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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: March 9, 2001
Date of earliest event reported: February 23, 2001
CAPITAL PACIFIC HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
File No. 001-09911
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(Commission File Number)
Delaware (95-2956559)
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(State of incorporation) (I.R.S. Employer
Identification Number)
4100 MacArthur Blvd., Suite 200, Newport Beach, California 92660
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(Address of principal executive offices) (Zip Code)
949-622-8400
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(Registrant's telephone number, including area code)
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ITEM 2. Acquisition or Disposition of Assets.
On November 7, 2000, Capital Pacific Holdings, Inc. (the "Company")
received a letter (the "Letter") from Farallon Capital Management, LLC
("Farallon") proposing a transaction with California Housing Finance, L.P.
("CHF"), an unaffiliated investment company managed by Farallon and a large
shareholder in the Company and investor with the Company in several joint
venture projects. The Letter expressed an interest in CHF's acquiring all of the
Company's interest in certain commercial, residential, mixed use and land
development properties (the "Projects") and in two office buildings in which the
Company maintained offices, including its headquarters (the "Buildings") (the
Projects and Buildings are listed below) in exchange for a majority of CHF's
interest in Capital Pacific Holdings, L.L.C. ("CPH LLC"), a business entity
through which the Company holds a substantial portion of its residential assets,
and CHF's entire interest in certain other residential joint ventures between
CHF, the Company and certain third party venture partners (the "Exchange"). CHF
conditioned its expression of interest on the participation in the future
management of the Projects and Buildings by Paul Makarechian, then an Executive
Vice President and Director of the Company. On November 6, 2000, in anticipation
of the Company's consideration of the Letter, Paul Makarechian resigned as a
director of the Company.
On February 8, 2001, the Company's board of directors, by unanimous
vote of the disinterested directors, approved the terms of the Exchange
Agreement which were reached through negotiations between the Company's
management and Farallon. On February 15, 2001, CHF and the Company entered into
an Interest Exchange Agreement (the "Exchange Agreement"). The transaction
contemplated by the Exchange Agreement closed on February 23, 2001 (the
"Closing") upon which, among other things, (i) the Company transferred all of
its interests in the Projects and in one of the Buildings (and in the proceeds
from the sale of the other Building that was recently sold to an unaffiliated
third party) to Makallon, LLC, a newly-formed limited liability company and
affiliate of CHF, described below, (ii) CHF transferred to the Company a 25.07%
ownership interest in CPH LLC (reducing CHF's ownership interest in CPH LLC from
32.07% to 7%) and all of its ownership interest in certain other joint ventures
in which the Company also holds an interest, and (iii) the Company and CHF each
were granted an option (the "Option") to convert CHF's remaining 7% ownership
interest in CPH LLC into 1,235,000 shares (the "Conversion Shares") of
non-voting Common Stock of the Company. The Option may be exercised by either
the Company or CHF between 90 and 180 days following the Closing.
Under the Exchange Agreement, if the Option is exercised, the existing
Registration Rights Agreement dated as of October 1, 1997 between the Company
and CHF automatically will be amended such that (i) the Conversion Shares become
subject to the registration rights provided thereunder, (ii) CHF shall have
three demand registration rights and (iii) the Company shall, within 8 months of
Closing, register the Conversion Shares for sale under the Securities Exchange
Act of 1934, as amended, and
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list the Conversion Shares for trading on the exchange or quotation system on
which the Company's voting Common Stock is traded (currently the American Stock
Exchange).
If the Option is exercised, (i) any distributions made to CHF by CPH
LLC, or capital contributions made by CHF to CPH LLC, during the period from and
after the Closing through the date of the exercise of the Option (the "Option
Period") will be repaid to CPH LLC or CHF, as the case may be, and (ii) CHF will
receive the benefit of any cash dividend paid by the Company during the Option
Period. The number of Conversion Shares issuable upon exercise of the Option
will be adjusted for any stock split, stock dividend or similar event during the
Option Period. Under the Exchange Agreement, the Company has the right to
convert the Conversion Shares to voting Common Stock prior to any sale of the
Conversion Shares by CHF. In addition, the Conversion Shares automatically
convert to voting Common Stock if CHF exercises its tag-along rights (discussed
below) upon the sale by the CPH Shareholders of more than 50% of the Common
Stock collectively owned by them. If CHF sells the Conversion Shares and they
have not been converted into voting Common Stock, the Company is obligated to
pay to CHF a cash premium of 5% of the cash sale price received by CHF in such
sale.
Pursuant to the Exchange Agreement, the Company consented to the
resignation by Paul Makarechian, an Executive Vice President and former Director
of the Company, and the son of Hadi Makarechian, Chairman and CEO of the
Company, of his employment with the Company and his entering into a joint
venture agreement with CHF to manage the Projects and the Buildings through an
affiliate. CHF and an affiliate of Paul Makarechian have formed a limited
liability company ("Makallon, LLC") for this purpose. Paul Makarechian acquired
his indirect ownership interest in Makallon, LLC through Makar Properties, LLC,
an entity controlled by him ("Makar"). Makar is the Managing Member of Makallon,
LLC, and will receive from Makallon, LLC a contingent profit participation in
the Projects and the Buildings as well as a management fee. Certain employees of
the Company who previously were actively involved in the management and
administration of the Projects and Buildings have left the Company and been
offered employment by Makar. These employees included William Funk, a former
Senior Vice President and Director of the Company. (See Item 5 below.) As a
condition of the Exchange, CHF required the Company's Chairman and Chief
Executive Officer, Mr. Hadi Makarechian, to enter into a consulting agreement
with Makallon, LLC under which he will, without compensation at this time,
provide certain consulting services relating to the Projects, subject to the
primacy of his duties to the Company.
The Company and CHF (or certain affiliated entities) have made certain
payments to each other to reimburse certain outstanding advances, and to net-out
the economic benefit of any capital contributions and distributions made between
December 1, 2000 and the Closing. The general effect of these provisions of the
Exchange Agreement is to make the Exchange effective as of November 30, 2000 for
financial purposes.
The Investment and Stockholders Agreement (the "Stockholders
Agreement") dated September 29, 1997 among CHF, the Company, CPH LLC, the CPH
Shareholders,
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and certain subsidiaries of the Company was terminated pursuant to the Exchange
Agreement. The Exchange Agreement also provides for the right of CHF to
"tag-along" on certain sales of Company Common Stock by the CPH Shareholders and
the CPH Shareholders' right to "tag-along" on certain sales of Company Common
Stock (which includes voting and non-voting stock) by CHF. This provision
provides that if CHF or the CPH Shareholders wish to sell any of their shares of
Company Common Stock to a third party, the non-selling party has the right to
sell a pro rata portion of its shares of Company Common Stock to such third
party on the same terms and conditions. This tag-along provision is
substantially similar to the tag-along provision that previously existed in the
Stockholders Agreement. Two of the Company's shareholders, CPH2, LLC and CPH3,
LLC (the "CPH Shareholders"), which are affiliates of the Company's Chairman and
Chief Executive Officer and which were parties to the Stockholders Agreement,
joined in the Exchange Agreement for the purpose of this provision.
Capital Pacific Homes, Inc., a subsidiary of the Company, has entered
into construction, management and marketing agreements relating to certain of
the Projects.
The following commercial, residential, mixed use and land development
properties constitute the Projects: CPHAHB, LLC and Atlanta Huntington Beach,
LLC (Huntington Beach); CPHMB,LLC and CPH Monarch Beach, LLC (Ritz Pointe);
CPHR-I, LLC and CPH Resorts I, LLC (Monarch Beach Resort); CPHVP, LLC and CPH
Vista Palisades, LLC (Vista Palisades); CPHCHF Golf, LLC, CPH Dos Pueblos, LLC
and CPH Dos Pueblos Associates, LLC (Dos Pueblos); CPHROB, LLC and CPH Redhill
Office Building, LLC (Summit Office Building); CPHAOB, LLC and CPH Airport
Office Building, LLC (Airport Office Building); CPHDP, LLC and CPH Dana Point,
LLC (Dana Point); CPH Industrial I, LLC and CPH Jurupa/Milliken, LLC (Commerce
Point); CPHOOB, LLC and CPH Orange Office Building, LLC (Bradley Plaza); CPHRPV,
LLC and RPV Associates, LLC (Rancho Palos Verdes); and CPHA, LLC, CPH Austin,
LLC and CPH Foster Ranch, L.P. (Foster Ranch). The Buildings are CPH Newport
Building, LLC (4100 MacArthur Blvd., Newport Beach, CA) and CPH Las Vegas
Building, LLC (3200 Soaring Gulls Drive, Las Vegas, NV).
This filing of this report is not intended to indicate that the Company
believes that the Company's and its other subsidiaries' equity in the net book
value of the assets acquired and disposed of in the Exchange and described in
this item exceeded 10 percent of the total assets of the Company and its
consolidated subsidiaries.
ITEM 5. Other Events.
Effective March 6, 2001, William Funk resigned as Director in light of the
Exchange described in Item 2 above, and the Company's Board of Directors elected
William J. Hadaway to fill the vacancy. Mr. Hadaway is a C.P.A., and has been
practicing as a sole practitioner or partner in a public accounting firm since
1971. Further information regarding Mr. Hadaway will be provided in subsequent
filings by the Company.
ITEM 7. Financial Statements and Exhibits.
Financial Statements and Exhibits required to be filed by this Item
will be filed by Amendment not later than 60 days after the date of the filing
of this report.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
March 9, 2001 By: /s/ STEVEN O. SPELMAN, JR.
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Steven O. Spelman, Jr.
Chief Financial Officer and Corporate
Secretary (Principal Financial Officer)