his or her adjusted tax basis in the Series
A Shares sold pursuant to the Offer and the amount of cash received therefor.
Gain or loss must be determined separately for each block of Series A Shares
(i.e., Series A Shares acquired at the same cost in a single transaction) sold
pursuant to the Offer. Such gain or loss will be capital gain or loss (provided
such Series A Shares are held as capital assets) and long-term capital gain or
loss if the stockholder has held the Series A Shares for more than one year on
the date of sale. Long term capital gains recognized by individual taxpayers
currently are taxed at a maximum federal income tax rate of 20%.
6. PRICE RANGE OF SERIES A SHARES; DIVIDENDS
The Series A Shares are currently listed and traded on the NYSE and quoted
under the symbol "PDC". The following table sets forth, for the quarters
indicated, the range of high and low sales prices for the Series A
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Shares on the NYSE, as reported in the Company's Annual Report on Form 10-K/A
for the fiscal year ended December 31, 1998 (the "1998 Form 10-K/A") and in
published financial sources:
MARKET PRICE
------------------
HIGH LOW
------- -------
FISCAL YEAR ENDED DECEMBER 31, 1997:
First Quarter............................................. $1.2500 $0.8750
Second Quarter............................................ $1.8750 $1.0000
Third Quarter............................................. $1.9375 $0.8125
Fourth Quarter............................................ $1.0625 $0.5625
FISCAL YEAR ENDED DECEMBER 31, 1998:
First Quarter............................................. $1.1250 $0.6250
Second Quarter............................................ $1.1250 $0.6875
Third Quarter............................................. $1.3125 $0.5625
Fourth Quarter............................................ $0.7500 $0.4375
FISCAL YEAR ENDED DECEMBER 31, 1999:
First Quarter............................................. $0.7500 $0.3750
Second Quarter............................................ $1.0000 $0.5000
Third Quarter............................................. $1.1250 $0.6250
Fourth Quarter (through October 6, 1999).................. $0.8750 $0.7500
On October 6, 1999, the last full trading day prior to the announcement of
the Purchase Agreement and the Purchasers' intention to commence the Offer, the
closing price per Series A Share on the NYSE was $0.8125.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SERIES
A SHARES.
The Company has reported in its 1998 Form 10-K/A that it has not paid any
cash dividends on its Common Stock during the last two fiscal years and that it
expects that for the foreseeable future, it will follow a policy of retaining
earnings in order to help finance its business. In addition, the Company reports
in the 1998 Form 10-K/A that the Company's principal financing agreements
currently prohibit the payment of dividends by the Company.
7. CERTAIN INFORMATION CONCERNING THE COMPANY
General. The Company is a Delaware corporation and its principal executive
offices are located at 00 Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000;
telephone: (000) 000-0000. The Company and its subsidiaries are primarily
engaged in designing, constructing and selling single family detached and
attached homes in California, Arizona, New Mexico and Nevada. The Company
designs, constructs and sells a wide range of homes designed to meet the
specific needs of each of its markets, although it primarily emphasizes sales to
the entry-level and move-up home buyer markets. The Company currently markets
its homes through 46 sales locations in both its wholly owned projects and
projects being developed in unconsolidated joint ventures. In the Company's 1998
Form 10-K/A, the Company reports that it had total sales of $368.3 million and
(together with its unconsolidated joint ventures) sold 2,139 homes during the
fiscal year ended December 31, 1998.
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act, and is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities, any material interests
of such persons in transactions with the Company and other matters is required
to be disclosed in proxy statements distributed to the Company's stockholders
and filed with the Commission. These reports, proxy statements and other
information are available for inspection at the public reference facilities of
the Commission located at Judiciary Plaza, 000 Xxxxx Xxxxxx, X.X.,
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Washington, D.C. 20549, and are available for inspection and copying at
prescribed rates at the following regional offices of the Commission: Seven
World Trade Center, New York, New York 10048; and Citicorp Center, 000 Xxxx
Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000. Copies of such materials may also be
obtained by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at Judiciary Plaza, 000 Xxxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000. The Commission also maintains a website on the Internet
(xxxx://xxx.xxx.xxx) that contains reports, proxy statements and other
information relating to the Company which have been filed via the Commission's
XXXXX System. Such material should also be available for inspection at the
offices of the NYSE, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
Except as otherwise noted in this Offer to Purchase, all the information
with respect to the Company and its affiliates set forth in this Offer to
Purchase has been derived from publicly available information and information
provided by the Company. Although the Purchasers do not have any knowledge that
any such information is untrue, none of the Purchasers, the Information Agent or
the Depositary takes any responsibility for, or makes any representation with
respect to, the accuracy or completeness of such information or for any failure
by the Company to disclose events that may have occurred and that may affect the
significance or accuracy of any such information.
A copy of this Offer to Purchase, and certain of the agreements referred to
herein, are attached as exhibits to the Purchasers' Tender Offer Statement on
Schedule 14D-1, dated October 7, 1999 (the "Schedule 14D-1"), which has been
filed with the Commission. The Schedule 14D-1 and the exhibits thereto, along
with such other documents as may be filed by the Purchasers with the Commission,
may be examined and copied in the same manner as set forth above for documents
filed with Commission by the Company.
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Summary Financial Information for the Company. The following table sets
forth certain summary consolidated financial information and certain operating
information with respect to the Company and its subsidiaries excerpted or
derived from the audited financial statements contained in the Company's 1998
Form 10-K/A, and the unaudited financial information contained in the Company's
Quarterly Reports on Form 10-Q/A and Form 10-Q for the six months ended June 30,
1999 and June 30, 1998, respectively. More comprehensive financial and operating
information is included in such reports and other documents filed by the Company
with the Commission, and the following summary is qualified in its entirety by
reference to such documents (which may be inspected and obtained as described
above), including the financial statements and related notes contained therein.
None of the Purchasers, the Information Agent or the Depositary assumes any
responsibility for the accuracy of the financial information set forth below.
THE XXXXXXX COMPANIES
SUMMARY FINANCIAL INFORMATION
(In Thousands, Except Per Common
Share Amounts and Number of Homes)
UNAUDITED
SIX MONTHS ENDED AUDITED FROM 10-K
JUNE 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
STATEMENT OF OPERATIONS DATA:
Sales............................ $178,012 $147,008 $368,282 $329,942 $318,997 $285,505 $270,168
Operating income (loss).......... 18,685 954 15,580 (84,534) 163 (41,335) 14,318
Income (loss) before
extraordinary item............. 13,084 (2,607) 7,114 (89,894) 152 (39,785) 6,037
Net income (loss)................ 14,873 (2,085) 9,855 (89,894) 152 (37,097) 6,037
Basic and diluted earnings per
common share:
Before extraordinary item...... $ 0.25 $ (0.05) $ 0.14 $ (1.72) $ -- $ (0.76) $ 0.11
After extraordinary item....... 0.28 (0.04) 0.19 (1.72) -- (0.71) 0.11
JUNE 30, DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
BALANCE SHEET DATA:
Real estate inventories.......... $176,522 $196,555 $174,502 $255,472 $306,381 $315,535 $382,055
Total assets..................... 246,232 258,085 246,404 285,244 331,615 340,933 425,637
Notes payable.................... 181,290 231,810 195,393 254,935 208,524 224,434 272,717
Stockholder's equity (deficit)... 23,188 (7,766) 5,824 (5,681) 84,213 84,061 121,158
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
OTHER OPERATING DATA
(INCLUDING UNCONSOLIDATED
JOINT VENTURES):
Number of homes sold............. 1,259 1,161 2,139 1,718 1,804 1,488 1,423
Number of homes closed........... 1,051 734 1,925 1,597 1,838 1,425 1,442
Number of homes in escrow at end
of period...................... 825 830 617 403 282 316 253
Average sales prices of homes
closed......................... $ 208 $ 186 $ 202 $ 192 $ 173 $ 162 $ 182
Additional Information Relating to the Acquisition and the Merger. The
Acquisition and the Merger are described in detail in proxy materials which have
been prepared by the Company in connection with its special meeting of
stockholders to be held on November 5, 1999 for the purpose of considering and
voting upon the Merger. The Company's proxy materials (including the information
incorporated therein by reference)
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contain important financial and other information with respect to the Company
and WLHI, including historical and pro forma financial information, financial
forecasts and a financial projection for WLHI and the Company on stand-alone and
combined bases.
The Company's proxy materials, including the information incorporated
therein by reference, have been filed with the Commission (and thus may be
inspected, obtained and copied as described above) and will be mailed to all
record holders of Common Stock as of September 15, 1999. HOLDERS OF SERIES A
SHARES SHOULD REVIEW THE COMPANY'S PROXY MATERIALS CAREFULLY BEFORE MAKING ANY
DECISION WITH RESPECT TO THE OFFER.
8. CERTAIN INFORMATION CONCERNING THE PURCHASERS
Identity and Background
The Purchasers are Xxxxxxx Xxxx and Xxxxxxx X. Xxxx. The Purchasers are the
owners of WLHI, a California-based homebuilder and real estate developer, and
their principal business address is 0000 Xxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx
00000. Both Purchasers are citizens of the United States.
Since September 1992, Xxxxxxx Xxxx has served as the Chairman of the Board,
President and Chief Executive Officer of WLHI. Since 1987, he has also served as
the Chairman of the Board of Directors of the Company. Xxxxxxx Xxxx is the
father of Xxxxxxx X. Xxxx.
Xxxxxxx X. Xxxx has served as an Assistant Project Manager at WLHI since
November of 1997. Prior to such time, he was a full-time student. Xxxxxxx X.
Xxxx is the son of Xxxxxxx Xxxx.
Interests in Securities of the Company
Xxxxxxx Xxxx beneficially owns an aggregate of 6,189,589 Series A Shares
representing approximately 17.4% of the total number of Series A Shares and
approximately 11.7% of the total number of shares of Common Stock of the Company
outstanding as of August 10, 1999 (as reported in the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1999), such percentages
being calculated in accordance with Rule 13d-3 promulgated under the Exchange
Act by the Commission. Of the 6,189,589 Series A Shares beneficially owned by
Xxxxxxx Xxxx, 750,000 are shares that he has the right to acquire pursuant to
stock options granted by the Company to him in 1994 in respect of his service as
a consultant to the Company. It is contemplated under the Purchase Agreement
that these stock options (which have an exercise price of $2.875 per share) will
be cancelled by the Company and Xxxxxxx Xxxx upon the closing of the
Acquisition, and thus the Series A Shares issuable upon the exercise of such
options are not taken into account for purposes of determining the number of
shares necessary to satisfy the Minimum Condition under the terms of the
\Purchase Agreement. Except as may otherwise be provided under applicable
community property laws, Xxxxxxx Xxxx has the sole power to vote or to direct
the vote, and the sole power to dispose or direct the disposition, of all Series
A Shares beneficially owned by him. Pursuant to the Purchase Agreement, Xxxxxxx
Xxxx has agreed to vote all shares of Common Stock owned by him in favor of the
Merger at the special meeting of stockholders called for such purpose.
Xxxxxxx X. Xxxx is the beneficiary of a trust which owns 492,450 Series A
Shares. However, Xxxxxxx X. Xxxx does not have or share, directly or indirectly,
the power to vote or to direct the vote, or the power to dispose or to direct
the disposition, of such Series A Shares, and thus is not considered to have
beneficial ownership of such shares. Xxxxxxx X. Xxxx does not otherwise
beneficially own any shares of Common Stock of the Company.
For purposes of determining the number of shares necessary to satisfy the
Minimum Condition under the terms of the Purchase Agreement, the Purchasers are
deemed to own 5,932,039 Series A Shares as of the commencement of the Offer,
consisting of 5,439,589 Series A Shares owned directly by Xxxxxxx Xxxx and
492,450 Series A Shares held in trust for the benefit of Xxxxxxx X. Xxxx.
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Series B Stock Purchase Agreements
The following is a summary of certain provisions of the Series B Stock
Purchase Agreements. A copy of each of the Series B Stock Purchase Agreements is
attached as an exhibit to the Schedule 14D-1 and is incorporated herein by
reference. The Series B Stock Purchase Agreements may be examined, and copies
may be obtained, as set forth in Section 7 above. The following summary is
qualified in its entirety by reference to the Series B Stock Purchase
Agreements.
WLHI, which is controlled by Xxxxxxx Xxxx (and in which Xxxxxxx X. Xxxx has
a non-controlling, minority interest), has entered into the Series B Stock
Purchase Agreements with each of the Series B Stockholders, which agreements
provide for the purchase from the Series B Stockholders by WLHI or its permitted
assigns of an aggregate minimum of 9,434,813 Series B Shares and an aggregate
maximum of 15,566,837 Series B Shares for a cash price of $0.655 per share. The
Series B Shares are convertible on a share for share basis into Series A Shares.
The exact number of Series B Shares to be purchased under the Series B
Stock Purchase Agreements depends upon the number of Series A Shares tendered
and not withdrawn as of the Expiration Date of the Offer. If the maximum of
10,678,792 Series A Shares are tendered and not withdrawn as of the Expiration
Date of the Offer, then WLHI will have the right to purchase the minimum of
9,434,813 Series B Shares under the Series B Stock Purchase Agreements. If,
however, the number of Series A Shares validly tendered and not withdrawn as of
the Expiration Date, when added to the 5,932,039 Series A Shares which are
deemed for this purpose to be owned by the Purchasers and the minimum of
9,434,813 Series B Shares which may be purchased by WLHI under the Series B
Stock Purchase Agreements, does not aggregate to 26,045,644 shares of Common
Stock (constituting approximately 49.9% of the total shares of Common Stock
which are issued and outstanding), then the Series B Stockholders have agreed to
sell to WLHI, on a pro rata basis, additional Series B Shares at a price of
$0.655 per share, up to a maximum aggregate of 15,566,837 Series B Shares.
The purchase of the Series B Shares under the Series B Stock Purchase
Agreements is subject to numerous conditions as set forth therein, including the
consummation of the Acquisition, the acceptance of and payment for Series A
Shares pursuant to the Offer, the approval of the Merger by holders of a
majority of the Series A Shares and Series B Shares voting together as a class,
and the absence of any person (other than the Purchasers and their affiliates)
owning beneficially five percent (5%) or more of the outstanding Common Stock of
the Company. If and when such conditions are satisfied or waived by WLHI, the
closing of the purchases under the Series B Stock Purchase Agreements is
expected to occur after the Expiration Date of the Offer and prior to the
effective date of the Merger. Each of the Series B Stock Purchase Agreements may
be terminated by either WLHI or the Series B Stockholder party thereto upon
(among other events) the termination of the Purchase Agreement or in the event
the closing under the Series B Stock Purchase Agreement has not occurred on or
before November 15, 1999.
Each of the Series B Stockholders has agreed that, prior to the closing of
the transactions contemplated by the Series B Stock Purchase Agreements, it will
not (i) transfer or dispose of any interest in, tender (pursuant to the Offer or
otherwise), or pledge or otherwise create any encumbrance on any shares of the
Company's Common Stock owned by such Series B Stockholder, (ii) convert any
Series B Shares into Series A Shares, or (iii) acquire any beneficial interest
in any shares of the Company's Common Stock, or any options, warrants or other
rights to acquire shares of the Company's Common Stock. Each of the Series B
Stockholders has also conditionally agreed to vote all shares of Common Stock
owned by it and its respective affiliates in favor of the Merger.
WLHI has agreed that, for a period of three years from the closing date of
the purchase of Series B Shares under the Series B Stock Purchase Agreements,
WLHI and its affiliates will not sell any shares of the Company's Common Stock,
other than the Series A Shares owned by WLHI or its affiliates (including the
Purchasers) prior to the commencement of the Offer, unless such sale takes place
in connection with a transaction in which all other holders of the Company's
Common Stock are afforded an opportunity to participate pro-rata, and on the
same terms and conditions as WLHI and its affiliates. Excluded from this
restriction is WLHI's or any of its affiliates' right to transfer shares of
Common Stock to and among certain
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affiliated entities, individuals and trusts, provided that such transferees
agree to the foregoing restrictions on transfer.
Sales of Series A Shares by the Purchasers
On August 12, 1999, and in separate transactions, Xxxxxxx Xxxx and Xxxxxxx
X. Xxxx sold an aggregate of 2,500,000 Series A Shares and 500,000 Series A
Shares, respectively, for a cash price of $0.65 per share. Such sales were
effected through privately-negotiated sale transactions not involving a broker
or dealer.
Except as set forth in this Offer to Purchase, neither the Purchasers nor,
to the best knowledge of the Purchasers, any associate or
majority-owned-subsidiary of such persons, beneficially owns or has a right to
acquire any equity security of the Company, and neither the Purchasers nor, to
the best knowledge of the Purchasers, any of the other entities or persons
referred to above, or any of the respective directors, executive officers or
subsidiaries of any of the foregoing, has effected any transaction in any equity
security of the Company during the past 60 days. In addition, except as
otherwise set forth in this Offer to Purchase, the Purchasers do not have any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including, without limitation, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies.
Other Information
Confidentiality Agreement. WLHI and the Company are parties to a letter
agreement dated November 17, 1998 (the "Confidentiality Agreement") which
requires the Company and its representatives to maintain the confidentiality of
certain information provided to the Company by WLHI for the purpose of
evaluating a possible transaction with WLHI and to use such information solely
for the purpose of evaluating a possible transaction.
Purchase of Lots by XXXX. During the fiscal year ended December 31, 1998,
XXXX made a bulk lot purchase from the Company for $6,996,000 in cash. The
Purchasers believe that the sale was an arm's length transaction representing
fair market value at the time the transaction was negotiated based upon
competitive bids from other homebuilders.
Indemnification Agreement. Xxxxxxx Xxxx is the Chairman of the Board of
Directors of the Company. Pursuant to an indemnification agreement (the
"Indemnification Agreement"), the Company has agreed to indemnify him to the
fullest extent permitted by the bylaws of the Company and applicable law for all
expenses, damages, liabilities and settlement payments which may be incurred by
him in connection with any actions brought against him as a result of or
relating to any act taken in his capacity as a director or officer of the
Company.
Except as set forth in this Offer to Purchase, the Purchasers have not had,
since January 1, 1996, any business relationships or transactions with the
Company, or any of its executive officers, directors or affiliates that would
require reporting under applicable rules of the Commission.
9. SOURCE OF FUNDS
The Offer is not subject to any financing condition. The total amount of
funds required by the Purchasers to consummate the Offer and to pay related fees
and expenses is estimated to be approximately $7.75 million. Assuming that the
maximum number of Series A Shares are validly tendered pursuant to the Offer and
not withdrawn, the total amount of additional funds required by the Purchasers
to consummate the purchase of the Series B Shares pursuant to the Series B Stock
Purchase Agreements and to pay related fees and expenses is estimated to be
approximately $6.2 million. The Purchasers expect to use a combination of
proceeds received from the Acquisition and personal funds (including
distributions received as shareholders of WLHI prior to the closing date of the
Acquisition) to consummate the Offer and the purchase of the Series B Shares and
to pay the related fees and expenses.
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10. BACKGROUND OF THE OFFER; THE PURCHASE AGREEMENT
Background of the Offer
The Company announced on or about May 5, 1998 that it had engaged Xxxxxxx
Xxxxxx Read to explore various strategic alternatives for the Company.
Subsequent thereto and in connection therewith, a Special Committee comprised of
independent directors of the Company's Board of Directors was formed to evaluate
strategic alternatives.
On or about June 30, 1998, XXXX submitted a non-binding proposal to the
Company (the "June 30 Proposal"), proposing a series of related transactions by
which XXXX would acquire all of the Common Stock of the Company for a cash price
of $0.40 per share. The June 30 Proposal was conditioned on, among other things,
the negotiation and execution of a definitive agreement, completion of due
diligence, certain amendments of the Company's 12 1/2% Senior Notes due 2001
(the "Senior Notes"), and regulatory, stockholder and other approvals. The June
30 Proposal, by its terms, would expire on July 31, 1998, unless accepted prior
to that date.
On or about July 28, 1998, the Special Committee advised XXXX that the
Special Committee had determined to continue exploring additional strategic
alternatives. The Special Committee did, however, invite XXXX at the same time
to make a new or revised proposal to the Special Committee.
During September and October of 1998, WLHI continued to indicate its
interest in pursuing a transaction with the Company. In November of 1998,
Xxxxxxx Xxxx and XXXX submitted a revised proposal to the Special Committee.
XXXX and the Special Committee, and their respective representatives, continued
to negotiate the revised proposal through the month of December, 1998.
On December 31, 1998, WLHI, the Company and Xxxxxxx Homes entered into a
letter of intent setting forth their preliminary understanding with respect to
(i) the proposed acquisition by the Company of substantially all of the assets
of WLHI for approximately $48,000,000 together with the assumption of related
liabilities, and (ii) the concurrent purchase by WLHI pursuant to a tender offer
for not less than 40% and not more than 49% of the outstanding shares of the
Company's Common Stock held by stockholders other than WLHI and its affiliates
at a price of $0.62 per share. Following the completion of the proposed
transactions, WLHI, Xxxxxxx Xxxx and their respective affiliates would own
beneficially between 55% and 65% (depending on the number of shares tendered) of
the outstanding shares of the Company's Common Stock.
Under the terms of the letter of intent, the proposed transactions would be
subject to various conditions, including the successful negotiation and
execution of a definitive agreement, the receipt of opinions of the Company's
advisors with respect to the fairness of the transactions to the Company and its
stockholders as well as the solvency of the Company following consummation of
the transactions, the receipt of real estate appraisals satisfactory to the
Company and WLHI with respect to the real estate assets of WLHI, the approval of
a definitive agreement by the respective boards of directors of the Company and
WLHI by March 31, 1999, receipt of all required regulatory approvals and third
party consents, including any required lender consents, the receipt of
agreements from certain significant stockholders of the Company to tender their
shares pursuant to the tender offer, the receipt of financing by the Company in
an amount sufficient to enable the Company to finance the transactions, and the
absence of any material adverse change in the business or financial condition of
either the Company or WLHI.
In addition, the letter of intent contemplated that each of the
transactions would be structured so as to be subject to the successful
completion of the other and, by imposing share transfer restrictions, to avoid
triggering the change of control tax provisions that would result in the loss of
the Company's net operating losses for tax purposes. The letter of intent also
contemplated that the Company's Senior Notes would remain outstanding without
modification.
The letter of intent provided that, subject to the fiduciary duties of
their respective boards of directors, the Company and XXXX would negotiate
exclusively with each other toward a definitive agreement until March 31, 1999.
The letter of intent did not constitute a binding agreement to consummate the
transactions.
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On February 18, 1999, XXXX proposed a modification to the December 31, 1998
letter of intent. Under the proposed modification, WLHI would make a tender
offer for not more than 37% of the outstanding shares of Common Stock of the
Company for a purchase price of $0.62 per share. In the event that more than 37%
of the outstanding shares of Common Stock of the Company were tendered, WLHI
would purchase shares from each tendering stockholder on a pro rata basis. The
tender offer was to be conditioned upon there being tendered and not withdrawn,
a number of shares which constituted at least 37% of the outstanding shares of
the Company. The proposed modification also provided that the transactions would
be structured to permit Xxxxxxx Xxxx and his affiliates, prior to consummation
of the transaction and consistent with applicable securities laws, to sell
shares of the Company's Common Stock owned by them up to a maximum of 4% of the
total number of shares of the Company's Common Stock presently outstanding.
On March 30, 1999, the parties amended the December 31, 1998 letter of
intent to extend its term and the period of exclusive negotiations to April 30,
1999. The parties also agreed that XXXX could participate in discussions and
negotiations with the holders of Series B Shares regarding the purchase by WLHI
of such percentage of the Series B Shares so as to reduce each such Series B
Stockholder's ownership interest in the Company's Common Stock to below 5% of
the Company's outstanding Common Stock following consummation of the proposed
transactions. WLHI was also permitted to seek commitments from the Series B
Stockholders to sell additional shares to WLHI to the extent that the number of
Series A Shares tendered in the tender offer were below the minimum threshold to
be set forth in a definitive agreement.
On May 4, 1999, WLHI, the Company and Xxxxxxx Homes entered into a revised
letter of intent setting forth their preliminary understanding with respect to
(i) the proposed acquisition by the Company of substantially all of the assets
of WLHI for a cash purchase price of $48,000,000 and the assumption of all or
substantially all of the liabilities of WLHI; and (ii) the proposed purchase by
WLHI of a portion of the outstanding shares of Common Stock of the Company.
Under the terms of the revised letter of intent, WLHI would make offers to the
holders of Series B Shares and a tender offer to the holders of Series A Shares
to purchase, for a cash purchase price of $0.655 per share, an aggregate number
of shares of Common Stock which when added to the number of shares of Common
Stock already owned by WLHI and its affiliates, and after giving effect to a
disposition by Xxxxxxx Xxxx and his affiliates of up to 8% of the total number
of shares of Common Stock of the Company then outstanding, would cause WLHI and
its affiliates to own an aggregate of approximately 49% of the outstanding
shares of the Company's Common Stock. The proposed transactions were subject to
various conditions, including the successful negotiation and execution of a
definitive agreement; the receipt of opinions of the Company's advisors with
respect to the fairness of the transactions to the Company and its stockholders
as well as the solvency of the Company following the consummation of the
transactions; the receipt of real estate appraisals satisfactory to the Company
and WLHI with respect to the real estate assets of WLHI; the approval of a
definitive agreement by the respective boards of directors of the Company and
WLHI by July 15, 1999; receipt of all required regulatory approvals and third
party consents, including any required lender consents; the possession of
sufficient borrowing capacity or the receipt of financing by the Company in an
amount sufficient to enable the Company to finance the transactions; the holders
of the Company's Series B Shares not acquiring or disposing of any beneficial
interest in the Company's Common Stock prior to closing; the purchase by WLHI or
its affiliates of a sufficient number of shares of Common Stock to cause, when
added to the number of shares already owned by WLHI and its affiliates and after
giving effect to the sale by WLHI and its affiliates of up to 8% of the
outstanding Common Stock, WLHI and its affiliates to own at least 49% of the
Company's Common Stock (but not more than 49.9%); and the absence of any
material adverse change in the business or financial condition of either the
Company or WLHI.
Effective as of July 15, 1999, the Company and XXXX amended the revised
letter of intent to extend from July 15 to October 15, 1999 the term of the
letter of intent, the period of exclusive negotiations and the date by which the
respective boards of directors of the Company and WLHI must approve a definitive
agreement with respect to the proposed transactions.
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PURCHASE AGREEMENT
The following is a summary of certain provisions of the Purchase Agreement.
A copy of the Purchase Agreement is attached as an exhibit to the Schedule 14D-1
and is incorporated herein by reference. The Purchase Agreement may be examined,
and copies may be obtained, as set forth in Section 7 above. The following
summary is qualified in its entirety by reference to the Purchase Agreement.
On October 7, 1999, WLHI, the Purchasers, the Company and Xxxxxxx Homes
entered into the Purchase Agreement. Pursuant to the terms of the Purchase
Agreement, Xxxxxxx Homes or its permitted assigns will purchase, and WLHI will
sell, substantially all of WLHI's real estate and related assets for a cash
purchase price of $48,000,000, subject to the adjustments described below, and
the assumption by Xxxxxxx Homes of all or substantially all of the liabilities
of WLHI.
The closing of the purchase and sale of assets pursuant to the Purchase
Agreement is expected to occur immediately prior to the expiration of the Offer
and prior to the completion of the Merger. The completion of the Acquisition is
a condition precedent to the completion of the Offer and the Merger.
Assets to be Acquired by Xxxxxxx Homes
Subject to the terms and conditions in the Purchase Agreement, WLHI will
sell, and will cause any partnership or limited liability company through which
WLHI owns real property to sell, to Xxxxxxx Homes or its permitted assigns, all
or substantially all of the assets and properties of WLHI or any such
partnership or limited liability company, including without limitation the
following assets: (i) substantially all real property located in the State of
California that is owned by WLHI or by partnerships and limited liability
companies of which WLHI is a partner or a member, in each case, as identified on
a schedule to the Purchase Agreement, inclusive of any and all buildings,
structures, fixtures and improvements located on such real property and all
associated rights, privileges and easements appurtenant to, or used in
connection with, such real property; (ii) substantially all personal property of
any kind that is owned by WLHI or by any partnerships or limited liability
companies in which WLHI is a partner or member and used in connection with or
related to the real property being sold to Xxxxxxx Homes; and (iii) all
receivables, escrow proceeds, deposits and other assets arising out of or
related to the real property and the personal property being sold by WLHI or the
selling partnerships and limited liability companies to Xxxxxxx Homes.
Pursuant to the Purchase Agreement, certain assets are specifically
excluded from the Acquisition and will be retained by WLHI or the partnerships,
or limited liability companies, including but not limited to: (i) any rights and
claims to tax refunds; (ii) the cash consideration to be paid by Xxxxxxx Homes
to WLHI pursuant to the Purchase Agreement; (iii) company records and all income
tax records and non-transferable licenses and permits; (iv) assets acquired
after the closing date of the Purchase Agreement except for assets that are
acquired with proceeds constituting part of the assets transferred to Xxxxxxx
Homes; (v) cash reserves in respect of or relating to any of the excluded
liabilities that are not assumed by Xxxxxxx Homes under the Purchase Agreement;
and (vi) assets scheduled as excluded under the Purchase Agreement.
Adjustments to the Purchase Price
The purchase price for the real property of $48,000,000 was determined
based on the value of the real property and related assets owned directly or
indirectly by WLHI and the selling partnerships and limited liability companies
as of December 31, 1998. The parties intend that these assets, together with all
income, receivables, escrow and other proceeds, purchase deposits, cash and
other assets earned or received by WLHI or the selling partnerships and limited
liability companies from the sale of any of these assets, including any assets
acquired with sales proceeds, in the ordinary course of business since January
1, 1999 and through the closing date of the Acquisition will inure to Xxxxxxx
Homes. The amounts so inuring to Xxxxxxx Homes are to be net of any amounts that
have been used to pay or satisfy land acquisition or development costs, capital
expenditures, principal or interest on indebtedness, accounts payable, accrued
liabilities, employee wages and benefits, taxes and other liabilities and
operating expenses existing at December 31, 1998 and incurred in the ordinary
course of business.
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The cash portion of the purchase price will be reduced by certain
distributions and payments made and liabilities accrued by WLHI or the selling
partnerships or limited liability companies in the interim time period between
January 1, 1999 and the closing date of the Acquisition (the "Operating
Period"), except to the extent such payments have been recorded on the books of
the applicable selling party, including: (i) dividends, redemptions or similar
payments or distributions; (ii) the unpaid balance of any loans or other
advances to or for the personal benefit of its shareholders or affiliates or
partners other than WLHI, but excluding loans or other advances in which the
right to receive payment is being transferred to Xxxxxxx Homes and any advances
or payments made in the form of salary or other compensation for services
rendered in the ordinary course of business; (iii) bonuses and other
compensation to directors, officers and employees for services rendered prior to
December 31, 1998; (iv) warranty expenses related to real estate assets sold and
closed prior to December 31, 1998; (v) payments and related legal fees made in
settlement of legal claims, other than claims relating to the assets being
purchased or the liabilities being assumed; and (vi) significant and unusual
charitable contributions during the period.
The cash portion of the purchase price will be further reduced for: (i) the
value of any real estate assets scheduled as assets excluded from purchase; (ii)
the amount of any costs and operating expenses incurred or accrued by WLHI or
the selling partnership during the period in respect of or relating directly to
any of the excluded assets; (iii) the amount of any non-cash adjustments made on
the books and records of the applicable seller during the period for write-offs
or abandonment of assets to be purchased that were recorded on the books at
December 31, 1998, but only to the extent that amount exceeds $500,000 in the
aggregate; (iv) the amount of any cash reserves to be retained in respect of
liabilities that are not being assumed by Xxxxxxx Homes; and (v) any amounts
paid or incurred by the applicable selling party (except to the extent that a
corresponding liability was recorded on the books as of December 31, 1998), to
the extent the amounts were paid or incurred in respect of legal, financial and
tax accounting, appraisal, or financial advisory fees and expenses incurred in
connection with the transactions contemplated by the Purchase Agreement which
are in the aggregate greater than $1,250,000.
The cash portion of the purchase price will be increased by the aggregate
amount of the following: (i) any capital contribution or other equity investment
made in WLHI or the selling partnerships or limited liability companies made
during the operating period, if approved by Xxxxxxx Homes after the date of the
Purchase Agreement; (ii) accounts payable, accrued liabilities or indebtedness
secured by or relating to any of the assets excluded from purchase; (iii)
warranty reserves reflected on the books and records of WLHI or any of the
selling partnerships or limited liability companies as of the closing date
retained by WLHI; and (iv) tax refunds, insurance recoveries, utility deposits
and other assets acquired by WLHI or any of the selling partnerships or limited
liability companies during the period in exchange for or in respect of any
claims or other assets that were not reflected on their books as of December 31,
1998.
Any adjustment to the purchase price will be determined by Xxxxx & Young
LLP or other independent accounting firm acceptable to Xxxxxxx Homes and WLHI
based on a review of the books and records of the selling parties. The
independent auditor will perform a preliminary review and notify the parties and
the escrow holder not later than five business days prior to the closing date of
its estimate of any proposed adjustment. Unless either Xxxxxxx Homes or WLHI
objects, the adjustment will be made to the purchase price at the closing
through escrow. If either objects, the escrow holder is required to withhold the
amount of the proposed adjustment until the amount of the adjustment is finally
determined.
After the closing, the independent auditor will complete a review and
deliver to the parties its final determination of any adjustment to the purchase
price within thirty (30) calendar days of the closing date. If the parties agree
or fail to timely object, the determination will be final and conclusive. If
either party disagrees or makes a timely objection, the parties are required to
make a good faith attempt to resolve any differences. If the parties can't
resolve the matter, it will be directed to Xxxxxx Xxxxxxxx LLP or another
independent accounting firm acceptable to the parties whose determination shall
be binding.
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Liabilities to be Assumed by Xxxxxxx Homes
Pursuant to the Purchase Agreement, Xxxxxxx Homes and its permitted assigns
will assume certain obligations and liabilities of WLHI and the selling
partnerships or limited liability companies related to the assets purchased
pursuant to the Purchase Agreement (other than those obligations and liabilities
excluded from assumption), including but not limited to the following: (i) the
subcontract agreements on the standard form contracts for services, materials or
supplies to be incorporated into the works of improvement on the real property;
(ii) the purchase agreements on the standard form contracts for the sale of
individual lots to homebuyers which sales have not closed escrow on or before
the closing date under the Purchase Agreement; (iii) the subdivision agreements,
development agreements and other entitlement agreements with governmental
entities relating to the real property; (iv) construction or performance bonds,
guaranties and similar commitments entered into in connection with the
development of the real property; (v) the contracts listed on an exhibit to the
Purchase Agreement; (vi) accounts payable and accrued liabilities arising in the
ordinary course of business with respect to the assets; and (vii) compensation,
salary, wages or other benefits for employees who are to continue employment
with Xxxxxxx Homes, to the extent such benefits are accrued and reflected on the
books and records of WLHI, disclosed on a list delivered to Xxxxxxx Homes or
incurred by WLHI or the partnerships with respect to the payment period in which
the closing occurs.
Xxxxxxx Homes will not assume or be responsible for any of the liabilities
or obligations of WLHI and the partnership or limited liability companies which:
(i) result from any alleged or actual defect or breach of warranty claim with
respect to any portion of the real property, including all improvements thereon,
for work done by WLHI or the partnerships or limited liability companies on the
real property prior to the closing date; (ii) result from any claim or other
proceeding made by or against WLHI or the partnerships or limited liability
companies, either before the closing date or after the closing date, with
respect to events that occurred or conditions that existed before the closing
date; (iii) result from taxes, other than property taxes; (iv) relate to or
arise out of the excluded assets that are not being purchased by Xxxxxxx Homes
and will remain with WLHI or the partnerships or limited liability companies;
(v) arise after the closing date in connection with the Purchase Agreement; (vi)
result from its ownership interest in WLHI or the partnerships or limited
liability companies; (vii) result from indebtedness secured by mortgages or
other security interests on the assets purchased to which WLHI or the
partnerships or limited liability companies is not directly or indirectly liable
or does not provide credit support; (viii) the selling party has the right to be
indemnified or reimbursed by an insurer or other third party with respect to;
and (ix) are scheduled as excluded liabilities in the Purchase Agreement.
As soon as reasonably possible after the execution of the Purchase
Agreement, the parties will open an escrow with First American Title Insurance
Company, the escrow holder. The closing of the purchase and sale of the real
property and related assets will take place through the escrow when all the
conditions to closing have been satisfied, but in no event later than November
30, 1999; provided, however, that if the closing of the transactions has not
occurred by November 30, 1999 due to delays in obtaining governmental or
regulatory approvals of the transactions, then the parties have agreed to extend
the closing date for up to an additional thirty (30) calendar days to obtain
such approvals. The close of escrow shall occur when Xxxxxxx Homes deposits the
purchase price into escrow and the grant deeds held by XXXX conveying the real
property to Xxxxxxx Homes are recorded through escrow in the official records of
the counties in which each respective parcel of real property is located.
The Offer
The Purchase Agreement provides for the making of the Offer by the
Purchasers. The Purchasers have agreed to complete the Offer in accordance with
its terms and accept for payment and pay for the Series A Shares tendered
pursuant to the Offer as soon as they are legally permitted to do so under
applicable law. The Offer will be subject to various conditions set forth in the
Purchase Agreement, including the Minimum Condition, as described in Section 14
of this Offer to Purchase. The Purchasers may amend or waive the Minimum
Condition but shall not decrease the Offer Price, or decrease the number of
Series A Shares sought, or amend any other condition of the Offer in any manner
adverse to the holders of Series A Shares without the prior written consent of
the Company.
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In the event that the Company determines that consummation of the Offer or
the purchase of Series B Shares pursuant to the Series B Stock Purchase
Agreements would result in an "ownership change" under applicable federal income
tax laws and regulations or other adverse tax consequences, the Purchasers have
agreed to amend the Offer to decrease the number of Series A Shares being
sought, but not below the number of shares required to satisfy the Minimum
Condition.
If certain conditions to the Offer, including the Minimum Condition,
consummation of the Acquisition and the receipt of the requisite stockholder
approval of the Merger, have not been satisfied or waived by the Purchasers as
of the Expiration Date due to delays in obtaining government or regulatory
approvals or third party consents or obtaining financing or obtaining necessary
releases, then the Purchasers may extend the Expiration Date of the Offer to
allow the conditions to be satisfied, but in no event are the Purchasers
obligated to extend the Offer beyond November 30, 1999 (or thirty calendar days
thereafter in the event the closing of the Acquisition or Merger is delayed due
to further delays in obtaining government or regulatory approvals).
Notwithstanding the foregoing, all conditions to the Offer set forth in the
Purchase Agreement (other than the condition that there be no actions by
governmental entities that would prohibit completion of the Offer) shall be
deemed to have been satisfied upon completion of the Acquisition.
The Company represents that a Special Committee of independent members of
the Company's Board of Directors has determined that the Purchase Agreement and
the transactions contemplated in it, taken together, are fair to and in the best
interests of the Company and the holders of the Series A Common Stock, other
than the Purchasers, provided that each holder is advised to consult with their
financial and tax advisors. The Company has received an opinion from Xxxxxxx
Xxxxxx Read, financial advisor to the Special Committee, to the effect that,
after giving effect to the Acquisition, the Offer, the Merger and the
transactions contemplated by the Series B Stock Purchase Agreements, the shares
of common stock of New Xxxxxxx to be issued in the Merger to holders of Series A
Shares, and to the extent that any such holder of Series A Shares (other than
the Purchasers and the Series B Stockholders) tenders Series A Shares in the
Offer, the cash that may be received by each such tendering holder of Series A
Shares (other than the Purchasers and the Series B Stockholders), subject to the
pro ration provisions of the Offer, is fair to the holders of the Series A
Shares from a financial point of view. The Special Committee has approved the
transactions contemplated in the Purchase Agreement and resolved to recommend
that the holders of Series A Shares (other than the Purchasers and the Series B
Stockholders) accept the Purchasers' tender offer, provided that holders of
Series A Shares should consult with their financial and tax advisors prior to
tendering their Series A Shares and that the recommendation may be withdrawn,
modified or changed if in their opinion, after consultation with counsel, the
failure to take that action would be inconsistent with their fiduciary duties.
In the event that the Offer is oversubscribed, the Purchasers will purchase
Series A Shares from each tendering stockholder on a pro rata basis. In the
event that the Offer is undersubscribed, the Purchasers will purchase additional
shares of Common Stock at $0.655 per share from the Series B Stockholders on a
pro rata basis pursuant to the Series B Stock Purchase Agreements, such that
Xxxxxxx Xxxx and one or more of his affiliates or associates will own not more
than 49.9% of the issued and outstanding shares of the Company's Common Stock.
Xxxxxxx Xxxx and one or more of his affiliates or associates will in no event
purchase a number of shares of Common Stock of the Company such that an
"ownership change" would occur with respect to the Company under applicable
federal income tax laws and other regulations.
Representations and Warranties
The Purchase Agreement contains certain representations and warranties of
WLHI including, without limitation, representations as to organization,
authority of WLHI and the individuals relative to the Purchase Agreement and the
Series B Stock Purchase Agreements, identification of WLHI equity interests,
California residency status, condition and marketability of personal property
assets, financial statements, no default, zoning, government notices,
undisclosed defects, unrecorded interests, compliance with law, absence of
certain contracts, litigation, environmental compliance, absence of endangered
species, accounts receivable, employee benefit plans, insurance, no conflicts,
WARN Act, and brokers' fees.
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The Company and Xxxxxxx Homes make certain representations and warranties
to WLHI in the Purchase Agreement including, without limitation, representations
as to authority with respect to the Purchase Agreement, no conflicts, broker's
fees, litigation, and WARN Act.
Indemnification and Survival of Representations.
The representations and warranties of WLHI made in the Purchase Agreement
will survive for a period of one (1) year after the closing date.
From and after the closing date, XXXX will indemnify and hold the Company
and Xxxxxxx Homes harmless from any losses resulting from any breach of
representation, any breach of a covenant, and any of the excluded liabilities.
The indemnity liability will be reduced to the extent that the underlying loss
already resulted in an adjustment to the purchase price as provided for in the
Purchase Agreement. WLHI will not be obligated to indemnify the Company or
Xxxxxxx Homes for losses resulting from any breach of representation or covenant
unless the losses in the aggregate exceed $500,000, and then only to the extent
such losses exceed $500,000. In no event will WLHI be obligated to cover losses
from any breach of representation or covenant (that are not covered by
insurance) in excess of $2,400,000.
From and after the closing date, the Company and Xxxxxxx Homes will
indemnify and hold WLHI harmless from any losses resulting from any breach of
representation, any breach of a covenant, and any of the assumed liabilities.
The Company and Xxxxxxx Homes will not be obligated to indemnify WLHI for losses
resulting from any breach of representation or covenant unless the losses in the
aggregate exceed $500,000, and then only to the extent such losses exceed
$500,000. In no event will the Company or Xxxxxxx Homes be obligated to cover
losses from any breach of representation or covenant in excess of $2,400,000.
The Purchasers and WLHI have agreed to maintain the corporate existence of
WLHI and to maintain in WLHI a tangible net worth of not less than $2.4 million
for a period of one year after closing and for such longer period thereafter as
the representations and warranties may be extended pursuant to the Purchase
Agreement.
Interim Covenants
Prior to the closing date, XXXX agrees to provide Xxxxxxx Homes with
reasonable access to the assets and the books and records of WLHI, to use best
efforts to maintain and preserve the assets being sold to Xxxxxxx Homes and to
manage the assets reasonably consistent with past practices in the ordinary
course of business and to cooperate in the obtaining of governmental or third
party consents necessary to complete the transactions.
Prior to the closing date, the Company and Xxxxxxx Homes agree to cooperate
in the obtaining of any governmental or third party consents necessary to
complete the transactions, maintain and preserve the business operations of
Xxxxxxx Homes in accordance with past practices and use reasonable efforts to
obtain financing without triggering a default under the senior notes of Xxxxxxx
Homes.
Conditions to the Acquisition
The obligations of the Company and Xxxxxxx Homes under the Purchase
Agreement are conditioned upon the satisfaction or waiver of certain conditions,
including: (i) the accuracy of the representations and warranties by WLHI and
the performance of all covenants by WLHI and the Purchasers; (ii) receipt of all
required regulatory approvals and third party consents; (iii) absence of any
material adverse change to the assets or assumed liabilities; (iv) receipt of a
legal opinion from O'Melveny & Xxxxx LLP, counsel for WLHI; (v) absence of any
litigation affecting the assets or the completion of the asset purchase; (vi)
issuance of acceptable policies of title insurance in favor of Xxxxxxx Homes;
(vii) assignment of all necessary real property documents to Xxxxxxx Homes;
(viii) receipt by the Company of a solvency opinion from Xxxxxxxx Xxxxx Xxxxxx &
Xxxxx Financial Advisors, Inc., (or such other firm of national standing and
reasonably acceptable to the Company and WLHI); (ix) receipt of adequate
financing; (x) absence of any default under the Senior Notes of the Company;
(xi) determination by the Company of the absence of an "ownership change" under
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applicable federal income tax laws; (xii) conditions to the Offer shall have
been satisfied or waived; (xiii) approval of the stockholders of the Company of
the Merger; (xiv) each of the Series B Stock Purchase Agreements shall be in
full force and effect against the Series B Stockholders in accordance with their
terms; and (xv) cancellation by Xxxxxxx Xxxx of all his outstanding options to
acquire 750,000 shares of the Series A Shares.
The obligations of WLHI under the Purchase Agreement are conditioned upon
the satisfaction or waiver of certain conditions, including: (i) the accuracy of
the representations and warranties and the performance of all covenants by the
Company and Xxxxxxx Homes; (ii) the receipt of all required regulatory approvals
and third party consents; (iii) the receipt of legal opinions from Irell &
Xxxxxxx XXX and Morris, Xxxxxxx, Arsht & Xxxxxxx, counsel for the Company and
Xxxxxxx Homes, and of Xxxxx X. Xxxxxx, Esq., Senior Vice President and General
Counsel of the Company; (iv) the absence of any litigation affecting the
completion of the Acquisition; (v) the conditions to the Offer shall have been
satisfied or waived; (vi) the approval of the stockholders of the Company of the
Merger; (vii) the release of WLHI from its contracts and obligations assumed by
Xxxxxxx Homes; (viii) the Series B Stock Purchase Agreements shall continue in
full force and effect and shall be enforceable against the Series B Stockholders
in accordance with their terms, except that this condition shall be satisfied if
any failure is due solely to a breach of the Series B Stock Purchase Agreements
by WLHI; and (ix) the determination by WLHI and its affiliates of the absence of
an "ownership change" under applicable federal income tax laws.
Post Closing Obligations.
After the closing date, Xxxxxxx Homes agrees to offer continued employment
(on an "at will" basis) to the officers, employees and sales agents of WLHI
identified on an exhibit to the Purchase Agreement on substantially the same
terms and conditions as are in effect at WLHI on the closing date.
XXXX will remain liable and indemnify and defend Xxxxxxx Homes for any
claims relating to homes which close escrow prior to the closing date for the
Acquisition. Xxxxxxx Homes will be liable and indemnify and defend XXXX for any
claims relating to homes where no work had commenced prior to the closing date.
To the extent that construction has begun on any improvements prior to the
closing date, or a home has been started but has not yet closed escrow, Xxxxxxx
Homes and XXXX will each remain liable for any claims for alleged construction
defects for any work done by or for them, respectively, on the real property,
and each shall indemnify the other in accordance with the Purchase Agreement.
After the closing date, Xxxxxxx Homes agrees to manage and to provide such
other related services as WLHI may reasonably request with respect to certain
real estate development projects which are identified on a schedule to the
Purchase Agreement and are being retained by WLHI. XXXX has agreed to reimburse
Xxxxxxx Homes for all costs incurred for its management services relating to
such projects.
The Purchasers and WLHI shall, and shall cause the Company and New Xxxxxxx
to, comply with all applicable federal and state laws and all applicable listing
criteria of the NYSE (or such other securities exchange on which the common
stock of New Xxxxxxx shall be listed) concerning the corporate governance of the
Company and New Xxxxxxx, as applicable, following consummation of the Offer,
including obligations in respect of New Xxxxxxx'x stockholders, directors,
officers and otherwise.
After the closing date, XXXX agrees to cooperate, and to cause the
partnerships and the limited liability companies through which it owns real
property to cooperate, in the transfer and delivery of the assets being
purchased by Xxxxxxx Homes and to maintain adequate levels of insurance coverage
to protect the assets being purchased by Xxxxxxx Homes.
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Termination
The Purchase Agreement may be terminated under the following circumstances:
(i) by mutual consent of the parties;
(ii) by the Company, Xxxxxxx Homes or WLHI if any governmental entity
issues an order, decree or ruling which permanently restrains or
otherwise prohibits the purchase of the shares pursuant to the Offer
or the Series B Stock Purchase Agreements;
(iii) by the Company, Xxxxxxx Homes or WLHI if the closing of the
Acquisition has not occurred (other than through the failure of any
party seeking to terminate to comply fully with its obligations
under the Purchase Agreement) on or before November 30, 1999;
provided that if the closing has not occurred by that date due to
delays in obtaining government approvals, then the parties agree to
extend the closing date for up to an additional thirty (30) days;
(iv) by Xxxxxxx Homes or the Company if the Purchasers fail to commence
the Offer within the time set forth in the Purchase Agreement,
provided that Xxxxxxx Homes is not in material breach at that time;
(v) by Xxxxxxx Homes or the Company in connection with entering into a
definitive agreement with a third party as permitted under the
Purchase Agreement in respect of the Company's Board of Directors'
fiduciary duties to the Company's stockholders (provided that Xxxxxxx
Homes has complied with all provisions of the Purchase Agreement);
(vi) by Xxxxxxx Homes or the Company if WLHI shall have breached in any
material respect any of its representations, warranties or
agreements, if the breach cannot be or has not been cured within
thirty (30) days after written notice of the breach;
(vii) by WLHI if, due to an occurrence not involving a breach by it of its
obligations under the Purchase Agreement which makes it impossible
to satisfy any of the conditions to the Offer, the Purchasers shall
have failed to commence the Offer within the time specified in the
Purchase Agreement;
(viii) by WLHI if, prior to the purchase of the Series A Shares by the
Purchasers pursuant to the Offer, the Company's Board of Directors
shall have withdrawn, modified or changed in a manner adverse to the
Purchasers its approval or recommendation of the Offer or shall have
recommended an acquisition proposal or executed an agreement
relating to an acquisition proposal or similar business combination
with a person or entity other than WLHI or its affiliates; or
(ix) by WLHI if Xxxxxxx Homes or the Company shall have breached any
representation, warranty or covenant in the Purchase Agreement which
cannot be or has not been cured within thirty (30) days after notice.
If the Purchase Agreement is terminated, all further obligations of the
parties shall terminate, provided that the termination will not relieve any
party of any liability that it may have for breach of any representation or
warranty or nonperformance of any covenant or constitute a waiver of any
available remedy for breach or nonperformance.
No Solicitation
Each of WLHI and the Company has agreed that prior to the closing, neither
it nor any of its representatives will solicit or encourage the submission of an
acquisition proposal other than from a party to the Purchase Agreement; or
provide any information concerning it or its assets to any other person or
permit any other person to visit its premises in connection with or for the
purpose of soliciting or facilitating an acquisition proposal.
In the event any other potential acquiror contacts a party to the Purchase
Agreement regarding an acquisition proposal, that party is required to inform
the other parties and to inform the potential acquiror of the period of
exclusive negotiations. If the board of directors of the Company or WLHI, after
receiving advice from counsel, determines that a failure to act would be
inconsistent with such board's fiduciary duties, the party may furnish
information pursuant to confidentiality agreements and participate in
discussions and
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negotiations. If a party enters into a definitive agreement with respect to a
competing proposal, that party is required to concurrently pay all fees and
expenses incurred by the other party through that date in connection with the
Purchase Agreement.
Except as set forth in this Offer to Purchase, there have not been, since
January 1, 1996, any contacts, negotiations or transactions between the
Purchasers, on the one hand, and the Company or its executive officers,
directors or affiliates, on the other hand, concerning a merger, consolidation
or acquisition, tender offer or other acquisition of securities, election of
directors, or a sale or other transfer of a material amount of assets.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY
The Purchasers have commenced the Offer pursuant to the terms of the
Purchase Agreement and for the purpose of acquiring such number of Series A
Shares as will enable the Purchasers and their respective affiliates to own up
to 49.9% of the outstanding Common Stock of the Company. The purchase of Series
A Shares pursuant to the Offer will also allow for the Acquisition and the
Merger to be consummated.
Except as disclosed in this Offer to Purchase, none of the Purchasers or
their respective affiliates has any present plans or proposals that would (a)
result in (i) an extraordinary corporate transaction, such as a merger,
reorganization, liquidation, or sale or transfer of a material amount of assets,
involving the Company or any of its subsidiaries, or (ii) any change in the
present board of directors or management of the Company, or (iii) any material
change in the present capitalization or dividend policy of the Company, or (iv)
any other material change in the Company's corporate structure or business, or
(b) cause a class of the Company's securities to be delisted from the NYSE or
eligible for termination of registration under the Exchange Act.
12. DIVIDENDS AND DISTRIBUTIONS
If, on or after October 7, 1999 and prior to the Expiration Date of the
Offer, the Company should (i) split, combine or otherwise change the Common
Stock or its capitalization, (ii) issue or sell any additional securities of the
Company or otherwise cause an increase in the number of outstanding securities
of the Company (except for Series A Shares issuable upon the exercise of
employee stock options outstanding on October 7, 1999), or (iii) acquire
currently outstanding shares of Common Stock or otherwise cause a reduction in
the number of outstanding shares of Common Stock, then, without prejudice to the
Purchasers' rights under Sections 1 and 14 of this Offer to Purchase, the
Purchasers in their sole discretion, subject to the terms of the Purchase
Agreement, may make such adjustments as they deem appropriate in the Offer Price
and other terms of the Offer.
If, on or after October 7, 1999, the Company should declare or pay any
dividend on the Common Stock or make any distribution (including, without
limitation, cash dividends, the issuance of additional shares of Common Stock
pursuant to a stock dividend or stock split, the issuance of other securities or
the issuance of rights for the purchase of any securities, with respect to
shares of Common Stock, that is payable or distributable to stockholders of
record on a date prior to the transfer to the names of the Purchasers or their
respective nominees or transferees on the Company's stock transfer records of
the Series A Shares purchased pursuant to the Offer, then, without prejudice to
the Purchasers' rights under Sections 1 and 14, any such dividend, distribution
or right to be received by the tendering stockholders will be received and held
by the tendering stockholders for the account of the Purchasers and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of the Purchasers, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, the Purchasers will be entitled to all rights and privileges as owner of
any such dividend, distribution or right and may withhold the entire purchase
price or deduct from the purchase price the amount or value thereof, as
determined by the Purchasers in their sole discretion.
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13. EFFECT OF THE OFFER ON THE MARKET FOR THE SERIES A SHARES; STOCK EXCHANGE
LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS
Market for the Series A Shares. The purchase of Series A Shares pursuant
to the Offer will reduce the number of Series A Shares that might otherwise
trade publicly and may reduce the number of holders of Series A Shares, which
could adversely affect the liquidity and market value of the remaining Series A
Shares held by the stockholders other than the Purchasers. The Purchasers cannot
predict whether the reduction in the number of Series A Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Series A Shares or whether such
reduction would cause future market prices to be greater or less than the Offer
Price.
The Purchase Agreement contemplates that, assuming holders of a majority of
the Company's outstanding Common Stock approve the Merger, the Merger will take
effect after the closing of the Offer, the Acquisition and the purchase of
Series B Shares pursuant to the Series B Stock Purchase Agreements. The Merger
will implement transfer restrictions on the common stock of New Xxxxxxx. Such
transfer restrictions would, absent prior approval of the Company's Board of
Directors, prohibit certain sales of common stock of New Xxxxxxx by or to
persons owning 5% or more of New Xxxxxxx'x common stock or that would result in
any person becoming the holder of 5% or more of New Xxxxxxx'x common stock.
Accordingly, the transfer restrictions will have the effect of further
restricting the liquidity of New Xxxxxxx'x common stock following the Merger.
The Merger and the transfer restrictions are described in detail in the
Company's proxy materials prepared in connection with the special meeting of the
Company's stockholders to be held on November 5, 1999. Such proxy materials have
been filed with the Commission, and copies of these materials may be obtained as
described in Section 7 of this Offer to Purchase. In addition, the proxy
materials will be mailed to holders of record of the Common Stock as of
September 15, 1999. The Merger and the transfer restrictions are also discussed
in the Company's Schedule 14D-9, which is being mailed to stockholders herewith
and which has been filed by the Company with the Commission. Holders of Series A
Shares should review these materials carefully before making a decision to
tender Series A Shares pursuant to the Offer.
Stock Exchange Listing. The Series A Shares are presently listed on the
NYSE under the symbol "PDC." Upon consummation of the Merger, each Series A
Share will be converted into the right to receive 0.2 share of New Xxxxxxx
common stock, and the Series A Shares will cease to be listed on the NYSE.
The Company states in its proxy materials relating to the Merger that the
NYSE has authorized New Xxxxxxx'x common stock for listing on the NYSE. However,
the Company has also announced that the NYSE has informed the Company that it is
not in compliance with the NYSE's recently amended continued listing criteria,
and that failure by the Company to raise its stock price above $1.00 per share
(over a 30 trading-day period) within six months will result in immediate
suspension of trading and application to the Commission for delisting. The
Company has stated in its filings with the Commission that it has presented a
business plan to the NYSE that demonstrates compliance with all aspects of the
NYSE's continued listing criteria (other than the minimum stock price
requirement) within 12 months of the date of the NYSE's notification. Under
these criteria, the Company (or, after consummation of the Merger, New Xxxxxxx)
must have:
- a total market capitalization of not less than $50 million and
stockholders' equity of not less than $50 million; and
- an average market capitalization of not less than $15 million over a
consecutive 30 day period.
The NYSE will monitor the Company and New Xxxxxxx for quarterly compliance
with its plan. If the Company or New Xxxxxxx fails to achieve the quarterly
milestones included in the plan or, at the completion of the 12 months, is not
in compliance with the NYSE's continued listing criteria, the shares of common
stock of the Company or New Xxxxxxx will be suspended from trading on the NYSE,
and the NYSE, will apply to the Commission to delist the shares. Delisting of
the Company's or New Xxxxxxx'x shares could adversely impact the liquidity and
market price of such shares.
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If the NYSE were to delist the Company's or New Xxxxxxx'x shares, it is
possible that such shares would continue to trade on other securities exchanges
or in the over-the-counter market and that price quotations would be reported by
such exchanges or through the Nasdaq Stock Market or other sources. The extent
of the public market for such shares and the availability of such quotations
would depend, however, upon such factors as the number of stockholders and/or
the aggregate market value of the publicly traded shares remaining at such time,
the interest in maintaining a market in the shares on the part of securities
firms, the possible termination of registration under the Exchange Act as
described below, and other factors.
The Purchasers will not be required to accept for payment or pay for any
tendered Series A Shares and may terminate or amend the Offer, as of the
Expiration Date, if it is reasonably determined that upon consummation of the
Offer, the purchases of Series B Shares under the Series B Stock Purchase
Agreements and the Merger, (1) the shares of Common Stock of the Company (or the
shares of Common Stock of New Xxxxxxx) will cease to be listed on the NYSE or
another national securities exchange, or will not be quoted on an inter-dealer
quotation system of a registered national securities association, or (2) the
shares of Common Stock of the Company (or the shares of Common Stock of New
Xxxxxxx) outstanding immediately following consummation of such transactions
will be held of record by less than 300 persons.
Exchange Act Registration. The Series A Shares are currently registered
under the Exchange Act, and the shares of New Xxxxxxx are expected to be
registered under the Exchange Act. Registration of the Series A Shares or the
shares of New Xxxxxxx under the Exchange Act may be terminated upon application
of the Company or New Xxxxxxx to the Commission if such shares are neither
listed on a national securities exchange nor held by 300 or more holders of
record. Termination of registration of the Series A Shares or the shares of New
Xxxxxxx under the Exchange Act would substantially reduce the information
required to be furnished by the Company or New Xxxxxxx to its stockholders and
to the Commission and would make certain provisions of the Exchange Act no
longer applicable to the Company or New Xxxxxxx, such as the short-swing profit
recovery provisions of Section 16(b) of the Exchange Act, the requirement of
furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in
connection with stockholders' meetings and the related requirement of furnishing
an annual report to stockholders and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions. Furthermore, the
ability of "affiliates" of the Company or New Xxxxxxx and persons holding
"restricted securities" of the Company or New Xxxxxxx to dispose of such
securities pursuant to Rule 144 or Rule 144A under the Securities Act of 1933,
as amended, may be impaired or eliminated.
Margin Regulations. The Series A Shares are currently "margin securities"
under the regulations of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Series A Shares.
Depending upon factors similar to those described above regarding listing and
market quotations, it is possible that, following the Offer and the Merger, the
Series A Shares or the shares of New Xxxxxxx would no longer constitute "margin
securities" for the purposes of the margin regulations of the Federal Reserve
Board and therefore could no longer be used as collateral for loans made by
brokers.
14. CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, the Purchasers shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchasers obligation to pay for or return tendered Shares
promptly after termination of withdrawal of the Offer), pay for, and may delay
the acceptance for payment of or, subject to the restriction referred to above,
the payment for, any tendered Series A Shares, and may amend the Offer or
terminate the Offer and not accept for payment any tendered Shares, if (i) the
Minimum Condition has not been satisfied or waived (pursuant to the Purchase
Agreement) by the Expiration Date, (ii) the Acquisition has not been consummated
in accordance with the terms of the Purchase Agreement, (iii) the stockholders
of the Company have not approved the Merger by the required vote, or (iv) at any
time after October 7, 1999
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and prior to the Expiration Date, any of the following events shall have
occurred and be continuing as of the Expiration Date:
(a) there shall be any action taken, instituted or pending, or any
statute, rule, regulation, legislation, interpretation, ruling,
condition, judgment, order or injunction enacted, enforced, promulgated,
proposed, amended, issued or deemed applicable to the Offer, the
purchase of the Series B Shares pursuant to the Series B Stock Purchase
Agreements, the Acquisition or the Merger, by any Governmental Entity
(as defined in the Purchase Agreement), that could reasonably be
expected to, directly or indirectly: (1) make illegal or otherwise
prohibit consummation of the Offer, the purchase of the Series B Shares
pursuant to the Series B Stock Purchase Agreements, the Acquisition or
the Merger as contemplated by the Purchase Agreement, (2) impose a
limitation on the ability of the Purchasers effectively to acquire, hold
or exercise full rights of ownership of Common Stock of the Company,
including, without limitation, the right to vote any shares acquired or
owned by the Purchasers on all matters properly presented to the
Company's stockholders, or (3) require divestiture by the Purchasers,
WLHI or their respective affiliates of shares of Common Stock of the
Company or any material portion of the business or assets of the Company
taken as a whole;
(b) (1) the representations of the Company and Xxxxxxx Homes set
forth in the Purchase Agreement shall not be true and correct in any
material respect as of the date of the Purchase Agreement and as of
consummation of the Offer as though made on and as of such date, (2) the
Company or Xxxxxxx Homes shall have failed to comply in all material
respects with their respective covenants and agreements set forth in the
Purchase Agreement, (3) there shall have occurred any events or changes
which have had or could reasonably be expected to have a material
adverse effect on the business, assets, prospects, condition (financial
and other) and results of operations of the Company taken as a whole;
(c) (1) it shall have been publicly disclosed, or the Purchasers
and WLHI shall have otherwise learned, that beneficial ownership
(determined for the purposes of this paragraph (c) as set forth in Rule
13d-3 promulgated under the Exchange Act) of 50% or more of the
outstanding shares of Common Stock has been acquired by any person
(including the Company and Xxxxxxx Homes or any of their subsidiaries or
affiliates) or group (as defined in Section 13(d)(3) under the Exchange
Act), (2) the Board of Directors of the Company or any committee thereof
shall have withdrawn, or shall have modified or amended in a manner
adverse to the Purchasers and WLHI, the approval, adoption or
recommendation, as the case may be, of the Offer or the Merger, or
approved or recommended any, merger, consolidation, other business
combination, sale of material assets, takeover proposal or other
acquisition of shares of Common Stock other than the Offer, the
Acquisition, the Merger and the other transactions contemplated by the
Purchase Agreement, (3) a third party shall have entered into a
definitive agreement or a written agreement in principle with the
Company with respect to a tender offer or exchange offer for any shares
of Common Stock of the Company or a merger, consolidation, other
business combination with the Company or sale of material assets of the
Company or any of its subsidiaries (except as specifically permitted by
the Purchase Agreement), or (4) the Board of Directors of the Company or
any committee thereof shall have resolved to do any of the foregoing and
such resolution shall be made public;
(d) The Company, Xxxxxxx Homes and WLHI agree to terminate the
Offer, the Acquisition or the Purchase Agreement, or the Purchase
Agreement shall have been otherwise terminated in accordance with its
terms;
(e) there shall have occurred, and continued to exist, (1) any
general suspension of, or limitation on prices for, trading in
securities on the NYSE (excluding any coordinated trading half-
triggered solely as a result of a specified decrease in a market index
and suspensions on limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), or
(2) a banking moratorium in the United States or other limitation on the
extension of credit, or (3) a commencement of a war, armed hostilities
or other national or international
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calamity involving the United States and having a material adverse
effect on the business, assets, prospects, condition (financial and
other) and results of operations of the Company, taken as a whole, or
materially adversely affecting or delaying the Offer, or (4) in the case
of any condition, circumstance or event referenced in any of the
foregoing clauses (1), (2) and (3) and existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(f) the Series B Stock Purchase Agreements shall no longer be in
full force or effect, or the Series B Stock Purchase Agreements shall no
longer be enforceable against the Series B Stockholders in accordance
with their terms (except for any such failure to be in full force or
effect or enforceable which is due solely to a breach thereof by WLHI);
or
(g) it is reasonably determined that upon consummation of the
Offer, the purchase of Series B Shares under the Series B Stock Purchase
Agreements and the Merger, (1) the shares of Common Stock of the Company
will cease to be listed on the NYSE or another national securities
exchange, or will not be quoted on an inter-dealer quotation system of a
registered national securities association, or (2) the shares of Common
Stock of the Company outstanding immediately following consummation of
such transactions will be held of record by less than 300 persons.
The foregoing conditions are for the sole benefit of the Purchasers and may
be asserted by the Purchasers regardless of the circumstances giving rise to any
such conditions or may be waived by the Purchasers in whole or in part, at any
time and from time to time in their sole discretion, subject to the terms of the
Purchase Agreement. Subject to the terms of the Purchase Agreement, the failure
by Purchasers at any time to exercise any of the foregoing rights will not be
deemed a waiver of any such right and each right will be deemed an on-going
right which may be asserted at any time and from time to time. Any reasonable
determination by the Purchasers concerning any events described in the above
conditions will be final and binding on all parties.
Notwithstanding the foregoing, all conditions to the Offer (other than the
condition set forth in paragraph (a) of this Section 14) shall be deemed to have
been satisfied upon consummation of the Acquisition in accordance with the terms
of the Purchase Agreement. In addition, if on the Initial Expiration Date, (i)
the Minimum Condition shall not have been satisfied or waived by the Purchasers,
or (ii) the Acquisition shall not have been consummated or the stockholders of
the Company shall not have approved the Merger due to delays in (a) obtaining
necessary governmental or regulatory approvals of, or necessary third party
consents to, either the Acquisition or the Merger, or (b) obtaining the
financing required to satisfy the conditions to the Acquisition, or (c)
obtaining the release of WLHI from certain performance bonds, guarantees and
other obligations set forth in the Purchase Agreement, the Purchasers have
agreed to extend the Initial Expiration Date of the Offer from time to time and
for such number of business days as may be necessary to allow for such
conditions to be satisfied and for the closing of the Offer to be substantially
coterminous with the closing of the Acquisition; provided, however, that in no
event shall the Purchasers be obligated to extend the Expiration Date of the
Offer beyond November 30, 1999 (or thirty days thereafter in the event that the
closing of the Acquisition or the stockholder vote upon the Merger is delayed
due to further delays in the process of obtaining necessary governmental or
regulatory approvals).
15. CERTAIN LEGAL MATTERS
General. Except as otherwise disclosed herein, based on a review of
publicly available filings by the Company with the Commission and the review of
certain information furnished by the Company to the Purchasers and their
representatives, the Purchasers are not aware of (i) any governmental license or
regulatory permit that appears to be material to the business of the Company and
its subsidiaries, taken as a whole, that might be adversely affected by the
acquisition of Series A Shares by the Purchasers pursuant to the Offer, or (ii)
except as set forth below, any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of Series A Shares by the
Purchasers as contemplated herein. Should any such approval or other action be
required, the Purchasers currently contemplate that such approval or action
would be sought. While the Purchasers do not currently intend to delay the
acceptance for payment of Series A Shares tendered pursuant to the Offer pending
the outcome of any such matter, there can be no assurance that any such approval
or
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action, if needed, would be obtained or would be obtained without substantial
conditions or that adverse consequences might not result to the business of the
Company or the Purchasers or that certain parts of the businesses of the Company
or the Purchasers might not have to be disposed of in the event that such
approvals were not obtained or any other actions were not taken. The Purchasers'
obligation under the Offer to accept for payment and pay for Series A Shares is
subject to certain conditions, including conditions relating to the legal
matters discussed in this Section 15. See Section 14.
State Takeover Statutes. A number of states have adopted laws and
regulations which purport, to varying degrees, to apply to attempted
acquisitions of securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In 1982, in Xxxxx x. MITE Corp., the Supreme
Court of the United States invalidated on constitutional grounds the Illinois
Business Takeover Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that
the Indiana Control Share Acquisition Act was constitutional. Such Act, by its
terms, is applicable only to corporations that have a substantial number of
stockholders in Indiana and are incorporated there. Subsequently, a number of
federal courts have ruled that various state takeover statutes were
unconstitutional insofar as they apply to corporations incorporated outside the
state of enactment.
The Company, directly or through subsidiaries, conducts business in
California, Arizona, New Mexico and Nevada, some of which states have enacted
takeover laws. The Purchasers do not know whether any of these laws will, by
their terms, apply to the Offer and have not complied with any such laws. Should
any person seek to apply any state takeover law, the Purchasers will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer,
and an appropriate court does not determine that it is inapplicable or invalid
as applied to the Offer, the Purchasers might be required to file certain
information with, or receive approvals from, the relevant state authorities. In
addition, if enjoined, the Purchasers might be unable to accept for payment any
Series A Shares tendered pursuant to the Offer, or be delayed in continuing or
consummating the Offer. In such case, the Purchasers may not be obligated to
accept for payment any Series A Shares tendered. See Section 14.
16. FEES AND EXPENSES
Except as set forth below, the Purchasers will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
Series A Shares pursuant to the Offer.
Purchaser has retained ChaseMellon Consulting Services, L.L.C. to act as
the Information Agent and ChaseMellon Shareholder Services, L.L.C. to act as the
Depositary in connection with the Offer. The Information Agent may contact
stockholders by mail, electronic mail, telephone, facsimile, telegraph and
personal interviews, and may request brokers, dealers and other nominee
stockholders to forward materials relating to the Offer to beneficial owners of
Series A Shares. The Information Agent and the Depositary will receive
reasonable and customary compensation for their services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by the Purchasers for customary
mailing and handling expenses incurred by them in forwarding the Offer materials
to their customers.
17. MISCELLANEOUS
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Series A Shares in any jurisdiction in which the making of
the Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Purchasers may, in their discretion, take such action
as they may deem necessary to make the Offer in any such jurisdiction and extend
the Offer to holders of Series A Shares in such jurisdiction.
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The Purchasers have filed with the Commission the Schedule 14D-1,
furnishing certain additional information with respect to the Offer, and may
file amendments thereto. The Schedule 14D-1 and any amendments thereto,
including exhibits, may be inspected at, and copies may be obtained from, the
same places and in the same manner as set forth in Section 7 above (except that
they will not be available at the regional offices of the Commission). The
Company's recommendation with respect to the Offer and other information
required to be disseminated to stockholders pursuant to Rule 14d-9 is contained
in the Company's Schedule 14D-9, which is being mailed to stockholders herewith
and which has been filed by the Company with the Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASERS NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
XXXXXXX XXXX
XXXXXXX X. XXXX
October 7, 1999
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Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Series A Shares and any
other required documents should be sent by each stockholder or such
stockholder's broker, dealer, bank, trust company or other nominee to the
Depositary as follows:
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Registered/Certified Mail: By Hand: Overnight Delivery:
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 0000 000 Xxxxxxxx 00 Xxxxxxxxxx Xx.
South Hackensack, NJ 07606 13th Floor Mail Stop - Reorg. Dept.
New York, NY 00000 Xxxxxxxxxx Xxxx, XX 00000
By Facsimile Transmission
(For Eligible Institutions Only)
(000) 000-0000
Confirm Facsimile by Telephone:
(000) 000-0000
Questions and requests for assistance or for additional copies of the Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent at the telephone number and location listed
below. You may also contact your broker, dealer, bank, trust company or other
nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
CHASEMELLON CONSULTING SERVICES, L.L.C.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
For Information Telephone:
(000) 000-0000
