The information in this proxy statement/preliminary prospectus is not complete and is subject to completion and amendment. A registration statement relating to the securities described in this proxy statement/prospectus has been filed with the U.S. Securities and Exchange Commission. These securitiesmay be changed. We may not be sold nor may offers to buy be acceptedoffer, sell or exchange these securities until the registration statement filed with the U.S. Securities and Exchange Commission is declared effective. This proxy statement/preliminary prospectus is not an offer to sell or exchange these securities, nor a solicitation of an offer to buy or exchange these securities, in any jurisdiction where the offer, solicitation, sale or saleexchange is not permitted prior to registration under the securities laws of any such jurisdiction.permitted.
PRELIMINARY—SUBJECT TO COMPLETION—COMPLETION, DATED MAY 5, 2017DECEMBER 31, 2019
PROSPECTUS
CENTURY COMMUNITIES, INC.
Offer to Exchange
6.750% Senior Notes due 2027 and Related Guarantees
for
6.750% Senior Notes due 2027 and Related Guarantees
MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT
Dear Fellow Stockholders:
As previously announcedOn May 23, 2019, we issued $500 million in aggregate principal amount of our 6.750% Senior Notes due 2027 (which we refer to as the “Initial Notes”) under an Indenture, dated as of May 23, 2019, as amended and/or supplemented from time to time (which we refer to as the “Indenture”), by and among us, the guarantors party thereto, and U.S. Bank National Association, as trustee. We are hereby offering to issue up to $500 million in aggregate principal amount of our 6.750% Senior Notes due 2027 (which we refer to as the “Exchange Notes”), which will be fully, unconditionally, jointly and severally guaranteed on April 11, 2017, UCP, Inc. (“UCP”a unsecured senior basis by certain of our existing and future direct and indirect subsidiaries, subject to certain customary release provisions contained in the Indenture, in exchange for any and all of the Initial Notes, in an exchange offer (which we refer to as the “Exchange Offer”) that will be registered under the Securities Act of 1933, as amended (which we refer to as the “Securities Act”). We refer to the Exchange Notes and the Initial Notes collectively herein as the “Notes.” We are conducting the Exchange Offer to satisfy our obligations in the registration rights agreement that we entered into when the Initial Notes were sold (which we refer to as the “Registration Rights Agreement”).
The Exchange Offer:
We will exchange all Initial Notes that are validly tendered and not validly withdrawn prior to the expiration of the Exchange Offer for an equal principal amount of Exchange Notes.
You may withdraw tenders of your Initial Notes at any time prior to the expiration of the Exchange Offer.
| • | The Exchange Offer expires at 5:00 P.M., New York City time, on the evening of [ the 25th business day following commencement of the Exchange Offer ], 2020 (which we refer to as the “Expiration Date”), unless extended. |
We believe that the exchange of the Initial Notes for Exchange Notes in the Exchange Offer will not be a taxable event for U.S. federal income tax purposes, but you should consult your financial and tax advisors in making your own decision on what action to take.
We will not receive any proceeds from the Exchange Offer.
The Exchange Notes:
The terms of the Exchange Notes are identical in all material respects to the Initial Notes, except that the Exchange Notes are registered under the Securities Act and the transfer restrictions, registration rights, and additional interest provisions applicable to the Initial Notes do not apply to the Exchange Notes.
The Exchange Notes and the Initial Notes (to the extent not surrendered in exchange for Exchange Notes in the Exchange Offer) will be treated together as a single series of debt securities for all purposes under the Indenture and will vote together on all matters under the Indenture.
All untendered Initial Notes will continue to be subject to the restrictions on transfer set forth in the Initial Notes and in the Indenture. In general, the Initial Notes may not be offered or sold, except in transactions that are registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Except as required by the Registration Rights Agreement, we currently do not anticipate that we will register the resale of the Initial Notes under the Securities Act.
See “Risk Factors” on page 14 for a discussion of certain risks that you should consider before participating in the Exchange Offer.
Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The letter of transmittal states that by so acknowledging and Plandelivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of Merger, dated April 10, 2017 (asthe Securities Act. This prospectus, as it may be amended or supplemented from time to time, the “Merger Agreement”),may be used by a broker-dealer in connection with Century Communities, Inc. (“Century Communities”) and Casa Acquisition Corp. (“Merger Sub”), a wholly-owned subsidiaryresales of Century Communities, pursuant to which UCP will be merged with and into Merger Sub (the “Merger”), with Merger Sub surviving as a wholly-owned subsidiary of Century Communities, and UCP no longer being a public company. If the Merger Agreement is adopted by UCP stockholders and the Merger is consummated, UCP stockholders will receive,Exchange Notes received in exchange for each shareInitial Notes where such Initial Notes were acquired by such broker-dealer as a result of UCP Class A Common Stock (as defined herein) owned by them immediately priormarket-making activities or other trading activities. In addition, all dealers effecting transactions in the Exchange Notes may be required to the Merger, (i) 0.2309 ofdeliver a share of Century Communities Common Stock (as defined herein) (the “stock consideration”)plus(ii) $5.32 in cash (the “cash consideration” and, together with the stock consideration, the “Merger Consideration”).
Based on Century Communities’ closing stock price on , 2017, the most recent practicable dateprospectus. We have agreed that we will make this prospectus, as amended or supplemented, available to any broker-dealer for which such information was available, the Merger Consideration represented approximately $ in value per share of UCP Class A Common Stock, which represents a premium of approximately % over UCP’s closing stock price on April 10, 2017, the last trading day before the public announcement of the Merger Agreement. The value of the Merger Consideration will fluctuate based on the market price of Century Communities Common Stock until the completion of the Merger. Shares of Century Communities Common Stock and shares of UCP Class A Common Stock are traded on the New York Stock Exchange (the “NYSE”), under the ticker symbols “CCS” and “UCP,” respectively. We urge you to obtain current market quotations for the shares of Century Communities Common Stock and UCP Class A Common Stock.
Based on the number of shares of Century Communities Common Stock and UCP Class A Common Stock expected to be outstanding immediately prior to the closing of the Merger, Century Communities expects to issue approximately 4.2 million shares of Century Communities Common Stock (not including shares of Century Communities Common Stock issuableuse in connection with any such resale for a period ending on the assumed conversionearlier of outstanding UCP stock options and restricted stock units into Century Communities stock options and restricted stock units in accordance with(i) 180 days from the terms set forth indate on which the Merger Agreement). The issuanceregistration statement of which this prospectus forms a part is expected to result in former UCP stockholders owning approximately 16.4%, and current Century Communities stockholders owning approximately 83.2%, of the outstanding Century Communities Common Stock immediately after the completion of the Merger.
The Merger cannot be consummated unless UCP stockholders holding a majority of the voting power of the outstanding shares of Class A Common Stock and Class B Common Stock (collectively, the “UCP Common Stock”), voting together as a single class, as of the close of business on , 2017 (the “Record Date”), vote in favor of the adoption of the Merger Agreement at the special meeting of UCP stockholders (the “UCP special meeting”) to be held on , 2017, at a.m., local time, at .Your vote is very important regardless of the number of shares of UCP Common Stock you own. Whether or not you expect to attend the UCP special meeting in person, please vote or otherwise submit a proxy to vote your shares as promptly as possible so that your shares may be represented and voted at the UCP special meeting.
The board of directors of UCP (the “UCP Board”) recommends that UCP stockholders vote FOR the proposal to adopt the Merger Agreement and FOR each of the other proposals to be voted on at the UCP special meeting, as described in more detail in the accompanying proxy statement/prospectus. In considering the recommendations of the UCP Board, you should be aware that certain directors and executive officers of UCP will have interests in the Merger that may be different from, or in addition to, the interests of UCP stockholders generally. See the section entitled “Proposal I: Adoption of the Merger Agreement—Interests of Certain UCP Directors and Officers in the Merger” beginning on page 89 of the accompanying proxy statement/prospectus.
The accompanying proxy statement/prospectus provides important information regarding the UCP special meeting and a detailed description of the Merger Agreement, the Merger and the other transactions contemplated thereby, and the matters to be presented at the UCP special meeting.We urge you to read the accompanying proxy statement/prospectus (and any documents incorporateddeclared effective by reference into the accompanying proxy statement/prospectus) carefully and in its entirety. Please pay particular attention to “Risk Factors” beginning on page 34 of the accompanying proxy statement/prospectus.
We hope to see you at the UCP special meeting and look forward to the successful completion of the Merger.
Sincerely,
Dustin L. Bogue
President and Chief Executive Officer
UCP, Inc.
Neither the U.S. Securities and Exchange Commission (which we refer to as the “SEC”), and (ii) the date on which a broker-dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities. See “Plan of Distribution.”
Neither the SEC nor any state securities commission has approved or disapproved of thethese securities to be issued in connection with the Merger described in the accompanying proxy statement/prospectus or determined that the accompanying proxy statement/if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The accompanying proxy statement/prospectus is dated , 2017 and is first being mailed to UCP stockholders on or about , 2017.
UCP, INC.
99 Almaden Boulevard, Suite 400
San Jose, California 95113
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held onThe date of this prospectus is , 20172020.
Dear Fellow Stockholders:
We are pleased to invite you to attend the special meeting of stockholders of UCP, Inc. (“UCP”) to be held on , 2017 at a.m., local time, at , for the following purposes:
UCP will transact no other business at the UCP special meeting except such business as may properly be brought before the UCP special meeting or any adjournment or postponement thereof. Please refer to the accompanying proxy statement/prospectus for further information with respect to the business to be transacted at the UCP special meeting.
The board of directors of UCP (the “UCP Board”) has fixed the close of business on , 2017 as the record date (the “Record Date”) for the UCP special meeting. Only holders of record of UCP Common Stock as of the Record Date are entitled to notice of, and to vote at, the UCP special meeting or any adjournment or postponement thereof. Completion of the Merger is conditioned on, among other things, adoption of the Merger Agreement by the UCP stockholders.
Adoption of the Merger Agreement requires the affirmative vote of holders of a majority of the voting power of the outstanding shares of UCP Class A Common Stock and UCP Class B Common Stock, voting together as a single class. Approval of the adjournment proposal requires the affirmative vote of holders of a majority of the votes which could be cast by the holders of all classes of stock entitled to vote on such question which are present in person or by proxy at the meeting.
The UCP Board recommends that UCP stockholders vote FOR the adoption of the Merger Agreement and FOR the adjournment proposal.
Your vote is very important. Whether or not you plan to attend the UCP special meeting, please act promptly to submit a proxy to vote your shares with respect to the proposals described above. You may submit a proxy to vote your shares by completing, signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided. You also may submit a proxy to vote your shares by
telephone or through the Internet by following the instructions set forth on the proxy card. If you attend the UCP special meeting, you may vote your shares in person, even if you have previously submitted a proxy in writing, by telephone or through the Internet. If your shares are held in the name of a nominee or intermediary, please follow the instructions on the voting instruction card furnished by such record holder.
We urge you to read the accompanying proxy statement/prospectus, including all documents incorporated by reference into the accompanying proxy statement/prospectus, and its annexes carefully and in their entirety. In particular, see “Risk Factors” beginning on page 34 of the accompanying proxy statement/prospectus. If you have any questions concerning the Merger Agreement, the Merger or the other transactions contemplated thereby, the UCP special meeting or the accompanying proxy statement/prospectus, would like additional copies of the accompanying proxy statement/prospectus, or need help submitting a proxy to have your shares of UCP Common Stock voted, please contact UCP’s proxy solicitor:
105 Madison Avenue
New York, New York 10016
Telephone: (800) 322-2885
Email: proxy@mackenziepartners.com
By Order of the Board of Directors,
W. Allen Bennett
Vice President and General Counsel
, 2017
ADDITIONAL INFORMATION
The accompanying document is the proxy statement of UCP for its special meeting of stockholders and the prospectus of Century Communities relating to the offer and sale of Century Communities Common Stock to be issued to UCP stockholders in the Merger. The accompanying proxy statement/prospectus incorporates important business and financial information about Century Communities and UCP from documents that are not included in or delivered with the accompanying proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain documents incorporated by reference into the accompanying proxy statement/prospectus by requesting them in writing or by telephone from Century Communities or UCP at the following addresses and telephone numbers:
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In addition, if you have questions about the Merger, the other transactions contemplated by the Merger Agreement, or the accompanying proxy statement/prospectus, would like additional copies of the accompanying proxy statement/prospectus, or need to obtain proxy cards or other information related to the proxy solicitation, please contact UCP’s proxy solicitor:
105 Madison Avenue
New York, New York 10016
Telephone: (800) 322-2885
Email: proxy@mackenziepartners.com
You will not be charged for any of these documents that you request.If you would like to request any documents, please do so by , 2017 to receive them before the UCP special meeting.
See also “Where You Can Find More Information” beginning on page 147 of the accompanying proxy statement/prospectus for further information.
ABOUT THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed by Century Communities with the U.S. Securities and Exchange Commission, constitutes a prospectus of Century Communities under Section 5 of the Securities Act of 1933, as amended, with respect to the shares of Century Communities Common Stock to be issued to UCP stockholders pursuant to the Merger Agreement. This proxy statement/prospectus also constitutes a proxy statement for UCP under Section 14(a) of the Securities Exchange Act of 1934, as amended. In addition, it constitutes a notice of meeting with respect to the special meeting of UCP stockholders.
You should rely only on the information contained in, or incorporated by reference into, this proxy statement/prospectus. No one has beenprospectus or any free writing prospectus prepared by us. We have not authorized anyone to provide you with any information, that is different from thatother than the information contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated , 2017. You shouldor any free writing prospectus prepared by us, and we take no responsibility for any other information that others may give you. We are not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. You should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of such information. Neither our mailing of this proxy statement/prospectus to UCP stockholders nor the issuance by Century Communities of shares of Century Communities Common Stock pursuant to the Merger Agreement will create any implication to the contrary.
This proxy statement/prospectus shall not constitutemaking an offer to sell or the solicitation of an offer to buy, anyexchange these securities or the solicitation of a proxy, in any jurisdiction where the offer, sale or to or from any person to whom, itexchange is unlawful to make any such offer or solicitation. Information containednot permitted. You should assume that the information appearing in this proxy statement/prospectus regarding Century Communities has been providedand any free writing prospectus prepared by Century Communities and information contained in this proxy statement/prospectus regarding UCP has been provided by UCP.
Unless otherwise indicated orus is accurate only as the context otherwise requires, a reference in this proxy statement/prospectus to:
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prospects may have changed since those dates.
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As used in this prospectus, unless the context otherwise requires or indicates, references to the “Company,” “we,” “our,” “us,” and similar expressions, refer to Century Communities, Inc. and its subsidiaries and affiliates.
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QUESTIONS AND ANSWERSCAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
The following questions and answers are intended to address some commonly asked questions regarding the Merger, the Merger Agreement, certain voting procedures and other matters with respect to the special meeting of UCP stockholders. These questions and answers may not address all questions that may be important to UCP stockholders. To better understand these matters, and for a more complete description of the terms of the Merger Agreement, the Voting Agreement, the Merger and the other transactions contemplated thereby including, certain risks relating to the Merger and Century Communities following the Merger, and the proceedings to be conducted at the UCP special meeting, you should carefully readVarious statements contained in this entire proxy statement/prospectus, including each of the attached annexes,those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements within the documents that have been incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 147 of this proxy statement/prospectus.
UCP is holding a special meeting of stockholders to obtain the requisite approval of its stockholdersmeaning of the adoptionfederal securities laws. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. Our forward-looking statements are generally accompanied by words such as “may,” “will,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “project,” “expect,” “intend,” anticipate,” “potential,” “goal” or other words that convey the Merger Agreement. In addition, UCP stockholders willuncertainty of future events or outcomes. You can also identify forward-looking statements by discussions of strategy, plans or intentions. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be askedreasonable, they are inherently subject to approve the adjournment proposal. UCP’s named executive officerssignificant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are identified under “Proposal I: Adoptiondifficult to predict and many of the Merger Agreement—Interestswhich are beyond our control. The forward-looking statements in this prospectus speak only as of Certain UCP Directors and Officers in the Merger” beginning on page 89 of this proxy statement/prospectus.
This proxy statement/prospectus serves as both a proxy statement of UCP and a prospectus of Century Communities in connection with the Merger.
Your vote is very important. We encourage you to complete, sign, date and submit a proxy card to have your shares of UCP Common Stock voted as soon as possible.
Based on the closing sale price of a share of Century Communities Common Stock as reported on NYSE on April 10, 2017, the last trading day before the public announcement of the Merger Agreement, the Merger
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Consideration represented approximately $11.35 in value per share of UCP Class A Common Stock. Based on the closing sale price of a share of Century Communities Common Stock on NYSE on , 2017, the most recent practicable trading day prior to the date of this proxy statement/prospectus, the Merger Consideration represented approximately $ in value per share of UCP Class A Common Stock.and we disclaim any obligation to update these statements unless required by law.
Because Century Communities will, in additionThe following factors, among others, may cause our actual results, performance or achievements to the payment of $5.32 of cash consideration, issuediffer materially from any future results, performance or achievements expressed or implied by these forward-looking statements:
economic changes either nationally or in the Merger to UCP stockholders markets in which we operate, including declines in employment, volatility of mortgage interest rates and inflation;
a fixed number of shares (0.2309) of Century Communities Common Stock in exchange for each share of UCP Class A Common Stock and because there will be no adjustment made to such fixed number of shares, the aggregate value of the Merger Consideration that UCP stockholders will receivedownturn in the Merger will depend on the then-current NYSEhomebuilding industry, including a decline in real estate values or market priceconditions resulting in impairment of shares of Century Communities Common Stock at the effective time of the Merger. As a result, the value of the Merger Consideration that UCP stockholders will receiveour assets;
changes in assumptions used to make industry forecasts;
continued volatility and uncertainty in the Merger could be greater than, less than, or the same as, the valuecredit markets and broader financial markets;
our future operating results and financial condition;
our business operations;
changes in our business and investment strategy;
availability of the Merger Considerationland to acquire, and our ability to acquire such land on the date of this proxy statement/prospectusfavorable terms or at the time of the UCP special meeting.all;
The adoption by UCP stockholdersavailability, terms and deployment of the Merger Agreement is a condition to the obligations of Century Communities and of UCP to complete the Merger. The approval of the adjournment proposal is not a condition to the obligations of Century Communities or of UCP to complete the Merger.capital;
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Asavailability of the Record Date, there were shares of UCP Class A Common Stock outstanding and 100 shares of UCP Class B Common Stock outstanding. Each outstanding share of UCP Class A Common Stock is entitled to one vote on each matter to be acted upon at the UCP special meeting. Each outstanding share of UCP Class B Common Stock is entitled to, without regard tomortgage financing or an increase in the number of sharesforeclosures in the market;
shortages of UCP Class B Common Stock held byor increased prices for labor, land or raw materials used in housing construction;
delays in land development or home construction resulting from adverse weather conditions or other events outside our control;
impact of construction defect, product liability, and/or home warranty claims, including the holderadequacy of such share,accruals and the applicability and sufficiency of our insurance coverage;
changes in, or the failure or inability to comply with, governmental laws and regulations;
the timing of receipt of regulatory approvals and the opening of projects;
the degree and nature of our competition;
our leverage, debt service obligations, and exposure to changes in interest rates;
our ability to successfully integrate acquired businesses and realize projected cost savings and other benefits;
ii
availability of qualified personnel and our ability to retain our key personnel;
tax rate changes, taxation and tax policy changes, new tax laws, and new or revised tax law interpretations or guidance, including as a number of votes equal to the number of Series A Units of UCP, LLC held by such holder, multiplied by the Exchange Rate. Asresult of the Record Date, the sole holder of record of all outstanding shares of UCP Class B Common Stock was PICO,Tax Cuts and PICO held 10,593,000 Series A Units of UCP, LLC, which are exchangeable for 10,401,722 shares of UCP Class A Common Stock.Jobs Act;
The UCP Board recommends that UCP stockholders vote FOR the adoption of the Merger Agreement, and FOR the adjournment proposal. See “Proposal I: Adoption of the Merger Agreement—UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors” and “Proposal II: Adjournment of UCP Special Meeting” beginning on pages 70 and 118, respectively, of this proxy statement/prospectus.
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In connection with the execution of the Merger Agreement, PICO entered into the Voting Agreement with Century Communities. As of the Record Date, the shares of UCP Class B Common Stock held by PICO subject to the Voting Agreement represent approximately 57% of the aggregate voting power of the UCP Common Stock. PICO has agreed in the Voting Agreement to, among other things, vote all shares of UCP capital stock held by it (i) in favor of the adoption of the Merger Agreement and any action required in furtherance thereof, (ii) against approval of any proposal made in opposition to, in competition with, or that would result in a breach of the Merger Agreement or the Merger or any other transactions contemplated by the Merger Agreement, and (iii) against certain other actions that are intended or would reasonably be expected to prevent, interfere with, or materially impair or delay, the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement in accordance with their terms. The Voting Agreement terminates automatically on the first to occur of (i) the termination of the Merger Agreement in accordance with its terms, and (ii) the effective time of the Merger. In addition, if the UCP Board changes its recommendation with respect to the Merger Agreement due to an “Intervening Event” (as defined in the Merger Agreement) and Century Communities does not exercise its right to terminate the Merger Agreement, PICO’s voting obligations as described above will not apply to all shares of UCP capital stock held by PICO but, in lieu and instead thereof, will be in respect of a number of shares of UCP Common Stock equal to 28% of the aggregate voting power of all outstanding shares of UCP Common Stock.
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If you are a beneficial owner and hold your shares in street name, or through a nominee or intermediary, such as a bank or broker, you will receive separate instructions from such nominee or intermediary describing how to vote your shares. The availability of telephonic or internet voting will depend on the intermediary’s voting process. Please check with your nominee or intermediary and follow the voting instructions provided by your nominee or intermediary with these materials.
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The UCP Board recommends that UCP stockholders voteFOR the adoption of the Merger Agreement.
If you are a holder of record as of the Record Date, you can revoke your proxy or change your vote by:
changes in United States generally accepted accounting principles (which we refer to as “GAAP”); and
additional factors described under the UCP special meeting and voting in person, which will automatically cancel any proxy previously given, or revoking your proxy in person, but your attendance alone will not constitute a vote or revoke any proxy previously given.section entitled “Risk Factors”.
If you hold your shares in street name, you must contact your nominee or intermediary to change your vote or obtain a legal proxy to vote your shares if you wish to cast your vote in person at the UCP special meeting.
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UCP, Inc.
99 Almaden Boulevard, Suite 400
San Jose, California 95113
Attention: Investor Relations
Email: Investorrelations@unioncommunityllc.com
Telephone: (408) 207-9499 Ext. 476
or
105 Madison Avenue
New York, New York 10016
Telephone: (800) 322-2885
Email: proxy@mackenziepartners.com
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This summary highlights selected information fromcontained elsewhere in this proxy statement/prospectus. It mayprospectus, but it does not contain all of the information that isyou may consider important before deciding to you. You are urged toparticipate in the Exchange Offer. Therefore, you should read this entire proxy statement/prospectus carefully, including, in particular, the description of the terms and conditions of the Exchange Notes discussed under “Description of Notes” and the other documents referred to or incorporated by reference into this proxy statement/prospectusrisks of investing in order to fully understand the Merger, the Merger Agreement and other matters to be considered at the UCP special meeting. See “Where You Can Find More Information”Exchange Notes discussed under “Risk Factors” beginning on page 14714 of this proxy statement/prospectus. Each item in this summary refers to the beginning page of this proxy statement/prospectus on which that subject is discussed in more detail.
The Companies (See page 48)Company
Century Communities, Inc.General
Century Communities isWe are engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in metropolitan areas inthe States of Alabama, Arizona, California, Colorado, Austin and San Antonio,Florida, Georgia, Indiana, Iowa, Michigan, Nevada, North Carolina, Ohio, South Carolina, Tennessee, Texas, (which we refer to as “Central Texas”), Houston, Texas, Las Vegas, Nevada, Atlanta, Georgia, Salt Lake City, Utah, and Charlotte, North Carolina.Washington. In many of itsour projects, in addition to building homes, Century Communities iswe are responsible for the entitlement and development of the underlying land. We build and sell homes under our Century Communities’Communities and Wade Jurney Homes brands. Our Century Communities brand targets a wide range of buyer profiles including: first time, first and second time move up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade selections. Our Wade Jurney Homes brand targets first time homebuyers, primarily sells homes through retail studios and over the internet, and provides no option or upgrade selections. Our homebuilding operations are organized into the following seven operating segments based on the geographic markets in which it operates: Atlanta, Centralfive reportable segments: West, Mountain, Texas, Charlotte, Colorado, Houston, Nevada,Southeast, and Utah.Wade Jurney Homes. Additionally, Century Communities’ wholly ownedour indirect wholly-owned subsidiaries, Inspire Home Loans Inc., Parkway Title, LLC, and Parkway Financial GroupIHL Home Insurance Agency, LLC, which provide mortgage andservices, title services, and insurance services, respectively, to itsour home buyers, respectively, have been identified as itsour Financial Services operating segment.
Century Communities builds and sellsWe build an extensive range of home types across a variety of price points. Its emphasis is on acquiring well located land positions and offering quality homes with innovative design elements. The core of itsour business plan is to acquire and develop land strategically, based on itsour understanding of population growth patterns, local markets, entitlement restrictions and infrastructure development. Century Communities focusesWe focus on locations within itsour markets with convenient access to metropolitan areas that are generally characterized by diverse economic and employment bases and demographics and increasing populations. Century Communities believesWe believe these conditions create strong demand for new housing, and these locations represent what it believeswe believe to be attractive opportunities for long-term growth. Century CommunitiesWe also seeksseek assets that have desirable characteristics, such as good access to major job centers, schools, shopping, recreation and transportation facilities, and it striveswe strive to offer a broad spectrum of product types in these locations. Product developmentLocation, product, price point and customer service are key components of the lifestyle connection Century Communities seekswe seek to establish with each individual homebuyer. Century Communities’Our construction expertise across an extensive product offering allows itus flexibility to pursue a wide array of land acquisition opportunities and appeal to a broad range of potential homebuyers, from entry-level to first- and second-time move-up buyers, and lifestyle homebuyers. Additionally, Century Communities believes itswe believe our diversified product strategy enables itus to adapt quickly to changing market conditions and to optimize returns while strategically reducing portfolio risk.
During the year ended December 31, 2016, Century Communities delivered 2,825 homes, with an average sales priceFor a further description of $346.5 thousand. During the same period, it generated approximately $978.7 million in home sales revenue, approximately $73.1 million in income before tax expense, and approximately $49.5 million in net income. For the year ended December 31, 2016, Century Communities’ net new home contracts totaled 2,860 homes, a 21.4% increase over the same period in 2015. On December 31, 2016, Century Communities had a backlog of 749 sold but unclosed homes, consisting of approximately $302.8 million in sales value, a 11.7% increase over the same period in 2015. Itsour business, financial condition, results of operations are significantly impactedand other important information regarding us, please see our filings with the SEC incorporated by its acquisitionsreference into this prospectus. For instructions on how to find copies of Peachtree Communities Group, Inc.the filings incorporated by reference in this prospectus, please see the sections entitled “Where You Can Find More Information” and its affiliates“Information Incorporated by Reference.”
The Notes
On May 23, 2019, we completed a private offering of $500 million in aggregate principal amount of our 6.750% Senior Notes due 2027 (which we refer to as the “Initial Notes”) in reliance on Rule 144A and subsidiaries in November 2014, Grand View Builders in August 2014,Regulation S under the Securities Act, where we received net proceeds of approximately $494 million (which we refer to as our “May 2019 private offering of notes”). The Initial Notes carry a coupon of 6.750% per annum and Las Vegas Land Holdings, LLC in April 2014. Subsequentwere issued at a price equal to the acquisition, these operations became Century Communities’ Atlanta, Houston and Nevada operating segments, respectively.
100% of their principal amount.
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During 2016, Century Communities also investedCorporate Information
Our common stock is listed for future growth through (i) its entrance intotrading on the Utah and North Carolina markets, (ii) commencing its wholly owned financing operations, Parkway Financial Group, and (iii) acquiring a 50% ownership in Wade Jurney Homes. Century Communities also continued to expand its future pipeline of land positions as it increased its total lots owned andNew York Stock Exchange under control from 13,160 as of December 31, 2015 to 18,296 as of December 31, 2016.the ticker symbol “CCS.”
Century Communities’Our principal executive offices are located at 8390 East Crescent Parkway, Suite 650, Greenwood Village, Colorado 80111. ItsOur main telephone number is (303) 770-8300. Our internet website is www.centurycommunities.com. The information contained in, or that can be accessed through, our website is not incorporated by reference and is not a part of this prospectus.
UCP, Inc.
The Exchange Offer
UCP isAs used in this prospectus, (i) the term “Initial Notes” refers to our outstanding $500,000,000 in aggregate principal amount of 6.750% Senior Notes due 2027 and the related guarantees issued on May 23, 2019 in a homebuilderprivate offering pursuant to Rule 144A and land developer with expertise in residential land acquisition, development and entitlement, as well as home design, construction and sales. UCP operates in the states of California, Washington, North Carolina, South Carolina and Tennessee. UCP designs, constructs and sells high quality single-family homes through Benchmark Communities, LLC (which we refer to as “Benchmark Communities”), its wholly owned homebuilding subsidiary. Prior to completion of its initial public offering of UCP Class A Common Stock (its “IPO”) on July 23, 2013, UCP operated as a wholly owned subsidiary of PICO Holdings, Inc., a NASDAQ-listed, diversified holding company. Subsequent to UCP’s IPO, PICO holds a majority of the voting power of UCP, Inc. and of the economic interests of UCP, LLC, the subsidiary through which UCP operates its businessRegulation S under the name UCP.
UCP has segmented its operating activities into two geographical regions and currently has homebuilding reportable segments and land development reportable segments in the West and Southeast.
In California, UCP primarily operates in the Central Valley area (Fresno and Madera counties), the Monterey Bay area (Monterey County), the South San Francisco Bay area (Santa Clara and San Benito counties) and in Southern California (Los Angeles, Ventura and Kern counties). In Washington State, it operates in the Puget Sound area (King, Snohomish, Thurston and Kitsap counties). In North Carolina, it operates in the Charlotte and Raleigh areas (Mecklenburg, Iredell, Union, Chatham counties). In South Carolina, UCP operates in the Myrtle Beach area (Horry County). In Tennessee, it operates in the Nashville area (Davidson, Rutherford, Wilson and Sumner counties).
UCP believes that these markets have attractive residential real estate investment characteristics, such as favorable long-term population demographics, consumer demand for single-family housing that often exceeds available supply, large and growing employment bases, and the ability to generate above-average investment returns. It continues to experience significant homebuilding and land development opportunities in its current markets and is evaluating potential expansion opportunities in other markets that it believes have attractive long-term investment characteristics.
UCP actively sources, evaluates and acquires land for residential real estate development and homebuilding. For each of its real estate assets, it periodically analyzes ways to maximize value by either (i) building single-family homes and marketing them for sale under its Benchmark Communities brand or (ii) completing entitlement work and horizontal infrastructure development and selling lots to third-party homebuilders. It performs this analysis using a disciplined analytical process, which UCP believes is a differentiating component of its business strategy.
UCP builds homes through its wholly owned homebuilding subsidiary, Benchmark Communities, LLC. Benchmark Communities operates under the principle that “Everything Matters!” This principle underlies all phases of UCP’s new home sale and construction process including planning, design, construction, marketing, sales and the customer experience. UCP is diversified by product offering, which it believes reduces its exposure to any particular market or customer segment. UCP decides to target specific and identifiable buyer segments by project and geographic market, in part dictated by each particular asset, its location, topography and competitive market positioning, and the amenities of the surrounding area and the community in which it is located.
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UCP believes that its sizable inventory of well-located land provides it with a significant opportunity to develop communities and design, construct and sell homes under its Benchmark Communities brand. UCP expects that homebuilding and home sales will constitute its primary means of generating revenue growth for the foreseeable future.
UCP’s principal executive offices are located at 99 Almaden Boulevard, Suite 400, San Jose, California 95113. Its telephone number is (408) 207-9499.
Casa Acquisition Corp. (which we refer to as “Merger Sub”), a wholly-owned subsidiary of Century Communities, is a Delaware corporation that was formed on April 7, 2017 for the sole purpose of effecting the Merger. In the Merger, UCP will be merged with and into Merger Sub, with Merger Sub surviving the Merger. As a result of the Merger, Merger Sub, together with the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities.
Merger Sub’s principal executive offices and its telephone number are the same as those of Century Communities.
UCP Special Meeting (See page 51)
General
The UCP special meeting will be held on , 2017, at a.m., local time, at . At the UCP special meeting, UCP stockholders will vote on:
The adoption of the Merger Agreement by UCP stockholders is a condition to the obligations of Century Communities and of UCP to complete the Merger.
Record Date
The UCP Board has fixed the close of business on , 2017 as the Record Date for determination of the UCP stockholders entitled to vote at the UCP special meeting or any adjournment or postponement thereof. Only UCP stockholders of record on the Record Date are entitled to receive notice of, and to vote at, the UCP special meeting or any adjournment or postponement thereof.
UCP has two classes of voting stock issued and outstanding, the UCP Class A Common Stock and the UCP Class B Common Stock, which generally vote together as a single class on all matters presented to UCP stockholders for their vote or approval. As of the Record Date, there were shares of UCP Class A Common Stock outstanding and entitled to vote at the UCP special meeting, held by approximately holders of record, and there were 100 shares of UCP Class B Common Stock outstanding and entitled to vote at the UCP special meeting, held by one holder of record (PICO). With respect to each matter to be acted upon at the UCP special meeting, each holder of UCP Class A Common Stock is entitled to one vote for each outstanding share of UCP Class A Common Stock held by such holder, and each holder of UCP Class B Common Stock is entitled to, without regard to the number of outstanding shares of UCP Class B Common Stock held by such holder, a number of votes equal to the number of Series A Units of UCP, LLC held by such holder, multiplied by the Exchange Rate. As of the Record Date, the sole holder of record of all outstanding shares of UCP Class B Common Stock is PICO, and PICO holds 10,593,000 Series A Units of UCP, LLC, which are exchangeable for 10,401,722 shares of UCP Class A Common Stock.
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Quorum
A quorum of outstanding shares is necessary to take action at the UCP special meeting. The presence in person or by proxy of the holders of UCP Common Stock having a majority of the votes which could be cast by the holders of all outstanding classes of stock entitled to vote at the UCP special meeting will constitute a quorum at the UCP special meeting. Abstentions and broker non-votes will be counted as present in determining the existence of a quorum. However shares held by a beneficial owner in “street name” who does not give the nominee or other intermediary that holds such shares instructions on how to vote such shares on any proposal to be voted on at the UCP special meeting will not be deemed to be in attendance at the meeting or counted for purposes of determining whether a quorum has been achieved.
Required Vote
The required number of votes to approve the matters to be voted upon at the UCP special meeting depends on the particular item to be voted upon as set out below:
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Share Ownership of and Voting by UCP Directors and Executive Officers
At the Record Date, UCP’s directors and executive officers and their affiliates (other than PICO, UCP’s majority stockholder) beneficially owned and had the right to vote at the UCP special meeting an aggregate of shares of UCP Class A Common Stock and no shares of UCP Class B Common Stock, which represents % of the voting power of the outstanding shares of UCP Common Stock entitled to vote at the UCP special meeting.
Two members of the UCP Board, Eric H. Speron and Maxim C.W. Webb, are members of the board of directors of PICO (and Mr. Webb is also the President and Chief Executive Officer of PICO), and may be deemed to share voting power and investment control over the shares of UCP Class B Common Stock owned by PICO. Messrs. Speron and Webb disclaim beneficial ownership of the shares of UCP Class B Common Stock owned by PICO except to the extent of any pecuniary interest therein. The 100 shares of UCP Class B Common
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Stock owned by PICO are entitled to approximately 57% of the voting power of the outstanding shares of UCP Common Stock entitled to vote at the UCP special meeting.
It is expected that UCP’s directors and executive officers and PICO will vote their respective sharesFOR the adoption of the Merger Agreement andFOR the approval of the adjournment proposal. For more information regarding PICO’s obligations to vote its shares of UCP capital stock pursuant to the Voting Agreement, see “The Voting Agreement” beginning on page 116 of this proxy statement/prospectus.
The Merger Agreement and the Merger
In the Merger, UCP will be merged with and into Merger Sub, with Merger Sub being the surviving corporation in the Merger. As a result of the Merger, Merger Sub, together with the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities.
The Merger will not be completed without the adoption of the Merger Agreement by UCP stockholders.
A copy of the Merger Agreement is attached asAnnex A to this proxy statement/prospectus.You are urged to read the Merger Agreement in its entirety because it is the legal document that governs the Merger. For more information on the Merger and the Merger Agreement, see “Proposal I: Adoption of The Merger Agreement” and “The Merger Agreement” beginning on pages 57 and 99, respectively, of this proxy statement/prospectus.
As of the date of this proxy statement/prospectus, it is not possible to accurately estimate the closing date for the Merger because the Merger is subject to the satisfaction (or, to the extent permitted by applicable law, waiver) of the conditions to Century Communities’ and UCP’s obligations to complete the Merger, some of which are not within the control of such parties; however, Century Communities and UCP currently expect the Merger to close during the third quarter of 2017. No assurance can be given as to when, or if, the Merger will be completed.
The Voting Agreement (See page 116)
On April 10, 2017, Century Communities, Merger Sub, PICO, for the limited purposes set forth therein, UCP, and for the limited purposes set forth therein, UCP, LLC, entered into a Voting Support and Transfer Restriction AgreementSecurities Act (which we refer to as the “Voting Agreement”“May 2019 private offering of notes”).
Pursuant; (ii) the term “Exchange Notes” refers to the Voting Agreement, PICO has agreed (i) to appear and be present at all meetings of UCP stockholders and otherwise cause all shares of UCP held by PICO to be counted for purposes of determining a quorum, and (ii) to (A) affirmatively vote and cause to be voted all of its shares of UCP Common Stock (or, following certain changes in the recommendation of the UCP Board, a number of shares of UCP Common Stock equal to 28% of the aggregate voting power of all outstanding shares of UCP Common Stock) in favor of the adoption of the Merger Agreement by UCP stockholders and approval of the Mergerour 6.750% Senior Notes due 2027 and the other transactions contemplatedrelated guarantees offered by the Merger Agreement; and (B) vote and cause to be voted all shares of UCP Common Stock held by PICO against the adoption or approval of (1) any Company Takeover Proposal (as defined in the Merger Agreement) and the transactions contemplated thereby, (2) any action or agreement that PICO knows, or would reasonably be expected to know, would result in (x) a breach or violation of, or non-compliance with, any representation, warranty, covenant, agreement, or other obligation of UCP or any subsidiary or affiliate of UCP set forth in the Merger Agreement, or (y) the failure of any of the conditions to the obligations of Century Communities or Merger Sub to consummate the Merger and the other transactions contemplated by the Merger Agreement set forth in Sections 7.01 and 7.02 of the Merger Agreement, (3) any change in the size, term in office, or composition of the board of directors of UCP, and (4) any agreement, any amendment or restatement of
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the UCP Charter or the UCP Bylaws, or any other action (or failure to act) that is intended or would reasonably be expected to prevent, interfere with, or materially impair or delay, the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement in accordance with their terms.
The Voting Agreement terminates automatically on the first to occur of (i) the termination of the Merger Agreement in accordance with its terms, and (ii) the effective time of the Merger.
See “The Voting Agreement” beginning on page 116 of this proxy statement/prospectus.
Merger Consideration (See page 100)
At the effective time of the Merger, each share of UCP Class A Common Stock (other than dissenters’ shares or treasury shares held by UCP and any shares of UCP Class A Common Stock owned by any UCP subsidiary, Century Communities or Century Communities subsidiary) will be converted into the right to receive and become exchangeable for the Merger Consideration, consisting of (i) $5.32 in cash, without any interest thereon, and (ii) 0.2309 of a duly authorized, fully paid and non-assessable share of Century Communities Common Stock. No fractional shares will be issued in the Merger, and UCP stockholders will receive cash in lieu of any fractional shares.
Based on the closing sale price of a share of Century Communities Common Stock on NYSE on April 10, 2017, the last trading day before the public announcement of the Merger Agreement, the Merger Consideration represented approximately $11.35 in value per share of UCP Class A Common Stock. Based on the closing sale price of a share of Century Communities Common Stock on NYSE on , 2017, the most recent practicable trading day prior to the date of this proxy statement/prospectus the Merger Consideration represented approximately $ in value for each share of UCP Class A Common Stock.
Because Century Communities will, in addition to the payment of $5.32 of cash consideration, issue a fixed number of shares (0.2309) of Century Communities Common Stock in exchange for each sharethe Initial Notes; and (iii) the term “Notes” refers to, collectively, the Initial Notes and the Exchange Notes. As used in this section of UCP Class A Common Stockthe prospectus, the terms “we,” “us” and because there“our” and similar expressions refer only to Century Communities, Inc. and not to its subsidiaries or affiliates unless otherwise stated or the context otherwise requires.
The summary below describes the principal terms of the Exchange Offer. See also “The Exchange Offer,” which contains a more detailed description of the terms and conditions of the Exchange Offer.
General | In connection with the May 2019 private offering of notes, we entered into a registration rights agreement with the initial purchasers of the Initial Notes (which we refer to as the “Registration Rights Agreement”) in which we agreed, among other things, to use our commercially reasonable efforts to cause the Exchange Offer described in this prospectus to be consummated on the earliest practicable date after the registration statement of which this prospectus forms a part has been declared effective by the SEC, but in no event later than 270 days after the date of the original issuance of the Initial Notes. You are entitled to exchange in the Exchange Offer your Initial Notes for Exchange Notes, which are identical in all material respects to the Initial Notes except: |
the offer and sale of the Exchange Notes will have been registered under the Securities Act;
the Exchange Notes are not entitled to any registration rights that are applicable to the Initial Notes under the Registration Rights Agreement; and
the provisions of the Registration Rights Agreement that provide for payment of additional interest upon a default in the requirement to register the offer and sale of the Exchange Notes are no longer applicable.
The Exchange Offer | We are offering to exchange up to $500,000,000 in aggregate principal amount of our 6.750% Senior Notes due 2027 and the related guarantees, comprising the Exchange Notes, the offer and sale of which have been registered under the Securities Act, for any and all of our outstanding 6.750% Senior Notes due 2027 and the related guarantees issued on May 23, 2019, comprising the Initial Notes. |
| Initial Notes may be exchanged only in denominations of $2,000 and in integral multiples of $1,000 in excess thereof. |
Subject to the satisfaction or waiver of specified conditions, we will exchange the Exchange Notes for all Initial Notes that are validly tendered and not validly withdrawn prior to the expiration of the |
Exchange Offer. We will cause the exchange to be effected promptly after the expiration of the Exchange Offer. |
Resale of the Exchange Notes | Based on interpretations by the staff of the SEC set forth in no-action letters issued to third parties, we believe that the Exchange Notes issued pursuant to the Exchange Offer in exchange for the Initial Notes may be offered for resale, resold and otherwise transferred by you without the requirement to comply with the registration and prospectus-delivery provisions of the Securities Act, provided that: |
you are acquiring the Exchange Notes in the ordinary course of your business; and
you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes.
| If you are a broker-dealer that will be receiving Exchange Notes for your own account in exchange for Initial Notes that you acquired as a result of market-making activities or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any resale of the Exchange Notes. See “Plan of Distribution.” |
Expiration Date of the Exchange Offer | The Exchange Offer expires at 5:00 P.M., New York City time, on the evening of [ the 25th business day following commencement of the Exchange Offer ], 2020 (which we refer to as the “Expiration Date”), unless extended by us. |
Withdrawal of Tender of Initial Notes | You may withdraw any tender of your Initial Notes at any time prior to the expiration of the Exchange Offer. We will return to you any of your Initial Notes that are not accepted for any reason for exchange, without expense to you, promptly after the expiration or termination of the Exchange Offer. |
Interest on the Notes | The Exchange Notes bear interest at the rate of 6.750% per annum from December 1, 2019. The interest on the Exchange Notes is payable semiannually on June 1 and December 1 of each year, commencing on June 1, 2020. No interest will be paid on Initial Notes following their acceptance for exchange. |
Conditions to the Exchange Offer | Our obligation to accept for exchange, or to issue Exchange Notes in exchange for, any Initial Notes is subject to customary conditions relating to compliance with any applicable law or any applicable interpretation by the staff of the SEC, and the absence of any actions or proceedings of any court or governmental agency which would reasonably be expected to impair our ability to consummate the Exchange Offer. We currently expect that each of the conditions will be satisfied and that no waivers will be necessary. See “The Exchange Offer—Conditions to the Exchange Offer.” |
Procedures for Tendering Initial Notes | If you wish to participate in the Exchange Offer, you must complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must then mail or otherwise deliver the letter of transmittal, or a facsimile of the letter of transmittal, together with the Initial Notes and any other required documents, to the Exchange Agent at the address set forth on the cover page of the letter of transmittal. |
| If you hold Initial Notes through The Depository Trust Company (which we refer to as the “DTC”) and wish to participate in the Exchange Offer, you must comply with the procedures under DTC’s Automated Tender Offer Program by which you will agree to be bound by the letter of transmittal. By signing, or agreeing to be bound by, the letter of transmittal, you will represent to us that, among other things: |
you are acquiring the Exchange Notes in the ordinary course of your business;
you are not engaged in, and do not intend to engage in, a distribution of the Exchange Notes;
you do not have an arrangement or understanding with any person or entity to participate in the distribution of the Exchange Notes;
you are not an “affiliate” of ours or of any guarantor of the Notes within the meaning of Rule 405 under the Securities Act; and
if you are a broker-dealer that will be no adjustment madereceiving Exchange Notes for your own account in exchange for Initial Notes, that the Initial Notes to such fixed numberbe exchanged for the Exchange Notes were acquired by you for your own account as a result of shares,market-making activities or other trading activities, and that you will deliver a prospectus meeting the aggregate valuerequirements of the Merger Consideration will dependSecurities Act in connection with any resale of such Exchange Notes.
Special Procedures for Beneficial Owners | If you are a beneficial owner of Initial Notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender those Initial Notes in the Exchange Offer, you should contact the registered holder promptly and instruct the registered holder to tender those Initial Notes on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your Initial Notes, either make appropriate arrangements to register ownership of the Initial Notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration of the Exchange Offer. |
Guaranteed Delivery Procedures | If you wish to tender your Initial Notes and your Initial Notes are not immediately available or you cannot deliver your Initial Notes, the letter of transmittal or any other required documents, or you cannot comply with the procedures under DTC’s Automated Tender Offer Program for transfer of book-entry interests, prior to the expiration of the Exchange Offer, you must tender your Initial Notes according to the guaranteed delivery procedures described under “The Exchange Offer—Guaranteed Delivery Procedures.” |
Effect on Holders of Initial Notes | As a result of the making, and upon acceptance for exchange of all validly tendered Initial Notes pursuant to the terms, of the Exchange Offer, we will have fulfilled a covenant under the Registration Rights Agreement. |
| If you do not tender your Initial Notes in the Exchange Offer, you will continue to be entitled to all the rights and limitations applicable to the Initial Notes as set forth in the Indenture, except we will not have any further obligation to you to provide for the exchange and registration of the Initial Notes under the Registration Rights Agreement. However, under some circumstances, holders of the Initial Notes who are not permitted to participate in the Exchange Offer and holders of the Exchange Notes who may not freely resell the Exchange Notes received in the Exchange Offer, may require us to file, and to cause to become effective, a shelf registration statement covering resales of the Initial Notes or the Exchange Notes, as the case may be, by these holders. |
Consequences of Failure to Exchange | If you do not exchange your Initial Notes for Exchange Notes under the Exchange Offer, your untendered Initial Notes will remain subject to the restrictions on transfer as set forth in the Indenture and the legend printed on the Initial Notes as a consequence of the issuance of the Initial Notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may not offer or sell your Initial Notes except in transactions that are registered under the Securities Act or if the offer or sale is exempt from, or not subject to, the registration requirements of the Securities Act and applicable state securities laws. Except as required by the Registration Rights Agreement, we do not intend to register resales of the Initial Notes under the Securities Act. |
| To the extent that Initial Notes are tendered and accepted in the Exchange Offer, the trading market for Initial Notes could be adversely affected. |
Certain Material Federal Income Tax Consequences of the Exchange Offer | The exchange of Initial Notes for Exchange Notes in the Exchange Offer will not be a taxable event for United States federal income tax purposes. See “Certain Material Federal Income Tax Considerations.” |
Use of Proceeds | We will not receive any cash proceeds from the issuance of Exchange Notes in the Exchange Offer. See “Use of Proceeds.” |
Exchange Agent | U.S. Bank National Association is the Exchange Agent (which we refer to as the “Exchange Agent”) for the Exchange Offer. The address and telephone number of the Exchange Agent are set forth under “The Exchange Offer—Exchange Agent.” |
The Exchange Notes
The summary below describes the then-current NYSE market priceprincipal terms of sharesthe Exchange Notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. You should carefully review the “Description of Notes” section in this prospectus, which contains more detailed descriptions of the terms and conditions of the Initial Notes and the Exchange Notes.
As used in this section of the prospectus, the terms “we,” “us” and “our” and similar expressions refer only to Century Communities, Common Stock atInc. and not to its subsidiaries or affiliates unless otherwise stated or the effectivecontext otherwise requires.
Issuer | Century Communities, Inc. |
Notes Offered | Up to $500 million in aggregate principal of 6.750% Senior Notes due 2027 |
Indenture | The Exchange Notes will be issued under the existing Indenture, dated as of May 23, 2019, among the Company, the Guarantors (as defined therein), and U.S. Bank National Association, as trustee, as amended and/or supplemented from time to time (which we refer to as the “Indenture”). The Indenture also governs the Initial Notes. The Exchange Notes will have terms identical in all material respects to the Initial Notes, except that the offer and sale of the Exchange Notes will be registered under the Securities Act and the Exchange Notes will not contain terms with respect to transfer restrictions, registration rights and additional payments upon a failure to fulfill certain of our obligations under the Registration Rights Agreement. The Exchange Notes and the Initial Notes (to the extent not surrendered in exchange for Exchange Notes in the Exchange Offer) will be treated together as a single series of debt securities for all purposes under the Indenture and will vote together on all matters under the Indenture. |
Maturity Date | June 1, 2027 |
Interest | 6.750% |
| Interest on the Exchange Notes is payable semiannually on June 1 and December 1 of each year, commencing on June 1, 2020. Interest on the Exchange Notes will accrue from December 1, 2019. |
Guarantees | The Exchange Notes will be fully, unconditionally, jointly and severally guaranteed on an unsecured senior basis by certain of our current and future subsidiaries, including substantially all of our domestic wholly-owned subsidiaries, other than immaterial subsidiaries and subsidiaries that we designate as unrestricted subsidiaries, subject to certain customary release provisions contained in the Indenture. The subsidiary guarantees will: |
rank senior in right of payment to any future subordinated indebtedness of the Merger. As a result,guarantors;
rank equally in right of payment with all of the existing and future senior indebtedness of the guarantors;
be effectively subordinated to all existing and future secured indebtedness of the guarantors, to the extent of the value of the Merger Consideration could collateral securing that indebtedness; and
be greater than, less than, or the same as, the valuestructurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, of the Merger Considerationour non-guarantor subsidiaries.
| See “Description of Notes—Note Guarantees.” |
Ranking | The Exchange Notes will be our unsecured senior obligations and will rank equally with our unsecured senior indebtedness. The Exchange Notes will be effectively subordinated to all of our secured indebtedness to the extent of the assets securing such indebtedness, and certain other obligations that are granted preferential treatment under law. The Exchange Notes will also be effectively subordinated to all indebtedness and other liabilities of our subsidiaries that do not guarantee the Exchange Notes. |
| As of September 30, 2019, we and our guarantors would have had aggregate consolidated indebtedness of approximately $1.175 billion, consisting of: |
$494.2 million outstanding on the date of this proxy statement/prospectus or at the time of the UCP special meeting.Initial Notes,
At the effective time of the Merger, each share of UCP Class B Common Stock
$395.9 million outstanding will be canceled for no consideration. Although PICO currently holds and will be entitled to vote at the UCP special meeting 100 shares of UCP Class B Common Stock, concurrently with the execution and delivery of the Merger Agreement, PICO exercised its right under the existing Exchange Agreement, dated as of July 23, 2013on our 5.875% Senior Notes due 2025 (which we refer to as the “Exchange Agreement”“Existing 5.875% Notes”), by and among UCP, UCP, LLC and PICO, to exchange all Series A Units of UCP, LLC held by PICO for shares of UCP Class A Common Stock, effective immediately prior to the effective time of the Merger. As a result of this exchange, the completion of which is also a condition to Century Communities’ and UCP’s obligations to complete the Merger as more fully described in this proxy statement/prospectus and in the Merger Agreement, PICO will receive the same Merger Consideration per share of UCP Class A Common Stock as every other UCP stockholder.
UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors (See page 70)
In evaluating the Merger and other transactions contemplated by the Merger Agreement, the UCP Board consulted with UCP senior management and UCP’s outside legal counsel and financial advisor. After consideration, all of the members of the UCP Board who attended and participated in the April 10, 2017 meeting of the UCP Board at which the Merger Agreement was being considered and voted on, determined that the
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Merger Agreement and the other transactions contemplated by the Merger Agreement, including the Merger, are fair to, and in the best interests of, UCP and its stockholders, and adopted, approved and declared advisable the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the proposed Merger. For more information regarding the factors considered by the UCP Board in reaching its decision to approve the Merger Agreement and the Merger contemplated by the Merger Agreement, see “Proposal I: Adoption of the Merger Agreement—UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors” beginning on page 70 of this proxy statement/prospectus.
The UCP Board recommends that UCP stockholders vote FOR the adoption of the Merger Agreement, and FOR the adjournment proposal.
Opinion of UCP’s Financial Advisor (See page 77)
In connection with the proposed Merger, UCP’s financial advisor, Citigroup Global Markets Inc., referred to as Citi, delivered a written opinion, dated April 10, 2017, to the UCP Board as to the fairness, from a financial point of view and as of the date of the opinion, of the Merger Consideration to be received by holders of UCP Class A Common Stock (other than PICO and its affiliates) pursuant to the Merger Agreement. The full text of Citi’s written opinion, dated April 10, 2017, to the UCP Board, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, is attached asAnnex C to this proxy statement/prospectus and is incorporated herein by reference. The description of Citi’s opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of Citi’s opinion.Citi’s opinion was provided for the information of the UCP Board (in its capacity as such) in connection with its evaluation of the Merger Consideration from a financial point of view and did not address any other terms, aspects or implications of the Merger. Citi expressed no view as to, and its opinion did not address, the underlying business decision of UCP to effect or enter into the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for UCP or the effect of any other transaction which UCP might engage in or consider. Citi’s opinion is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed Merger or otherwise.
Interests of Certain UCP Directors and Officers in the Merger (See page 89)
In considering the recommendation of the UCP Board that UCP stockholders voteFOR the adoption of the Merger Agreement andFOR the adjournment proposal, UCP stockholders should be aware and take into account the fact that certain UCP directors and executive officers have interests in the Merger or the other transactions contemplated by the Merger Agreement that may be different from, or in addition to, the interests of UCP stockholders generally and that may create potential conflicts of interests. Specifically, (i) Mr. Bogue will be entitled to a one-time transaction bonus equal to $1,972,639, paid 60 days after the closing of the Merger, and may be entitled to up to $1.5 million in accelerated vesting of restricted stock units and $530,000 in cash severance if terminated without “cause” or if he resigns for “good reason” following such closing (plus a COBRA subsidy for 12 months following termination), and (ii) Mr. Pirrello, if terminated without “cause” or if he resigns for “good reason” after such closing, may be entitled to up to $1 million in accelerated vesting of restricted stock units and $1,126,726 in cash severance (plus a COBRA subsidy for 12 months following termination).
The directors and executive officers of UCP will also be entitled to certain indemnification rights under the Merger Agreement.
The UCP Board was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation of, the Merger, in approving the Merger Agreement and in recommending that UCP stockholders voteFOR the adoption of the Merger Agreement, andFOR the
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adjournment proposal. All of the independent and disinterested UCP directors, constituting a majority of the UCP Board, approved the Merger Agreement and made the foregoing recommendations.
For additional information about these interests, see “Proposal I: Adoption of the Merger Agreement—Interests of Certain UCP Directors and Officers in the Merger” beginning on page 89 of this proxy statement/prospectus.
Board of Directors and Management Following the Merger (See page 91)
Upon consummation of the Merger, the board of directors and executive officers of Century Communities are expected to remain unchanged. For information on Century Communities’ current directors and executive officers, please see Century Communities’ proxy statement for its 2017 annual meeting of stockholder filed with the SEC on March 29, 2017. See “Where You Can Find More Information” beginning on page 147.
Treatment of UCP Equity Awards in the Merger (See page 91)
At the effective time of the Merger, each then-outstanding option to purchase shares of UCP Common Stock will automatically be converted into an option to purchase shares of Century Communities Common Stock on the same terms and conditions as were applicable under such UCP option immediately prior to the effective time of the Merger, and each then-outstanding restricted stock unit award with respect to shares of UCP Common Stock will automatically be converted into a restricted stock unit award with respect to shares of Century Communities Common Stock, with the same terms and conditions as were applicable under such UCP restricted stock unit award immediately prior to the effective time of the Merger. However, pursuant to amendments to employment agreements of certain UCP employees that will become effective as of, and are subject to and conditioned upon, the consummation of the Merger, all of the outstanding UCP options, whether vested or unvested, will be canceled for no consideration upon the consummation of the Merger. For additional information see the section entitled “Proposal I: Adoption of the Merger Agreement—Treatment of UCP Equity Awards” beginning on page 91, of this proxy statement/prospectus.
Certain Material U.S. Federal Income Tax Consequences of the Merger (See page 92)
It is a condition to completion of the Merger that Paul, Weiss, tax counsel to UCP, and Greenberg Traurig, tax counsel to Century Communities, each deliver an opinion to both UCP and Century Communities, dated the closing date of the Merger, to the effect that the Merger will qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. Each party may waive the requirement to receive such opinions as a condition to such party’s obligation to complete the Merger. Assuming that the Merger qualifies as a reorganization, a U.S. holder of UCP Class A Common Stock will generally recognize gain, but not loss, if the U.S. holder surrenders its shares of UCP Class A Common Stock in exchange for a combination of Century Communities Common Stock and cash. In such case, that U.S. holder will generally recognize gain equal to the lesser of (1) the cash received (other than cash in lieu of any fractional share) and (2) the excess of the sum of the cash received (other than cash in lieu of any fractional share) and the fair market value (on the date of the Merger) of the Century Communities Common Stock received (including any fractional share for which cash was paid) over such U.S. holder’s adjusted tax basis in the shares of UCP Class A Common Stock surrendered by such U.S. holder in the Merger. In addition, such U.S. holder will generally recognize gain or loss on the receipt of cash in lieu of any fractional share.
The tax opinions regarding the Merger will not address any state, local or foreign tax consequences of the Merger. The opinions will be based on certain assumptions and representations as to factual matters from Century Communities and UCP, as well as certain covenants and undertakings by Century Communities and UCP, substantially in the forms of the letters set forth in the disclosure schedules to the Merger Agreement. If any of the assumptions, representations, covenants or undertakings is incorrect, incomplete, inaccurate or is violated prior to
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the effective time of the Merger, one or both of the opinions may not be delivered and, if delivered, the conclusions reached by counsel in their opinions cannot be relied upon. In such case, the tax consequences of the Merger could differ from those described in this proxy statement/prospectus. Neither Century Communities nor UCP is currently aware of, nor expects there to be, any facts or circumstances that would cause any of the assumptions, representations, covenants or undertakings set forth in the forms of the letters set forth in the disclosure schedules to the Merger Agreement to be incorrect, incomplete, inaccurate or violated.
An opinion of counsel represents such counsel’s best legal judgment but is not binding on the IRS or any court, so there can be no certainty that the IRS will not challenge the conclusions reflected in the opinion or that a court would not sustain such a challenge.
You are urged to consult your own tax advisor regarding the particular tax consequences to you of the Merger.
Accounting Treatment of the Merger (See page 96)
The Merger will be accounted for in accordance with GAAP. GAAP requires the Merger to be accounted for using the acquisition method pursuant to which Century Communities has been determined to be the acquirer for accounting purposes. As required by the acquisition method, Century Communities will record UCP’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of consideration transferred (i.e. purchase price) over the fair value of net assets acquired will be recognized as goodwill. Goodwill is not amortized, but is tested for impairment at least annually or more frequently if circumstances indicate potential impairment. The operating results of UCP will be reported as part of the combined company beginning on the closing date of the Merger. The final valuation of the tangible and identifiable intangible assets acquired and liabilities assumed has not yet been completed. The completion of the valuation upon consummation of the Merger could result in significantly different amortization expenses and balance sheet classifications than those presented in Century Communities’ unaudited pro forma condensed combined financial information included in this proxy statement/prospectus.
Regulatory Approvals Required to Complete the Merger (See page 96)
Century Communities and UCP have determined that no authorizations, approvals or consents from regulatory authorities are required to enable them to complete the Merger. For a more complete discussion of regulatory matters relating to the Merger, see “Proposal I: Adoption of the Merger Agreement—Regulatory Approvals Required to Complete the Merger” beginning on page 96 of this proxy statement/prospectus.
Completion of the Merger is Subject to Certain Conditions (See page 110)
As more fully described in this proxy statement/prospectus and in the Merger Agreement, the obligations of Century Communities and UCP to complete the Merger are subject to the satisfaction of a number of conditions, including the following:
$6.2 million outstanding on insurance premium notes, and the absence of a stop order in respect thereof or proceedings initiated or threatened by the SEC for that purpose;
$278.8 million outstanding under our revolving credit facility.
| None of the foregoing indebtedness was secured indebtedness owed by us or our guarantors. |
| As of September 30, 2019, our non-guarantor subsidiaries accounted for $88.0 million of our consolidated liabilities (including debt and trade payables but excluding intercompany liabilities), primarily consisting of $77.8 million outstanding under our mortgage repurchase facilities, which are secured by the mortgage loans financed thereunder. See “Description of Other Indebtedness—Mortgage Repurchase Facilities.” |
Optional Redemption | We may redeem the Notes, in whole or in part, at any time prior to June 1, 2022, at a price equal to 100% of the aggregate principal amount of the Notes being redeemed, plus the applicable “make whole” premium, as described in “Description of Notes—Optional Redemption,” plus accrued and unpaid interest, if any, to the applicable redemption date. |
| We may redeem the Notes, in whole or in part, at any time on or after June 1, 2022, at the applicable redemption price specified in “Description of Notes—Optional Redemption,” plus accrued and unpaid interest, if any, to the applicable redemption date. |
| In addition, we may redeem up to 40% of the aggregate principal amount of the Notes at any time on or prior to June 1, 2022 with the net cash proceeds from certain equity issuances at the applicable redemption price specified in “Description of Notes—Optional Redemption,” plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. |
Change of Control | Upon a Change of Control (as defined under “Description of Notes—Change of Control”), we will be required to make an offer to repurchase all of the Notes at 101% of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the applicable repurchase date. We may not have sufficient funds available at the time of any Change of Control to make any required debt repayment (including repurchases of the Notes). See “Risk Factors—Risks Related to Our Indebtedness and the Notes—We may not have the ability to raise the funds necessary to finance the Change of Control Offer required by the Indenture governing the Notes.” |
Mandatory Offer to Repurchase Following Certain Asset Sales | If we sell assets under certain circumstances and do not use the proceeds for specified purposes, we will be required to make an offer to repurchase the Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the repurchase date. See “Description of Notes—Certain Covenants—Limitations on Asset Sales.” |
Certain Covenants | The terms of the Notes restrict our ability and the ability of certain of our subsidiaries to: |
incur or guarantee additional indebtedness;
create liens on assets;
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pay dividends or purchase or redeem our capital stock;
prepay, redeem or UCP; andrepurchase certain debt;
For more information, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 110 of this proxy statement/prospectus.
No Solicitation of Alternative Proposals (See page 105)
The Merger Agreement precludes UCP from soliciting or engaging in discussions or negotiations with a third party with respect to any proposal for a competing transaction, including the acquisition of a significant interest in UCP’s capital stock or assets. However, if UCP receives an unsolicited proposal from a third party for a competing transaction that the UCP Board, among other things, determines in good faith (after consultation with UCP’s outside legal counsel and financial advisor) (i) constitutes or would reasonably be expected to lead to a proposal that is superior to the Merger, and (ii) did not result from a breach of the non-solicitation obligations set forth in the Merger Agreement, then UCP may furnish non-public information to and enter into discussions with that third party and its representatives and financing sources about such competing transaction after obtaining from such third party an executed confidentiality agreement. For more information, see “The Merger Agreement—No Solicitation of Alternative Proposals” beginning on page 105 of this proxy statement/prospectus.agreements restricting our subsidiaries’ ability to pay dividends;
Termination of the Merger Agreement (See page 112)
The Merger Agreement may be terminated and the Merger abandoned at any time before the effective time of the Merger in the following circumstances:
make certain investments;
sell assets;
issue preferred stock;
enter into transactions with our affiliates; or
effect a consolidation or postponement thereof); ormerger.
| However, these limitations will be subject to a number of important qualifications and exceptions. In addition, certain of the covenants will not apply when the Notes are rated investment grade. See “Description of Notes.” |
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No Established Trading Market | We do not plan to list the Exchange Notes on any securities exchange or to arrange to have the Exchange Notes included on any automated dealer quotation systems. Accordingly, we cannot assure you that an active or liquid trading market for the Exchange Notes will develop. If an active or liquid trading market for the Exchange Notes does not develop, the market price and liquidity of the Exchange Notes may be adversely affected. |
Under the Merger Agreement, UCP is not permitted to terminate the Merger Agreement if the UCP Board changes its recommendation to UCP stockholders solely in response to an “Intervening Event” (as defined in the Merger Agreement). For more information, see “The Merger Agreement—Termination of the Merger Agreement” beginning on page 112 of this proxy statement/prospectus.
Fees and Expenses and Termination Fees (See page 113)
Generally, each party is required to pay all fees and expenses incurred by it in connection with the Merger. However, the Merger Agreement provides that, upon termination of the Merger Agreement under certain circumstances, including termination by UCP to enter into a definitive agreement for a proposal that constitutes a superior proposal (as further described in the Merger Agreement), UCP will be required to pay Century Communities a cash termination fee of $7,050,000.
For more information, see “The Merger Agreement—Fees and Expenses and Termination Fees” beginning on page 113 of this proxy statement/prospectus.
Listing of Shares of Century Communities Common Stock and Delisting and Deregistration of UCP Class A Common Stock (See page 98)
Under the terms of the Merger Agreement, Century Communities is required to use all reasonable efforts to cause the shares of Century Communities Common Stock to be issued in the Merger to be approved for listing on the NYSE, prior to the closing of the Merger. Accordingly, application will be made to have such shares approved for listing on the NYSE, where shares of Century Communities Common Stock are currently listed for trading under the ticker symbol “CCS.”
If the Merger is completed, there will no longer be any publicly held shares of UCP Class A Common Stock. Accordingly, UCP Class A Common Stock will no longer be listed on the NYSE and will be deregistered under the Exchange Act.
Comparison of Stockholder Rights (See page 133)
UCP stockholders will have different rights once they become Century Communities stockholders due to differences between the organizational documents of UCP and Century Communities. See “Comparison of Stockholder Rights” beginning on page 133 of this proxy statement/prospectus.
Appraisal Rights (See page 138)
Pursuant to Section 262 of the DGCL, UCP stockholders who do not vote in favor of adoption of the Merger Agreement, who continuously hold their shares of UCP Class A Common Stock through the effective time of the Merger and who otherwise comply with the applicable requirements of Section 262 of the DGCL have the right to seek appraisal of the fair value of their shares of UCP Common Stock, as determined by the Delaware Court of Chancery, if the Merger is completed. The “fair value” of shares of UCP Common Stock as determined by the Delaware Court of Chancery could be greater than, the same as, or less than the value of the Merger Consideration that UCP stockholders would otherwise be entitled to receive under the terms of the Merger Agreement.
Risk Factors | Investing in the Exchange Notes involves substantial risks and uncertainties. See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to participate in the Exchange Offer. |
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The right to seek appraisal will be lost if a UCP stockholder votesFOR adoptionSummary of the Merger Agreement. However, abstaining or voting against adoption of the Merger Agreement is not in itself sufficient to perfect appraisal rights because additional actions must also be taken to perfect such rights.
UCP stockholders who wish to exercise the right to seek an appraisal of their shares must so advise UCP by submitting a written demand for appraisal prior to the taking of the vote on the Merger Agreement at the UCP special meeting, and must otherwise follow the procedures prescribed by Section 262 of the DGCL. A person having a beneficial interest in shares of UCP Class A Common Stock held of record in the name of another person, such as a nominee or intermediary, must act promptly to cause the record holder to follow the steps required by Section 262 of the DGCL and in a timely manner to perfect appraisal rights. In view of the complexity of Section 262 of the DGCL, UCP stockholders that may wish to pursue appraisal rights are urged to consult their legal and financial advisors. In addition, under Section 262 of the DGCL, the Delaware Court of Chancery will dismiss any appraisal proceedings as to all stockholders who have perfected their appraisal rights unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of UCP Class A Common Stock, or (ii) the value of the Merger Consideration provided in the Merger Agreement for the total number of shares of UCP Class A Common Stock entitled to appraisal exceeds $1 million. See “Appraisal Rights” beginning on page 138 of this proxy statement/prospectus.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CENTURY COMMUNITIESSelected Financial Data
The following table presentssets forth our selected historical consolidated financial data of Century Communities.and operating data. The selected historical consolidated financial data as of December 31, 2016following information is only a summary and 2015, and for each ofshould be read in conjunction with the yearsmore detailed information contained in the three-year period ended December 31, 2016, are derived from Century Communities’ auditedour consolidated financial statements and accompanyingthe related notes which are contained in Century Communities’ Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which is incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data as of December 31, 2014, 2013 and 2012, and for the years ended December 31, 2013 and 2012, are derived from Century Communities’ audited consolidated financial statements and accompanying notes for such years, which have previously been filed with the SEC but which are not incorporated by reference into this proxy statement/prospectus. The selected historical unaudited condensed consolidated financial data as of March 31, 2017 and 2016, and for the three months ended March 31, 2017 and 2016, are derived from Century Communities’ unaudited condensed consolidated financial statements and accompanying notes, which are contained in Century Communities’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017, which is incorporated by reference into this proxy statement/prospectus.
The information set forth below is only a summary. You should read the following information together with Century Communities’ audited consolidated financial statements and accompanying notesthereto, and the sectionsections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” containedOperations,” included in Century Communities’our Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2018, and with Century Communities’ unaudited condensed consolidated financial statements and accompanying notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Century Communities’our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017, which are incorporated by reference into this proxy statement/prospectus, and in Century Communities’ other reports filed with the SEC. For more information, see “Where You Can Find More Information” beginning on page 147 of this proxy statement/prospectus.
| Three Months Ended March 31, | Year Ended December 31, | |||||||||||||||||||||||||||
| (in thousands, except per share amounts) | 2017 | 2016 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||||
Consolidated Statements of Operations: | ||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||
Homebuilding revenues | ||||||||||||||||||||||||||||
Home sales revenues | $ | 226,420 | $ | 181,081 | $ | 978,733 | $ | 725,437 | $ | 351,823 | $ | 171,133 | $ | 96,030 | ||||||||||||||
Land sales and other revenues | 1,896 | 3,015 | 15,707 | 9,052 | 10,569 | — | — | |||||||||||||||||||||
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| 228,316 | 184,096 | 994,440 | 734,489 | 362,392 | 171,133 | 96,030 | ||||||||||||||||||||||
Financial services revenue | — | — | — | — | — | — | — | |||||||||||||||||||||
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Total Revenue | 228,316 | 184,096 | 994,440 | 734,489 | 362,392 | 171,133 | 96,030 | |||||||||||||||||||||
Home Building Cost of Revenue | ||||||||||||||||||||||||||||
Cost of homes sales revenues | (182,324 | ) | (144,353 | ) | (786,127 | ) | (579,203 | ) | (276,386 | ) | (129,651 | ) | (75,448 | ) | ||||||||||||||
Cost of land sales and other revenues | (1,144 | ) | (2,542 | ) | (14,217 | ) | (8,432 | ) | (8,109 | ) | — | — | ||||||||||||||||
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| (183,468 | ) | (146,895 | ) | (800,344 | ) | (587,635 | ) | (284,495 | ) | (129,651 | ) | (75,448 | ) | |||||||||||||||
Financial services costs | (754 | ) | — | — | — | — | — | — | ||||||||||||||||||||
Selling, general, and administrative | (33,212 | ) | (25,185 | ) | (122,224 | ) | (87,840 | ) | (46,795 | ) | (23,622 | ) | (13,496 | ) | ||||||||||||||
Equity in income of unconsolidated subsidiaries | 1,255 | — | — | — | — | — | — | |||||||||||||||||||||
Other income (expense) | (86 | ) | 413 | 1,277 | 1,291 | (143 | ) | 213 | 353 | |||||||||||||||||||
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Income before tax expense | 12,051 | 12,429 | 73,149 | 60,305 | 30,959 | 18,073 | 7,439 | |||||||||||||||||||||
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Income tax expense | (3,252 | ) | (4,446 | ) | (23,609 | ) | (20,415 | ) | (10,937 | ) | (5,642 | ) | — | |||||||||||||||
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| Three Months Ended March 31, | Year Ended December 31, | |||||||||||||||||||||||||||
| (in thousands, except per share amounts) | 2017 | 2016 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||||
Consolidated net income of Century Communities, Inc. | 8,799 | 7,983 | 49,540 | 39,890 | 20,022 | 12,431 | 7,439 | |||||||||||||||||||||
Net income attributable to non-controlling interests | — | — | — | — | — | 52 | 1,301 | |||||||||||||||||||||
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Net income attributable to common stockholders | $ | 8,799 | $ | 7,983 | $ | 49,540 | $ | 39,890 | $ | 20,022 | $ | 12,379 | $ | 6,138 | ||||||||||||||
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Basic earnings per share | $ | 0.40 | $ | 0.38 | $ | 2.34 | $ | 1.88 | $ | 1.03 | $ | 0.95 | — | |||||||||||||||
Diluted earnings per share | $ | 0.40 | $ | 0.38 | $ | 2.33 | $ | 1.88 | $ | 1.03 | $ | 0.95 | — | |||||||||||||||
Balance Sheet Data (end of period): | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 23,465 | $ | 11,437 | $ | 29,450 | $ | 29,287 | $ | 33,462 | $ | 109,998 | $ | 7,897 | ||||||||||||||
Inventories | $ | 884,072 | $ | 867,357 | $ | 857,885 | $ | 810,137 | $ | 556,323 | $ | 184,072 | $ | 77,305 | ||||||||||||||
Total assets | $ | 1,026,026 | $ | 957,621 | $ | 1,007,528 | $ | 917,741 | $ | 670,616 | $ | 312,639 | $ | 90,673 | ||||||||||||||
Total debt | $ | 447,948 | $ | 415,051 | $ | 454,088 | $ | 390,243 | $ | 224,247 | $ | 1,500 | $ | 33,206 | ||||||||||||||
Total liabilities | $ | 529,561 | $ | 541,092 | $ | 533,892 | $ | 508,262 | $ | 305,411 | $ | 41,083 | $ | 66,112 | ||||||||||||||
Equity | $ | 496,465 | $ | 416,529 | $ | 473,636 | $ | 409,479 | $ | 365,205 | $ | 271,556 | $ | 24,561 | ||||||||||||||
Other Operating Information (dollars in thousands): | ||||||||||||||||||||||||||||
Number of homes delivered | 608 | 539 | 2,825 | 2,401 | 1,046 | 448 | 336 | |||||||||||||||||||||
Average sales price of homes delivered | $ | 372.4 | $ | 336.0 | $ | 346.5 | $ | 302.1 | $ | 336.4 | $ | 382.0 | $ | 285.8 | ||||||||||||||
Homebuilding gross margin percentage | 19.5 | % | 20.3 | % | 19.7 | % | 20.2 | % | 21.4 | % | 24.2 | % | 21.4 | % | ||||||||||||||
Cancellation rates | 15 | % | 22 | % | 20 | % | 21 | % | 18 | % | 20 | % | 17 | % | ||||||||||||||
Backlog at end of period, number of homes | 1,098 | 969 | 749 | 714 | 772 | 222 | 148 | |||||||||||||||||||||
Backlog at end of period, aggregate sales value | $ | 436,003 | $ | 361,298 | $ | 302,823 | $ | 271,138 | $ | 246,327 | $ | 103,250 | $ | 51,562 | ||||||||||||||
Average sales price of homes in backlog | $ | 397.1 | $ | 372.9 | $ | 404.3 | $ | 379.7 | $ | 319.1 | $ | 465.1 | $ | 348.4 | ||||||||||||||
Net new home contracts | 957 | 794 | 2,860 | 2,356 | 1,042 | 406 | 415 | |||||||||||||||||||||
Selling communities at period end | 88 | 87 | 89 | 88 | 83 | 23 | 13 | |||||||||||||||||||||
Total owned and controlled lot inventory | 18,854 | 13,188 | 18,296 | 13,160 | 11,463 | 8,341 | 3,072 | |||||||||||||||||||||
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF UCP
The following table presents selected historical consolidated financial data of UCP. The selected historical consolidated financial data as of December 31, 2016 and 2015, and forSeptember 30, 2019, each of the years in the three-year period ended December 31, 2016, are derived from UCP’s audited consolidated financial statements and accompanying notes, which are contained in UCP’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which is incorporated by reference into this proxy statement/prospectus.
The selectedfollowing summary consolidated historical financial data is derived from our audited consolidated financial data as of December 31, 2014 and 2013 and 2012, andstatements for the years ended December 31, 20132018, 2017 and 2012, are derived2016, and from UCP’sour unaudited condensed consolidated financial statements for the nine months ended September 30, 2019 and 2018. The unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and, accompanying notesin our opinion, include all adjustments, consisting of normal recurring adjustments, that we consider necessary for a fair presentation of our results of operations for such years, which have previously been filed with the SEC but whichperiods. Operating results for any interim or historical period are not incorporated by reference into this proxy statement/prospectus. The selected historical unaudited condensed consolidated financial data asnecessarily indicative of March 31, 2017 and 2016, andthe results for the three months ended March 31, 2017 and 2016, are derived from UCP’s unaudited condensed consolidated financial statements and accompanying notes, which are contained in UCP’s Quarterly Report on Form 10-Qany full fiscal year or indicative of results that may be expected for the quarterly period ended March 31, 2017, which is incorporated by reference into this proxy statement/prospectus.any future period.
The information set forth below is only a summary.
| (in thousands, except per share amounts) | Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||
| 2019 | 2018 | 2018 | 2017 | 2016 | ||||||||||||||||
| (unaudited) | ||||||||||||||||||||
Consolidated statements of operations: | ||||||||||||||||||||
Revenue | ||||||||||||||||||||
Homebuilding revenues | ||||||||||||||||||||
Home sales revenues | $ | 1,705,798 | $ | 1,469,871 | $ | 2,110,058 | $ | 1,405,443 | $ | 978,733 | ||||||||||
Land sales and other revenues | 8,837 | 4,304 | 5,631 | 8,503 | 15,707 | |||||||||||||||
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| 1,714,635 | 1,474,175 | 2,115,689 | 1,413,946 | 994,440 | ||||||||||||||||
Financial Services revenues | 28,734 | 21,292 | 31,724 | 9,853 | — | |||||||||||||||
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Total revenue | $ | 1,743,369 | $ | 1,495,467 | $ | 2,147,413 | $ | 1,423,799 | $ | 994,440 | ||||||||||
Homebuilding cost of revenues | ||||||||||||||||||||
Cost of home sales revenues | (1,407,519 | ) | (1,206,924 | ) | (1,741,619 | ) | (1,153,359 | ) | (786,127 | ) | ||||||||||
Cost of land sales and other revenues | (6,115 | ) | (3,010 | ) | (3,832 | ) | (6,516 | ) | (14,217 | ) | ||||||||||
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| (1,413,634 | ) | (1,209,934 | ) | (1,745,451 | ) | (1,159,875 | ) | (800,344 | ) | |||||||||||
Financial Services costs | (22,750 | ) | (15,836 | ) | (22,958 | ) | (8,664 | ) | — | |||||||||||
Selling, general, and administrative | (216,987 | ) | (191,130 | ) | (263,981 | ) | (176,304 | ) | (122,224 | ) | ||||||||||
Loss on debt extinguishment | (10,832 | ) | — | — | — | — | ||||||||||||||
Acquisition expense | — | (395 | ) | (437 | ) | (9,905 | ) | (490 | ) | |||||||||||
Equity in income of unconsolidated subsidiaries | — | 14,849 | 14,849 | 12,176 | 191 | |||||||||||||||
Other income (expense) | (499 | ) | (553 | ) | (905 | ) | 2,937 | 1,576 | ||||||||||||
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Income before income tax expense | $ | 78,667 | $ | 92,468 | $ | 128,530 | $ | 84,164 | $ | 73,149 | ||||||||||
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Income tax expense | (19,031 | ) | (22,207 | ) | (32,075 | ) | (33,869 | ) | (23,609 | ) | ||||||||||
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Consolidated net income | $ | 59,636 | $ | 70,261 | $ | 96,455 | $ | 50,295 | $ | 49,540 | ||||||||||
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Basic earnings per share | $ | 1.96 | $ | 2.35 | $ | 3.20 | $ | 2.06 | $ | 2.34 | ||||||||||
Diluted earnings per share | $ | 1.95 | $ | 2.33 | $ | 3.17 | $ | 2.03 | $ | 2.33 | ||||||||||
Balance sheet data (end of period): | ||||||||||||||||||||
Cash, cash equivalents, and cash held in escrow | $ | 68,870 | $ | 47,833 | $ | 57,246 | $ | 126,555 | $ | 49,494 | ||||||||||
Inventories | $ | 2,093,493 | $ | 1,834,897 | $ | 1,848,243 | $ | 1,390,354 | $ | 857,885 | ||||||||||
Total assets | $ | 2,489,562 | $ | 2,152,494 | $ | 2,254,255 | $ | 1,735,022 | $ | 1,007,528 | ||||||||||
Total debt | $ | 1,252,870 | $ | 1,080,782 | $ | 1,091,832 | $ | 824,602 | $ | 454,088 | ||||||||||
Total liabilities | $ | 1,538,383 | $ | 1,311,701 | $ | 1,394,896 | $ | 999,789 | $ | 533,892 | ||||||||||
Equity | $ | 951,179 | $ | 840,793 | $ | 859,359 | $ | 735,233 | $ | 473,636 | ||||||||||
| (dollars in thousands) | Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||
| 2019 | 2018 | 2018 | 2017 | 2016 | ||||||||||||||||
Other operating information: | ||||||||||||||||||||
Number of homes delivered | 5,521 | 4,071 | 6,099 | 3,640 | 2,825 | |||||||||||||||
Average sales price of homes delivered | $ | 309.0 | $ | 361.1 | $ | 346.0 | $ | 386.1 | $ | 346.5 | ||||||||||
Gross margin from home sales | $ | 298,279 | $ | 262,947 | $ | 368,439 | $ | 252,084 | $ | 192,606 | ||||||||||
Homebuilding gross margin percentage | 17.5 | % | 17.9 | % | 17.5 | % | 17.9 | % | 19.7 | % | ||||||||||
Adjusted homebuilding gross margin excluding interest and purchase price accounting for acquired work in process inventory(1) | 20.0 | % | 22.1 | % | 21.6 | % | 21.4 | % | 21.7 | % | ||||||||||
Backlog at end of period, number of homes | 2,746 | 2,988 | 2,181 | 1,320 | 749 | |||||||||||||||
Backlog at end of period, aggregate sales value | $ | 854,856 | $ | 930,951 | $ | 669,526 | $ | 572,888 | $ | 302,823 | ||||||||||
Average sales price of homes in backlog | $ | 311.3 | $ | 311.5 | $ | 306.9 | $ | 434.0 | $ | 404.3 | ||||||||||
Net new home contracts | 6,086 | 4,436 | 5,657 | 3,814 | 2,860 | |||||||||||||||
Selling communities at period end | 129 | 125 | 122 | 119 | 89 | |||||||||||||||
Total owned and controlled lot inventory | 39,315 | 38,147 | 37,919 | 30,784 | 18,296 | |||||||||||||||
Adjusted EBITDA(2) | $ | 142,530 | $ | 163,091 | $ | 227,865 | $ | 150,477 | $ | 100,343 | ||||||||||
| (1) | This non-GAAP financial measure should not be used as a substitute for our operating results in accordance with GAAP. See the reconciliations to the most comparable GAAP measure and other information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.” An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. |
| (2) | The following table presents EBITDA and adjusted EBITDA for the nine months ended September 30, 2019 and 2018, and the years ended December 31, 2018, 2017 and 2016. Adjusted EBITDA is a non-GAAP financial measure we use as a supplemental measure in evaluating operating performance. We define adjusted EBITDA as consolidated net income before (i) income tax expense, (ii) interest in cost of home sales revenues, (iii) other interest expense, (iv) depreciation and amortization expense, and (v) adjustments resulting from the application of purchase accounting for acquired work in process inventory related to business combinations and purchase price accounting for investment in unconsolidated subsidiaries, and (vi) acquisition expense. We believe adjusted EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, and items considered to be non-recurring. Accordingly, our management believes that this measurement is useful for comparing general operating performance from period to period. Adjusted EBITDA should be considered in addition to, and not as a substitute for, consolidated net income in accordance with GAAP as a measure of performance. Our presentation of adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our adjusted EBITDA is limited as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. |
| Nine Months Ended September 30, | Year Ended December 31, | |||||||||||||||||||
| (in thousands) | 2019 | 2018 | 2018 | 2017 | 2016 | |||||||||||||||
Consolidated net income | $ | 59,636 | $ | 70,261 | $ | 96,455 | $ | 50,295 | $ | 49,540 | ||||||||||
Income tax expense | 19,031 | 22,207 | 32,075 | 33,869 | 23,609 | |||||||||||||||
Interest in cost of home sales revenues | 41,499 | 33,577 | 48,692 | 32,898 | 19,502 | |||||||||||||||
Interest expense (income) | 15 | (579 | ) | 3 | (3 | ) | 5 | |||||||||||||
Depreciation and amortization expense | 9,793 | 8,803 | 12,031 | 6,973 | 5,580 | |||||||||||||||
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EBITDA | $ | 129,974 | $ | 134,269 | $ | 189,256 | $ | 124,032 | $ | 98,236 | ||||||||||
Loss on debt extinguishment | 10,832 | — | — | — | — | |||||||||||||||
Purchase price accounting for acquired work in process inventory | 1,724 | 28,367 | 38,112 | 15,625 | 389 | |||||||||||||||
Purchase price accounting for investment in unconsolidated subsidiaries outside basis | — | 60 | 60 | 915 | 1,228 | |||||||||||||||
Acquisition expense | — | 395 | 437 | 9,905 | 490 | |||||||||||||||
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Adjusted EBITDA | $ | 142,530 | $ | 163,091 | $ | 227,865 | $ | 150,477 | $ | 100,343 | ||||||||||
You should readcarefully consider the following information together with UCP’s audited consolidated financial statementsrisks and accompanying notesuncertainties described below and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” containedother information in UCP’s Annual Report on Form 10-K forthis prospectus before making an investment in the year ended December 31, 2016, and with UCP’s unaudited condensed consolidated financial statements and accompanying notes andExchange Notes or participating in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in UCP’s Quarterly Report on Form 10-Q forExchange Offer. The risks described below are not the quarterly period ended March 31, 2017, which are incorporated by reference into this proxy statement/prospectus, and in UCP’s other reports filed withonly ones facing the SEC. For more information, see “Where You Can Find More Information” beginning on page 147 of this proxy statement/prospectus.
UCP completed its initial public offering of UCP Class A Common Stock (its “IPO”) on July 23, 2013. Due to the timing of UCP’s IPO, presented herein are certain combined consolidated historical financial data for UCP, LLC for periods prior to UCP’s IPO. As such, the information for the year ended December 31, 2012 reflects theCompany. Our business, financial condition and results of operations could be materially and adversely affected by any of UCP’s predecessor,these risks. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. This prospectus also contains forward-looking statements that involve risks and the information for the year ended December 31, 2013 reflects the financial conditionuncertainties. Our actual results could differ materially and resultsadversely from those anticipated in these forward-looking statements as a result of operations of UCP’s predecessor for the portion of the year preceding UCP’s IPO and of UCP for the remainder of 2013.
| Three Months Ended March 31, | Year Ended December 31, | |||||||||||||||||||||||||||
(In thousands, except per share data) | 2017 | 2016 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||
Home sales | $ | 94,002 | $ | 68,225 | $ | 343,919 | $ | 252,597 | $ | 155,417 | $ | 72,511 | $ | 14,060 | ||||||||||||||
Cost of home sales | 76,653 | 56,206 | 280,614 | 206,747 | 129,577 | 57,500 | 9,832 | |||||||||||||||||||||
Impairment on real estate | 102 | — | 458 | 923 | — | — | — | |||||||||||||||||||||
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Homebuilding gross profit (a) | 17,247 | 12,019 | 62,847 | 44,927 | 25,840 | 15,011 | 4,228 | |||||||||||||||||||||
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Land sales | 496 | — | 5,449 | 21,134 | 32,513 | 20,215 | 44,066 | |||||||||||||||||||||
Cost of land sales | 475 | 461 | 4,637 | 15,291 | 25,466 | 13,820 | 32,876 | |||||||||||||||||||||
Impairment on real estate | — | — | 2,131 | — | — | — | — | |||||||||||||||||||||
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Land sales gross (loss) profit (a) | 21 | (461 | ) | (1,319 | ) | 5,843 | 7,047 | 6,395 | 11,190 | |||||||||||||||||||
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Other revenue | — | — | — | 5,060 | 3,253 | — | — | |||||||||||||||||||||
Cost of sales—other revenue | — | — | — | 4,363 | 2,828 | — | — | |||||||||||||||||||||
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Other revenue gross profit | — | — | — | 697 | 425 | — | — | |||||||||||||||||||||
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Total gross profit | 17,268 | 11,558 | 61,528 | 51,467 | 33,312 | 21,406 | 15,418 | |||||||||||||||||||||
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-24-
| Three Months Ended March 31, | Year Ended December 31, | |||||||||||||||||||||||||||
(In thousands, except per share data) | 2017 | 2016 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||||
Sales and marketing | 5,149 | 4,076 | 19,257 | 18,943 | 13,748 | 6,647 | 2,875 | |||||||||||||||||||||
General and administrative | 8,502 | 7,275 | 29,161 | 26,878 | 27,406 | 19,368 | 10,103 | |||||||||||||||||||||
Goodwill impairment | — | — | 4,223 | — | — | — | — | |||||||||||||||||||||
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Total expenses | 13,651 | 11,351 | 52,641 | 45,821 | 41,154 | 26,015 | 12,978 | |||||||||||||||||||||
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Total cost and expenses | 90,881 | 68,018 | 340,481 | 273,145 | 199,025 | 97,335 | 55,686 | |||||||||||||||||||||
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Income (loss) from operations | 3,617 | 207 | 8,887 | 5,646 | (7,842 | ) | (4,609 | ) | 2,440 | |||||||||||||||||||
Other income | 460 | 28 | 276 | 206 | 121 | 322 | 578 | |||||||||||||||||||||
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Net income (loss) before income taxes | $ | 4,077 | $ | 235 | $ | 9,163 | $ | 5,852 | $ | (7,721 | ) | $ | (4,287 | ) | $ | 3,018 | ||||||||||||
Benefit (provision) for income taxes | (621 | ) | (5 | ) | 5,285 | (69 | ) | — | — | — | ||||||||||||||||||
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Net income (loss) | $ | 3,456 | $ | 230 | $ | 14,448 | $ | 5,783 | $ | (7,721 | ) | $ | (4,287 | ) | $ | 3,018 | ||||||||||||
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Net income (loss) attributable to noncontrolling interest | $ | 2,310 | $ | 134 | $ | 5,210 | $ | 3,412 | $ | (2,728 | ) | $ | (2,346 | ) | $ | 3,018 | ||||||||||||
Net income (loss) attributable to UCP, Inc. | $ | 1,146 | $ | 96 | $ | 9,238 | $ | 2,371 | $ | (4,993 | ) | $ | (1,941 | ) | — | |||||||||||||
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Income (loss) per share | ||||||||||||||||||||||||||||
Basic | $ | 0.14 | $ | 0.01 | $ | 1.16 | $ | 0.30 | $ | (0.63 | ) | $ | (0.25 | ) | — | |||||||||||||
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Diluted | $ | 0.14 | $ | 0.01 | $ | 1.15 | $ | 0.30 | $ | (0.63 | ) | $ | (0.25 | ) | — | |||||||||||||
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| Three Months Ended March 31, | Year Ended December 31, | |||||||||||||||||||||||||||
(In thousands, except unit data) | 2017 | 2016 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||||
Operating Data-Owned Projects: | ||||||||||||||||||||||||||||
Net new home orders | 270 | 225 | 933 | 860 | 473 | 205 | 61 | |||||||||||||||||||||
New homes delivered | 226 | 167 | 820 | 701 | 432 | 196 | 41 | |||||||||||||||||||||
Average sales price of homes delivered (in thousands) | $ | 416 | $ | 409 | $ | 419 | $ | 360 | $ | 360 | $ | 370 | $ | 343 | ||||||||||||||
Cancellation rate | 11.5 | % | 13.5 | % | 12.1 | % | 10.0 | % | 8.0 | % | 12.8 | % | 12.9 | % | ||||||||||||||
Average active selling communities(1) | 27 | 28 | 28 | 28 | 16 | 7 | 3 | |||||||||||||||||||||
Active selling communities at end of period(2) | 26 | 29 | 28 | 28 | 21 | 9 | 4 | |||||||||||||||||||||
Backlog at end of period, number of homes | 406 | 307 | 362 | 249 | 91 | 35 | 26 | |||||||||||||||||||||
Backlog at end of period, aggregate sales value (in thousands) | $ | 176,596 | $ | 136,220 | $ | 149,639 | $ | 108,773 | $ | 32,499 | $ | 17,121 | $ | 9,182 | ||||||||||||||
Average sales price of backlog (in thousands) | $ | 435 | $ | 444 | $ | 413 | $ | 437 | $ | 357 | $ | 489 | $ | 353 | ||||||||||||||
-25-
| (In thousands, except per share data) | As of March 31, | As of December 31, | ||||||||||||||||||||||||||
FINANCIAL CONDITION | 2017 | 2016 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||||
Cash and cash equivalents | $ | 34,270 | $ | 29,769 | $ | 40,931 | $ | 39,829 | $ | 42,033 | $ | 87,503 | $ | 10,324 | ||||||||||||||
Real estate inventories | 389,379 | 371,545 | 373,207 | 360,989 | 321,693 | 176,848 | 125,367 | |||||||||||||||||||||
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Total assets(a) | 442,118 | 414,155 | 434,106 | 414,697 | 375,139 | 267,320 | 137,534 | |||||||||||||||||||||
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Debt(a)(b) | 161,551 | 158,584 | 160,994 | 155,966 | 133,139 | 30,950 | 29,112 | |||||||||||||||||||||
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Total liabilities(a) | 213,608 | 196,377 | 207,220 | 197,289 | 163,872 | 49,604 | 35,219 | |||||||||||||||||||||
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Total equity | $ | 228,510 | $ | 217,778 | $ | 226,886 | $ | 217,408 | $ | 211,267 | $ | 217,716 | $ | 102,315 | ||||||||||||||
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Total UCP, Inc. stockholders’ equity | $ | 102,184 | $ | 90,356 | $ | 100,628 | $ | 90,200 | $ | 87,255 | $ | 91,254 | ||||||||||||||||
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Number of shares issued at period end (in 000s) | 8,105 | 8,026 | 8,043 | 8,014 | 7,922 | 7,750 | ||||||||||||||||||||||
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Book value per share (c) | $ | 12.61 | $ | 11.27 | $ | 12.51 | $ | 11.26 | $ | 11.01 | $ | 11.77 | ||||||||||||||||
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| As of March 31, | As of December 31, | |||||||||||||||||||||||||||
(In thousands) | 2017 | 2016 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||||
Acquisition (a) | $ | 17,155 | $ | 19,505 | $ | 19,061 | $ | 26,102 | $ | 20,254 | $ | 11,046 | 12,274 | |||||||||||||||
Development (a) | — | 2,128 | — | 4,701 | 544 | 6,018 | 12,906 | |||||||||||||||||||||
Construction (a) | 69,846 | 63,257 | 67,597 | 51,683 | 39,711 | 13,886 | 3,932 | |||||||||||||||||||||
Bonds (a) | 74,550 | 73,694 | 74,336 | 73,480 | 72,630 | — | — | |||||||||||||||||||||
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Total | $ | 161,551 | $ | 158,584 | $ | 160,994 | $ | 155,966 | $ | 133,139 | $ | 30,950 | $ | 29,112 | ||||||||||||||
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-26-
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following table presents selected unaudited pro forma combined financial information including consolidated balance sheet and statements of operations, after giving effect to the Merger of Century Communities with UCP. The information for the three months ended March 31, 2017 and the year ended December 31, 2016 under “Statement of Operations Data” in the table below give effect to the Merger as if it had been consummated on January 1, 2016, the beginning of the earliest period presented. The information under “Balance Sheet Data” in the table below assumes the Merger had been consummated on March 31, 2017. This unaudited pro forma combined financial information was prepared using the acquisition method of accounting with Century Communities considered the acquirer of UCP. See “Proposal I: Adoption of the Merger Agreement—Accounting Treatment of the Merger” beginning on page 96.
In addition, the unaudited pro forma combined financial information includes adjustments that are preliminary and may be revised. There can be no assurance that such revisions will not result in material changes. The unaudited pro forma combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company.
The following selected unaudited pro forma condensed combined financial data has been developed from and should be read in conjunction with the respective consolidated financial statements and related notes of each of Century Communities and UCP incorporated by reference into this proxy statement/prospectus, and the more detailed unaudited pro forma condensed combined financial statements,certain factors, including the notes thereto, appearingrisks facing the Company described below and elsewhere in this proxy statement/prospectus. See “Where You Can Find More InformationSome statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Cautionary Note Concerning Forward-Looking Statements.””
Risks Related to Our Indebtedness and “the Notes
Unaudited Pro Forma Condensed Combined Financial Statements” beginningWe have substantial indebtedness and expect to continue to use leverage in executing our business strategy, which could have important consequences on pages 147our business and 119, respectively,adversely affect the return on our assets.
As of this proxy statement/prospectus.September 30, 2019, we had approximately $1.25 billion in outstanding indebtedness, consisting of $395.9 million outstanding on the Existing 5.875% Notes, $494.2 million outstanding on the Initial Notes, $6.2 million outstanding on insurance premium notes, $278.8 million outstanding under our revolving credit facility, and $77.8 million outstanding under our mortgage repurchase facilities. Additionally, as of September 30, 2019, we had $361.2 million of available borrowing capacity under our revolving credit facility. Our board of directors will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the ability of particular assets, and the Company as a whole, to generate cash flow to cover the expected debt service. Our charter does not contain a limitation on the amount of debt we may incur and our board of directors may change our target debt levels at any time without the approval of our stockholders.
The following selected unaudited pro forma condensed combined financial data constitutes forward-looking information and is subject to certain risks and uncertainties thatThis substantial indebtedness, as well as any future indebtedness we may incur in the future, could cause actual results to differ materially from those anticipated. See “Risk Factors” and “Cautionary Information Regarding Forward-Looking Statements” beginning on pages 34 and 32, respectively, of this proxy statement/prospectus.have important consequences for our business, including:
| (Amounts in thousands, except per share amounts) | ||||||||
| Three Months Ended March 31, 2017 | Year Ended December 31, 2016 | |||||||
Statement of Operations Data: | ||||||||
Total revenue | $ | 322,814 | $ | 1,343,808 | ||||
Income before income tax expense | $ | 18,256 | $ | 86,972 | ||||
Net income available to common stockholders | $ | 13,638 | $ | 67,017 | ||||
Income per common share | ||||||||
Basic | $ | 0.52 | $ | 2.64 | ||||
Diluted | $ | 0.51 | $ | 2.57 | ||||
Balance Sheet Data: | ||||||||
Total assets | $ | 1,448,152 | NA | |||||
Notes payable and revolving line of credit | $ | 712,458 | NA | |||||
making it more difficult for us to satisfy our obligations with respect to our debt or to our trade or other creditors;
-27-increasing our vulnerability to adverse economic or industry conditions;
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
Historical per Share Data for Century Communities Common Stocklimiting our ability to obtain additional financing to fund capital expenditures and UCP Class A Common Stock
The historical per share data for Century Communities Common Stock and UCP Class A Common Stock belowacquisitions, particularly when the availability of financing in the capital markets is derivedlimited;
requiring a substantial portion of our cash flows from the audited consolidated financial statements of each of Century Communities and UCP as of andoperations for the year ended December 31, 2016,payment of interest on our debt and reducing our ability to use our cash flows to fund working capital, capital expenditures, acquisitions and general corporate requirements;
limiting our flexibility in planning for, or reacting to, changes in our business and the unaudited condensed consolidated financial statements of each of Century Communitieshomebuilding industry; and UCP as of and for the three months ended March 31, 2017.
Unaudited Pro Forma Combined per Share Data for Century Communities Common Stock
The unaudited pro forma combined per share data for Century Communities Common Stock set forth below gives effectplacing us at a competitive disadvantage to the Merger as if it had been consummated on January 1, 2016, the beginning of the earliest period presented,less leveraged competitors.
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us through capital markets financings or under our credit facilities or otherwise in the case of continuing net income per share data, and as of March 31, 2017 and December 31, 2016 in the case of book value per share data, and assuming that each outstanding share of UCP Class A Common Stock had been converted into shares of Century Communities Common Stock based on the Stock Exchange Ratio of 0.2309.
The unaudited pro forma combined per share data for Century Communities Common Stock has been derived from the audited consolidated financial statements of each of Century Communities and UCP as of and for the year ended December 31, 2016, and the unaudited condensed consolidated financial statements of each of Century Communities and UCP as of and for the three months ended March 31 2017.
The unaudited pro forma combined per share data for Century Communities Common Stock has been derived using the acquisition method of accounting. See “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 119 of this proxy statement/prospectus. Accordingly, the pro forma adjustments reflect the assets and liabilities of UCP at their preliminary estimated fair values. Differences between these preliminary estimates and the final values in acquisition accounting will occur and these differences could have a material impact on the unaudited pro forma combined per share information set forth below.
The unaudited pro forma combined per share data for Century Communities Common Stock does not purportan amount sufficient to represent the actual results of operations that Century Communities would have achieved had the Merger been completed during these periodsenable us to pay our indebtedness, or to project the future resultsfund our other liquidity needs. We may need to refinance all or a portion of operations that Century Communities may achieve after the Merger.
Unaudited Pro Forma Combined per UCP Equivalent Share Data
The unaudited pro forma combined per UCP equivalent share data set forth below shows the effectour indebtedness, on or before its maturity. A substantial majority of the Merger from the perspective of an owner of UCP Class A Common Stock. The information was calculated by multiplying the unaudited pro forma combined per share data for Century Communities Common Stock by the Stock Exchange Ratio of 0.2309.
Generally
You should read the below information in conjunction with the selected historical consolidated financial data included elsewhere in this proxy statement/prospectus and the historical consolidated financial statements of Century Communities and UCP and related notes that have been filed with the SEC, certain of which are incorporated by reference into this proxy statement/prospectus. See “Selected Historical Consolidated Financial Data of Century Communities,” “Selected Historical Consolidated Financial Data of UCP” and “Where You Can Find More Information” beginning on pages 22, 24 and 147, respectively, of this proxy statement/prospectus. The unaudited pro forma combined per share data for Century Communities Common Stock and the unaudited pro forma combined per UCP equivalent share data is derived from, and should be read in conjunction with, the
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unaudited pro forma condensed combined financial statements and related notes included in this proxy statement/prospectus. See “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 119 of this proxy statement/prospectus.
The following table sets forth certain historical and unaudited pro forma combined per share information for Century Communities and UCP.
| Three Months Ended March 31, 2017 | Year Ended December 31, 2016 | |||||||
Century Communities—Historical | ||||||||
Earnings per share: | ||||||||
Basic | $ | 0.40 | $ | 2.34 | ||||
Diluted | $ | 0.40 | $ | 2.33 | ||||
Book value per share of common stock(1) | $ | 22.27 | $ | 21.91 | ||||
Dividends declared per share of common stock | — | — | ||||||
UCP—Historical | ||||||||
Earnings per share: | ||||||||
Basic | $ | 0.14 | $ | 1.16 | ||||
Diluted | $ | 0.14 | $ | 1.15 | ||||
Book value per share of common stock(1) | $ | 12.61 | $ | 12.51 | ||||
Dividends declared per share of common stock | — | — | ||||||
Surviving Corporation Unaudited Pro Forma Combined Amounts | ||||||||
Earnings per share: | ||||||||
Basic | $ | 0.52 | $ | 2.64 | ||||
Diluted | $ | 0.51 | $ | 2.57 | ||||
Pro forma book value per share of common stock | $ | 22.90 | $ | 22.74 | ||||
UCP Unaudited Pro Forma Equivalent Per Share Data(2) | ||||||||
Earnings per share: | ||||||||
Basic | $ | 0.12 | $ | 0.61 | ||||
Diluted | $ | 0.12 | $ | 0.59 | ||||
Pro forma book value per share of common stock | $ | 5.29 | $ | 5.25 | ||||
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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Market Prices
Century Communities Common Stock is listed for trading on the NYSE under the ticker symbol “CCS.” UCP Class A Common Stock is listed for trading on the NYSE under the ticker symbol “UCP.”
Comparative Per Share Market Price Information
The following table presents the closing prices of UCP Class A Common Stock and Century Communities Common Stock on April 10, 2017, the last trading day before the public announcement of the Merger Agreement, and , 2017, the last practicable trading dayour current indebtedness matures prior to the mailing of this proxy statement/prospectus. The table also shows the estimated valuematurity of the per share consideration for each shareNotes. We cannot assure you that we will be able to refinance any of UCP Class A Common Stockour indebtedness on commercially reasonable terms, or at all. In addition, we may incur additional
indebtedness in order to finance our operations, make acquisitions or to repay existing indebtedness. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional debt or equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances. We cannot assure you that any such actions, if necessary, could be effected on commercially reasonable terms, or at all, or on terms that would be advantageous to our securityholders or on terms that would not require us to breach the relevant date.terms and conditions of our existing or future debt agreements.
Access to financing sources may not be available on favorable terms, or at all, especially in light of current market conditions, which could adversely affect our ability to maximize our returns.
We expect to continue to employ prudent levels of leverage to finance the acquisition and development of our lots and construction of our homes. Our access to additional third-party sources of financing will depend, in part, on:
Date | UCP Closing Price | Century Communities Closing Price | Exchange Ratio | Estimated Value of the Per Share Consideration(1) | ||||||||||||
April 10, 2017 | $ | 9.30 | $ | 26.10 | 0.2309 | $ | 11.35 | |||||||||
, 2017 | $ | $ | 0.2309 | $ | ||||||||||||
general market conditions;
The above table shows only historical comparisons. The market pricethe market’s perception of UCP Class A Common Stock and Century Communities Common Stock will fluctuate prior to the UCP special meeting and before the consummation of the Merger, which will affect the implied value of the stock portion of the Merger Consideration paid to the UCP stockholders. These comparisons may not provide meaningful information to UCP stockholders in determining whether to adopt the Merger Agreement. UCP stockholders are urged to obtain current market quotations for Century Communities Common Stock and UCP Class A Common Stock and to review carefully the other information contained in, or incorporated by reference into, this proxy statement/prospectus in considering whether to adopt the Merger Agreement. See “Where You Can Find More Information” beginning on page 147 of this proxy statement/prospectus.our growth potential;
Comparative Stock Prices and Dividends
The following table sets forth, for the respective periods of UCP and Century Communities indicated, the high and low sale prices per share of UCP Class A Common Stock and Century Communities Common Stock as reported by the NYSE and cash dividends declared and paid. Neither UCP nor Century Communities has historically paid dividends on its common stock, and neither company presently anticipates paying any dividends on its common stock in the foreseeable future.
| UCP | Century Communities | |||||||||||||||||||||||
| High | Low | Dividends Declared and Paid | High | Low | Dividends Declared and Paid | |||||||||||||||||||
Quarter ended March 31, 2017 | $ | 12.60 | $ | 9.55 | — | $ | 25.40 | $ | 20.75 | — | ||||||||||||||
Year Ended December 31, 2016 | ||||||||||||||||||||||||
Quarter ended December 31, 2016 | $ | 12.05 | $ | 8.45 | — | $ | 21.60 | $ | 16.49 | — | ||||||||||||||
Quarter ended September 30, 2016 | $ | 9.11 | $ | 7.71 | — | $ | 24.50 | $ | 18.90 | — | ||||||||||||||
Quarter ended June 30, 2016 | $ | 8.07 | $ | 7.00 | — | $ | 22.00 | $ | 18.76 | — | ||||||||||||||
Quarter ended March 31, 2016 | $ | 8.40 | $ | 5.46 | — | $ | 19.95 | $ | 14.45 | — | ||||||||||||||
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| UCP | Century Communities | |||||||||||||||||||||||
| High | Low | Dividends Declared and Paid | High | Low | Dividends Declared and Paid | |||||||||||||||||||
Year Ended December 31, 2015 | ||||||||||||||||||||||||
Quarter ended December 31, 2015 | $ | 8.00 | $ | 6.39 | — | $ | 21.60 | $ | 19.20 | — | ||||||||||||||
Quarter ended September 30, 2015 | $ | 8.44 | $ | 6.71 | — | $ | 21.51 | $ | 17.15 | — | ||||||||||||||
Quarter ended June 30, 2015 | $ | 9.27 | $ | 7.20 | — | $ | 18.85 | $ | 16.20 | — | ||||||||||||||
Quarter ended March 31, 2015 | $ | 10.77 | $ | 8.08 | — | $ | 17.07 | $ | 13.47 | — | ||||||||||||||
Year Ended December 31, 2014 | ||||||||||||||||||||||||
Quarter ended December 31, 2014 | $ | 13.79 | $ | 10.28 | — | $ | 19.04 | $ | 15.48 | — | ||||||||||||||
Quarter ended September 30, 2014 | $ | 14.11 | $ | 11.83 | $ | 0.2625 | $ | 23.34 | $ | 17.19 | — | |||||||||||||
Quarter ended June 30, 2014 | $ | 15.08 | $ | 13.02 | — | $ | 23.40 | $ | 20.55 | — | ||||||||||||||
Quarter ended March 31, 2014 | 16.85 | 14.05 | $ | 0.2625 | $ | — | $ | — | — | |||||||||||||||
Year Ended December 31, 2013 | ||||||||||||||||||||||||
Quarter ended December 31, 2013 | 15.93 | 13.60 | — | $ | — | $ | — | — | ||||||||||||||||
Quarter ended September 30, 2013 | 15.17 | 12.90 | — | $ | — | $ | — | — | ||||||||||||||||
Quarter ended June 30, 2013 | — | — | — | — | — | — | ||||||||||||||||||
Quarter ended March 31, 2013 | — | — | — | — | — | — | ||||||||||||||||||
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CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the documents incorporated by reference into this proxy statement/prospectus contain certain forecasts and other forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to acquisition and/or development financing, the financial condition, results of operations, business strategies, operating efficiencies or synergies, revenue enhancements, and competitive positions, growth opportunities, plans and objectives of the management of each of Century Communities and UCP, the Merger and the markets for Century Communities and UCP Class A Common Stock and other matters. Statements in this proxy statement/prospectus and the documents incorporated by reference herein that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act. These forward-looking statements, including, without limitation, those relating to the future business prospects, revenues and income of Century Communities and UCP, wherever they occur in this proxy statement/prospectus or the documents incorporated by reference herein, are necessarily estimates reflecting the best judgment of the respective managements of Century Communities and UCP and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in and incorporated by reference into this proxy statement/prospectus.
Words such as “estimate,” “project,” “plan,” “intend,” “expect,” “anticipate,” “believe,” “would,” “should,” “could,” “may,” “will,” “predict,” “potential,” “continue,” “forecast” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are found at various places throughout this proxy statement/prospectus, including in the section entitled “Risk Factors” beginning on page 34. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include those set forth in Century Communities’ and UCP’s filings with the SEC, including their respective Annual Reports on Form 10-K for 2016 (in the case of UCP, as amended by Amendment Number 1 to the 2016 Annual Report on Form 10-K/A, filed with the SEC on April 28, 2017). These important factors also include those set forth under “Risk Factors,” beginning on page 34, as well as, among others, risks and uncertainties relating to:
our current debt levels;
our current and expected future earnings;
our cash flow; and
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For a further discussion of these and other risks, contingencies and uncertainties that may impact Century Communities or UCP, and that UCP stockholders should consider prior to deciding whether to voteFOR the adoption of the Merger Agreement, see “Risk Factors” beginning on page 34 of this proxy statement/prospectus and in Century Communities’ and UCP’s other filings with the SEC incorporated by reference into this proxy statement/prospectus.
Due to these risks, contingencies and other uncertainties, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement/prospectus as to the forward-looking statements contained in this proxy statement/prospectus, and as of the date of any document incorporated by reference into this proxy statement/prospectus as to any forward-looking statement incorporated by reference herein. Except as provided by federal securities laws, neither Century Communities nor UCP is required to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written or oral forward-looking statements attributable to Century Communities or UCP or any person acting on its or their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Century Communities and UCP do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events, except as may be required under applicable federal securities laws.
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In deciding how and whether to vote, UCP stockholders should carefully consider the following risk factors and all of the information contained in or incorporated by reference into this proxy statement/prospectus, including but not limited to, the matters addressed in “Cautionary Information Regarding Forward-Looking Statements” beginning on page 32 of this proxy statement/prospectus and the matters discussed under “Item 1A. Risk Factors” of Century Communities’ and UCP’s respective Annual Reports on Form 10-K for the year ended December 31, 2016 (in UCP’s case, as amended by Amendment Number 1 to the 2016 Annual Report on Form 10-K/A, filed with the SEC on April 28, 2017), as updated from time to time in Century Communities’ and UCP’s respective subsequent filings with the SEC, which are incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 147 of this proxy statement/prospectus.
Risk Factors Relating to the Merger
The Stock Exchange Ratio is fixed and will not be adjusted in the event of any change in either Century Communities’ or UCP’s stock price. Because the market price of Century Communities Common Stock may fluctuate, the value of the Merger Consideration is uncertain.
In the Merger, each share of UCP Class A Common Stock (other than dissenters’ shares or treasury shares held by UCP and any shares of UCP Class A Common Stock owned by any UCP subsidiary, Century Communities or Century Communities subsidiary) will be converted into the right to receive and exchanged for the Merger Consideration, consisting of 0.2309 of a duly authorized, fully paid and nonassessable share of Century Communities Common Stock and $5.32 in cash, without any interest thereon. No fractional shares will be issued in the Merger, and UCP stockholders will receive cash in lieu of any fractional shares.
Because the Stock Exchange Ratio is fixed, the value of the Merger Consideration will depend on the market price of Century Communities Common Stock at the effective time of the Merger. The Stock Exchange Ratio will not be adjusted for changes in the market price of Century Communities Common Stock or UCP Class A Common Stock between the date of signing the Merger Agreement and completion of the Merger. There will be a lapse of time between the date on which UCP stockholders vote on the adoption of the Merger Agreement at the UCP special meeting and the date on which UCP stockholders entitled to receive shares of Century Communities Common Stock actually receive those shares. The value of the Merger Consideration has fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this proxy statement/prospectus to the effective time of the Merger and thereafter. The closing sale price per share of UCP Class A Common Stock as of April 10, 2017,our common stock.
If the last trading date before the public announcement of the Merger Agreement, was $9.30,capital and the closing sale price per share has fluctuated ascredit markets experience increased volatility or weakness, potential lenders may be unwilling or unable to provide us with financing that is attractive to us or may charge us prohibitively high as $ and as low as $ between that date and , 2017. The closing sale price per share of Century Communities Common Stock as of April 10, 2017, the last trading date before the public announcement of the Merger Agreement, was $26.10, and the closing sale price per share has fluctuated as high as $ and as low as $ between that date and , 2017. Accordingly, at the time of the UCP special meeting, the value of the Merger Consideration will not be known. Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changesfees in Century Communities’ and UCP’s respective operations and prospects, cash flows, and financial position, market assessments of the likelihood that the Merger will be completed, the timing of the Merger, and regulatory considerations. Moreover, the issuance of additional shares of Century Communities Common Stock in the Merger could depress the per share price of Century Communities Common Stock.
UCP stockholders are urgedorder to obtain current market quotationsfinancing. In such a situation, investment returns on our assets and our ability to make acquisitions could be adversely affected by our inability to secure additional financing on reasonable terms, if at all.
In addition, while we have not encountered any such issues to date, if the credit rating agencies that rate our debt were to downgrade our credit ratings, it would likely increase our cost of capital and make it more difficult for shares of Century Communities Common Stock and UCP Class A Common Stock before making a decision on whether to voteFOR the adoption of the Merger Agreement.
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Current Century Communities stockholders and UCP stockholders will generally have a reduced ownership and voting interest in Century Communities after the Merger.
Century Communities expects to issue to UCP stockholders approximately 4.2 million shares of Century Communities Common Stock in the Merger (which does not include shares of Century Communities Common Stock issuable in connection with the future vesting of outstanding stock options and restricted stock units of UCP following their conversion into reciprocal stock options and restricted stock units of Century Communities). Based on the expected number of shares of Century Communities Common Stock and UCP Class A Common Stock expected to be outstanding upon the completion of the Merger, current Century Communities stockholders and former UCP stockholders are expected to own approximately 83.2% and 16.4%, respectively, of Century Communities Common Stock.
Century Communities stockholders and UCP stockholders currently have the right to vote for their respective directors and on other matters affecting their respective companies. At the completion of the Merger, each UCP stockholder that receives shares of Century Communities Common Stock and is not already a stockholder of Century Communities will become a stockholder of Century Communities with a percentage ownership that will be smaller than such stockholder’s percentage ownership of UCP prior to the Merger. Correspondingly, each Century Communities stockholder will remain a stockholder of Century Communities with a percentage ownership that will generally be smaller than such stockholder’s percentage of Century Communities prior to the Merger. As a result of these reduced ownership percentages, each of Century Communities and UCP stockholders will generally have less voting power in, and influence on management and policies of, Century Communities after the Merger than they now have in their respective companies.
The Merger is subject to the receipt of certain approvals in addition to those from regulatory authorities, if any, including approvals from UCP stockholders as to the Merger Agreement. Failureus to obtain these approvals would prevent completion of the Merger.
Before the Merger can be completed, UCP stockholders must adopt the Merger Agreement. There can be no assurance that such approval will be obtained. Failure to obtain the required approval may result in a material delay in, or the abandonment of, the Merger. Any delay in completing the Merger may materially adversely affect the timing and amount of cost savings and other benefits that are expected to be achieved from the Merger.
Century Communities may not be able to obtain its preferred form of financing to consummate the Merger, and the terms of the financing may be less favorable to Century Communities than expected, depending on market conditions.
There is no financing condition under the Merger Agreement, which means that if the conditions to closing are otherwise satisfied or waived, Century Communities is obligated to consummate the Merger whether or not it has sufficient funds to pay the consideration under the Merger Agreement. Century Communities currently intends to finance the cash portion of the Merger Consideration, repay and redeem certain outstanding indebtedness of UCP and its subsidiaries, and pay related fees and expenses in connection with the Merger using a combination of borrowings under Century Communities’ existing revolving credit facility and cash on hand. If Century Communities needs to pursue other financing options, it may result in less favorable financing terms that could increase costs and/or materially adversely affect thenew financing and operating flexibility ofaccess the combined company.
The Merger is subject to a number of conditions to the obligations of both Century Communitiescapital and UCP to complete the Merger,credit markets, which if not fulfilled, or not fulfilled in a timely manner, may result in termination of the Merger Agreement.
The Merger Agreement contains a number of conditions to completion of the Merger, including:
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Many of the conditions to completion of the Merger are not within either Century Communities’ or UCP’s control, and neither company can predict when or if these conditions will be satisfied. If any of these conditions are not satisfied or waived prior to October 15, 2017, it is possible that the Merger Agreement may be terminated. Although Century Communities and UCP have agreed in the Merger Agreement to use commercially reasonable efforts, subject to certain limitations, to complete the Merger as promptly as practicable, these and other conditions to the completion of the Merger may fail to be satisfied. In addition, satisfying the conditions to and completion of the Merger may take longer, and could cost more, than Century Communities and UCP expect. Neither Century Communities nor UCP can predict whether and when these other conditions will be satisfied. Furthermore, the requirements for obtaining the required clearances and approvals could delay the completion of the Merger for a significant period of time or prevent them from occurring. Any delay in completing the Merger may adversely affect the cost savings and other benefits that Century Communities expects to achieve if the Merger and the integration of the companies’ respective businesses are completed within the expected timeframe.
If the Merger does not qualify as a reorganization under Section 368(a) of the Code, UCP stockholders may be required to pay substantial additional U.S. federal income taxes.
It is a condition to completion of the Merger that Paul, Weiss, tax counsel to UCP, and Greenberg Traurig, tax counsel to Century Communities, each deliver an opinion to both UCP and Century Communities, dated the closing date of the Merger, to the effect that the Merger will qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. Each party may waive the requirement to receive such opinions as a condition to such party’s obligation to complete the Merger. These opinions will be based on certain assumptions and representations as to factual matters from Century Communities and UCP, as well as certain covenants and undertakings by Century Communities and UCP, all of which must continue to be true and accurate as of the effective time of the Merger. If any of the assumptions, representations, covenants or undertakings is incorrect, incomplete, inaccurate or is violated, one or both of the opinions may not be delivered and, if delivered, the conclusions reached by counsel in their opinions cannot be relied upon and the tax consequences of the Merger could differ from those described in this proxy statement/prospectus. Additionally, an opinion of counsel represents counsel’s best legal judgment but is not binding on the IRS or any court, so there can be no certainty that the IRS will not challenge the conclusions reflected in the opinions or that a court will not sustain such a challenge. If the IRS or a court determines that the Merger does not qualify as a “reorganization,” a U.S. holder of UCP Class A Common Stock would generally recognize taxable gain or loss for U.S. federal income tax purposes upon the exchange equal to the difference between (1) the sum of the
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amount of cash and the fair market value of the Century Communities Common Stock received by such U.S. holder, and (2) such U.S. holder’s tax basis in the UCP Class A Common Stock surrendered in the exchange. Depending on such holder’s particular circumstances, any such determination could result in such holder being required to pay substantial additional U.S. federal income taxes.
UCP stockholders will not be permitted to recognize loss for U.S. federal income tax purposes in connection with the Merger.
Assuming that the Merger qualifies as a reorganization under Section 368(a) of the Code, a UCP stockholder who surrenders shares of UCP Class A Common Stock in exchange for a combination of Century Communities Common Stock and cash in the Merger will not be permitted to recognize, for U.S. federal income tax purposes, any losses realized in respect of such exchange except as discussed in “Proposal I: Adoption of the Merger Agreement—Material U.S. Federal Income Tax Consequences of the Merger—Cash in Lieu of Fractional Shares.”
Uncertainties associated with the Merger may cause a loss of management personnel and other key employees which could adversely affect the future business and operations of Century Communities following the Merger.
Century Communities and UCP are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. Century Communities’ success after the Merger will depend in part upon its ability to retain key management personnel and other key employees. Current and prospective employees of Century Communities and UCP may experience uncertainty about their roles within Century Communities following the Merger or other concerns regarding the timing and completion of the Merger or the operations of Century Communities following the Merger, any of which may have an adverse effect on the ability of each of Century Communities and UCP to attract or retain key management and other key personnel. Accordingly, no assurance can be given that Century Communities following the Merger will be able to attract or retain key management personnel and other key employees of Century Communities and UCP to the same extent that Century Communities and UCP have previously been able to attract or retain their own employees. If Century Communities is unable to retain key management personnel and other key employees who are critical to the successful integration and future operations of Century Communities following the Merger, Century Communities could face disruptions in its operations, loss of existing customers, loss of key information, expertise or know-how, and unanticipated additional recruitment and training costs. In addition, the loss of key personnel could diminish the anticipated benefits of the Merger.
The pendency of the Merger could materially adversely affect theour business, financial condition, results of operations, or cash flowsflows.
Depending on market conditions at the relevant time, we may have to rely more heavily on additional equity financings or on less efficient forms of Century Communitiesdebt financing that require a larger portion of our cash flow from operations, thereby reducing funds available for our operations, future business opportunities and UCP.other purposes. We may not have access to such equity or debt capital on favorable terms at the desired times, or at all.
We may not be able to generate sufficient cash flow to meet our debt service obligations, including the Notes.
Our ability to generate sufficient cash flows from operations to make scheduled payments on our debt obligations, including the Notes, will depend on our current and future financial performance, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. In connection with the pending Merger, some homebuying customersfuture, we may fail to generate sufficient cash flows from the sales of our homes and land to meet our cash requirements. Further, our capital requirements may vary materially from those currently planned if, for example, our revenues do not reach expected levels or vendorswe have to incur unforeseen capital expenditures and make investments to maintain our competitive position. If we do not generate sufficient cash flows from operations to satisfy our debt obligations, including interest payments and the payment of eachprincipal at maturity, we may have
to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot provide assurance that any refinancing would be possible, that any assets could be sold, or, if sold, of Century Communitiesthe timeliness and UCPamount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect. Furthermore, our ability to refinance would depend upon the condition of the finance and credit markets. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms or on a timely basis, would materially affect our business, financial condition or results of operations and may delay or defer decisionsprevent the expansion of our business.
We are dependent upon payments from our subsidiaries to fund payments on continuingour indebtedness, including the Notes, and our ability to receive funds from our subsidiaries is dependent upon the profitability of our subsidiaries and restrictions imposed by law and contracts.
We are dependent on the cash flow of, and dividends and distributions to us from, our subsidiaries in order to service our existing indebtedness, including the Notes. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or expanding theirotherwise, to pay any amounts due pursuant to any indebtedness of ours or to make any funds available therefor, except for those subsidiaries that have guaranteed our obligations under our outstanding indebtedness and that guarantee our obligations under the Notes. The ability of our subsidiaries to pay any dividends and distributions will be subject to, among other things, the terms of any debt instruments of our subsidiaries then in effect as well as among other things, the availability of profits or funds and requirements of applicable laws, including surplus, solvency and other limits imposed on the ability of companies to pay dividends. There can be no assurance that our subsidiaries will generate cash flow sufficient to pay dividends or distributions to us that enable us to pay interest or principal on our existing indebtedness or the Notes.
The Indenture governing the Notes, as well as other agreements governing our debt, include covenants and other provisions that may restrict our financial and business dealingsoperations, but may not necessarily restrict our ability to take actions that may impair our ability to repay our debt, including the Notes. Failure to comply with the companies,covenants and conditions imposed by our debt agreements could restrict future borrowings or cause our debt to become immediately due and payable.
The agreements governing our indebtedness, including our revolving credit facility, the indenture that governs the Existing 5.875% Notes, and the Indenture that governs the Notes, contain negative covenants customary for such financings, such as limiting our ability to sell or dispose of assets, incur additional indebtedness or liens, make certain restricted payments, make certain investments, consummate mergers, consolidations or other business combinations or engage in other lines of business. These restrictions may interfere with our ability to engage in other necessary or desirable business activities, which could materially adversely affect our business, financial condition or results of operations.
Our revolving credit facility also requires us to comply with certain financial ratios and covenants, such as maximum consolidated leverage ratios, minimum consolidated interest coverage ratios and minimum tangible net worth. Our ability to comply with these covenants depends on our financial condition and performance and also is subject to events outside our control. Asset write-downs, other non-cash charges and other one-time events also impact our ability to comply with these covenants. In addition, these restrictions may interfere with our ability to obtain financing or to engage in other necessary or desirable business activities, which may have a material effect on our operations. These covenants are subject to important exceptions and qualifications. See “Description of Other Indebtedness.” Moreover, if we fail to comply with these covenants and are unable to obtain a waiver or amendment, an event of default would result. Our revolving credit facility, the revenues, earnings,indenture that governs the Existing 5.875% Notes, and other debt agreements, including the Indenture governing the Notes, also contain other events of default and cross default provisions customary for such financings. Our inability to generate sufficient cash flowsflow to satisfy our debt service obligations, or to refinance or restructure our obligations
on commercially reasonable terms or at all, would likely have an adverse effect, which could be material, on our business, financial condition, and expensesoperating results. We cannot provide assurance that we would have sufficient liquidity to repay or refinance our debt if such amounts were accelerated upon an event of Century Communitiesdefault. If we are unable to service our debt, this could materially affect our business, financial condition or results of operations.
If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.
Any default under the agreements covering our indebtedness that is not waived by the required lenders, and UCP, regardlessthe remedies sought by the holders of whethersuch indebtedness, could make us unable to pay the Merger is consummated. Similarly, currentprincipal, premium, if any, and prospective employees of Century Communitiesinterest on the Notes and UCP may experience uncertainty about their future roles with Century Communities followingsubstantially decrease the consummationmarket value of the Merger, which may materially adversely affectNotes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain alternative financing necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the ability of each of Century Communitiesvarious covenants, including financial and UCP to attract, retain and motivate key personnel during the pendency of the Merger and which may materially adversely divert attention from the daily activities of Century Communities’ and UCP’s existing employees. In addition, due to operating covenants, in the Merger Agreement, UCP mayinstruments governing our indebtedness, we would be unable, duringin default under the pendencyterms of the Merger,agreements governing such indebtedness, which could also result in an event of default under other financing agreements. In the event of such default, the holders of such indebtedness could elect to pursue strategic transactions, undertake certain significant financing transactionsdeclare all the funds borrowed thereunder to be due and otherwise pursue other actions that are not in the ordinary course of business, even if such actions would prove beneficial. Further, the Merger may give risepayable, together with accrued and unpaid interest, or we could be forced to potential liabilities, including those that may result from future stockholder lawsuits relating to the Merger. Any of these matters could materially adversely affect the businesses, financial condition, results of operations andapply all available cash flows of Century Communitiesto repay such indebtedness, and, UCP.
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Completion of the Merger may trigger change in controlany case, we could ultimately be forced into bankruptcy or other provisions in certain agreements to which UCP is a party.
Completion of the Merger may trigger change in control or other provisions in certain agreements to which UCP is a party. If Century Communities and UCP are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Century Communities and UCP are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to UCP or the combined company.liquidation.
The Merger Agreement subjects Century Communities and UCP to restrictions on their business activities prior to the effective timerepayment of the Merger.Notes will be effectively subordinated to substantially all of our future secured debt and the future secured debt of our guarantors.
The Merger Agreement subjects Century CommunitiesNotes, and UCP to restrictions on their business activities and obligates Century Communities and UCP to generally operate their businesses in the ordinary course, consistent with past practice, until the effective timeeach guarantee of the Merger. These restrictions could prevent Century CommunitiesNotes, are unsecured obligations. The Notes, and UCP from pursuing attractive business opportunities that arise priorany other unsecured debt obligations of ours, will be effectively junior in right of payment to all of our future secured indebtedness to the effective timeextent of the Mergervalue of the collateral securing such indebtedness. In the event of our bankruptcy, or the bankruptcy of any of the guarantors, holders of any of our or such guarantors’ secured indebtedness will have claims that are senior to the claims of the holders of any of our unsecured debt obligations with respect to the value of the assets securing such indebtedness.
If we defaulted on our obligations under any of our secured debt, our secured lenders could proceed against the collateral granted to them to secure that indebtedness. If any secured indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay in full that indebtedness and are outsideour other indebtedness, including the ordinary courseNotes. In addition, upon any distribution of business.assets pursuant to any liquidation, insolvency, dissolution, reorganization or similar proceeding, the holders of secured indebtedness will be entitled to receive payment in full from the proceeds of the collateral securing such secured indebtedness before the holders of the Notes will be entitled to receive any payment with respect thereto. As a result, the holders of the Notes may recover proportionally less than holders of secured indebtedness.
As of September 30, 2019, we and our guarantors did not have any secured indebtedness.
The market priceNotes and related guarantees are structurally subordinated to indebtedness of Century Communities Common Stock afterour existing and future non-guarantor subsidiaries.
Certain of our existing and newly acquired or created subsidiaries which are immaterial or which we designate as unrestricted subsidiaries will not be required to guarantee the MergerNotes. The Notes are structurally subordinated to all indebtedness and other liabilities and commitments, including trade payables, of our existing and future subsidiaries that do not guarantee the Notes. All obligations of the newly acquired or created non-guarantor subsidiaries will have to be satisfied before any of the assets of such subsidiaries would be available for distribution, upon a liquidation or otherwise, to us or our creditors, including the holders of the Notes. In the event of bankruptcy, liquidation or dissolution of any of the newly acquired or created
non-guarantor subsidiaries, following payment by such subsidiary of its liabilities, such subsidiary may not have sufficient assets necessary to make payments to us as its direct or indirect equity holder or otherwise. This may materially and adversely affect our ability to make payments to the holders of the Notes.
In addition, our subsidiaries that provide, or will provide, Note guarantees will be affected by factors differentautomatically released from those currently affecting Century Communities Common StockNote guarantees upon the occurrence of certain events, including the following:
the designation of that guarantor as an unrestricted subsidiary;
the release or UCP Class A Common Stock.
Upon consummationdischarge of any guarantee or indebtedness that resulted in the creation of the Merger, UCP stockholdersNote guarantee by such guarantor; or
the sale or other disposition, including the sale of substantially all the assets, of that guarantor.
If any Note guarantee is released, no holder of the Notes will becomehave a claim as a creditor against that subsidiary, and the indebtedness and other liabilities, including trade payables and preferred stock, if any, whether secured or unsecured, of that subsidiary will be effectively senior to the claim, if any, of any holders of Century Communities Common Stock. The businessthe Notes. See “Description of Century Communities differs from thatNotes—Note Guarantees.”
As of UCPSeptember 30, 2019, our non-guarantor subsidiaries accounted for $88.0 million of our consolidated liabilities, including debt and trade payables but excluding intercompany liabilities. For additional information about the operations, assets and liabilities of our non-guarantor subsidiaries, see note 18 to our unaudited financial statements for the nine months ended September 30, 2019 included in important respects and, accordingly,our Quarterly Report on Form 10-Q for the results of operations of the combined company and the market price of shares of Century Communities Common Stock following the Merger may be affected by factors different from those currently affecting the independent operations of Century Communities and UCP. For a discussion of the businesses of Century Communities and UCP and of certain factors to consider in connection with those businesses, see the documentsquarterly period ended September 30, 2019, which is incorporated by reference into this proxy statement/prospectus referred to under “Where You Can Find More Information” beginning on page 147 of this proxy statement/prospectus.
UCP’s directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of UCP stockholders generally.
In considering the recommendation of the UCP Board that UCP stockholders voteFOR the adoption of the Merger Agreement, UCP stockholders should be aware and take into account the fact that certain UCP directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of UCP stockholders generally and that may create potential conflicts of interest. These include severance rights, rights to continuing indemnification and directors’ and officers’ liability insurance and accelerated vesting of certain restricted stock awards. See “Proposal I: Adoption of the Merger Agreement—Interests of Certain UCP Directors and Officers in the Merger” beginning on page 89 of this proxy statement/prospectus for a more detailed description of these interests. The UCP Board was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation of, the Merger, in approving the Merger Agreement and in recommending that UCP stockholders voteFOR the adoption of the Merger Agreement andFOR the adjournment proposal.
The Merger Agreement limits UCP’s ability to pursue alternatives toNotes are not secured by our assets or the Merger and may discourage other companies from trying to acquire UCP.assets of the guarantors.
The Merger Agreement contains “no shop” provisions that restricts UCP’s ability to solicitNotes and the related guarantees will not be secured by any of our assets or initiate discussions with third parties regarding other proposals to acquire UCP,any of the assets of the guarantors. In addition, we have entered into various project-level financing arrangements for certain construction projects and UCP has agreed to certain termsland acquisitions, and our obligations thereunder are secured by the underlying projects or land, as applicable.
Because the Notes and the related guarantees will be unsecured obligations, your right of repayment may be compromised if any of the following situations occur:
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there is a default in payment under our secured indebtedness; or
there is an acceleration of any indebtedness under our secured indebtedness.
If any of these events occurs, the secured creditors could sell those of the guarantors’ assets in which they have been granted a security interest, to your exclusion, even if an event of default exists under the Indenture at such time. As a result, upon the occurrence of any of these events, there may not be sufficient funds to pay amounts due on the Notes and the related guarantees.
Federal and state fraudulent transfer laws permit a court to void the Exchange Notes and the guarantees, and, if that occurs, you may not receive any payments on the Exchange Notes.
conditions relatingThe issuance of the Exchange Notes and the guarantees may be subject to review under federal and state fraudulent transfer and conveyance statutes and bankruptcy and insolvency statutes. While the relevant laws may vary from jurisdiction to jurisdiction, under such laws the payment of consideration will generally be a fraudulent conveyance if (i) the issuers or the guarantors paid the consideration with the intent of hindering, delaying or defrauding creditors, or (ii) any of the issuers or the guarantors, as applicable, received less than reasonably
equivalent value or fair consideration in return for issuing either the Exchange Notes or a guarantee and, in the case of (ii) only, one of the following is also true:
any of the issuers or the guarantors were insolvent or rendered insolvent by reason of the incurrence of the indebtedness; or
payment of the consideration left any of the issuers or the guarantors with an unreasonably small amount of capital to carry on the business; or
any of the issuers or the guarantors intended to, or believed that it would, incur debts beyond its ability to respondpay as they mature.
If a court were to find that the issuance of the Exchange Notes or a guarantee was a fraudulent conveyance, the court could void the payment obligations under the Exchange Notes or such guarantee or subordinate the Exchange Notes or such guarantee to presently existing and future indebtedness of the issuers or such guarantor, or require the holders of the Exchange Notes to repay any amounts received or pay such amounts to a fund for the benefit of our creditors. In the event of a finding that a fraudulent conveyance occurred, you may not receive any repayment on the Exchange Notes.
Generally, an entity would be considered insolvent if at the time it incurred indebtedness:
the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all its assets; or
the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts and liabilities, including contingent liabilities, as they become absolute and mature; or
it could not pay its debts, including contingent liabilities, as they become due.
We cannot assure you as to what standard a court would apply in order to determine whether we or the guarantors were “insolvent” as of the date the Exchange Notes were issued, and we cannot assure you that, regardless of the method of valuation, a court would not determine that we were insolvent on that date. We also cannot assure you that a court would not determine, regardless of whether we were insolvent on the date the Exchange Notes were issued, that the payments constituted fraudulent transfers on another ground. If the guarantees were legally challenged, any guarantee could also be subject to the claim that, since the guarantee was incurred for our benefit, and only indirectly for the benefit of the guarantor, the obligations of the applicable guarantor were incurred for less than fair consideration. A court could thus void the obligations under the guarantees, subordinate them to the applicable guarantor’s other debt or take other action detrimental to the holders of the Exchange Notes.
The Indenture limits the obligations of each guarantor under its guarantee to the maximum amount that would be enforceable under applicable law in order to avoid invalidation of the guarantees. However, we cannot assure you that a court would give effect to such provisions. One court has held that a “savings clause” (of the type described in the foregoing sentence) in connection with upstream guarantees was unenforceable as a matter of New York contract law, which could increase the risk of a subsidiary guarantee being deemed invalid.
The credit ratings assigned to the Notes may not reflect all risks of an investment in the Notes.
The credit ratings assigned to the Notes reflect the rating agencies’ assessments of our ability to make payments on the Notes when due. Credit ratings are not recommendations to purchase, hold or sell the Notes.
Consequently, actual or anticipated changes in these credit ratings will generally affect the market value of the Notes. These credit ratings, however, may not reflect the potential impact of risks related to structure, market or other factors related to the value of the Notes.
Adverse changes in the ratings of the Notes may cause their trading price to fall and affect the marketability of the Notes.
Our debt will have a non-investment grade rating. Rating agencies may lower, suspend or withdraw ratings on the Notes or our other debt in the future for any number of reasons due to our performance or expected future performance. Holders of the Notes will have no recourse against us or any other parties in the event of a change in or suspension or withdrawal of such ratings. Any lowering, suspension or withdrawal of such ratings may have an adverse effect on the market prices or marketability of the Notes.
We may not have the ability to raise the funds necessary to finance the Change of Control Offer required by the Indenture governing the Notes.
Upon the occurrence of a “Change of Control” (as defined in the Indenture governing the Notes), we must offer to buy back all the Notes at a price equal to 101% of their principal amount, together with any accrued and unpaid interest, if any, to the date of repurchase. Our failure to purchase, or give notice of purchase of, the Notes would be a default under the Indenture. See “Description of Notes—Change of Control.” The occurrence of a Change of Control would constitute a default under our revolving credit facility, and could constitute an event of default under our other indebtedness.
If a Change of Control occurs, it is possible that we may not have sufficient assets at the time of the Change of Control to make the required repurchase of Notes or to satisfy all obligations under our other debt instruments, including future debt instruments. In order to satisfy our obligations, we could seek to refinance our indebtedness or obtain a waiver from the other lenders or you as a holder of the Notes. We cannot assure you that we would be able to obtain a waiver or refinance our indebtedness on terms acceptable to us, if at all. Our failure to repurchase any Notes submitted in a Change of Control Offer (as defined in the Indenture governing the Notes) could constitute an event of default under our other debt documents, even if the Change of Control Offer itself would not cause a default under the Indenture.
There is uncertainty about the meaning of the phrase “all or substantially all” under applicable laws in connection with determining whether a Change of Control has occurred.
One of the events that triggers our obligation to repurchase the Notes upon a change in control triggering event is the sale of all or substantially all of our assets. The phrase “all or substantially all” as used in the Indenture varies according to the facts and circumstances of the subject transaction, has no clearly established meaning under the law that governs the Indenture and is subject to judicial interpretation. In certain circumstances, there may be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of “all or substantially all” of our assets, and therefore, it may be unclear as to whether a Change of Control has occurred and whether you have the right to require us to repurchase the Notes.
We may be unable to repay the Notes at maturity.
At maturity, the entire outstanding principal amount of the Notes, together with accrued and unpaid interest, will become due and payable. We may not have the funds to fulfill these obligations or the ability to renegotiate these obligations.
The terms of the Indenture and the Notes provide only limited protection against significant corporate events and other actions we may take that could adversely impact your investment in the Notes.
While the Indenture and the Notes contain terms intended to provide protection to the holders of the Notes upon the occurrence of certain events involving significant corporate transactions, such terms are limited and may not be sufficient to protect your investment in the Notes. The definition of the term “Change of Control” (as defined in the Indenture governing the Notes) does not cover a variety of transactions (such as acquisitions by us
or recapitalizations) that could negatively affect the value of your Notes. If we were to enter into discussion and negotiation with respect to, and approve and accept, certain unsolicited proposalsa significant corporate transaction that would negatively affect the value of the Notes but would not constitute or are reasonably likely to lead to a superior proposal. In addition, Century Communities generally has an opportunityChange of Control, we would not be required to offer to modifyrepurchase your Notes prior to their maturity. Furthermore, the Indenture for the Notes does not require us to maintain any financial ratios or specific levels of net worth, sales, income, cash flow or liquidity. As a result of the foregoing, when evaluating the terms of the Merger Agreement in response to any competing acquisition proposals beforeNotes, you should be aware that the UCP Board may withdraw or qualify its recommendation to UCP stockholders in favorterms of the adoptionIndenture and the Notes may not restrict our ability to engage in, or to otherwise be a party to, a variety of corporate transactions, including highly leveraged transactions, reorganizations, restructurings, mergers or other similar transactions, that could have an adverse impact on your investment in the Merger Agreement. The Merger Agreement further provides that, upon terminationNotes.
Secured indebtedness exposes us to the possibility of foreclosure on our ownership interests in our land parcels.
Incurring mortgage and other secured indebtedness increases our risk of loss of our ownership interests in our land parcels or other assets because defaults thereunder, and the Merger Agreementinability to refinance such indebtedness, may result in foreclosure action initiated by lenders.
Interest expense on our debt limits our cash available to fund our growth strategies.
As of September 30, 2019, we had approximately $1.25 billion in outstanding indebtedness, consisting of $395.9 million outstanding on the Existing 5.875% Notes, $494.2 million outstanding on the Initial Notes, $6.2 million outstanding on insurance premium notes, $278.8 million outstanding under specified circumstances, including termination by UCPour revolving credit facility, and $77.8 million outstanding under our mortgage repurchase facilities. Additionally, as of September 30, 2019, we had $361.2 million of available borrowing capacity under our revolving credit facility. As part of our growth strategy, we may incur a significant amount of additional debt. Borrowings under our revolving credit facility bear interest at a floating rate equal to enter intothe adjusted Eurodollar Rate plus an applicable margin between 2.60% and 3.10% per annum, or, in the Administrative Agent’s discretion, a definitive agreementbase rate plus an applicable margin between 1.60% and 2.10% per annum. Higher interest rates could increase debt service requirements on our current floating rate debt and on any floating rate debt we subsequently incur, and could reduce funds available for a proposal that constitutes a superior proposal, UCP willoperations, future business opportunities or other purposes. If we need to repay existing debt during periods of rising interest rates, we could be required to pay Century Communities a cash termination feerefinance our then-existing debt on unfavorable terms or liquidate one or more of $7,050,000.
These provisionsour assets to repay such debt at times which may not permit realization of the maximum return on such assets and could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of UCP from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or total value than the total Merger Consideration to be paid by Century Communities and received by UCP stockholders in the Merger. These provisions might also result in a potential third-party acquirer proposingloss. The occurrence of either such event or both could materially and adversely affect our cash flows and results of operations.
Interest rate changes may adversely affect us.
We currently do not hedge against interest rate fluctuations associated with our debt obligations. We may obtain in the future one or more forms of interest rate protection (in the form of swap agreements, interest rate cap contracts or similar agreements) in order to payhedge against the possible negative effects of interest rate fluctuations. However, we cannot assure you that any hedging will adequately relieve the adverse effects of interest rate increases or that counterparties under these agreements will honor their obligations thereunder. In addition, we may be subject to risks of default by hedging counterparties. Adverse economic conditions could also cause the terms on which we borrow to be unfavorable. We could be required to liquidate one or more of our assets at times which may not permit us to receive an attractive return on our assets in order to meet our debt service obligations.
If an actual trading market does not develop for the Notes, you may not be able to resell the Notes quickly, for the price that you paid, or at all.
We do not intend to apply for the Notes to be listed on any securities exchange or to arrange for any quotation on any automated dealer quotation systems. As a lower priceresult, we cannot assure you as to UCP stockholders than such third-party acquirer might otherwisethe liquidity of any trading market for the Notes.
We also cannot assure you that you will be able to sell your Notes at a particular time, or at all, or that the prices that you receive when you sell them will be favorable. You may not be able to resell your Notes at their fair market value. The liquidity of, and trading market for, the Notes may also be adversely affected by, among other things:
the number of holders of Notes;
prevailing interest rates;
our operating performance and financial condition;
the interest of securities dealers in making a market; and
the amount of indebtedness we have proposed to pay becauseoutstanding, the repayment features of the added expenseNotes to be sold, the time remaining to maturity of your Notes and the market for similar securities.
Historically, the market for non-investment grade debt has been subject to disruptions that have caused volatility in the prices of securities similar to the Notes. It is possible that the market for the Notes will be subject to disruptions. Any disruptions may have a negative effect on noteholders, regardless of our prospects and financial performance.
We may redeem the Notes at our option, which may adversely affect your return.
As described under “Description of Notes—Optional Redemption”, we have the right to redeem the Notes in whole or in part beginning on June 1, 2022. In addition, we may redeem up to 100% of the termination fee. See “Merger Agreement—No SolicitationNotes before June 1, 2022 at a make-whole premium and up to 40% of Alternative Proposals” beginning on page 105the Notes before June 1, 2022, with the net cash proceeds from certain equity offerings. We may choose to exercise this redemption right when prevailing interest rates are relatively low. As a result, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of this proxy statement/prospectus.the Notes.
FailureThe lenders under our revolving credit facility have the ability to completerelease any guarantors under our revolving credit facility in a variety of circumstances, which, in certain circumstances, will cause those guarantors to be released from their guarantees of the MergerNotes.
The lenders under our revolving credit facility have the ability to release any guarantors under our revolving credit facility in a variety of circumstances, and if the released guarantors are no longer guarantors of obligations under our revolving credit facility or any other indebtedness, those guarantors will, in certain circumstances, be automatically released as guarantors of the Notes without action by, or consent of, the holders of the Notes or the trustee under the Indenture governing the Notes. You will not have a claim as a creditor against any subsidiary that is no longer a guarantor of the Notes, and the Notes will be structurally subordinated to the indebtedness and other liabilities and commitments, including trade payables, of those non-guarantor subsidiaries. See “Description of Notes—Note Guarantees.”
Our current financing arrangements contain, and our future financing arrangements likely will contain, restrictive covenants relating to our operations.
Our current financing arrangements contain, and the financing arrangements we enter into in the future likely will contain, covenants (financial and otherwise) affecting our ability to incur additional debt, make certain investments, reduce liquidity below certain levels, make distributions to our stockholders and otherwise affect our operating policies. The restrictions contained in our financing arrangements could negatively impact Century Communities’also limit our ability to plan for or UCP’s stock pricereact to market conditions, meet capital needs or make acquisitions or otherwise restrict our activities or business plans. If we fail to meet or satisfy any of these covenants in our debt agreements we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral or enforce their respective interests
against existing collateral. A default also could limit significantly our financing alternatives, which could cause us to curtail our investment activities and/or dispose of assets when we otherwise would not choose to do so. If we default on several of our debt agreements or any single significant debt agreement, it could have a material adverse effect on their results of operations, cash flows and financial position.
If the Merger is not completed for any reason, including as a result of UCP stockholders failing to adopt the Merger Agreement, the ongoing businesses of Century Communities and UCP may be materially adversely affected and, without realizing any of the benefits of having completed the Merger, Century Communities and UCP would be subject to a number of risks, including the following:
If the Merger is not completed, the risks described above may materialize and they may have a material adverse effect on Century Communities’ or UCP’s results of operations, cash flows, financial position and stock prices.
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Failure to complete the Merger could negatively affect the ability of UCP to refinance its 8.5% Senior Notes due 2017 before maturity.
UCP’s 8.5% Senior Notes due 2017 (which we refer to as the “2017 Notes”) have an aggregate outstanding principal amount of $75 million and mature on October 21, 2017. This significant maturity represents approximately 46.2% of UCP’s outstanding debt (including capital lease obligations but excluding intercompany liabilities) as of March 31, 2017. If the Merger is not completed before the 2017 Notes become due, UCP will have to satisfy this maturity, and UCP’s ability to do so will depend on its future operating performance and financial results, which will be subject, in part, to factors beyond UCP’s control, including interest rates and general economic, financial and competitive conditions. UCP’s sources of capital to satisfy this maturity may include retained capital, the issuance of equity securities, debt financing and refinancing and asset sales or a combination of any of the foregoing. However, no assurance can be given that any of these sources of capital will be available to UCP on favorable terms, or at all, or that such sources will enable UCP to be able to satisfy the maturity of the 2017 Notes. Any refinancing of the 2017 Notes may be on terms less favorable than those applicable to the 2017 Notes. As a result, UCP can provide no assurance that it will be able to refinance or repay the 2017 Notes as UCP currently anticipates or at all. UCP’s failure to refinance or repay the 2017 Notes at their stated maturity would have a material adverse impact on UCP’s financial condition, results of operations, cash flow,prospects, liquidity, the market price of UCP Class A Common Stock and UCP’s ability to achieve its objectives.
In addition, the restrictions on the conduct of UCP’s business under the Merger Agreement generally inhibit incurring new indebtedness outside the ordinary course, which may limit UCP’s ability to refinance the 2017 Notes before the earlier of the completion of the Merger or termination of the Merger Agreement. Although UCP and Century Communities have agreed to certain exceptions to these restrictions permitting UCP to negotiate, enter into and incur certain fees under (but not draw on) replacement credit facilities between signing and closing, there can be no assurance that UCP will be able to negotiate or enter into any such replacement facilities prior to a potential termination of the Merger Agreement or that UCP will be able to otherwise refinance the 2017 Notes on commercially acceptable terms or at all between any potential termination of the Merger Agreement and the maturity of the 2017 Notes.
Negative publicity related to the Merger may materially adversely affect Century Communities and UCP.
Political and public sentiment in connection with a proposed combination may result in a significant amount of adverse press coverage and other adverse public statements affecting the parties to the Merger. Adverse press coverage and public statements, whether or not driven by political or popular sentiment, may also result in legal claims or in investigations by regulators, legislators and law enforcement officials. Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceedings, can divert the time and effort of senior management from operating their businesses. Addressing any adverse publicity, governmental scrutiny or enforcement of other legal proceedings is time-consuming and expensive and, regardless of the factual basis for the assertions being made, could have a negative effect on the reputation of Century Communities and UCP, on the morale of their employees and on their relationships with regulators. It may also have a negative impact on their ability to take timely advantage of various business and market opportunities. All of these factors may materially adversely affect Century Communities’ and UCP’s respective business and cash flows, financial condition and results of operations.
The unaudited pro forma condensed combined financial statementsWe may require additional capital in the future and the unaudited prospective financial information prepared by Century Communities and UCP included in this proxy statement/prospectus are basedmay not be able to secure adequate funds on a number of preliminary estimates and assumptions and the actual results of operations, cash flows and financial position of Century Communities after the Merger may differ materially.terms acceptable to us.
The unaudited pro forma condensed combined financial informationexpansion and development of our business may require significant additional capital, which we may be unable to obtain, to fund our capital expenditures and operating expenses, including working capital needs. At September 30, 2019, we had a $640.0 million revolving credit facility, of which $361.2 million was available. In addition, in this proxy statement/prospectus is presentedaccordance with our growth strategy, we expect to opportunistically raise additional capital to help fund the growth of our business, subject to market and other conditions, but such capital may not be available to us on a timely basis at reasonable rates, or at all. Under our shelf registration statement, which we filed with the SEC in July 2018 and was automatically effective upon filing, we have the ability to access the debt and equity capital markets, as needed as part of our ongoing financing strategy and subject to market conditions. Additional debt financing, if available, may involve additional covenants restricting our operations or our ability to incur additional debt, in addition to those under our existing indentures and revolving credit facility. Any additional debt financing or additional equity that we raise may contain terms that are not favorable to us or our securityholders.
We are permitted to create unrestricted subsidiaries, which generally will not be subject to any of the covenants in the Indenture, and we may not be able to rely on the cash flow or assets of those unrestricted subsidiaries to pay our indebtedness.
Unrestricted subsidiaries will generally not be subject to the covenants under the Indenture. Unrestricted subsidiaries may enter into financing arrangements that limit their ability to make loans or other payments to fund payments in respect of the Notes. Accordingly, we may not be able to rely on the cash flow or assets of unrestricted subsidiaries to pay any of our indebtedness, including the Notes. See “Description of Notes” for illustrative purposes onlyfurther information.
Covenant restrictions under our revolving credit facility and is not necessarily indicative of what Century Communities’ actual results of operations, cash flowsother agreements governing our indebtedness impose operating and financial position would have been hadrestrictions on us and may limit our ability to operate our business and to make payments on the Merger been completed onNotes and other outstanding indebtedness.
The credit agreement that governs our revolving credit facility, the
indenture that governs the Existing 5.875% Notes, and the Indenture that governs the Notes contain covenants that restrict our ability to finance future operations or capital needs, to take advantage of other business opportunities that may be in our interest or to satisfy our obligations under the Notes. These covenants restrict our ability to, among other things:
-40-incur or guarantee additional debt or extend credit;
pay dividends or make distributions on, or redeem or repurchase, our capital stock or certain other debt;
make other restricted payments, including investments;
dispose of assets;
engage in transactions with affiliates;
enter into agreements restricting our subsidiaries’ ability to pay dividends;
create liens on our assets or engage in sale/leaseback transactions; and
effect a consolidation or merger, or sell, transfer, lease all or substantially all of our assets.
dates indicated. The unaudited pro forma condensed combined financial information reflects adjustments, which are based upon preliminary estimates,limitations in our credit agreement for our revolving credit facility, the indenture that governs the Existing 5.875% Notes, the Indenture that governs the Notes, and other instruments governing indebtedness that we may incur in the future may restrict our ability to recordrepay our existing outstanding indebtedness.
Risks Related to the UCP identifiable assetsExchange Offer
Your Initial Notes will not be accepted for exchange if you fail to follow the Exchange Offer procedures and, as a result, your Initial Notes will continue to be acquiredsubject to existing transfer restrictions and liabilitiesyou may not be able to sell them freely.
We will not accept your Initial Notes for exchange if you do not follow the proper Exchange Offer procedures. We will issue Exchange Notes as part of the Exchange Offer only after timely receipt of your Initial Notes, a properly completed and duly executed letter of transmittal and all other required documents. Therefore, if you want to tender your Initial Notes, please allow sufficient time to ensure timely delivery. If we do not receive your Initial Notes, letter of transmittal and other required documents (or permitted equivalents thereof) prior to the expiration of the Exchange Offer, we will not accept your Initial Notes for exchange. We are under no duty to give notification of defects or irregularities with respect to the tenders of Initial Notes for exchange. If there are defects or irregularities with respect to your tender of Initial Notes, we may not accept your Initial Notes for exchange. For more information, see “The Exchange Offer—Procedures for Tendering Initial Notes.”
If you do not exchange your Initial Notes in the Exchange Offer, the transfer restrictions currently applicable to your Initial Notes will remain in force, your ability to resell your Initial Notes could be limited, and the market price of your Initial Notes could decline.
If you do not exchange your Initial Notes for Exchange Notes in the Exchange Offer, you will no longer be entitled to exchange your Initial Notes for Exchange Notes registered under the Securities Act, and your Initial Notes will continue to be assumed at fair value,subject to the transfer restrictions applicable thereto as set forth in the Indenture. In general, the Initial Notes may not be offered or sold unless in transactions that are registered, or exempt from registration, under, or not subject to, the Securities Act (including pursuant to Rule 144 under the Securities Act, as and when available) and applicable state securities laws. Except in connection with the Exchange Offer and the resulting goodwillother limited circumstances provided under the Registration Rights Agreement, we do not intend to be recognized. The purchase price allocation reflected is preliminary, and final allocationregister resales of the purchase priceInitial Notes under the Securities Act. You should refer to “Summary—The Exchange Offer” and “The Exchange Offer” for information on how to tender your Initial Notes.
To the extent that Initial Notes are tendered and accepted in the Exchange Offer, the trading market for the untendered Initial Notes could be adversely affected. The tender of Initial Notes in the Exchange Offer will be based uponreduce the actual purchase price and the fair valueprincipal amount of the assets acquiredcurrently outstanding Initial Notes. Due to the corresponding reduction in liquidity, this may have an adverse effect upon, and liabilities assumed inincrease the Merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document. The unaudited pro forma condensed combined financial information is also based on a number of other estimates and assumptions, including estimates and assumptionsvolatility of, the type and termsmarket price of debtany currently outstanding Initial Notes that you will continue to be incurred to pay the related fees and expenses. If the type or terms of the new debt actually incurred differ materially from the estimates and assumptions set out in the accompanying unaudited pro forma condensed combined financial information, Century Communities’ actual results and financial condition afterhold following the completion of the Merger could differ materially fromExchange Offer.
Risks Related to Our Business
We are subject to demand fluctuations in the housing industry. Any reduction in demand would adversely affect our business, results of operations, and financial condition contemplated by the unaudited pro forma condensed combined financial information.condition.
The unaudited prospective financial information prepared by Century CommunitiesDemand for our homes is subject to fluctuations, often due to factors outside of our control. In a housing market downturn, our revenues and UCP in this proxy statement/prospectus was prepared for each company’s internal purposesresults of operations may be adversely affected; we may have significant inventory impairments and is presented in this proxy statement/prospectus because such forecasts were furnished to the Century Communities Board, the UCP Boardother write-offs; our gross margins may decline significantly from historical levels; and their respective financial advisors. The unaudited prospective financial information is based on numerous variables and assumptionswe may incur substantial losses from operations. At any particular time, we cannot predict whether housing market conditions existing at that are inherently uncertain and are beyond the control of each company’s management team, including assumptions with respect to macro-economic trends,time will continue. While rising interest rates and anticipatedtightening affordability created an industry-wide deceleration in housing growth rates,during the second half of 2018, underlying job and is not necessarily indicative
population growth still remained positive in our markets. We are unable to predict if such deceleration will continue or whether it will deepen. Further, if the duration of what each company’s actualthe deceleration becomes a long-term trend, we cannot assure you that any efforts to mitigate its adverse effects will be successful.
Adverse changes in general economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on our business and results of operations, cash flows or financial position would be on the dates indicated. The assumptions used in preparing these forecasts may not prove to be accurate and other factors may affect Century Communities’ actual results and financial condition after the completion of the Merger, which may cause Century Communities’ actual results and financial condition to differ materially from the estimates contained in the unaudited prospective financial information prepared by Century Communities and UCP.
The shares of Century Communities Common Stock to be received by UCP stockholders upon completion of the Merger will have different rights from shares of UCP Class A Common Stock.
Upon completion of the Merger, UCP stockholders will no longer be stockholders of UCP. Instead, former UCP stockholders will become stockholders of Century Communities and their rights as Century Communities stockholders will be governed by the terms of the Century Communities Charter and the Century Communities Bylaws. The terms of the Century Communities Charter and the Century Communities Bylaws are in some respects materially different than the terms of the UCP Charter and the UCP Bylaws, which currently govern the rights of UCP stockholders. See “Comparison of Stockholder Rights” beginning on page 133 of this proxy statement/prospectus for a discussion of the different rights associated with shares of Century Communities Common Stock and shares of UCP Class A Common Stock.
Potential litigation instituted against UCP and its directors challenging the proposed Merger may prevent the Merger from becoming effective within the expected timeframe or at all.
Potential litigation related to the Merger may result in injunctive or other relief prohibiting, delaying or otherwise adversely affecting UCP’s ability to complete the Merger. Such relief may prevent the Merger from becoming effective within the expected timeframe or at all. In addition, defending against such claims may be expensive and divert management’s attention and resources, which could adversely affect the respective businesses of UCP and Century Communities.
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Risk Factors Relating to Century Communities Following the Merger
Century Communities may be unable to successfully integrate the businesses of Century Communities and UCP successfully or realize the anticipated benefits of the Merger.operations.
The Merger involves residential homebuilding industry is cyclical and is highly sensitive to changes in local and general economic conditions that are outside our control, including:
consumer confidence, levels of employment, spending levels, personal income growth and household debt-to-income levels of potential homebuyers;
the combinationavailability of two companies that currently operate as independent public companies. Century Communities will be required to devote significant management attentionfinancing for homebuyers or restrictive mortgage standards, including private and resources to integratingfederal mortgage financing programs and federal, state, and provincial regulation of lending practices;
real estate taxes and federal and state income tax provisions, including provisions for the business practicesdeduction of mortgage interest payments;
U.S. and operations of Century Communitiesglobal financial system and UCP. Potential difficulties that Century Communities may encounter as partcredit markets, including short- and long-term interest rates and inflation;
housing demand from population growth, demographic changes (including immigration levels and trends in urban and suburban migration) or otherwise, or perceptions regarding the strength of the integration process include the following:housing market;
competition from other real estate investors with managing significant capital, including other real estate operating companies and developers, institutional investment funds and companies solely focused on single family rentals; and
the combined businesses,supply of new or existing homes, including difficulty addressing possible differences in corporate cultures and management philosophies and the challenge of integrating complex systems, technology, networksforeclosures, and other assets of each of the companies in a seamless manner that minimizes any adverse impact on homebuying customers, suppliers, employeeshousing alternatives, such as apartments and other constituencies; and
residential rental property.
In addition, Century Communitiesthe event these economic and UCP have operatedbusiness factors occur, we could experience a decline in the demand and untilpricing for our homes, an increase in customer cancellations, an increase in selling concessions and downward pressure on the completionmarket value of the Merger will continue to operate, independently. It is possible that the integration process could result in:
Any of these issues could adversely affect each company’s ability to maintain relationships with homebuying customers, suppliers, employees and other constituencies or achieve the anticipated benefits of the Merger, or could reduce each company’s earnings or otherwise adversely affect the business and financial results of Century Communities following the Merger.
Century Communities may be unable to realize anticipated cost synergies and expects to incur substantial expenses related to the Merger,our inventory, which could have a material adverse effect on Century Communities’our business, prospects, liquidity, financial condition and results of operations and increase the risk for asset impairments. A significant or sustained downturn in the homebuilding market would likely have an adverse effect on our business and results of operations for multiple years.
The health of the residential homebuilding industry may also be significantly affected by “shadow inventory” levels. “Shadow inventory” refers to the number of homes with a mortgage that are in some form of distress but that have not yet been listed for sale. Shadow inventory can occur when lenders put properties that have been foreclosed or forfeited to lenders on the market gradually, rather than all at once, or delay the foreclosure process. They may choose to do so because of regulations and foreclosure moratoriums, because of the additional costs and resources required to process and sell foreclosed properties, or because they want to avoid depressing housing prices further by putting many distressed properties up for sale at the same time. A significant supply of shadow inventory in our markets could, were it to be released into our markets, adversely impact home prices and demand for our homes, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
In addition, an important segment of our customer base consists of first- and second-time move-up buyers, who often purchase homes subject to contingencies related to the sale of their existing homes. If these potential buyers face difficulties in selling their homes, whether due to periods of weak economic conditions, oversupply, restrictive mortgage standards or otherwise, our sales may be adversely affected. Moreover, we may need to reduce our sales prices and offer greater incentives to buyers to compete for sales that may result in reduced margins.
Deployments of U.S. military personnel to foreign regions, terrorist attacks, other acts of violence or threats to national security and any corresponding response by the United States or others, related domestic or international instability or civil unrest may cause an economic slowdown in the markets where we operate, which could adversely affect our homebuilding business.
Our long-term growth depends upon our ability to successfully identify and acquire desirable land parcels for residential build-out.
Our future growth depends upon our ability to successfully identify and acquire attractive land parcels for development of our homes at reasonable prices and with terms that meet our underwriting criteria. Our ability to acquire land parcels for new homes may be adversely affected by changes in the general availability of land parcels, the willingness of land sellers to sell land parcels at reasonable prices, competition for available land parcels, availability of financing to acquire land parcels, zoning and other market conditions. If the supply of land parcels appropriate for development of homes is limited because of these factors, or for any other reason, our ability to grow could be significantly limited, and the number of homes that we build and sell could decline. Additionally, our ability to begin new projects could be impacted if we elect not to purchase land parcels under option contracts. To the extent that we are unable to purchase land parcels timely or enter into new contracts for the purchase of land parcels at reasonable prices, our home sales revenue and results of operations could be negatively impacted.
Our geographic concentration could materially and adversely affect us if the homebuilding industry in our current markets should decline.
Our business strategy is focused on the design, construction and sale of single-family detached and attached homes in 17 states across the West, Mountain, Midwest, Texas and Southeast U.S. regions. Because our operations are concentrated in these areas, a prolonged economic downturn in one or more of these areas could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations, and a disproportionately greater impact on us than other homebuilders with more diversified operations.
Any increase in unemployment or underemployment may lead to an increase in the number of loan delinquencies and property repossessions and have an adverse impact on us.
In the United States, the unemployment rate was 3.6% as of the end of April 2019, according to the U.S. Bureau of Labor Statistics. People who are not employed, are underemployed or are concerned about the loss of their jobs are less likely to purchase new homes, may be forced to try to sell the homes they own and may face difficulties in making required mortgage payments. Therefore, any increase in unemployment or underemployment may lead to an increase in the number of loan delinquencies and property repossessions and have an adverse impact on us both by reducing the demand for the homes we build and by increasing the supply of homes for sale. This would also likely adversely affect our Financial Services business.
If homebuyers are not able to obtain suitable financing, our results of operations may decline.
The success of homebuilders depends on the ability of potential homebuyers to obtain mortgages for the purchase of homes. If the home financing market is unstable or contracts, our revenues and results of operations could be adversely affected. A substantial majority of our homebuyers finance their home purchases through lenders that provide mortgage financing or through our Financial Services business. First-time homebuyers are generally more affected by the availability of financing than other potential homebuyers. These buyers are an important source of our demand, especially in our Wade Jurney Homes segment. A limited availability of home mortgage financing may adversely affect the volume of our home sales and the sales prices we achieve. This environment would also likely adversely affect our Financial Services business.
During the recent past, the mortgage lending industry in the United States experienced significant instability, beginning with increased defaults on subprime loans and other nonconforming loans and compounded
by expectations of increasing interest payment requirements and further defaults. This in turn resulted in a decline in the market value of many mortgage loans and related securities. In response, lenders, regulators and others questioned the adequacy of lending standards and other credit requirements for several loan products and programs offered in recent years. Credit requirements tightened, and investor demand for mortgage loans and mortgage-backed securities declined. The deterioration in credit quality during the economic downturn caused almost all lenders to stop offering subprime mortgages and most other loan products that were not eligible for sale to Fannie Mae or Freddie Mac, or loans that did not conform to Fannie Mae, Freddie Mac, Federal Housing Administration (which we refer to as the “FHA”) or Veterans Administration (which we refer to as the “VA”) requirements. Fewer loan products and tighter loan qualifications may continue to make it more difficult for certain buyers to finance the purchase of our homes. These factors may reduce the pool of qualified homebuyers and make it more difficult to sell to first-time and move-up buyers who have historically made up a substantial part of our customers and especially in our Wade Jurney Homes segment will likely continue to make up a substantial part of our customers. Reductions in demand adversely affected our business and financial results during that downturn. The liquidity provided by Fannie Mae and Freddie Mac to the mortgage industry has been very important to the housing market. These entities in the past have required substantial injections of capital from the federal government and may require additional government support in the future. Several federal government officials have proposed changing the nature of the relationship between Fannie Mae and Freddie Mac and the federal government and even nationalizing or eliminating these entities entirely. If Fannie Mae and Freddie Mac were dissolved or if the federal government determined to stop providing liquidity support to the mortgage market, there would be a reduction in the availability of the financing provided by these institutions. Any such reduction would likely have an adverse effect on interest rates, mortgage availability and our sales of new homes.
The FHA insures mortgage loans that generally have lower loan payment requirements and qualification standards compared to conventional guidelines, and as a result, continue to be a particularly important source for buyers financing the purchase of our homes. In recent years, lenders have taken a more conservative view of FHA guidelines causing significant tightening of borrower eligibility for approval. Availability of condominium financing and minimum credit score benchmarks have reduced opportunity for those purchasers. In the future, there may be further restrictions on FHA-insured loans, including limitations on seller-paid closing costs and concessions, stricter loan qualification standards, and an increase in minimum down payment requirements. This or any other restriction may negatively affect the availability or affordability of FHA financing, which could adversely affect our potential homebuyers’ ability to secure adequate financing and, accordingly, our ability to sell homes in the United States. In addition, changes in federal and provincial regulatory and fiscal policies aimed at aiding the home buying market (including repeal or another limitation of the home mortgage interest tax deduction) may also negatively affect potential homebuyers’ ability or desire to purchase homes.
Decreases in the availability of credit and increases in the cost of credit adversely affect the ability of homebuyers to obtain or service mortgage debt. Even if potential buyers of our homes do not themselves need mortgage financing, where our potential buyers must sell their existing homes in order to buy one of our homes, increases in mortgage costs, lack of availability of mortgages and/or regulatory changes could delay or adversely affect such a sale, which would result in our potential customers’ inability to buy a new home. Similar risks apply to those buyers who are awaiting delivery of their homes and are currently in backlog. If our customers (or potential buyers of our customers’ existing homes) cannot obtain suitable financing, our sales and results of operations could be adversely affected.
Interest rate increases or changes in federal lending programs or other regulations could lower demand for our homes, which could materially and adversely affect us.
Most of the purchasers of our homes finance their acquisitions with mortgage financing. Mortgage interest rates have remained near historic lows for the past several years, however, interest rates increased last year and may continue to rise in the future. Increases in interest rates increase the costs of owning a home and could adversely affect the purchasing power of consumers and lower demand for the homes we sell, which could result
in a decrease in sales, adversely affecting our results of operations. Increased interest rates can also decrease homebuyer confidence and hinder our ability to realize our backlog because our home purchase contracts often provide customers with a financing contingency. Financing contingencies allow customers to cancel their home purchase contracts in the event that they cannot arrange for adequate financing. As a result, rising interest rates can decrease our home sales and mortgage originations. In addition, monetary policy actions affecting interest rates or fiscal policy actions and new legislation related to taxation, spending levels or borrowing limits, along with the related political debates, conflicts and compromises associated with such actions, may negatively impact the financial markets and consumer confidence. Such events could hurt the U.S. economy and the housing market and in turn, could adversely affect our operating results.
In addition, the federal government plays a significant role in supporting mortgage lending through its conservatorship of Fannie Mae and Freddie Mac, both of which purchase home mortgages and mortgage-backed securities originated by mortgage lenders, and its insurance of mortgages originated by lenders through the FHA and the VA. Changes in these programs could materially adversely affect the mortgage market, which would have a negative impact on our business. The FHA may continue to impose stricter loan qualification standards, raise minimum down payment requirements, impose higher mortgage insurance premiums and other costs, and/or limit the number of mortgages it insures. Several bills have been introduced in Congress over the past several years concerning the future status of Fannie Mae and Freddie Mac and the mortgage finance system, including bills which provided for the wind-down of Fannie Mae and Freddie Mac or proposed modifications to the financial relationship between Fannie Mae and Freddie Mac and the federal government. The liquidity provided by Fannie Mae and Freddie Mac to the mortgage industry has been very important to the housing market. Eliminating Fannie Mae and Freddie Mac would mean that conventional loans, like the 30-year mortgage, would no longer be guaranteed, which would be likely to result in the elimination of these traditional, long-term, fixed-rate loans, and result in an increase in interest rates for longer term products. If Fannie Mae and Freddie Mac were dissolved or if the federal government determined to stop providing liquidity support to the mortgage market, there would be a reduction in the availability of the financing provided by these institutions. Any such reduction would likely have an adverse effect on interest rates and mortgage availability, and we would expect our sales of new homes to decline.
Our home purchase contracts often provide our customers with a financing contingency, which allows our customers to cancel their home purchase contracts in the event that they cannot arrange for adequate financing. Increased interest rates, restrictions or reductions in government backed mortgage financing or the tightening of lenders’ borrowing standards may make it more difficult for our customers to obtain financing, which would decrease our home sales and mortgage originations and have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
Any limitation on, or reduction or elimination of, tax benefits associated with owning a home would have an adverse effect on the demand for our home products, which could be material to our business.
Prior to the enactment of the Tax Cuts and Jobs Act (which we refer to as the “TCJA”), which was enacted into law on December 22, 2017, significant expenses of owning a home, including mortgage loan interest and state and local taxes, generally were deductible expenses for an individual’s U.S. federal income taxes and in some cases, state income taxes, subject to various limitations. The TCJA establishes new limits on the federal tax deductions individual taxpayers may take on mortgage loan interest payments and on state and local taxes, including property taxes. Under the TCJA, through the end of 2023, the mortgage interest deduction cap on a newly purchased home was decreased to $750,000 a year ($375,000 in the case of a separate return filed by a married individual) from the prior $1,000,000 threshold, and the annual deduction for real estate property taxes and state and local income or sales taxes has been limited to a combined amount of $10,000 (or $5,000 in the case of a separate return filed by a married individual). These changes could reduce the actual or perceived affordability of homeownership, which could adversely affect demand for and sales prices of new homes, especially in areas with relatively high housing prices or high state and local income taxes and real estate taxes, including in California and Washington. Any further change in income tax laws by the federal or state
government to eliminate or substantially reduce income tax benefits associated with homeownership could adversely affect demand for and sales prices of new homes.
Increases in property and sales taxes could prevent potential customers from buying our homes and adversely affect our business or financial results.
Increases in property tax rates by local governmental authorities, as experienced in response to reduced federal and state funding, can adversely affect the ability of potential customers to obtain financing or their desire to purchase new homes. Fees imposed on developers to fund schools, open spaces or road improvements, and/or to provide low and moderate income housing, could increase our costs and have an adverse effect on our operations. In addition, increases in sales taxes could adversely affect our potential customers who may consider those costs in determining whether to make a new home purchase and decide, as a result, not to purchase one of our homes.
The Tax Cuts and Jobs Act could adversely affect our business and financial condition.
The TCJA significantly reforms the Internal Revenue Code of 1986, as amended. The TCJA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income, elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. As a result of the reduction in the corporate tax rates, we recorded a reduction in the value of our deferred tax assets in 2017, as discussed in the notes to our financial statements.
Changes to the population growth rates in certain of the markets in which we operate or plan to operate could affect the demand for homes in these regions.
Slower rates of population growth or population declines in the markets where we do business, or other key markets in the United States we plan to enter, especially as compared to the high population growth rates in prior years, could adversely affect the demand for housing, causing home prices in these markets to fall, and adversely affect our plans for growth, business, financial condition and operating results.
Difficulty in obtaining sufficient capital could result in an inability to acquire land for our developments or increased costs and delays in the completion of development projects.
The homebuilding industry is capital-intensive and requires significant up-front expenditures to acquire land parcels and begin development. If internally generated funds are not sufficient, we may seek additional capital in the form of equity or debt financing from a variety of potential sources, including additional bank financings and/or securities offerings. The availability of borrowed funds, especially for land acquisition and construction financing, may be greatly reduced nationally, and the lending community may require increased amounts of equity to be invested in a project by borrowers in connection with both new loans and the extension of existing loans. The credit and capital markets have recently experienced significant volatility. If we are required to seek additional financing to fund our operations, continued volatility in these markets may restrict our flexibility to access such financing. If we are not successful in obtaining sufficient capital to fund our planned capital and other expenditures, we may be unable to acquire land for our housing developments and/or to develop the housing. Additionally, if we cannot obtain additional financing to fund the purchase of land under our option contracts or purchase contracts, we may incur contractual penalties and fees. Any difficulty in obtaining sufficient capital for planned development expenditures could also cause project delays and any such delay could result in cost increases. Any one or more of the foregoing events could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
We face potentially substantial risk with respect to our land and lot inventory arising from significant changes in economic or market conditions, which could adversely affect our results of operations and result in write-downs of the carrying values of land we own.
We face substantial risk in owning developed and undeveloped land. We acquire and own undeveloped land, buildable lots and housing inventories in the markets where we build homes. The market value of land, building lots, and housing inventories can fluctuate significantly as a result of changing market conditions, and the measures we employ to manage inventory risk may not be adequate to insulate our operations from a severe drop in inventory values. The risks inherent in purchasing and developing land parcels increase as consumer demand for housing decreases. If housing demand decreases below what we anticipated when we acquired our inventory, our results of operations may be adversely affected and we may not be able to recover our costs when we sell and build houses.
When market conditions are such that land values are not appreciating, previously entered into option agreements may become less desirable, at which time we may elect to forego deposits and pre-acquisition costs and terminate the agreements. In addition, inventory carrying costs can be significant, particularly if inventory must be held for longer than planned, and can result in losses on poorly performing projects or markets. Factors, such as changes in regulatory requirements and applicable laws (including in relation to building regulations, taxation and planning), political conditions, the condition of financial markets, both local and national economic conditions, the financial condition of customers, potentially adverse tax consequences, and interest and inflation rate fluctuations, subject land valuations to uncertainty.
We regularly review the value of our land holdings on a periodic basis. In the face of adverse market conditions, we may have substantial inventory carrying costs, and may have to write down our inventory to its fair value, and/or sell land or homes at a loss. In the past, we have not been required to record significant write-downs of the carrying value of our land inventory; however, if market conditions were to deteriorate in the future, we could be required to record significant write downs to our land inventory, which would decrease the asset values reflected on our balance sheet and could adversely affect our results of operations and financial condition and result in write-downs of the carrying values of land we own. We do as a matter of course elect not to exercise options to purchase land, even though that requires us to forfeit deposits and/or write off pre-acquisition costs. Although we take efforts to reduce our exposure to costs of this type, a certain amount of exposure is inherent in our homebuilding business.
If we are unable to develop our communities successfully or within expected timeframes, our results of operations could be adversely affected.
Before a community generates any revenues, time and material expenditures are required to acquire land, obtain development approvals and construct significant portions of project infrastructure, amenities, model homes and sales facilities. A decline in our ability to develop and market our communities successfully, especially in our more recent or new markets where it may be more difficult to do so, and to generate positive cash flow from these operations in a timely manner could have a material adverse effect on our business and results of operations and on our ability to service our debt and to meet our working capital requirements.
Adverse weather and geological conditions may increase costs, cause project delays and reduce consumer demand for housing, all of which could materially and adversely affect us.
Significant weather conditions and natural disasters in the geographic areas where we operate, such as hurricanes, tornadoes, earthquakes, volcanic activity, wildfires, ice storms, snow storms, landslides and soil subsidence, droughts and floods, could damage projects, cause delays in completion of projects, or reduce consumer demand for housing. Extreme weather conditions and natural disasters could also disrupt or cause shortages in labor or materials, which could delay project completion or result in increases in the prices for labor or materials, thereby affecting our sales and profitability. The climates of certain of the states in which we
operate present increased risks of adverse weather or natural disasters. For example, Colorado has historically experienced seasonal wildfires, snow storms, and soil subsidence; Texas has historically experienced tornadoes, coastal flooding and hurricanes; California and Nevada have historically experienced earthquakes, extreme temperatures, wildfires, and droughts and water shortages; and Florida and the Carolinas have historically experienced a risk of hurricanes and coastal flooding. As an example, during the third quarter or 2018, in the Southeast, we experienced severe weather during September, mainly affecting our Wade Jurney Homes segment, which pushed the portion of deliveries into the fourth quarter and constrained our selling activity in the region for a period of time. In addition to directly damaging or delaying our projects, natural disasters and extreme weather events could damage roads and highways providing access to those projects, thereby adversely affecting our ability to market homes in those areas and possibly increasing the costs of completion. Some conditions, such as severe drought or risk of flooding, may cause state and local governments to take restrictive actions, such as placing moratoriums on the issuance of new building permits or issuing new building codes and standards that increase building costs. Our insurance policies may not fully cover losses resulting from these events or any related business interruption. For example, losses associated with floods, landslides, earthquakes and other geological events may not be insurable and other losses, such as those arising from terrorism, may not be economically insurable. A significant uninsured loss could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.
Changes in global or regional climate conditions and governmental actions in response to such changes may adversely affect us by increasing the costs of, or restricting, our planned or future growth activities.
Projected climate change, if it occurs, may exacerbate the scarcity or presence of water and other natural resources in affected regions, which could limit, prevent or increase the costs of residential development in certain areas. In addition, there is a variety of new legislation being enacted, or considered for enactment, at the federal, state and local level relating to energy and climate change, and as climate change concerns continue to grow, legislation and regulations of this nature are expected to continue. This legislation relates to items such as carbon dioxide emissions control and building codes that impose energy efficiency standards. Government mandates, standards or regulations intended to mitigate or reduce greenhouse gas emissions or projected climate change impacts could result in prohibitions or severe restrictions on land development in certain areas, increased energy and transportation costs, and increased compliance expenses and other financial obligations to meet permitting, land development, or home construction-related requirements that we may be unable to fully recover (due to market conditions or other factors), any of which could cause a reduction in our homebuilding gross margins and materially and adversely affect our results of operations. Energy-related initiatives could similarly affect a wide variety of companies throughout the United States and the world, and because our results of operations are heavily dependent on purchasing significant amounts of raw materials, these initiatives could have an indirect adverse impact on our results of operations and profitability to the extent the manufacturers and suppliers of our materials are burdened with expensive cap and trade, tariffs, or other regulations.
As a result, climate change impacts, and the laws and land development and home construction standards implemented to address potential climate change concerns, could result in an increase in our costs and have a long-term adverse impact on our business and results of operations. This is a particular concern in the western United States, which have instituted some of the most extensive and stringent environmental laws and residential building construction standards in the country.
Failure to recruit, retain and develop highly skilled, competent personnel may have a material adverse effect on our standards of service.
Key employees, including management team members, are fundamental to our ability to obtain, generate and manage business opportunities. Key employees working in the homebuilding and construction industries are highly sought after. Failure to attract and retain such personnel or to ensure that their experience and knowledge is not lost when they leave the business through retirement, redundancy or otherwise may adversely affect the standards of our service and may have an adverse impact on our business, financial condition and operating
results. In addition, we do not maintain key person insurance in respect of any member of our senior management team. The loss of any of our management members or key personnel could adversely impact our business, financial condition and operating results.
Failure to find suitable contractors may have a material adverse effect on our standards of service.
Substantially all of our construction work is done by third-party subcontractors with us acting as the general contractor. Accordingly, the timing and quality of our construction depend on the availability and skill of our subcontractors. An increase in levels of homebuilding in the markets in which we operate has occasionally led to some difficulty in securing the services of skilled tradesmen who are currently in high demand. While we believe that our existing relationships with subcontractors are good, we do not have long-term contractual commitments with any subcontractors, and there can be no assurance that skilled subcontractors will continue to be available at reasonable rates and in the areas in which we conduct our operations.
In the future, certain of the subcontractors engaged by us may be represented by labor unions or subject to collective bargaining arrangements. A strike or other work stoppage involving any of our subcontractors could also make it difficult for us to retain subcontractors for our construction work. In addition, union activity could result in higher costs to retain subcontractors. The inability to contract with skilled subcontractors at reasonable costs on a timely basis could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
Our reliance on contractors can expose us to various liability risks.
We rely on third-party contractors in order to perform the construction of our homes, and in many cases, to select and obtain raw materials. We are exposed to various risks as a result of our reliance on these contractors and their respective subcontractors and suppliers, including the possibility of defects in our homes due to improper practices or materials used by contractors, which may require us to comply with our warranty obligations and/or bring a claim under an insurance policy. For example, despite our quality control efforts, we may discover that our subcontractors were engaging in improper construction practices or installing defective materials in our homes. When we discover these issues, we repair the homes in accordance with our new home warranty and as required by law. We establish warranty and other reserves for the homes we sell based on market practices, our historical experiences, and our judgment of the qualitative risks associated with the types of homes built. However, the cost of satisfying our warranty and other legal obligations in these instances may be significantly higher than our warranty reserves, and we may be unable to recover the cost of repair from such subcontractors. Regardless of the steps we take, we can in some instances be subject to fines or other penalties, and our reputation may be injured.
In addition, several other homebuilders have received inquiries from regulatory agencies concerning whether homebuilders using contractors are deemed to be employers of the employees of such contractors under certain circumstances. Although contractors are independent of the homebuilders that contract with them under normal management practices and the terms of trade contracts and subcontracts within the homebuilding industry, if regulatory agencies reclassify the employees of contractors as employees of homebuilders, homebuilders using contractors could be responsible for wage, hour and other employment-related liabilities of their contractors, which could adversely affect our results of operations. We have not received similar inquiries.
If we experience shortages in labor supply, increased labor costs or labor disruptions, there could be delays or increased costs in developing our communities or building homes, which could adversely affect our operating results.
We require a qualified labor force to develop our communities. Access to qualified labor may be affected by circumstances beyond our control, including:
work stoppages resulting from labor disputes;
shortages of qualified trades people, such as carpenters, roofers, electricians and plumbers, especially in our key markets in the United States;
changes in laws relating to union organizing activity;
changes in immigration laws and trends in labor force migration; and
increases in subcontractor and professional services costs.
Any of these circumstances could give rise to delays in the start or completion of, or could increase the cost of, developing one or more of our communities and building homes. We may not be able to recover these increased costs by raising our home prices because the price for each home is typically set months prior to its delivery pursuant to sales contracts with our homebuyers. In such circumstances, our operating results, including in particular, our margin, could be adversely affected. Additionally, market and competitive forces may also limit our ability to raise the sales prices of our homes.
Utility and resource shortages or rate fluctuations could have an adverse effect on our operations.
Several of the markets in which we operate and in which we may operate in the future have historically been subject to utility and resource shortages, including significant changes to the availability of electricity and water and seasonal fluctuation in the ability of certain commodities, particularly lumber. Shortages of natural resources in our markets, particularly of water, may make it more difficult for us to obtain regulatory approval of new developments. We have also experienced material fluctuations in utility and resource costs across our markets, and we may incur additional costs and may not be able to complete construction on a timely basis if such fluctuations arise. In particular, as the housing market has improved and the number of new homes being constructed has increased, we have experienced increased construction costs due to additional competition for labor and materials. Furthermore, these shortages and rate fluctuations may adversely affect the regional economies in which we operate, which may reduce demand for our homes and negatively affect our business and results of operations.
Government regulations and legal challenges may delay the start or completion of our communities, increase our expenses or limit our homebuilding or other activities, which could have a negative impact on our results of operations.
Various local, state and federal statutes, ordinances, rules and regulations concerning building, health and safety, environment, zoning, sales and similar matters apply to and/or affect the housing industry, and the approval of numerous governmental authorities must be obtained in connection with our development activities. These governmental authorities often have broad discretion in exercising their approval authority. We incur substantial costs related to compliance with legal and regulatory requirements in the markets in which we operate. Changes in legal and regulatory requirements may cause us to incur substantial additional costs, or in some cases cause us to determine that a property we acquired is not feasible for development.
Municipalities may restrict or place moratoriums on the availability of building permits or utilities, such as water and sewer taps. If municipalities in which we operate take such actions, it could have an adverse effect on our business by causing delays, increasing our costs or limiting our ability to build in those municipalities. In addition, we may become subject to various state and local “slow growth” or “no growth” initiatives and other restrictions that could negatively impact the availability of land and building opportunities within those localities.
Governmental regulation affects not only construction activities but also sales activities, mortgage lending activities and other dealings with consumers. In addition, it is possible that some form of expanded energy efficiency legislation may be passed by the U.S. Congress or federal agencies and certain state and provincial legislatures, which may, despite being phased in over time, significantly increase our costs of building homes and the sale price to our buyers, and adversely affect our sales volumes. We may be required to apply for additional
approvals or modify our existing approvals because of changes in local circumstances or applicable law. Further, we may experience delays and increased expenses as a result of legal challenges to our proposed communities, whether brought by governmental authorities or private parties.
An inability to obtain additional performance, payment and completion surety bonds and letters of credit could limit our future growth.
We are often required to provide performance, payment and completion surety bonds or letters of credit to secure the completion of our construction contracts, development agreements and other arrangements. We have obtained facilities to provide the required volume of these surety bonds and letters of credit for our expected growth in the medium term; however, unexpected growth may require additional facilities.
We may also be required to renew or amend our existing facilities. Our ability to obtain additional performance, payment and completion surety bonds and letters of credit primarily depends on our credit rating, capitalization, working capital, past performance, management expertise and certain external factors, including the capacity of the markets for such bonds. Surety bond and letter of credit providers consider these factors in addition to our performance and claims record and provider-specific underwriting standards, which may change from time to time.
If our performance record or our providers’ requirements or policies change and we are unable provide performance, payment and completion surety bonds to ensure the completion of our projects, our business operations and financial condition could be adversely affected. If market conditions become unfavorable, we may not be able to obtain new surety bonds, or and some providers might request credit enhancements (such as cash deposits or letters of credit) in order to maintain existing bonds or to issue new bonds. If we are unable to obtain new bonds in the future, or are required to provide credit enhancements with respect to our current or future bonds, our liquidity could be negatively impacted, and our growth and results of operations will be adversely affected.
A major health and safety incident relating to our business could be costly in terms of potential liabilities and reputational damage.
Building sites are inherently dangerous, and operating in the homebuilding industry poses certain inherent health and safety risks. Given the number of projects we work on, health and safety performance is critical to the success of all areas of our business. Any failure in health and safety performance may result in penalties for non-compliance with relevant regulatory requirements, and a failure that results in a major or significant health and safety incident is likely to be costly in terms of potential liabilities incurred as a result. Such a failure could also generate significant negative publicity, which could adversely impact our reputation, relationships with relevant regulatory agencies and governmental authorities, and our ability to win new business, which in turn could have a material adverse effect on our business, financial condition and operating results.
We are subject to environmental laws and regulations, which may increase our costs, limit the areas in which we can build homes and delay completion of our projects.
We are subject to a variety of local, state and federal statutes, rules and regulations concerning land use and the protection of health and the environment, including those governing discharge of pollutants to water and air, the handling of hazardous materials, including asbestos, and the cleanup of contaminated sites. We may be liable for the costs of removal, investigation or remediation of hazardous or toxic substances located on, under, from or in a property currently or formerly owned, leased or occupied by us, whether or not we caused or knew of the pollution. The costs of any required removal, investigation or remediation of such substances or the costs of defending against environmental claims may be substantial. The presence of such substances, or the failure to remediate such substances properly, may also adversely affect our ability to sell the land or to borrow using the land as security. Environmental impacts from historical activities have been identified at some of the projects we
have developed in the past and additional projects may be located on land that may have been contaminated by previous use. Although we are not aware of any projects requiring material remediation activities by us as a result of historical contamination, no assurances can be given that material claims or liabilities relating to such developments will not arise in the future.
The particular impact and requirements of environmental laws that apply to any given site vary greatly according to the community, the site’s environmental conditions and the present and former use of the site. From time to time, the United States Environmental Protection Agency and other federal or state agencies review homebuilders’ compliance with environmental laws and may levy fines and penalties for failure to comply with applicable environmental laws or impose additional requirements for future compliance as a result of past failures. Any such actions taken with respect to us may increase our costs. We expect that increasingly stringent requirements may be imposed on homebuilders in the future. Compliance with environmental laws that affect our building sites or our business may result in delays, cause us to implement time consuming and expensive compliance programs and prohibit or severely restrict development in certain environmentally sensitive regions or areas, such as wetlands. It may not be obvious during our pre-development review of project sites whether a site has environmental concerns, which could cause us to unnecessarily expend time and resources. Environmental regulations can also have an adverse impact on the availability and price of certain raw materials, such as lumber. Furthermore, we could incur substantial costs, including cleanup costs, fines, and penalties, as well as damages from third-parties for property damage or personal injury as a result of our failure to comply with applicable environmental laws and regulations.
In addition, we are subject to third-party challenges to the permits and other approvals required for our projects and operations, such as by environmental groups, under environmental laws and regulations. These matters could adversely affect our business, financial condition and operating results.
We may be liable for claims for damages as a result of use of hazardous materials.
As a homebuilding business with a wide variety of historic homebuilding and construction activities, we could be liable for future claims for damages as a result of our past or present use of hazardous materials, including building materials which in the future become known or are suspected to be hazardous. Any such claims may adversely affect our business, financial condition and operating results. Insurance coverage for such claims may be limited or non-existent.
Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem.
Litigation and concern about indoor exposure to certain types of toxic molds have been increasing as the public becomes increasingly aware that exposure to mold can cause a variety of health effects and symptoms, including allergic reactions. Toxic molds can be found almost anywhere as they can grow on virtually any organic substance as long as moisture and oxygen are present. There are molds that can grow on wood, paper, carpet, foods and insulation. When excessive moisture accumulates in buildings or on building materials, mold growth will often occur, particularly if the moisture problem remains undiscovered or unaddressed. It is impossible to eliminate all mold and mold spores in the indoor environment. If mold or other airborne contaminants exist or appear at our properties, we may have to undertake a costly remediation program to contain or remove the contaminants or increase indoor ventilation. If indoor air quality were impaired, we could be liable to our homebuyers or others for property damage or personal injury.
We may not be able to compete effectively against competitors in the homebuilding industry, especially in our recent markets and new markets we plan to enter.
Competition in the homebuilding industry is intense, and there are relatively low barriers to entry into our business. We compete with large national and regional homebuilding companies and with smaller local
homebuilders for home buying customers, land, financing, raw materials and skilled management and labor resources. A number of our primary competitors are significantly larger, have a longer operating history and may have greater resources or lower cost of capital than ours; accordingly, they may be able to compete more effectively in one or more of the markets in which we operate. In addition, many of these competitors have long-standing relationships with subcontractors and suppliers in the markets in which we operate. As we have expanded our operations into new markets, we have faced and will likely continue to face new competition from many established homebuilders in those markets, and we will not have the benefit of the extensive relationships and strong reputations with subcontractors, suppliers and homebuyers that we have historically enjoyed in our Colorado and other legacy markets. Increased competition could hurt our business, as it could prevent us from acquiring attractive land parcels on which to build homes or make such acquisitions more expensive, hinder our growth plans, lead to pricing pressures on our homes; cause us to increase selling concessions; and cause impairments in the value of our inventory or other assets, all of which may adversely impact our revenues, margins and other operating results. We also compete with sellers of existing homes, including foreclosed homes, and with rental housing. If we are unable to successfully compete in this industry, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected.
Raw materials and building supply shortages and price fluctuations could delay or increase the cost of home construction and adversely affect our operating results.
The homebuilding industry has, from time to time, experienced raw material shortages and been adversely affected by volatility in global commodity prices. In particular, shortages and fluctuations in the price of concrete, drywall, steel, lumber or other important raw materials could result in delays in the start or completion of, or increase the cost of, developing one or more of our residential communities. These shortages can be more severe during periods of strong demand for housing or during periods following natural disasters that have a significant impact on existing residential and commercial structures. The cost of raw materials may also be materially and adversely affected during periods of shortages or high inflation. Shortages or increases in the price of raw materials could cause delays in and increase our costs of home construction. We generally are unable to pass on increases in construction costs to customers who have already entered into home purchase contracts and may not be able to sufficiently increase the price of homes remaining to be sold. Sustained increases in construction costs may adversely affect our gross margins, which in turn could materially and adversely affect our business, liquidity, financial condition and results of operations.
The cost of petroleum products, which are used both to deliver our materials and to transport workers to our job sites, fluctuates and may be subject to increased volatility as a result of geopolitical events or accidents. Increases in such costs could also result in higher prices for any product utilizing petrochemicals. These cost increases may have an adverse effect on our operating margin and results of operations. Furthermore, any such cost increase may adversely affect the regional economies in which we operate and reduce demand for our homes.
Recent legislation and government action related to tariffs imposed on imported building supplies, such as lumber, concrete, plumbing supplies and wiring, could increase the cost to construct our homes. If we are unable to offset these higher costs with increases in the sales prices for our homes, our margins on the homes we sell will decrease, and our financial condition could be adversely affected.
Increases in our home cancellation rate could have a negative impact on our home sales revenue and homebuilding margins.
Our backlog reflects sales contracts with homebuyers for homes that have not yet been delivered. We have received a deposit from a homebuyer for most homes reflected in our backlog, and generally we have the right to retain the deposit if the homebuyer fails to comply with his or her obligations under the sales contract, subject to certain exceptions, including as a result of state and local law, the homebuyer’s inability to sell his or her current home or, in certain circumstances, the homebuyer’s inability to obtain suitable financing. Home order
cancellations negatively impact the number of closed homes, net new home orders, home sales revenue and results of operations, as well as the number of homes in backlog. Home order cancellations can result from a number of factors, including declines or slow appreciation in the market value of homes, increases in the supply of homes available to be purchased, increased competition, higher mortgage interest rates, elongated construction timeframes, homebuyers’ inability to sell their existing homes, homebuyers’ inability to obtain suitable financing, including providing sufficient down payments, and adverse changes in economic conditions. An increase in the level of our home order cancellations could have a negative impact on our business, prospects, liquidity, financial condition and results of operations.
Homebuilding is subject to product liability and warranty claims arising in the ordinary course of business that can be significant.
As a homebuilder, we are subject to home warranty and construction defect claims arising in the ordinary course of business. There can be no assurance that any developments we undertake on homes we construct will be free from defects once completed. Construction defects may in projects, developments and homes and may arise during a significant period of time after completion. Defects arising on a development or a home attributable to us may lead to significant contractual or other liabilities. As a consequence, we maintain products and completed operations excess liability insurance, obtain indemnities and certificates of insurance from subcontractors generally covering claims related to damages resulting from their faulty workmanship and materials, and create warranty and other reserves for the homes we sell based on historical experience in our markets and our judgment of the risks associated with the types of homes built. Although we actively monitor our insurance reserves and coverage, because of the uncertainties inherent to these matters, we cannot provide assurance that our insurance coverage, our subcontractor arrangements and our reserves will be adequate to address all of our warranty and construction defect claims in the future. In addition, contractual indemnities can be difficult to enforce. We may also be responsible for applicable self-insured retentions, and some types of claims may not be covered by insurance or may exceed applicable coverage limits. Additionally, the coverage offered by and the availability of products and completed operations excess liability insurance for construction defects is becoming increasingly expensive and the scope of coverage is restricted. There is no assurance that adequate insurance coverage will continue to be available with acceptable price and terms. If we cannot recover from our subcontractors or their insurance carriers, we may suffer even greater losses.
Unexpected expenditures attributable to defects or previously unknown sub-surface conditions arising on a development project may also have a material adverse effect on our business, financial condition and operating results. In addition, severe or widespread incidents of defects giving rise to unexpected levels of expenditure, to the extent not covered by insurance or redress against subcontractors, may adversely affect our business, reputation, financial condition and operating results.
We may suffer uninsured losses or suffer material losses in excess of insurance limits.
We could suffer physical damage to property and liabilities resulting in losses that may not be fully compensated by insurance. In addition, certain types of risks, such as personal injury claims, may be, or may become in the future, either uninsurable or not economically insurable, or may not be currently or in the future covered by our insurance policies. Should an uninsured loss or a loss in excess of insured limits occur, we could sustain financial loss or lose capital invested in the affected property as well as anticipated future income from that property. In addition, we could be responsible for repairing damages or covering liabilities caused by uninsured risks. We may be liable for any debt or other financial obligations related to affected property.
In the United States, the coverage offered and the availability of general liability insurance for construction defects is currently limited and is costly. As a result, an increasing number of our subcontractors in the United States may be unable to obtain insurance. If we cannot effectively recover construction defect liabilities and costs of defense from our subcontractors or their insurers, or if we have self-insured subcontractors who cannot cover the losses they cause, we may suffer losses. Insurance coverage may be further restricted and become even more
costly in our industry. Such circumstances could adversely affect our business, financial condition and operating results.
Our operating performance is subject to risks associated with the real estate industry.
Real estate investments are subject to various risks and fluctuations and cycles in value and demand, many of which are beyond our control. Certain events may decrease cash available for operations, as well as the value of our real estate assets. These events include, but are not limited to:
adverse changes in financial conditions of buyers and sellers of properties, particularly residential homes and land suitable for development of residential homes;
adverse changes in international, national or local economic and demographic conditions;
competition from other real estate investors with significant capital, including other real estate operating companies and developers and institutional investment funds;
reductions in the level of demand for and increases in the supply of land suitable for development;
fluctuations in interest rates, which could adversely affect our ability, or the ability of homebuyers, to obtain financing on favorable terms, or at all;
unanticipated increases in expenses, including, without limitation, insurance costs, development costs, real estate assessments and other taxes and costs of compliance with laws, regulations and governmental policies; and
changes in enforcement of laws, regulations and governmental policies, including, without limitation, health, safety, environmental, zoning, tax and disability rights laws.
In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in the purchase of homes or an increased incidence of home order cancellations. If we cannot successfully implement our business strategy, our business, prospects, liquidity, financial condition and results of operations will be adversely affected.
Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties for reasonable prices in response to changing economic, financial and investment conditions may be limited and we may be forced to hold non-income producing properties for extended periods of time.
Real estate investments are relatively difficult to sell quickly. As a result, our ability to promptly sell one or more properties in response to changing economic, financial and investment conditions is limited. We may be forced to sell an asset at significantly lower margins or at a loss, if we are able to sell them at all, or hold non-income producing assets for an extended period of time, which could have a negative impact on our liquidity or results of operations.
Inflation could adversely affect our business and financial results.
Inflation could adversely affect us by increasing the costs of land, materials and labor needed to operate our business. In the event of an increase in inflation, we may seek to increase the sales prices of homes in order to maintain satisfactory margins. However, an oversupply of homes relative to demand and home prices being set several months before homes are delivered may make any such increase difficult or impossible. In addition, inflation is often accompanied by higher interest rates, which historically have had a negative impact on housing demand. In such an environment, we may not be able to raise home prices sufficiently to keep up with the rate of inflation and our margins could decrease. Moreover, the cost of capital increases as a result of inflation and the purchasing power of our cash resources declines. Actions by the government to stimulate the economy may increase the risk of significant inflation, which may have an adverse impact on our business or financial results.
Our quarterly operating results may fluctuate because of the seasonal nature of our business and other factors.
Our quarterly operating results generally fluctuate by season. Historically, we have entered into a larger percentage of contracts for the sale of our homes during the spring and summer months. Weather-related problems, typically in the fall, late winter and early spring, may delay starts or closings and increase costs and thus reduce profitability. Seasonal natural disasters such as floods and fires could cause delays in the completion of, or increase the cost of, developing one or more of our communities, causing an adverse effect on our sales and revenues. In many cases, we may not be able to recapture increased costs by raising prices. In addition, deliveries may be staggered over different periods of the year and may be concentrated in particular quarters. Our quarterly operating results may fluctuate because of these and other factors.
Negative publicity may affect our business performance.
Unfavorable media related to the Company, our industry, or Company brands, marketing, personnel, operations, business performance or prospects may affect the performance of our business, regardless of its accuracy or inaccuracy. Our success in maintaining, extending and expanding our brand image depends on our ability to adapt to a rapidly changing media environment. Adverse publicity or negative commentary on social media outlets, such as blogs, websites or newsletters, could hurt operating results, as consumers might avoid brands that receive bad press or negative reviews. Negative publicity may result in a decrease in operating results.
Poor relations with the residents of our communities could negatively impact sales, which could cause our revenues or results of operations to decline.
Residents of communities we develop rely on us to resolve issues or disputes that may arise in connection with the operation or development of their communities. Efforts made by us to resolve these issues or disputes could be deemed unsatisfactory by the affected residents and subsequent actions by these residents could adversely affect sales or our reputation. In addition, we could be required to make material expenditures related to the settlement of such issues or disputes or to modify our community development plans, which could adversely affect our results of operations.
Failure to manage land acquisitions and development and construction processes could result in significant cost overruns or errors in valuing sites.
We own and purchase a large number of sites each year and are therefore dependent on our ability to process a very large number of transactions (which include, among other things, evaluating the site purchase, designing the layout of the development, sourcing materials and subcontractors and managing contractual commitments) efficiently and accurately. Errors by employees, failure to comply with regulatory requirements and conduct of business rules, failings or inadequacies in internal control processes, inabilities to obtain desired approvals and entitlements, cost overruns, equipment failures, natural disasters or the failure of external systems, including those of our suppliers or counterparties, could result in operational losses that could adversely affect our business, financial condition and operating results and our relationships with our customers.
Information technology failures or data security breaches could expose us to liability and materially adversely affect our financial condition and results of operations.
Following the consummationWe rely on accounting, financial and operational management information systems to conduct our operations and maintain critical business records. Many of these resources are provided to us and/or maintained on our behalf by third-party service providers pursuant to agreements that specify to varying degrees certain security and service level standards. Our information technology systems are dependent upon these providers, as well as global communications providers, telephone systems and other aspects of the Merger, Century Communities expectsInternet infrastructure,
which have experienced significant systems failures and electrical outages in the past, and are susceptible to realize annualized cost synergiesdamage or interruption from fire, floods, power outages, or telecommunications failures, or cybersecurity threats such as computer viruses, break-ins, security breaches, and similar events. The occurrence of approximately $5.0 million beginning in 2018.
While Century Communities believesany of these cost synergies are achievable, Century Communities’events to us directly or any of our third-party service providers could adversely affect our ability to achieve such estimated cost synergiesoperate our business, damage our reputation, result in the timeframe described,loss of customers, suppliers, or at all,revenues, or result in the misappropriation or public disclosure of our confidential information. As a result, we may be required to incur significant costs to remediate the damage caused by these disruptions or to prevent security breaches in the future.
In the ordinary course of our business, we collect and store certain confidential information, including personal information of homebuyers/borrowers and information about our employees, contractors, vendors and suppliers. This information is entitled to protection under a number of regulatory regimes. We may share some of this information with vendors who assist us with certain aspects of our business, particularly with respect to our mortgage lending business. If these vendors or we fail to maintain the security of the data which we are required to protect, including via the penetration of network security and the misappropriation of confidential and personal information, we could face business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation with potentially large costs, any of which could have a material adverse impact on our financial condition and results of operations. We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems.
Risks Related to Our Financial Services Business
We are subject to various assumptionsrisks relating to our Financial Services business.
We have vertically integrated financial services into our business, which has enabled us to provide mortgage, title and insurance services to our homebuyers. Our home buying customers account for substantially all loan production and substantially all of the loans we originate are sold in the secondary market within a short period of time after origination, generally within 30 days, either as whole loans or pursuant to a securitization. During 2018, we originated and closed 2,176 loans, with an aggregate total principal amount of $682.8 million. Mortgage loans in process for which interest rates were committed to borrowers totaled approximately $26.2 million at December 31, 2018 and carried a weighted average interest rate of approximately 4.7%. As of December 31, 2018, we had mortgage loans held for sale with an aggregate fair value of $114.1 million and an aggregate outstanding principal balance of $108.0 million. Interest rate risks related to these obligations are mitigated by Century Communities’ management,the preselling of loans to investors or through our interest rate hedging program.
There are numerous risks involved with engaging in our mortgage lending business, which risks may orbe exacerbated for us in light of the fact that we do not have a long history this business. Because we have limited experience in originating and underwriting home loans, our underwriting standards may not be realized, as wellstringent as a more traditional lender, and accordingly, we may experience a higher rate of default than lenders who have engaged in the mortgage lending industry for a longer period of time. Moreover, the loans we originate are limited primarily to buyers of our homes, so our pool of borrowers is generally less diverse than as is the case with a traditional lender, and thus there could be a higher correlation in the default rate with our borrowers. In addition, because we originate loans to buyers of our homes, there is the risk that we may be more incentivized, compared to more traditional lenders, to lower our underwriting standards in order to close home sales. Should we be unable to establish sufficiently stringent underwriting standards, or if our underwriting standards do not adequately screen quality applicants, the default rate on the loans we originate may be higher, which could have an adverse impact on our results of operations and financial condition, either because the borrowers under loans we own are no longer performing, or because we are required to repurchase or otherwise indemnify purchasers, guarantors or insurers of the loans we sold or securitized. Further, if we face a high default rate on the mortgages we originate, we may be unable to sell mortgages or the pricing we receive upon the sale of mortgages may not meet our expectations. Although we have established reserves for potential losses on mortgage loans we originate and sell or securitize, which we believe are adequate, if either actual repurchases or the losses incurred resolving
those repurchases exceed our expectations, additional expense may be incurred. There can be no assurance that we will not have significant liabilities in respect of such claims in the future, which could exceed our reserves, or that the impact of such claims on our results of operations will not be material.
Our mortgage lending business requires substantial debt, which may not continue to be available to us in the amounts we require.
On May 4, 2018 and September 14, 2018, one of our indirect wholly-owned subsidiaries, Inspire Home Loans, Inc., which is a full-service mortgage lender and primarily originates mortgage loans for our homebuyers (which we refer to as “Inspire”), entered into mortgage warehouse facilities, with Comerica Bank, and J.P. Morgan, respectively. The mortgage warehouse lines of credit (which we refer to as the incurrence“Repurchase Facilities”) provide Inspire with uncommitted repurchase facilities of other costsup to $140 million, secured by the mortgage loans financed thereunder. Amounts outstanding under the Repurchase Facilities are not guaranteed by us or any of our subsidiaries and the agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type. The mortgage repurchase facilities must be renewed annually and currently expire in Century Communities’ operations that offset allMay 2019 and September 2019 for Comerica Bank and J.P. Mortgage, respectively. We expect to renew and extend the term of the Repurchase Facilities with similar terms prior to their maturity. Adverse changes in market conditions could make the renewal of these facilities more difficult or could result in an increase in the cost of these facilities or a portiondecrease in the committed amounts. Such changes affecting our Repurchase Facilities may also make it more difficult or costly to sell the mortgages that we originate. As of September 30, 2019, we had $77.8 million outstanding under these Repurchase Facilities and were in compliance with all covenants thereunder. No assurance can be provided, however, that we will remain in compliance with the covenants or have continued access to these facilities or substitute or replacement facilities in an amount sufficient to fund our mortgage lending business.
Our Financial Services segment can be adversely affected by reduced demand for our homes and other factors.
Approximately 96.0% of the mortgage loans made by our Financial Services segment in 2018 were made to buyers of homes we built. Therefore, a decrease in the demand for our homes would adversely affect the revenues of this segment of our business. In addition, the revenues of our Financial Services segment would be adversely affected by a decrease in refinance transactions, if mortgage interest rates continue to rise.
If our ability to sell mortgages into the secondary market is impaired, that could significantly reduce our ability to sell homes unless we are willing to become a long-term investor in the loans we originate.
We sell substantially all of the loans we originate and the related servicing rights in the secondary mortgage market within a short period of time after origination, generally within 30 days, on a servicing released, non-recourse basis. If we became unable to sell loans into the secondary mortgage market or directly to Fannie Mae and Freddie Mac, we would have to either curtail our origination of residential mortgage loans, which among other things, could significantly reduce our ability to sell homes, or commit our own funds to long term investments in mortgage loans, which, in addition to requiring us to deploy substantial amounts of our own funds, could delay the time when we recognize revenues from home sales on our statements of operations.
We may be liable for certain limited representations and warranties we make in connection with sale of loans.
When we sell the loans we originate, we make customary representations and warranties to purchasers, guarantors and insurers about the mortgage loans and the manner in which they were originated, and offer certain indemnities and guaranties to the purchasers, guarantors and insurers of which we are responsible. In the event of defaults on the loans we originate, we may be required to repurchase or substitute mortgage loans, or indemnify buyers, guarantors or insurers of our loans. If we have significant liabilities with respect to such cost synergies. As a consequence, Century Communitiesclaims or future, it could have an adverse effect on our results of operations, and possibly our financial condition.
Our Financial Services business is competitive and we may not be able to realize allcompete effectively in this area.
The competitors to our Financial Services business include other insurance agencies, title companies and mortgage lenders, including national, regional and local mortgage banks and other financial institutions. Some of these cost synergies withincompetitors are subject to fewer governmental regulations and have greater access to capital than we do, and some of them may operate with different criteria than we do. These competitors may offer a broader or more attractive array of financing and other products and services to potential customers than we do. For these reasons, we may not be able to compete effectively in the timeframe expectedfinancial services business.
Governmental regulation of our Financial Services operations could adversely affect our business or at all.financial results.
Our Financial Services operations are subject to extensive state and federal laws and regulations, which are administered by numerous agencies, including but not limited to the CFPB, Federal Housing Finance Agency, U.S. Department of Housing and Urban Development, FHA, VA, USDA, Fannie Mae, Freddie Mac and Ginnie Mae. These laws and regulations include many compliance requirements, including but not limited to licensing, consumer disclosures, fair lending and real estate settlement procedures. As a result, our Financial Services operations are subject to regular, extensive examinations by the applicable agencies. In addition, Century Communitiesthe possibility of additional future regulations, changing rule interpretations and examinations by regulatory agencies may incur additional and/result in more stringent compliance standards and could adversely affect the results of our operations.
Our ability to collect upon mortgage loans may be limited by the application of state laws.
Our mortgage loans typically permit us to accelerate the debt upon default by the borrower. The courts of all states will enforce acceleration clauses in the event of a material payment default, subject in some cases to a right of the court to revoke the acceleration and reinstate the mortgage loan if a payment default is cured. The equity courts of a state, however, may refuse to allow the foreclosure of a mortgage or unexpected coststo permit the acceleration of the indebtedness in orderinstances in which they decide that the exercise of those remedies would be inequitable or unjust or the circumstances would render an acceleration unconscionable.
Further, the ability to realize these cost synergies. Failurecollect upon mortgage loans may be limited by the application of state and federal laws. For example, Nevada has enacted a law providing that if the amount an assignee of a mortgage note paid to achieveacquire the expected cost synergiesnote is less than the face amount of the note, the assignee cannot recover more through a deficiency action than the amount it paid for the note. If the Nevada law is upheld, or similar laws are enacted in other jurisdictions, it could significantly reduce the expected benefits associated with the Mergermaterially and adversely affect Century Communities.our ability and the ability of funds we manage to profit from purchases of distressed debt.
Risks Related to Our Prior and Any Future Acquisitions
The WJH acquisition may result in unexpected costs and the anticipated benefits may never be realized.
In November 2016, we acquired a 50% ownership of WJH LLC (which we refer to as “WJH”), which is a successor to Wade Jurney Homes, Inc. and Wade Jurney of Florida, Inc., and in June 2018, we acquired the remaining 50% ownership interest in WJH. WJH targets first-time homebuyers in the Southeastern United States and has since expanded into Texas, Arizona, Indiana, Michigan, and Ohio. While we believe the acquisition of WJH will produce many benefits, such as expanding our investment into a proven and profitable operation, enhancing our geographic and product diversification through additional exposure to new markets and first-time buyers, driving additional growth avenues for ancillary revenue streams, including our mortgage, title and insurance operations, and improving access to capital to accelerate WJH’s expansion efforts into additional markets, these benefits may not come to fruition or materialize to the extent we anticipate and within anticipated time periods. In addition, we still need to complete the integration of this business to some extent, which can be costly and involves risk. These issues could adversely affect our business and financial results.
We may incur a variety of costs to engage in future growth or expansion of our operations or acquisitions or disposals of businesses, and the anticipated benefits may never be realized.
As a part of our business strategy, we have made seven acquisitions since 2013 and may continue to make acquisitions, or significant investments in, and/or disposals of businesses. Any future acquisitions, investments and/or disposals would be accompanied by risks such as:
difficulties in assimilating the operations and personnel of acquired companies or businesses;
diversion of our management’s attention from ongoing business concerns;
our potential inability to maximize our financial and strategic position through the successful incorporation or disposition of operations;
maintenance of uniform standards, controls, procedures and policies; and
impairment of existing relationships with employees, contractors, suppliers and customers as a result of the integration of new management personnel and cost-saving initiatives.
We cannot guarantee that we will be able to successfully integrate any company or business that we might acquire in the future, and our failure to do so could harm our current business.
In addition, Century Communities has incurredwe may not realize the anticipated benefits of these transactions at all or within a reasonable time period and will incur substantial expenses in connection with the negotiation and consummation of the transactions contemplated by the Merger Agreement, including the costs and expenses of filing this proxy statement/prospectus with the SEC.
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Century Communities expects to continue to incur non-recurring costs associated with consummating the Merger, combining the operations of the two companies and achieving the desired cost synergies. These fees and costs have been, and will continue tothere may be substantial. The substantial majority of non-recurring expenses will consist of transaction costs related to the Merger and include, among others, fees paid to legal, accounting and financial advisors, employee benefit costs, and filing and printing fees.
These costs described above, as well as other unanticipated costsor unidentified effects. While we would seek protection, for example, through warranties and expenses, could have a material adverse effectindemnities in the case of acquisitions, significant liabilities may not be identified in due diligence or come to light after the expiry of warranty or indemnity periods. Additionally, while we would seek to limit our ongoing exposure, for example, through liability caps and period limits on warranties and indemnities in the case of disposals, some warranties and indemnities may give rise to unexpected and significant liabilities. Any claims arising in the future may adversely affect our business, financial condition and operating resultsresults.
A portion of Century Communities followingour historical growth has been due to our prior acquisitions and we may not be able to continue to grow through acquisitions.
Our recent growth has been due in part to our prior acquisitions and we intend to continue to grow through future acquisitions of, or significant investments in, businesses that offer complementary products and services or otherwise support our growth objectives. However, we cannot assure you that we will continue to identify attractive acquisition targets and consummate acquisitions. As a result of our prior acquisitions and the incurrence of debt in connection therewith, the amount of our indebtedness is significantly higher than prior to the consummation of such acquisitions. As a result, we cannot assure you that we will be able to arrange financing for future acquisitions on terms acceptable to us. In addition, as a result of our prior acquisitions, our Company is substantially larger than we have been in the Mergerpast, and manywe may face additional scrutiny in connection with federal and state governmental approvals in connection with any future acquisitions of attractive targets or may not be able to obtain such approvals at all. The realization of any of these costs will be borne by Century Communities even if the Merger is not consummated.risks could adversely affect our business.
TheOur future results of Century Communities following the Merger will suffer if Century Communities doeswe do not effectively manage itsour expanded operations.
Following the Merger,As a result of our recent acquisitions, including UCP Inc., Sundquist Homes and WJH, the size of our business has increased significantly during the business of Century Communities will increase significantly beyond the current size of either Century Communities’ or UCP’s business. Century Communities’past several years. Our future success will depend, in part, upon itsour ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that Century Communitieswe will be successful or that itwe will realize the expected operating efficiencies, cost savings, revenue enhancements or other benefits currently anticipated from these acquisitions.
We have intangible assets, including goodwill, primarily as a result of our prior acquisitions. If these assets become impaired, then our result of operations may be adversely affected.
As of September 30, 2019, we had $34.5 million in intangible assets, including $30.4 million in goodwill, related primarily to our prior business combinations and acquisitions. If the Merger.carrying value of our intangible assets is deemed impaired, the carrying value is written down to fair value. This would result in a charge to our earnings. If management’s expectations of future results and cash flows decrease significantly, impairments of the remaining intangible assets may occur, which would adversely affect our results of operations.
Century CommunitiesOur future operating results may be adversely affected as a result of our prior acquisitions.
Our prior acquisitions, including the UCP merger in August 2017, our acquisition of Sundquist Homes in October 2017, and UCP face competition, which is expected to intensify and which may reduce the market share and profits of Century Communities after consummationacquisition of the Merger.remaining ownership interest WJH in June 2018, were accounted for as business combinations in accordance with our accounting policies and GAAP with the acquired assets and assumed liabilities recorded at their estimated fair values as of the acquisition date. Based upon estimates of the fair value of the assets to be acquired and the liabilities to be assumed, we have recorded a step-up to the historical basis of an acquired home under construction inventory. As homes are delivered in future periods, this step-up will initially result in gross margins from home sales revenues that are commensurate with the stage of completion of the acquired inventory and the related risk assumed by us for its completion. The ultimate gross margins from home sales revenues that we will be able to achieve from our acquired businesses will be impacted by (i) our ability to construct homes at prices consistent with our forecasted budgets, and (ii) future pricing increases or decreases based on market demand.
Risk Related to Conflicts of Interest
As a result of Dale Francescon’s and Robert Francescon’s relationship with the Company, conflicts of interest may arise with respect to any transactions involving or with Dale Francescon, Robert Francescon, or their affiliates, and their interests may not be aligned with yours.
CompetitionDale Francescon and Robert Francescon are our Co-Chief Executive Officers, sit on our board of directors, are brothers, and collectively beneficially own 3,925,117 shares of our common stock, which represents 12.6% of our common stock outstanding as of September 30, 2019. For so long as Dale Francescon and Robert Francescon control such a significant percentage of our common stock, they will have significant influence over the power to:
elect our directors and exercise overall control over the Company;
agree to sell or otherwise transfer a controlling stake in the homebuilding industry is intense,Company; and there are relatively low barriers to entry in
determine the industry. Homebuilders compete for, among other things, home buying customers, desirable land parcels, financing, raw materialsoutcome of substantially all actions requiring the majority approval of our stockholders, including transactions with related parties, corporate reorganizations, mergers, acquisitions and skilled labor. Increased competitiondispositions of assets.
The interests of Dale Francescon and Robert Francescon may not be fully aligned with yours, and this could hurt Century Communities’ and UCP’s businesses, as it could prevent both companies from acquiring attractive land parcels on which to build homes or make such acquisitions more expensive, hinder their market share expansion and lead to pricing pressuresa strategy that is not in your best interests. In addition, their significant ownership in us and resulting ability to effectively control us will limit your ability to influence corporate matters and may discourage someone from making a significant equity investment in us, or could discourage transactions involving a change in control.
In addition, there may be transactions between us and Dale Francescon, Robert Francescon, or their affiliates that could present an actual or perceived conflict of interest. These conflicts of interest may lead Dale and/or Robert Francescon to recuse himself or themselves from actions of our board of directors with respect to any transactions involving or with Dale or Robert Francescon or their affiliates. For example, we have entered into employment agreements with Dale Francescon and Robert Francescon, our Co-Chief Executive Officers, in their capacities as officers, pursuant to which they are required to devote substantially full-time attention to our affairs. We may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with Dale Francescon and Robert Francescon.
Risks Related to Our Organization and Structure
We depend on key personnel, the loss of which could have a material adverse effect on our business.
Our success depends to a significant degree upon the contributions of certain key personnel including, but not limited to, Dale Francescon and Robert Francescon, our Co-Chief Executive Officers, each of whom would be difficult to replace. Although we have entered into employment agreements with Dale Francescon and Robert Francescon, there is no guarantee that these executives will remain employed with us. If any of our key personnel were to cease employment with us, our operating results could suffer. Further, the process of attracting and retaining suitable replacements for key personnel whose services we may lose would result in transition costs and would divert the attention of other members of our senior management from our existing operations. The loss of services from key personnel or a limitation in their homes that mayavailability could materially and adversely impact their margins and revenues. If Century Communities is unable to successfully compete following the Merger, itsour business, prospects, liquidity, financial condition and results of operationsoperations. Further, such a loss could be materially and adversely affected.
Following the consummation of the Merger, Century Communities’ competitive position could be weakened by strategic alliances or consolidation within the advisory services industry or the development of new technologies. Century Communities’ ability to compete successfully will depend on how well it markets its products and services and on its ability to anticipate and respond to various competitive factors affecting the industry, including changes in consumer preferences or demographics, and changesnegatively perceived in the product offerings or pricing strategies of Century Communities’ competitors.
After the consummation of the Merger, competition could materially adversely affect Century Communities in several ways, including (i) the loss of customerscapital markets. We have not obtained and market share, (ii) Century Communities’ needdo not expect to lower prices or increase marketing expenses to remain competitive and (iii) the loss of business relationships within Century Communities’ existing markets.
The market price of Century Communities Common Stock may declineobtain key person life insurance that would provide us with proceeds in the future as a resultevent of the sale of such shares held by former UCP stockholdersdeath or current Century Communities stockholders or due to other factors.
Based on the number of shares of UCP Class A Common Stock outstanding as of April 10, 2017, and adjusted for unvested stock awards of UCP that vest prior to the Merger and the exchange of all Series A Units of
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UCP, LLC held by PICO for shares of UCP Class A Common Stock immediately prior to the effective time of the Merger, Century Communities expects to issue approximately 4.2 million shares of Century Communities Common Stock to UCP stockholders in the Merger (which does not include shares of Century Communities Common Stock issuable in connection with the future vesting of outstanding stock options and restricted stock units of UCP following their conversion into reciprocal stock options and restricted stock units of Century Communities). Upon the receipt of Century Communities Common Stock as Merger Consideration, former holders of shares of UCP Class A Common Stock may seek to sell the Century Communities Common Stock delivered to them. Current Century Communities stockholders may also seek to sell Century Communities Common Stock held by them following, or in anticipation of, consummation of the Merger. These sales (or the perception that these sales may occur), coupled with the increase in the outstanding number of Century Communities Common Stock, may affect the market for, and the market price of, Century Communities Common Stock in an adverse manner. None of these stockholders are subject to “lock-up” or “market stand off” agreements.
The market price of Century Communities Common Stock may also decline in the future as a result of the consummation of the Merger for a number of other reasons, including:
These factors are, to some extent, beyond the control of Century Communities.
Century Communities is expected to incur substantial expenses related to the Merger and integration.
Century Communities is expected to incur substantial expenses in connection with the Merger and the related integration. There are a large number of processes, policies, procedures, operations, technologies and systems that may need to be integrated, including purchasing, accounting and finance, sales, payroll, pricing and benefits. While Century Communities has assumed that a certain level of expenses will be incurred, there are many factors beyond its control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These expenses could, particularly in the near term, exceed the savings that Century Communities expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings. These integration expenses likely will result in Century Communities taking significant charges against earnings following the completion of the Merger, and the amount and timing of such charges are uncertain at present.
Century Communities may not be able to continue to grow through acquisitions.
In the past, Century Communities has sought growth through acquisitions of, or significant investments in, businesses that offer complementary products and services or otherwise support its growth objectives. However, following the consummation of the Merger, Century Communities cannot assure you that it will continue to identify attractive acquisition targets and consummate acquisitions. Upon consummation of the Merger and the incurrence of debt in connection therewith, Century Communities’ anticipated level of indebtedness will be significantly higher than prior to the consummation of the Merger. As a result, Century Communities cannot assure you that it will be able to arrange financing for future acquisitions on terms acceptable to it. In addition, the combined company will be a substantially larger company than Century Communities is at this time and may face additional scrutiny in connection with federal and state governmental approvals in connection with any future acquisitions of attractive targets and may not be able to obtain such approvals at all. The realizationdisability of any of these risks could adversely affect Century Communities’ business.our key personnel.
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Following the consummationTermination of the Merger, Century Communities willemployment agreements with the members of our management team could be bound by allcostly and prevent a change in control of the obligations and liabilities of both companies.Company.
FollowingThe employment agreements we have entered into with Dale Francescon and Robert Francescon, our Co-Chief Executive Officers, and David Messenger, our Chief Financial Officer, each provide that if their employment with us terminates under certain circumstances, we may be required to pay them significant amounts of severance compensation, thereby making it costly to terminate their employment. In addition, under certain circumstances, the consummationtermination of the Merger, Century Communities will become bound by allemployment of the obligations and liabilitiesone of UCP in addition to Century Communities’ obligation and liabilities existing prior to the consummation of the Merger. Neither Century Communities nor UCP can predict the financial condition of Century Communities at the time of the combination or the ability of Century Communities to satisfy its obligations and liabilities.
The Merger may result in a loss of suppliers or strategic alliances and mayour Co-Chief Executive Officers could result in the termination of existing contracts.employment of our other Co-Chief Executive Officer which would result in a requirement for us to pay severance compensation to both former executives. Furthermore, these provisions could delay or prevent a transaction or a change in control of the Company that might otherwise be in the best interests of our securityholders.
We may change our operational policies, investment guidelines and business and growth strategies without stockholder consent, which may subject us to different and more significant risks in the future.
Following the Merger, someOur board of the suppliers or strategic partners of Century Communities or UCP, as historical businesses, may terminate or scale back their business relationship with Century Communities. Century Communitiesdirectors determines our operational policies, investment guidelines and UCP have contracts with suppliers, vendors, and other business partners which may require Century Communities or UCP to obtain consents from these other parties in connection with the Merger, which may not be obtained at all or on favorable terms. If supplier relationships or strategic alliances are adversely affected by the Merger, or if Century Communities, following the Merger, loses the benefits of the contracts of Century Communities or UCP, Century Communities’ business and financial performance could suffer.
Century Communitiesgrowth strategies. Our board of directors may havemake changes to, make additional contributions following completionor approve transactions that deviate from, those policies, guidelines and strategies without a vote of, the Mergeror notice to, fund its pensionour stockholders. Under any of these circumstances, we may expose ourselves to different and other post-retirement benefit plans, including UCP plans.
Century Communities and UCP and their respective subsidiaries currently maintain and contribute to defined benefit pension plans and other post-retirement benefit plans that cover various categories of employees and retirees. The obligation to make contributions to fund benefit obligations under these pension and other post-retirement benefit plans is based on actuarial valuations, which are based on certain assumptions, including the long-term return on plan assets and the discount rate. Century Communities may have to make additional contributions following completion of the Merger to fund its pension and other post-retirement benefit plans, including any such UCP plans. Additional contributions could have a material adverse effect on the results of operations, cash flows and financial position of Century Communities.
Century Communities’ anticipated level of indebtedness will increase significantly upon consummation of the Merger and may adversely affect the company.
In connection with the consummation of the Merger, Century Communities will incur approximately $97.7 million aggregate principal amount of additional indebtedness to fund the cash consideration payable under the Merger Agreement. Upon consummation of the Merger, Century Communities intends to repay or assume UCP’s project-level secured acquisition, development and constructions loans, which had approximately $87.0 million outstanding as of March 31, 2017, and redeem, satisfy and discharge UCP’s $75 million principal amount 8.5% Senior Notes due 2017, to the extent still outstanding at the time of the consummation of the Merger. Taking into account Century Communities’ current debt levels, the incurrence of additional indebtedness in connection with the Merger and the expected repayment of UCP’s outstanding debt, as of March 31, 2017 on a pro forma basis the principal amount of Century Communities’ pro forma consolidated indebtedness would be approximately $712.5 million.
In addition, Century Communities expects to continue to evaluate the possibility of acquiring additional businesses and making strategic investments, and Century Communities may elect to finance these endeavors by incurring additional indebtedness. Moreover, to respond to competitive challenges, Century Communities may be required to raise substantial additional capital to finance new product offerings. As a result, Century Communities’ indebtedness could increase relative to the level of indebtedness at the closing of the Merger, and the relatedmore significant risks that Century Communities faces could intensify.
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Century Communities’ anticipated level of indebtedness following the consummation of the Merger, together with any additional indebtedness it may incur in the future, could adversely affect Century Communities in a number of ways. For example, the anticipated level of indebtedness or any additional financing could or will:
The terms of Century Communities’ indebtedness as of the date of this proxy statement/prospectus and following the consummation of the Merger are expected to include covenants that, among other things, restrict Century Communities’ ability to: (i) dispose of assets; (ii) incur additional indebtedness; (iii) incur guarantee obligations; (iv) prepay certain other indebtedness or amend other financing arrangements; (v) pay dividends; (vi) create liens on assets; (vii) enter into sale and leaseback transactions; (viii) make investments, loans or advances; (ix) make acquisitions; (x) engage in mergers or consolidations; (xi) change the business conducted; and (xii) engage in certain transactions with affiliates. In addition, under its existing revolving credit facility, Century Communities is subject to financial maintenance covenants requiring that its leverage levels not exceed specified levels and that it maintain at least a specified interest coverage ratio. Century Communities’ failure to comply with any of these covenants could result in an event of default that, if not cured or waived, could result in the acceleration of certain of its debt, which could have a material adverse effect on Century Communities’our business, prospects, liquidity, financial condition and results of operations.
Century CommunitiesIf we fail to maintain an effective system of internal controls, we may not be able to service allaccurately determine our financial results or prevent fraud. As a result, our stockholders could lose confidence in our financial results, which could materially and adversely affect us.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. There is no assurance that material weaknesses or significant deficiencies will not be identified in the future or that we will be successful in adequately remediating any such material weaknesses and significant deficiencies. We may in the future discover areas of its indebtednessour internal controls that need improvement. We cannot be certain that we will be successful in maintaining adequate internal control over our financial reporting and may be forcedfinancial processes. Furthermore, as we grow our business, including through acquisition, our internal controls will become more complex, and we will require significantly more resources to take other actionsensure our internal controls remain effective. Additionally, the existence of any material weakness or significant deficiency would require management to satisfy its obligations under its indebtedness, whichdevote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies, and management may not be successful. Century Communities’ failureable to remediate any such material weaknesses or
significant deficiencies in a timely manner. The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet its debt serviceour reporting obligations, subject us to investigations from regulatory authorities or cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect us.
Changes in accounting rules, assumptions and/or judgments could materially and adversely affect us.
Accounting rules and interpretations for certain aspects of our operations are highly complex and involve significant assumptions and judgment. We refer you to footnote 1 for a description of certain changes in accounting rules and interpretations that may affect our future results of operations. These complexities could lead to a delay in the preparation and dissemination of our financial statements. Furthermore, changes in accounting rules and interpretations or in our accounting assumptions and/or judgments, such as asset impairments, could significantly impact our financial statements. In some cases, we could be required to apply a new or revised standard retroactively, resulting in restating prior period financial statements. Any of these circumstances could have a material adverse effect on Century Communities’our business, prospects, liquidity, financial condition and results of operations.
We may face substantial damages or be enjoined from pursuing important activities as a result of existing or future litigation, arbitration or other claims.
Century Communities estimatesIn our homebuilding activities, we are exposed to potentially significant litigation, including breach of contract, contractual disputes and disputes relating to damage to property and persons, defective title, property misdescription or construction defects, including use of defective materials. Although we have established warranty, claim and litigation reserves that we believe are adequate, due to the annual cash interest payments onuncertainty inherent in litigation, legal proceedings may result in the combined company’s debt, following the consummationaward of the Merger would be approximately $46.3 million, which can fluctuate depending on changessubstantial damages against us that exceed our reserves. Furthermore, plaintiffs may in interest rates. Century Communities depends on cash on hand and cash flowscertain of these legal proceedings seek class action status with potential class sizes that vary from operationscase to make scheduled debt payments. Century Communities expects to be able to meet the estimated cash interest payments on the combined company’s debt following the Merger through a combination of (i) the expected cash flows from operations of the combined company, (ii) cash generated from the sale of non-core assets, and (iii) to a limited extent, the undrawn capacity under its revolving credit facility. However, Century Communities’ ability to generate sufficient cash flow from operations of the combined company and to utilize other methods to make scheduled payments will depend on a range of economic, competitive and business factors, many of which are outside of its control. However, therecase. Class action lawsuits can be no assurance thatcostly to defend and settle, and if we were to lose any certified class action suit, it could result in substantial liability for us. In addition, we are subject to potential lawsuits, arbitration proceedings and other claims in connection with our business.
With respect to certain general liability exposures, including construction defect and product liability claims, interpretation of underlying current and future trends, assessment of claims and the related liability and reserve estimation process require us to exercise significant judgment due to the complex nature of these sourcesexposures, with each exposure often exhibiting unique circumstances. Furthermore, once claims are asserted for construction defects, it is difficult to determine the extent to which the assertion of these claims will be
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adequate. If Century Communities is unable to service its indebtedness and fund its operations, Century Communities will be forced to adopt an alternative strategy that may include:
Even if Century Communities adopts an alternative strategy, the strategyexpand geographically. As a result, our insurance policies may not be successfulavailable or adequate to cover any liability for damages, the cost of repairs, and/or the expense of litigation surrounding current claims, and Century Communitiesfuture claims may be unablearise out of events or circumstances not covered by insurance and not subject to service its indebtedness and fund its operations, which couldeffective indemnification agreements with our subcontractors. Should such a situation arise, it may have a material adverse effect on Century Communities’our business, financial condition or results of operations.and operating results.
The enactmentFailure by our directors, officers or employees to comply with applicable codes of proposed legislation in Californiaconduct could materially impact the combined company’s financial position and results of operations following the Merger.adversely affect us.
We have adopted a code of business conduct and ethics for our directors, officers and employees. Our adoption of this code and other standards of conduct is not a representation or warranty that all persons subject to this code or standards are or will be in complete compliance. The failure of a director, officer or employee to comply with the applicable code or standards of conduct may result in termination of the relationship and/or adverse publicity, which could materially and adversely affect us.
Any joint venture investments that we make could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial conditions and disputes between us and our co-venturers.
Prior to acquiring Wade Jurney Homes, we first acquired a 50% ownership interest and held this investment as a joint venture. Although it is currently not a focus in our business strategy, we may in the future continue to co-invest with third parties through partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a land acquisition and/or a development. In this event, we may not be in a position to exercise sole decision-making authority regarding the acquisition and/or development, and our investment may be illiquid due to our lack of control. Investments in partnerships, joint ventures, or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt, fail to fund their share of required capital contributions, make poor business decisions or block or delay necessary decisions. Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer would have full control over the partnership or joint venture. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. In addition, we may in certain circumstances be liable for the actions of our third-party partners or co-venturers.
We will not receive any cash proceeds from the issuance of the Exchange Notes pursuant to the Exchange Offer. In consideration for issuing the Exchange Notes as contemplated in this prospectus, we will receive in exchange a like principal amount of Initial Notes, the terms of which are identical in all material respects to the Exchange Notes, except that the Exchange Notes will have a different CUSIP number and will not contain terms with respect to transfer restrictions, registration rights, or additional interest upon a failure to fulfill certain obligations under the Registration Rights Agreement. The Initial Notes surrendered in exchange for the Exchange Notes will be retired and cancelled. Accordingly, the issuance of the Exchange Notes will not result in any change in our capitalization.
DESCRIPTION OF OTHER INDEBTEDNESS
5.875% Senior Notes due 2025
On January 23,May 12, 2017, California Assembly Bill No. 199we issued $400 million in aggregate principal amount of Existing 5.875% Notes, at a price equal to 100% of their principal amount, in a private offering pursuant to Rule 144A and Regulation S under the Securities Act.
We have completed registered exchange offers whereby all of the old Existing 5.875% Notes were exchanged for new Existing 5.875% Notes. The terms of the new Existing 5.875% Notes are identical in all material respects to the old Existing 5.875% Notes, except that the new Existing 5.875% Notes are registered under the Securities Act and the transfer restrictions, registration rights, and additional interest provisions that were applicable to the old Existing 5.875% Notes do not apply to the new Existing 5.875% Notes.
The Existing 5.875% Notes were issued under the Indenture, dated as of May 12, 2017 (which we refer to as “AB 199”) was proposedthe “2017 Indenture”, as it has been and may be in the California legislature. Interpreted broadly,future amended and/or supplemented from time to time), by and among our Company, our subsidiary guarantor’s party thereto, and U.S. Bank National Association, as trustee. The Existing 5.875% Notes are our unsecured senior obligations, and are fully and unconditionally guaranteed on an unsecured basis by substantially all of our direct and indirect wholly-owned operating subsidiaries and, subject to certain exceptions, any future subsidiaries. The 2017 Indenture contains restrictive covenants on issuing future secured debt and other transactions that are substantially similar to those applicable to the initial versionNotes offered in this offering. The aggregate principal balance of AB 199 mandated the paymentExisting 5.875% Notes is due July 2025, with interest only payments due semi-annually in January and July of prevailing wages for newly constructed and privately financed housing in California. As originally proposed, such a mandate would significantly increase the costs of construction in California, which would make certain projects in California economically infeasible. On April 6, 2017, the text of AB 199 was amended to exempt private residential projects. There can be no assurance, however, that AB 199 will not be subsequently amended to include private residential projects in the future. Due to UCP’s existing homebuilding activities in California, the enactment of AB 199 or other similar legislation may adversely affect the combined company’s financial position and results of operations following the Merger.
Other Risk Factors Relating to Century Communities and UCPeach year.
As a result of enteringSeptember 30, 2019, $400.0 million in aggregate principal amount of Existing 5.875% Notes is outstanding.
Revolving Credit Facility
On June 5, 2018, we entered into an Amended and Restated Credit Agreement with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the Merger Agreement, Century Communities’ and UCP’s businesses are and will be subject to the risks described above. In addition, Century Communities and UCP are, and following completion of the Merger, Century Communities will continue to be, subject to the risks described in Century Communities’ and UCP’s respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2016 (in UCP’s case, as amended by Amendment Number 1 to the 2016 Annual Report on Form 10-K/A, filed with the SEC on April 28, 2017), as updatedlenders from time to time in their subsequent filingsparty thereto (which, as modified as described below, we refer to as the “Credit Agreement”).
The Credit Agreement provides us with a revolving line of credit of up to $640.0 million (which, as modified as described below, we refer to as the SEC, including those incorporated“Revolving Credit Facility”). The obligations under the Revolving Credit Facility are guaranteed by referencecertain of our subsidiaries.
On June 28, 2018, we entered into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 147a Joinder Agreement with Texas Capital Bank, National Association, as Administrative Agent, BMO Harris Bank N.A., as a lender party thereto, and our subsidiary guarantors party thereto, which modified the Credit Agreement to, among other things, (i) increase the Revolving Credit Facility from its initial borrowing capacity of this proxy statement/prospectus.
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Century Communities, Inc.
Century Communities is engagedOn February 12, 2019, we entered into a Commitment Increase and Joinder Agreement with Texas Capital Bank, National Association, as Administrative Agent, BMO Harris Bank N.A., CIBC Bank USA, Flagstar Bank, FSB, and LegacyTexas Bank, as lenders party thereto, and our subsidiary guarantors party thereto, which further modified the Credit Agreement to, among other things, (i) increase the Revolving Credit Facility from $590.0 million to $640.0 million, (ii) increase each of the existing lenders’ respective commitments under the Credit Agreement by amounts set forth in the development, design, construction, marketingCredit Agreement, and (iii) add LegacyTexas Bank as an additional lender party to the Credit Agreement.
Unless terminated earlier, the principal amount under the Revolving Credit Facility, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on April 30, 2022, the maturity date of the Revolving Credit Facility. We may request a twelve-month extension of the maturity date, subject to the approval of the lenders and the Administrative Agent.
Borrowings under the Revolving Credit Facility bear interest at a floating rate equal to the adjusted Eurodollar Rate plus an applicable margin between 2.60% and 3.10% per annum, or, in the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.60% and 2.10% per annum. The “applicable margins” described above are determined by a schedule based on our leverage ratio, as defined in the Credit Agreement. The Credit Agreement also provides for fronting fees and letter of credit fees payable to the L/C Issuer and commitment fees payable to the Administrative Agent equal to 0.20% of the unused portion of the Revolving Credit Facility.
The Credit Agreement contains customary affirmative and negative covenants (including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments, and engage in certain merger, consolidation or asset sale transactions), as well as customary events of single-family attacheddefault. The Credit Agreement also requires us to maintain (i) a leverage ratio of not more than 1.50 to 1.0 as of the last day of any fiscal quarter, based upon our and detached homesour subsidiaries’ (on a consolidated basis) ratio of debt to tangible net worth, (ii) an interest coverage ratio of not less than 1.50 to 1.0 for any four fiscal quarter period, based upon our and our subsidiaries’ (on a consolidated basis) ratio of EBITDA to cash interest expense, (iii) a consolidated tangible net worth of not less than the sum of $546.0 million, plus 50% of the net proceeds of any issuances of equity interests by us and the guarantors of the Revolving Credit Facility after March 31, 2018, plus 50% of the amount of our and our subsidiaries’ consolidated net income as of the last day of any fiscal quarter, (iv) liquidity of not less than $40.0 million for us and our subsidiaries (on a consolidated basis) as of the last day of any fiscal quarter, and (v) a risk asset ratio of not more than 1.50 to 1.0 as of the last day of any fiscal quarter, based upon the ratio of the book value of all risk assets owned by us and our subsidiaries to our tangible net worth. As of September 30, 2019, we were in metropolitan areas in Colorado, Austincompliance with all covenants under the Credit Agreement.
As of September 30, 2019, we had $278.8 million outstanding under the Revolving Credit Facility.
Insurance Premium and San Antonio, TexasOther Notes
As of September 30, 2019, we had insurance premium and other notes with an aggregate outstanding balance of $6.15 million.
Mortgage Repurchase Facilities
On May 4, 2018 and September 14, 2018, one of our indirect wholly-owned subsidiaries, Inspire Home Loans, Inc., which is a full-service mortgage lender and primarily originates mortgage loans for our homebuyers (which we refer to as “Central Texas”“Inspire”), Houston, Texas, Las Vegas, Nevada, Atlanta, Georgia, Salt Lake City, Utah,entered into mortgage warehouse lines of credit with Comerica Bank, and Charlotte, North Carolina. In manyJ.P. Morgan, respectively. The mortgage warehouse lines of its projects, in addition to building homes, Century Communities is responsible for the entitlement and development of the underlying land. Century Communities’ homebuilding operations are organized into the following seven operating segments based on the geographic markets in which it operates: Atlanta, Central Texas, Charlotte, Colorado, Houston, Nevada, and Utah. Additionally, Century Communities’ wholly owned subsidiaries, Inspire Home Loans Inc. and Parkway Financial Group LLC, which provide mortgage and title services to its home buyers, respectively, have been identified as its Financial Services operating segment.
Century Communities builds and sells an extensive range of home types across a variety of price points. Its emphasis is on acquiring well located land positions and offering quality homes with innovative design elements. The core of its business plan is to acquire and develop land strategically, based on its understanding of population growth patterns, entitlement restrictions and infrastructure development. Century Communities focuses on locations within its markets with convenient access to metropolitan areas that are generally characterized by diverse economic and employment bases and demographics and increasing populations. Century Communities believes these conditions create strong demand for new housing, and these locations represent what it believes to be attractive opportunities for long-term growth. Century Communities also seeks assets that have desirable characteristics, such as good access to major job centers, schools, shopping, recreation and transportation facilities, and it strives to offer a broad spectrum of product types in these locations. Product development and customer service are key components of the lifestyle connection Century Communities seeks to establish with each individual homebuyer. Century Communities’ construction expertise across an extensive product offering allows it flexibility to pursue a wide array of land acquisition opportunities and appeal to a broad range of potential homebuyers, from entry-level to first- and second-time move-up buyers and lifestyle homebuyers. Additionally, Century Communities believes its diversified product strategy enables it to adapt quickly to changing market conditions and to optimize returns while strategically reducing portfolio risk.
During the year ended December 31, 2016, Century Communities delivered 2,825 homes, with an average sales price of $346.5 thousand. During the same period, it generated approximately $978.7 million in home sales revenue, approximately $73.1 million in income before tax expense, and approximately $49.5 million in net income. For the year ended December 31, 2016, Century Communities’ net new home contracts totaled 2,860 homes, a 21.4% increase over the same period in 2015. On December 31, 2016, Century Communities had a backlog of 749 sold but unclosed homes, consisting of approximately $302.8 million in sales value, a 11.7% increase over the same period in 2015. Its results of operations are significantly impacted by its acquisitions of Peachtree Communities Group, Inc. and its affiliates and subsidiaries in November 2014, Grand View Builders in August 2014, and Las Vegas Land Holdings, LLC in April 2014. Subsequent to the acquisitions, these operations became Century Communities’ Atlanta, Houston and Nevada operating segments, respectively.
During 2016, Century Communities also invested for future growth through (i) its entrance into the Utah and North Carolina markets, (ii) commencing its wholly-owned financing operations, Parkway Financial Group, and (iii) acquiring a 50% ownership in Wade Jurney Homes. Century Communities also continued to expand its future pipeline of land positions as it increased its total lots owned and under control from 13,160 as of December 31, 2015 to 18,296 as of December 31, 2016.
Century Communities’ principal executive offices are located at 8390 East Crescent Parkway, Suite 650, Greenwood Village, Colorado 80111. Its main telephone number is (303) 770-8300.
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UCP, Inc.
UCP is a homebuilder and land developer with expertise in residential land acquisition, development and entitlement, as well as home design, construction and sales. UCP operates in the states of California, Washington, North Carolina, South Carolina and Tennessee. UCP designs, constructs and sells high quality single-family homes through Benchmark Communities, LLCcredit (which we refer to as “Benchmark Communities”the “Repurchase Facilities”), its wholly owned homebuilding subsidiary. Prior provide Inspire with uncommitted repurchase facilities of up to completion$140 million, secured by the mortgage loans financed thereunder. Amounts outstanding under the Repurchase Facilities are not guaranteed by us or any of its IPO, UCP operated as a wholly owned subsidiaryour subsidiaries, and the agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of PICO Holdings, Inc., a NASDAQ-listed, diversified holding company. Subsequent to UCP’s IPO, PICO holds a majoritythis type.
As of September 30, 2019, we had $77.8 million outstanding under these Repurchase Facilities and were in compliance with all covenants thereunder.
As used in this section of the voting power of UCP,prospectus, the terms “we,” “us” and “our” and similar expressions refer only to Century Communities, Inc. and of the economic interests of UCP, LLC, the subsidiary through which UCP operates its business under the name UCP.
UCP has segmented its operating activities into two geographical regions and currently has homebuilding reportable segments and land development reportable segments in the West and Southeast.
In California, UCP primarily operates in the Central Valley area (Fresno and Madera counties), the Monterey Bay area (Monterey County), the South San Francisco Bay area (Santa Clara and San Benito counties) and in Southern California (Los Angeles, Ventura and Kern counties). In Washington State, it operates in the Puget Sound area (King, Snohomish, Thurston and Kitsap counties). In North Carolina, it operates in the Charlotte and Raleigh areas (Mecklenburg, Iredell, Union, Chatham counties). In South Carolina, UCP operates in the Myrtle Beach area (Horry County). In Tennessee, it operates in the Nashville area (Davidson, Rutherford, Wilson and Sumner counties).
UCP believes that these markets have attractive residential real estate investment characteristics, such as favorable long-term population demographics, consumer demand for single-family housing that often exceeds available supply, large and growing employment bases, and the ability to generate above-average investment returns. It continues to experience significant homebuilding and land development opportunities in its current markets and is evaluating potential expansion opportunities in other markets that it believes have attractive long-term investment characteristics.
UCP actively sources, evaluates and acquires land for residential real estate development and homebuilding. For each of its real estate assets, it periodically analyzes ways to maximize value by either (i) building single-family homes and marketing them for sale under its Benchmark Communities brand or (ii) completing entitlement work and horizontal infrastructure development and selling lots to third-party homebuilders. It performs this analysis using a disciplined analytical process, which UCP believes is a differentiating component of its business strategy.
UCP builds homes through its wholly owned homebuilding subsidiary, Benchmark Communities, LLC. Benchmark Communities operates under the principle that “Everything Matters!” This principle underlies all phases of UCP’s new home sale and construction process including planning, design, construction, marketing, sales and the customer experience. UCP is diversified by product offering, which it believes reduces its exposure to any particular market or customer segment. UCP decides to target specific and identifiable buyer segments by project and geographic market, in part dictated by each particular asset, its location, topography and competitive market positioning, and the amenities of the surrounding area and the community in which it is located.
UCP believes that its sizable inventory of well-located land provides it with a significant opportunity to develop communities and design, construct and sell homes under its Benchmark Communities brand. UCP expects that homebuilding and home sales will constitute its primary means of generating revenue growth for the foreseeable future.
UCP’s principal executive offices are located at 99 Almaden Boulevard, Suite 400, San Jose, California 95113. Its telephone number is (408) 207-9499.
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Merger Sub
Casa Acquisition Corp., a wholly-owned subsidiary of Century Communities, is a Delaware corporation that was formed on April 7, 2017 for the sole purpose of effecting the Merger. In the Merger, UCP will be merged with and into Merger Sub, with Merger Sub surviving the Merger. As a result of the Merger, Merger Sub, together with the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities.
Merger Sub’s principal executive offices and its telephone number are the same as those of Century Communities.
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UCP is providing this proxy statement/prospectusnot to its stockholders in connection withsubsidiaries or affiliates unless otherwise stated or the solicitation of proxies to be voted at the UCP special meeting (or any adjournment or postponement of the UCP special meeting). This proxy statement/prospectus contains important information for you to consider when deciding how and whether to vote on the matters brought before the UCP special meeting. Please read it carefully and in its entirety.context otherwise requires.
The date, time and place of the UCP special meeting are set forth below:
Date: , 2017
Time: a.m., local time
Place:
At the UCP special meeting, UCP stockholders will vote on:
The adoption by UCP stockholders of the Merger Agreement is a condition to the obligations of Century Communities and of UCP to complete the Merger. The approval of the adjournment proposal is not a condition to the obligations of Century Communities or of UCP to complete the Merger.
Recommendation of the UCP Board of Directors
In evaluating the Merger and other transactions contemplated by the Merger Agreement, the UCP Board consulted with UCP senior management and UCP’s outside legal counsel and financial advisor. After consideration, the UCP Board, at a meeting duly held on April 10, 2017, at which all of the members of the UCP Board were present, unanimously determined that the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the Merger, are fair to, and in the best interests of, UCP and its stockholders, and approved and declared advisable the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the proposed Merger. For more information regarding the factors considered by the UCP Board in reaching its decision to approve the Merger Agreement and the transactions contemplated by the Merger Agreement, see “Proposal I: Adoption of the Merger Agreement—UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors” beginning on page 70 of this proxy statement/prospectus.
The UCP Board recommends that UCP stockholders vote FOR the adoption of the Merger Agreement and FOR the adjournment proposal.
Record Date; Outstanding Shares; Stockholders Entitled to Vote
UCP has two classes of voting stock issued and outstanding, the UCP Class A Common Stock and the UCP Class B Common Stock, which generally vote together as a single class on all matters presented to UCP stockholders for their vote or approval.
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The UCP Board has fixed the close of business on , 2017 as the Record Date for determination of the UCP stockholders entitled to notice of, and to vote at, the UCP special meeting or any adjournment or postponement thereof. Only UCP stockholders of record on the Record Date are entitled to receive notice of, and to vote at, the UCP special meeting or any adjournment or postponement thereof.General
As of the Record Date, there were sharesdate of UCP Class A Common Stock outstanding and entitledthis prospectus, $500,000,000 in aggregate principal amount of 6.750% Senior Notes due 2027 issued on May 23, 2019, comprising the Initial Notes, is outstanding. This prospectus, together with the letter of transmittal, is first being sent to vote at the UCP special meeting, held by approximatelyall registered holders of record,Initial Notes known to us on or about , 2020.
We are offering to exchange a like principal amount of Exchange Notes for any or all validly tendered and there were 100 shares of UCP Class B Common Stock outstandingnot validly withdrawn Initial Notes on the terms and entitled to vote at the UCP special meeting, held by one holder of record (PICO). With respect to each matter to be acted upon at the UCP special meeting, each holder of UCP Class A Common Stock is entitled to one vote for each outstanding share of UCP Class A Common Stock held by such holder, and each holder of UCP Class B Common Stock is entitled to, without regardsubject to the numberconditions set forth in this prospectus and the accompanying letter of outstanding shares of UCP Class B Common Stock held by such holder, a number of votes equaltransmittal. We refer to the numberoffer as the “Exchange Offer.” You may tender some or all of Series A Units of UCP, LLC held by such holder, multiplied by the Exchange Rate. As of the Record Date, the sole holder of record of all outstanding shares of UCP Class B Common Stock is PICO, and PICO holds 10,593,000 Series A Units of UCP, LLC, which are exchangeable for 10,401,722 shares of UCP Class A Common Stock.
A list of stockholders entitled to vote at the UCP special meeting will be available for examination by any stockholder for any purpose germane to the UCP special meeting beginning ten days prior to the UCP special meeting between the hours of 10:00 a.m. and 5:00 p.m., local time, at 99 Almaden Boulevard, Suite 400, San Jose, California 95113, UCP’s principal place of business, and ending on the date of the UCP special meeting, and such list will also be available at the UCP special meeting during the duration of the meeting.
A quorum of outstanding shares is necessary to take action at the UCP special meeting. The presence in person or by proxy of the holders of UCP Common Stock having a majority of the votes which could be cast by the holders of all outstanding classes of stock entitled to vote at the UCP special meeting will constitute a quorum at the UCP special meeting.
If a holder of UCP Class A Common Stock is a beneficial owner of shares held in “street name” by a bank, broker, trust company or other nominee and does not provide the organization that holds its shares with specific voting instructions, then, under applicable rules, the organization that holds its shares may generally vote on “routine” matters but cannot vote on “non-routine” matters. If the organizations that holds its shares does not receive instructions from such UCP stockholder on how to vote its shares on a non-routine matter, that bank, broker, trust company or other nominee will inform the inspector of election at the UCP special meeting that it does not have authority to vote on the matter with respect to such shares. This is generally referred to as a “broker non-vote.” Abstentions and broker non-votes will be included in the calculation of the number of shares of UCP Common Stock represented at the UCP special meeting for purposes of determining whether a quorum has been achieved. However, if a beneficial owner of UCP Class A Common Stock does not instruct its broker, bank, trust company or other nominee how to vote on any matter, the broker, bank, trust company or other nominee will not have discretion to vote on any proposal at the UCP special meeting and such shares will not be deemed to be in attendance at the meeting or counted for purposes of determining whether a quorum has been achieved.
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The required number of votes to approve the matters to be voted upon at the UCP special meeting depends on the particular item to be voted upon as set out below:
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Share Ownership of and Voting by UCP Directors and Executive Officers
At the Record Date, UCP’s directors and executive officers and their affiliates (other than PICO, UCP’s majority stockholder) beneficially owned and had the right to vote an aggregate of shares of UCP Class A Common Stock and no shares of UCP Class B Common Stock at the UCP special meeting, which represents % of the voting power of the outstanding shares of UCP Common Stock entitled to vote at the UCP special meeting.
Two members of the UCP Board, Eric H. Speron and Maxim C.W. Webb, are members of the board of directors of PICO (and Mr. Webb is also the President and Chief Executive Officer of PICO), and may be deemed to share voting power and investment control over the shares of UCP Class B Common Stock owned by PICO. Messrs. Speron and Webb disclaim beneficial ownership of the shares of UCP Class B Common Stock owned by PICO except to the extent of any pecuniary interest therein. The 100 shares of UCP Class B Common Stock owned by PICO are entitled to approximately 57% of the voting power of the outstanding shares of UCP Common Stock entitled to vote at the UCP special meeting.
It is expected that UCP’s directors and executive officers and PICO will vote their respective sharesFOR the adoption of the Merger Agreement andFOR the adjournment proposal. For more information regarding PICO’s obligations to vote its shares of UCP capital stockyour Initial Notes pursuant to the Voting Agreement, see “The Voting Agreement” beginning on page 116 of this proxy statement/prospectus.
If your shares of UCP Common Stock are registered directlyExchange Offer, in your name with Computershare Trust Company, N.A., UCP’s transfer agent and registrar, then you are consideredpermitted denominations. Our obligation to be the stockholder “of record”
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with respect to those shares. You may specify whether your shares should be votedaccept Initial Notes for or against, or whether you abstain from voting with respectexchange pursuant to the proposalExchange Offer is subject to adopt the Merger Agreement andsatisfaction or waiver of certain conditions set forth under “—Conditions to the adjournment proposal.
You may attend the UCP special meeting and vote your shares in person or you may submit a proxy by anyExchange Offer” below. We anticipate that each of the following methods:conditions will be satisfied and that no waivers will be necessary.
If you are a beneficial ownerPurpose and hold your shares in street name, or through a nominee or intermediary, such as a bank or broker, you will receive separate instructions from such nominee or intermediary describing how to vote your shares. The availability of telephonic or Internet voting will depend on the intermediary’s voting process. Please check with your nominee or intermediary and follow the voting instructions provided by your nominee or intermediary with these materials.
Your vote is very important. Whether or not you plan to attend the UCP special meeting, please act promptly to vote your shares with respect to the proposals described above. You may vote your shares by completing, signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided. You also may vote your shares by telephone or through the Internet by following the instructions set forth on the proxy card. If you attend the UCP special meeting, you may vote your shares in person, even if you have previously submitted a proxy in writing, by telephone or through the Internet. If your shares are held in the name of a nominee or intermediary, please follow the instructions on the voting instruction card furnished by such record holder.
Revocability of Proxies; Changing Your Vote
You may revoke your proxy or change your vote at any time before your shares are voted at the UCP special meeting by:
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Beneficial owners who hold their UCP Common Stock in street name cannot revoke their proxies in person at the UCP special meeting because the UCP stockholders of record who have the right to cast the votes will not be present. If beneficial owners of UCP Common Stock wish to change their votes after returning voting instructions, they should contact their bank, broker or other agent before the UCP special meeting to determine whether they can do so.
Solicitation of Proxies; Expenses of Solicitation
This proxy statement/prospectus is being provided to UCP stockholders in connection with the solicitation of proxies by the UCP Board to be voted at the UCP special meeting and at any adjournments or postponementsaggregate principal amount of the UCP special meeting. UCP will bear all costs and expenses in connection with the solicitation of proxies for the UCP special meeting, except that Century Communities and UCP will each pay 50% of the costs of filing, printing and mailing this proxy statement/prospectus. UCP has engaged MacKenzie Partners, Inc. to assist in the distribution and solicitation of proxies for the UCP special meeting and will pay MacKenzie Partners, Inc. a fee of approximately $9,000, plus reimbursement of reasonable expenses, for these services.
UCP is making this solicitation by mail, but UCP’s directors, officers and employees also may solicit by mail, telephone, facsimile, electronic transmission, personal interview or otherwise. Such directors, officers and employees will not receive additional compensation, but may be reimbursed by UCP for out-of-pocket expenses in connection with such solicitation. UCP will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable expenses incurred in sending proxies and proxy materials to beneficial owners.
UCP has not instituted householding for stockholders of record. However, certain brokerage firms may have instituted householding for beneficial owners of shares of UCP Common Stock held through brokerage firms. If your household has multiple accounts holding shares of UCP Common Stock, you may have already received householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this proxy statement/prospectus. The broker will arrange for delivery of a separate copy of this proxy statement/prospectus promptly upon your request. UCP stockholders may decide at any time to revoke a decision to household, and thereby receive multiple copies.
The UCP special meeting may be adjourned from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place, if any, thereof and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned UCP special meeting, any business may be transacted that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, notice of the adjourned meeting in accordance with the UCP Bylaws must be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the UCP Board will fix as the record date for determining UCP stockholders entitled to notice of such adjourned UCP special meeting the same or an earlier date as that fixed for determination of UCP stockholders entitled to vote at the adjourned meeting, and will give notice of the adjourned UCP special meeting to each UCP stockholder of record as of the record date so fixed for notice of such adjourned UCP special meeting. All proxies will be voted in the same manner as they would have been voted at the original convening of the UCP special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.
Tabulation of Votes; Methods of Voting; Results
UCP will retain an independent party, , to receive and tabulate the proxies, and to serve as the inspector of election to certify the results of the UCP special meeting.
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The matters to be considered at the UCP special meeting are of great importance to UCP stockholders. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this proxy statement/prospectus and complete, date, sign and promptly return the enclosed proxy card in the postage-paid envelope provided. You may also vote your shares by telephone or through the Internet.If you submit your proxy by telephone or through the Internet, you do not need to return the enclosed proxy card.
If you need assistance in completing your proxy card or have questions regarding the UCP special meeting, please contact:
105 Madison Avenue
New York, New York 10016
Telephone: (800) 322-2885
Email: proxy@mackenziepartners.com
or
UCP, Inc.
99 Almaden Boulevard, Suite 400
San Jose, California 95113
Attention: Investor Relations
Email: Investorrelations@unioncommunityllc.com
Telephone: (408) 207-9499 Ext. 476
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PROPOSAL I: ADOPTION OF THE MERGER AGREEMENT
This proxy statement/prospectus is being provided to UCP stockholders in connection with the solicitation of proxies by the UCP Board to be voted at the UCP special meeting and at any adjournments or postponements of the UCP special meeting. At the UCP special meeting, UCP will ask its stockholders to vote to (i) adopt the Merger Agreement and (ii) approve the adjournment proposal.
The Merger will not be completed without the adoption of the Merger Agreement by UCP stockholders. A copy of the Merger Agreement is attached asAnnex A to this proxy statement/prospectus. You are urged to read the Merger Agreement in its entirety because it is the legal document that governs the Merger. For additional information about the Merger Agreement, see “The Merger Agreement” beginningInitial Notes on page 99 of this proxy statement/prospectus.
At the effective time of the Merger, UCP will merge with and into Merger Sub, a wholly-owned subsidiary of Century Communities that was formed for the sole purpose of effecting the Merger. Merger Sub will survive the Merger, and as a result of the Merger, Merger Sub, together with the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities.
At the effective time of the Merger, each outstanding share of UCP Class A Common Stock (other than dissenters’ shares or treasury shares held by UCP and any shares of UCP Class A Common Stock owned by any UCP subsidiary, Century Communities or Century Communities subsidiary) will be converted into the right to receive and become exchangeable for the Merger Consideration, with cash paid in lieu of fractional shares. Century Communities stockholders will continue to hold their existing shares of Century Communities Common Stock.
As part of its ongoing strategic planning process, the UCP Board regularly reviews and assesses UCP’s long-term strategic goals and opportunities, industry trends, competitive environment, and short- and long-term performance, with the goal of enhancing stockholder value. In connection with these activities, the UCP Board met from time to time in the ordinary course of business to consider and evaluate potential strategic alternatives, including business combinations, acquisitions, dispositions, stock buybacks, secondary sales of stock in the public markets and other potential transactions, as well as various operational strategies available to UCP. The UCP Board also reviewed and considered UCP’s share price and stockholder returns, both on an absolute basis and relative to UCP’s peers in the homebuilding sector, and potential risks that UCP faced in executing its strategic plan. These potential risks included UCP’s small market capitalization, lack of liquidity and trading volume, limited size and geographic footprint, including the effects of its limited size on overhead and other fixed costs, potentially unfavorable business environments with respect to the U.S. housing recovery and other factors.
In the spring of 2015, UCP received expressions of interest for a business combination transaction from two U.S. homebuilders, Century Communities and another partyMay 23, 2019 (which we refer to as Party A.the “original issuance date”) in a private offering pursuant to Rule 144A and Regulation S under the Securities Act (which we refer to as the “May 2019 private offering of notes”). In connection with the receiptMay 2019 private offering of these proposals, in April 2015, UCP engaged Citi as UCP’s financial advisor. UCP’s Board engaged Citi as UCP’s financial advisor given Citi’s familiarity with UCP, as well as Citi’s experiencenotes, we and reputation advising public companies in business combination transactions generally and specifically in the homebuilding sector. In response toguarantors of the expressions of interests by Century Communities and Party A, duringNotes entered into the spring and summer of 2015, UCP,Registration Rights Agreement with the assistance of Citi, solicited indications of interest from 12 potential counterparties to a business combination (including Century Communities and Party A). The transaction candidates included a mix of potential strategic acquirors and financial sponsors. Of those 12 parties, 10 executed confidentiality
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agreements and received confidential information regarding UCP, four submitted preliminary indications of interest (which did not include Party A), two completed due diligence, and only one, Century Communities, submitted a preliminary, non-binding proposal to enter into a business combination with UCP. Century Communities’ 2015 proposal contemplated a mix of cash and stock at a fixed exchange ratio, implying a total value of approximately $10.00 per share of UCP Class A Common Stock based on the parties’ respective stock prices at the time.
In connection with this process, UCP and Century Communities entered into customary confidentiality and standstill agreements in February 2015 and March 2015, respectively, and UCP, Century Communities and PICO, UCP’s majority stockholder, entered into a second standstill agreement in October 2015. Allinitial purchasers of the confidentiality and/or standstill agreements with the other parties contacted during this period either have since expired or do not restrict the other party from making offers to acquire UCP after public announcement of a definitive merger agreement.
Throughout the rest of the summer and into the fall of 2015, UCP and Century Communities continued to discuss a potential business combination, including engaging in extensive due diligence with respect to each other’s businesses and preparation of draft transaction agreements by their respective outside law firms. Due to changes in the financing environment in the fall of 2015, fluctuations in the market price for each company’s respective stock and other factors, the parties were not, however, able to reach a definitive agreement on value, pro forma equity ownership and other material terms. Discussions between UCP and Century Communities regarding a potential business combination were terminated in October 2015.
In March 2016, Century Communities and UCP re-initiated discussions regarding a potential all-stock business combination transaction. In connection with these discussions, UCP, Century Communities and PICO entered into a second customary confidentiality agreement. Negotiations between Century Communities and UCP continued for approximately one month, during which time the parties again engaged in mutual due diligence reviews and preparation of draft transaction agreements by their respective law firms. Again, however, these discussions were abandoned in early April 2016 without the parties reaching a definitive agreement on value, pro forma equity ownership and other material terms for a business combination transaction. As of the termination of these discussions, Century Communities’ all-stock proposal implied a total value of approximately $6.58 per share of UCP Class A Common Stock. UCP did not hold discussions with any other potential counterparties during the period of these 2016 discussions with Century Communities.
Through the remainder of 2016, there were no further discussions regarding a potential business combination transaction between UCP and Century Communities or any other party, although representatives of UCP spoke from time to time with representatives of Century Communities and other homebuilders to discuss general market and industry conditions and similar issues affecting their respective businesses. During this period, the UCP Board and management team resumed their focus on executing UCP’s standalone business plan.
On January 25 and 26, 2017, the UCP Board held a regularly scheduled meeting. Among other business conducted at that meeting, and in light of improvements in UCP’s operations and financial performance, the UCP Board and management initiated a review of and discussed with UCP’s financial advisors potential strategic alternatives for UCP, including various risks and benefits of continuing to execute UCP’s business plan as a standalone public company, issuing additional equity in secondary market transactions, potential acquisition opportunities to expand UCP’s national footprint and build scale and potential business combination transactions. During this meeting, the members of the UCP Board, together with representatives of UCP’s management, Citi and Sidley Austin LLP (which we refer to in this proxy statement/prospectus as Sidley), UCP’s regular outside counsel, discussed UCP’s 2015 and 2016 efforts to pursue a business combination transaction and whether any of the parties previously contacted were likely to remain interested in discussing a potential business combination transaction with UCP. At the conclusion of these discussions, the UCP Board directed management to contact representatives of likely potential counterparties to a business combination transaction to gauge such parties’ respective interest in participating in such a process and to update the UCP Board at its next regularly scheduled
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meeting to be held on February 28, 2017. The UCP Board gave this direction to assess the likelihood of success of a new, comprehensive process before authorizing UCP to invest time and financial resources in a formal process.
Subsequent to the January 25 and 26 UCP Board meeting, Mr. Bogue spoke by phone with a representative of Party A, during which they discussed a variety of matters meaningful to their respective companies, including general market and industry conditions and homebuilder mergers and acquisitions activity. During this conversation, the representative of Party A informed Mr. Bogue that Party A could be interested in discussing a potential business combination transaction with UCP at a future time, but that Party A would not be able to pursue such a transaction with UCP in the near term.
On February 13, 2017, Dustin L. Bogue, UCP’s President and Chief Executive Officer, held a telephone conversation with Dale Francescon, Century Communities’ Chairman and Co-Chief Executive Officer, and Robert Francescon, Century Communities’ Co-Chief Executive Officer, during which they discussed a variety of matters important to their respective companies, including general market and industry conditions and macroeconomic trends, including homebuilder mergers and acquisitions activity, proposed legislation affecting the California homebuilding industry, and similar issues. During the course of this conversation, Mr. Francescon asked if UCP and Century Communities should consider amending the February 2015 confidentiality agreement, which had expired in accordance with its terms on February 9, 2016, to facilitate further continued discussions. At this time, UCP, Century Communities and PICO remained bound until September 2017 by the March 2016 confidentiality agreement.
On February 18, 2017, UCP and Century Communities amended their February 2015 confidentiality agreement so that it would remain in full force and effect from its original execution through June 1, 2017.
Messrs. Bogue and Francescon spoke again by phone on February 23, 2017. During their conversation, Mr. Francescon informed Mr. Bogue that Century Communities would be interested in resuming discussions regarding a potential business combination transaction in light of a number of similarities between the two companies, including with respect to geographic footprint, product alignment and existing corporate cultures. They also discussed certain non-public financial information and internal forecasts of each of their respective companies, although they did not discuss the potential financial or other terms for a potential transaction between their companies or a timeframe for completing any such potential transaction. At the conclusion of this conversation, Messrs. Bogue and Francescon relayed to each other that they would inform the boards of directors of their respective companies of this discussion and obtain further directions.
The UCP Board met as scheduled on February 28, 2017. Among other business conducted at the meeting, Mr. Bogue reported on his discussions with Mr. Francescon since the last UCP Board meeting, including Mr. Francescon’s indication on February 23, 2017, that Century Communities remained interested in conducting further discussions with UCP regarding a potential business combination transaction. Following further discussion, including discussion of the potential risks and merits of a business combination transaction, the UCP Board directed Mr. Bogue to inform Mr. Francescon that the UCP Board would be willing to consider a preliminary proposal for a business combination transaction from Century Communities, provided that any proposal would have to be higher than what had previously been offered by Century Communities in either 2015 or 2016 to reflect the operational improvements that had been made by UCP since then.
The following day, March 1, 2017, Mr. Bogue spoke with Mr. Francescon and relayed the UCP Board’s message.
On March 6, 2017, Century Communities delivered a written, non-binding preliminary proposal outlining a potential business combination transaction between Century Communities and UCP. Among other things, Century Communities’ March 6 preliminary proposal contemplated UCP’s stockholders receiving 0.244 of a share of Century Communities Common Stock plus $5.00 in cash per share of UCP Class A Common Stock. As
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noted in Century Communities’ preliminary proposal, based on Century Communities’ and UCP’s respective closing stock prices on the NYSE on March 6, the implied total value of the stock and cash consideration was approximately $10.75 per share of UCP Class A Common Stock. Century Communities’ preliminary proposal further contemplated (1) as a condition to consummation of the proposed transaction, the exchange of PICO’s interest in UCP, LLC for shares of UCP Class A Common Stock, (2) that Century Communities had sufficient cash on hand and immediate borrowing capacity under its existing credit facility to complete the transaction without a financing condition and (3) a period of three to four weeks to conduct further due diligence on UCP.
Mr. Bogue promptly forwarded Century Communities’ March 6 preliminary proposal to the UCP Board and UCP’s advisors, and the UCP Board scheduled a meeting for March 10, 2017, to discuss the preliminary proposal.
On March 10, 2017, the UCP Board, together with representatives of UCP’s management, Citi and Sidley in attendance, met to consider Century Communities’ March 6 proposal. During the course of this meeting, the attendees first received a presentation from management reviewing the directors’ consideration of strategic alternatives to date, including the proposed transactions with Century Communities in 2015 and 2016, the outreach and other solicitation efforts undertaken in 2015 with respect to potential merger and acquisition transaction candidates other than Century Communities, and other potential strategic and financial alternatives that UCP had considered but determined not to pursue. Citi discussed with the UCP Board certain financial aspects of Century Communities’ March 6 proposal, including the fact that, due to changes in the companies’ respective stock prices in the intervening days, Century Communities’ proposal represented an implied total value of approximately $10.95 per share of UCP Class A Common Stock. The Sidley representatives discussed certain legal aspects of the March 6 proposal, including the likely U.S. federal income tax treatment of the proposed merger consideration to UCP’s stockholders, the fact that the number of shares of Century Communities Common Stock to be issued as merger consideration based on the proposed exchange ratio would require Century Communities to obtain stockholder approval under the NYSE listing rules and the risk to deal certainty that a Century Communities stockholder approval condition could create for the proposed transaction. In connection with these discussions, the UCP Board also discussed with UCP’s management and outside advisors the effects a new transaction process or publicly announced definitive merger agreement could have on UCP’s ongoing efforts to refinance its outstanding 8.5% SeniorInitial Notes due October 21, 2017 (which we refer to in this proxy/registration statement as the 2017 Notes). Specifically, it was noted that any new, replacement facility entered into to refinance the 2017 Notes before their maturity would likely include “make whole” or other early repayment provisions that could impose significant costs on consummating a business combination shortly thereafter, potentially impeding UCP’s ability to reach a definitive merger agreement with any party or reducing the merger consideration available to UCP’s stockholders pursuant to any such definitive merger agreement. It was further noted that if UCP did not take steps to refinance the 2017 Notes sufficiently in advance of their maturity, then a failure to reach a definitive merger agreement or the termination of a definitive merger agreement without closing the contemplated transaction could severely limit UCP’s ability to refinance the 2017 Notes on commercially acceptable terms before their maturity. After further discussion, the UCP Board determined that, while Century Communities’ March 6 preliminary proposal was inadequate from a financial standpoint and that accepting it in its current form would not be in the best interests of UCP and its stockholders, it was sufficiently attractive to warrant continued discussions and negotiations with Century Communities regarding a potential business combination transaction. In this regard, the UCP Board directed UCP’s management and advisors to inform Century Communities that a transaction requiring the approval of Century Communities’ stockholders was not acceptable to UCP. Given Century Communities’ proposed timeframe to complete a due diligence review and overall desire to proceed expeditiously to a definitive agreement, UCP’s management and advisors were also directed to request that any definitive agreement with Century Communities include a “go-shop” provision permitting UCP to solicit superior proposals after signing and publicly announcing a definitive agreement. During the meeting, the UCP Board also discussed engaging, and ultimately engaged, Paul, Weiss as special legal counsel in connection with the proposed transaction. The UCP Board determined to engage Paul, Weiss based on its experience, qualifications and reputation in advising public companies in transactions of the kind contemplated by Century Communities’ March 6 preliminary proposal, and its
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familiarity with UCP following its representation of the special committee of the UCP Board in connection with its consideration of various amendments to UCP’s certificate of incorporation and bylaws proposed by PICO. (For more information regarding these proposed amendments, see the Current Report on Form 8-K filed by UCP with the U.S. Securities and Exchange Commission on March 30, 2017.)
Following the March 10 UCP Board meeting and in accordance with the UCP Board’s directions, representatives of UCP management and Citi informed representatives of Century Communities and J.P. Morgan Securities LLC (which we refer to in this proxy statement/prospectus as J.P. Morgan), financial advisor to Century Communities, of the UCP Board’s determinations.
On March 13, 2017, Mr. Bogue called Mr. Francescon to inform him that neither Mr. Bogue nor any other officer or employee of UCP would be permitted to hold any discussions with representatives of Century Communities about their personal, post-transaction employment until expressly authorized to do so by the UCP Board. During this conversation, Mr. Francescon indicated to Mr. Bogue that a key potential risk to a transaction from Century Communities’ perspective was a bill introduced and pending in the California legislature, Assembly Bill No. 199, that if enacted could make homebuilding operations in California more costly, in turn materially undermining the value proposition to a business combination with UCP in view of UCP’s significant presence in the California homebuilding market.
Also on March 13, representatives of Paul, Weiss and representatives of Greenberg Traurig, Century Communities’ outside legal counsel, held a conference call to discuss various preliminary transaction process issues, including amending the March 2016 confidentiality agreement and March 2015 and October 2015 standstill agreements to extend their respective terms through March 2018. Also during this call, the representatives of Greenberg Traurig informed the representatives of Paul, Weiss that Century Communities would not agree to a go-shop provision in the merger agreement. The Greenberg Traurig representatives stated that, in view of the approximately four-week mutual due diligence process anticipated by Century Communities and the fact that Century Communities had not, in connection with its business combination proposal, requested an exclusivity period for negotiating the terms of a proposed transaction, UCP was unrestricted in its ability to conduct any pre-signing market check process it thought was appropriate under the circumstances.
On March 14, 2017, amendments to the March 2016 confidentiality agreement and March 2015 and October 2015 standstill agreements were entered into by UCP, Century Communities and PICO, as applicable, and on March 15, 2017, each of Century Communities and UCP made their respective virtual data rooms available to each other’s representatives. The parties, through their representatives, continued to perform mutual due diligence reviews on each other, including making from time to time supplemental due diligence requests up to the execution and delivery of the definitive merger agreement on April 10, 2017.
On the morning of March 16, 2017, the UCP Board held a meeting, with representatives of UCP’s management, Citi and Paul, Weiss in attendance, to discuss developments over the preceding days regarding discussions with Century Communities, including Century Communities’ concern over pending Assembly Bill No. 199 and the fact that Century Communities would not agree to a go-shop provision in the merger agreement. The representatives of Paul, Weiss provided a detailed overview of the UCP directors’ fiduciary duties and legal standards applicable to their decisions and actions with respect to their evaluation of the proposed business combination transaction and answered questions regarding certain expected terms of the draft merger agreement based on Century Communities’ March 6 preliminary proposal. These included UCP’s ability to respond to, engage in discussions and become fully informed with respect to unsolicited proposals from third parties that constituted or were reasonably expected to lead to a superior proposal following signing of a definitive merger agreement in the absence of a go-shop provision and the steps the UCP Board could take before signing to seek to obtain the best offer reasonably available. At this meeting, the UCP Board also established a special transaction committee of the UCP Board (which we refer to in this proxy statement/prospectus as the transaction committee) empowered to oversee day-to-day developments regarding the transaction process and comprised entirely of directors able to convene on short notice and dedicate significant time to this task, provided, that all
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members of the UCP Board would be and ultimately were invited to attend all meetings of the transaction committee. The UCP Board appointed Michael C. Cortney (Chairman of the UCP Board), Maxim C.W. Webb (a member of the UCP Board and PICO’s chief executive officer) and Mr. Bogue to the transaction committee.
The UCP Board discussed a number of other transaction-related matters at its March 16 meeting, including, with input from UCP’s management, Citi and Paul, Weiss, various options for conducting a pre-signing market check, related costs and benefits of each option, such as the timing necessary for a more targeted or comprehensive process, the risk of losing the Century Communities transaction option if a market check extended over a prolonged period, the possibility of employee attrition or loss of employee morale if it were to become public that UCP was marketing itself, the theoretical likelihood of finding through such a process a potential transaction candidate prepared to pay more in cash and/or stock value than Century Communities’ proposal taking into consideration UCP’s 2015 process and 2016 discussions with Century Communities, and the effect that the failure of reaching a definitive agreement in respect of a transaction could have on UCP’s ability to refinance the 2017 Notes by October 2017. Following discussion, the UCP Board determined to continue substantive discussions with Century Communities and directed Citi to commence a targeted pre-signing market check on behalf of UCP that included outreach to seven parties contacted by UCP during the 2015 process, plus an additional nine parties not previously contacted. The UCP Board determined not to contact four of the parties involved in the 2015 process because they either had solicited UCP employees in connection with that earlier process, and were deemed to pose a risk to UCP’s workforce, or were no longer likely to have the financial ability to complete a transaction with UCP. The additional nine parties included domestic and international potential counterparties that Citi had indicated had shown increased interest in acquisitions of U.S. homebuilding companies generally in recent months. Century Communities, plus the 16 contacted parties, represented those strategic acquirors and financial sponsors viewed as most likely to be interested in pursuing a transaction with UCP and to possess the financial resources and familiarity with the U.S. homebuilding sector reasonably necessary to complete a transaction. Also at this meeting, the UCP Board discussed with UCP’s management and advisors various options that might be available to UCP to refinance the 2017 Notes on a parallel track with the negotiations with Century Communities, including whether Century Communities would agree to a bridge or backstop facility to refinance the 2017 Notes if a definitive merger agreement could not be reached, or were entered into but subsequently terminated, and various other traditional and non-traditional financing sources that might be able to provide financing on commercially acceptable terms without jeopardizing the possibility of reaching a definitive merger agreement.
Following the March 16 UCP Board meeting and as directed by the UCP Board, representatives of Citi relayed to J.P. Morgan the UCP Board’s request that Century Communities consider providing a bridge or backstop facility to address the risks relating to the maturity of the 2017 Notes and reiterated the UCP Board’s request following its March 10 meeting that Century Communities revise the stock consideration component of its proposal to eliminate the need for Century Communities stockholder approval.
Later in the afternoon of March 16, Century Communities delivered a revised written, non-binding preliminary proposal. Century Communities’ March 16 preliminary proposal reduced the exchange ratio for the stock consideration to 0.2309 of a share of Century Communities Common Stock for each share of UCP Class A Common Stock, thereby reducing the number of shares Century Communities would have to issue to a level sufficient to avoid seeking Century Communities stockholder approval, and increased the cash consideration to $5.16 per share. Based on the companies’ respective closing stock prices on March 15, 2017, the last full trading day before delivery of Century Communities’ March 16 preliminary proposal, the revised proposal represented an implied total value of approximately $10.85 per share of UCP Class A Common Stock. In its March 16 preliminary proposal, Century Communities also declined to participate in any bridge or backstop financing arrangements with UCP.
On March 17, 2017, at the direction of the transaction committee, representatives of Citi contacted representatives of J.P. Morgan to inform them that, although Century Communities’ March 16 preliminary proposal provided greater transaction certainty to UCP by removing the requirement to seek Century
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Communities stockholder approval and reflected an increase in Century Communities’ March 6 preliminary proposal as of the time it was made, Century Communities’ March 16 preliminary proposal did not give effect to changes in the companies’ respective stock prices between March 6 and March 16 and that, as a result, the earlier March 6 preliminary proposal provided greater value to UCP stockholders than did the March 16 preliminary proposal. Later in the day on March 17, Century Communities sent a further revised written, non-binding preliminary proposal, which increased the cash portion of the proposed consideration to $5.32 per share while maintaining the exchange ratio for the stock consideration at 0.2309 of a share of Century Communities Common Stock per share of UCP Class A Common Stock. Based on the companies’ respective closing stock prices on March 17, Century Communities’ March 17 preliminary proposal represented an implied total value of approximately $11.17 per share of UCP Class A Common Stock. Century Communities’ March 17 preliminary proposal was forwarded to the transaction committee for its consideration and review.
Also on March 17, as directed by the UCP Board, Citi began to contact the 16 potential counterparties in addition to Century Communities identified by the UCP Board at its March 16 meeting as the most likely parties to engage in a potential business combination transaction with UCP. Over the following weeks, five of these parties (each of which was a potential strategic acquiror) entered into confidentiality agreements with UCP and subsequently received access to UCP’s virtual data room. We refer to these five parties in this proxy statement/prospectus as Party B, Party C, Party D, Party E and Party F. None of these confidentiality agreements included standstill provisions prohibiting the parties from making potentially superior proposals following UCP’s public announcement of a definitive merger agreement with another party.
On March 20, 2017, Greenberg Traurig sent a first draft of the merger agreement to Paul, Weiss. The draft merger agreement was based in many respects on the last draft merger agreement exchanged between the parties in connection with their negotiations in March/April 2016. Among other things, it contemplated a forward merger of UCP into a subsidiary of Century Communities, with the subsidiary (as the successor to UCP) continuing as a wholly owned subsidiary of Century Communities and with each outstanding share of UCP Class A Common Stock immediately prior to the consummation of the merger being converted into the right to receive $5.32 in cash and 0.2309 of a share of Century Communities Common Stock, consistent with Century Communities’ March 17 preliminary proposal. In addition, the draft merger agreement contemplated the exchange of all of PICO’s interests in UCP, LLC into shares of UCP Class A Common Stock immediately prior to the effective time of the merger pursuant to the terms of the existing Exchange Agreement between UCP and PICO entered into in July 2013 in connection with UCP’s initial public offering, generally reciprocal representations and warranties and interim operating covenants for the period between signing and closing, a customary non-solicitation covenant with a fiduciary out enabling the UCP Board to hold discussions with third party suitors in response to, and to terminate the merger agreement to accept, an unsolicited superior proposal, a termination fee payable by UCP to Century Communities if UCP terminated the merger agreement in certain circumstances (including to accept a superior proposal) in an amount equal to approximately 3.65% of the total equity value of the proposed transaction, and various customary closing conditions for a transaction of the size of the proposed transaction and with respect to companies in UCP and Century Communities’ industry. The draft merger agreement did not contain any financing conditions or requirement to obtain the approval of Century Communities’ stockholders.
Also on March 20, 2017, Greenberg Traurig sent a first draft of a voting support and transfer restriction agreement (which we refer to in this proxy statement/prospectus as the voting agreement) to PICO’s outside counsel, Cooley LLP (which we refer to in this proxy statement/prospectus as Cooley), and to Paul, Weiss. The first draft of the voting agreement contemplated, among other things, that PICO vote all of its shares in favor of the adoption of the merger agreement and approval of the merger, refrain from taking various actions that could prevent or delay the consummation of the merger, including restrictions on PICO’s ability to solicit alternative transactions generally consistent with the non-solicitation covenants in the draft merger agreement applicable to UCP, and restrictions on PICO’s ability to transfer shares of Century Communities Common Stock received as merger consideration for certain periods following the consummation of the merger. The draft voting agreement also would terminate upon the termination of the merger agreement, including if UCP terminated the voting
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agreement to accept a superior proposal. It did not, however, contemplate any termination of PICO’s obligation to vote all of its UCP shares in favor of the adoption of the merger agreement following a change of recommendation by the UCP Board not accompanied by a termination of the merger agreement.
On March 21, 2017, representatives of Cooley and Paul, Weiss held a conference call to discuss open issues in the draft voting agreement of mutual concern to their respective clients.
Later in the evening of March 21, Mr. Bogue briefed the other members of the transaction committee by email regarding recent developments with respect to the draft merger agreement, draft voting agreement and solicitation efforts to other potential counterparties. Representatives of Paul, Weiss also circulated their proposed revisions to the draft merger agreement to the transaction committee shortly thereafter.
On March 22, 2017, Paul, Weiss sent a revised draft of the merger agreement to Greenberg Traurig. Among other things, the revised draft of the merger agreement noted that the pricing terms of the proposed transaction remained subject to the parties’ continuing negotiation, revised the scope of and exceptions to certain of the parties’ respective representations and warranties, including to qualify certain representations and warranties by a material adverse effect standard, revised the definition of a material adverse effect to exclude any change in law relating to the California homebuilding industry (including pending Assembly Bill No. 199), revised the definitions of company takeover proposal and superior company proposal to broaden the circumstances in which UCP would be permitted to engage in discussions regarding or accept potentially superior proposals, revised the definition of intervening event, revised the definition of acceptable confidentiality agreement (applicable in connection with the exceptions to UCP’s non-solicitation covenants in the merger agreement), modified certain contractual procedures whereby the UCP Board would be permitted to change its recommendation of the merger agreement, reduced the termination fee to 3.25% of the proposed transaction’s equity value, modified certain provisions of the merger agreement regarding the remedies of the partieswe agreed, under certain circumstances, and narrowedto file a registration statement relating to an offer to exchange the circumstances under whichInitial Notes for the termination fee would not be Century Communities’ sole and exclusive remedyExchange Notes. The following a terminationdescription of the merger agreement.
Also on March 22, Greenberg Traurig sentRegistration Rights Agreement is only a revised draftbrief summary of the voting agreement to Cooley and Paul, Weiss. Cooley and Paul, Weiss exchanged amongst themselves and their respective clients proposed edits to the voting agreement by email on March 22 and March 23, 2017.
On March 24, 2017, Cooley sent a revised draft of the voting agreement to Greenberg Traurig and Paul, Weiss. The revised draft of the voting agreement reflected input from Paul, Weiss. Among other things, it revised PICO’s non-solicitation covenant to permit PICO to engage in discussions regarding potential superior proposals to the same extent and under the same circumstances applicable to UCP in the merger agreement and provided that the voting agreement would terminate upon any change of recommendation by the UCP Board, whether due to a superior proposal or the occurrence of an intervening event.
Later in the day on March 24, Greenberg Traurig circulated a revised draft of the merger agreement to Paul, Weiss and a revised draft of the voting agreement to Cooley and Paul, Weiss. Among other things, the revised draft of the merger agreement reverted to the March 20 draft of the merger agreement with respect to the pricing terms, definition of superior company proposal, 3.65% termination fee and circumstances under which the termination fee wouldagreement. It does not be Century Communities’ sole and exclusive remedy following a termination of the merger agreement. With respect to the voting agreement, Greenberg Traurig’s March 24 revised draft contemplated that PICO’s obligation to vote all of its shares in favor of the adoption of the merger agreement would be reduced to an obligation to vote 38% of UCP’s outstanding voting power if the UCP Board changed its recommendation of the merger agreement due to the occurrence of an intervening event (that, by reason of a so-called “force-the-vote” covenant in the merger agreement solely in respect of an intervening event, did not permit UCP to terminate the merger agreement).
On March 27 and 28, 2017, representatives of UCP traveled to Las Vegas, Nevada and toured most of Century Communities’ Las Vegas properties as part of UCP’s due diligence review of Century Communities.
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The UCP representatives did not meet with any management or personnel from Century Communities during these tours other than salespersons in model homes.
On March 27, 2017, Party D informed representatives of Citi that Party D was withdrawing from the process and would not submit a preliminary proposal.
On March 28, 2017, in accordance with the UCP Board’s directions, Citi sent a process letter on behalf of UCP to the remaining parties still engaged in the process (other than Century Communities), requesting that they submit written, non-binding indications of interest by Friday, April 7, 2017. The process letter indicated that UCP expected to invite a limited group of parties to participate in a second phase of the transaction process following review of the preliminary proposals received by April 7.
On March 29, 2017, Party B, which until that point was the party furthest along in its due diligence review of UCP (including based on its participation in the 2015 process) other than Century Communities, informed representatives of Citi that it was withdrawing from the process and would not submit a preliminary proposal. Also on March 29, Messrs. Bogue and Francescon had a telephone call to discuss a number of issues relating to the proposed transaction, including the parties’ mutual due diligence reviews and site tours. During that phone call, Mr. Francescon also inquired into the status of the draft merger agreement and informed Mr. Bogue of Century Communities’ desire to proceed to final documentation as expeditiously as possible and that Century Communities was prepared to abandon discussions if there were any delays in that regard, including if any such delays related to UCP’s ongoing pre-signing market check process. Later that day, Paul, Weiss sent Greenberg Traurig an issues list of open items in the latest drafts of the merger agreement and voting agreement, including pricing terms of the proposed transaction, the size of the termination fee, certain exclusive remedies provisions of the merger agreement, certain conditions to Century Communities’ obligation to close, certain language regarding the exceptions to UCP’s non-solicitation covenants and related definitional changes, the definition of a superior company proposal, and the events causing a termination of the voting agreement, and scheduled a conference call for the following day to discuss these issues further.
On March 30, 2017, representatives of UCP’s and Century Communities’ respective management teams met in person to tour several of UCP’s California properties in Fresno and Monterey counties as part of Century Communities’ due diligence review of UCP. During these property tours, the UCP and Century Communities management teams also discussed various other aspects of the proposed transaction and mutual due diligence matters.
Also on March 30, as scheduled the day before, representatives of Paul, Weiss and Greenberg Traurig held a conference call to discuss Paul, Weiss’s issues list. During that call, the representatives of Greenberg Traurig informed the representatives of Paul, Weiss that the pricing terms in Century Communities’ March 17 preliminary proposal reflected its best and final offer, however Century Communities would accept a termination fee of 3.5% of the transaction’s total equity value and that it would compromise with respect to certain of Paul, Weiss’s proposed changes to the definition of a superior company proposal. In addition, the representatives of Paul, Weiss informed the representatives of Greenberg Traurig that UCP would not accept any conditionality to a definitive agreement based on any future enactment of Assembly Bill No. 199, and that Century Communities would have to determine prior to entering into a definitive agreement whether to accept the risk of changes in applicable laws. With respect to the draft voting agreement, the representatives of Greenberg Traurig stated that Century Communities would not agree to permit the voting agreement to terminate upon a change of recommendation of the UCP Board solely in respect of an intervening event and that reducing PICO’s voting commitment to 38% of UCP’s outstanding voting power was appropriate under the circumstances. Following this conference call, Paul, Weiss sent a revised draft of the merger agreement to Greenberg Traurig, reflecting the resolution of the open items in that agreement.
Later in the day on March 30, representatives of Cooley and Paul, Weiss discussed the open items in the voting agreement. During that discussion, the representative of Cooley informed Paul, Weiss that there were a
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handful of additional open items of concern to PICO, including that PICO was not prepared to agree to vote more than 28% of UCP’s outstanding voting power in favor of a merger agreement that the UCP Board no longer recommended by reason of the occurrence of an intervening event that did not permit UCP to terminate the merger agreement. In addition, PICO proposed additional post-closing covenants between PICO and Century Communities primarily relating to certain tax matters in respect of PICO’s interests in UCP, LLC prior to consummation of the merger.
On March 31, 2017, Cooley sent a revised draft of the voting agreement to Greenberg Traurig and Paul, Weiss, which reflected a reduction in PICO’s obligation to vote in favor of the adoption of the merger agreement following a change of recommendation by the UCP Board in the case of an intervening event to 28% of UCP’s outstanding voting power as well as the proposed post-closing covenants between PICO and Century Communities.
On April 2, 2017, Paul, Weiss sent a first draft of UCP’s confidential disclosure schedules to Greenberg Traurig.
The following day, April 3, 2017, Greenberg Traurig sent Paul, Weiss a first draft of Century Communities’ confidential disclosure schedules and sent Cooley and Paul, Weiss revised drafts of the merger agreement and voting agreement. The revisions to the draft merger agreement did not reflect any open material deal terms between the parties, and the revised draft of the voting agreement reflected the status of ongoing discussions between PICO and Century Communities regarding their post-closing covenants and increased PICO’s obligation to vote in favor of the merger agreement following a change of recommendation in respect of an intervening event to 30% of UCP’s outstanding voting power.
On April 4, 2017, representatives of Cooley and Greenberg Traurig held a conference call to discuss open issues in the draft voting agreement. Cooley sent a revised draft of the voting agreement to Greenberg Traurig and Paul, Weiss later that day, which continued to reflect open issues between PICO and Century Communities with respect to the post-closing covenants.
On April 5, 2017, representatives of Paul, Weiss and Greenberg Traurig held a conference call to discuss open issues in the parties’ draft confidential disclosure schedules relating to, among other things, the circumstances in which Century Communities would be permitted to incur new indebtedness between signing and closing and limitations on UCP’s ability to pay retention awards to employees between signing and closing as contemplated by the merger agreement. Later in the day, Paul, Weiss sent Greenberg Traurig a revised draft of Century Communities’ confidential disclosure schedules, and Greenberg Traurig sent Paul, Weiss a revised draft of UCP’s confidential disclosure schedules, in each case reflecting the parties’ discussions from earlier that day. Paul, Weiss also sent a revised draft of the merger agreement to Cooley and Greenberg Traurig.
On the afternoon of April 6, 2017, Party E submitted a preliminary proposal for a business combination transaction with UCP. Party E’s preliminary proposal contemplated an all-stock transaction in the range of approximately $9.50 to $9.75 per share of UCP Class A Common Stock. Based on the closing price of Century Communities’ Common Stock on April 5, 2017, the last full trading day before Party E submitted its preliminary proposal, the cash and stock consideration contemplated by Century Communities’ March 17 preliminary proposal represented an implied total value of approximately $11.21 per share of UCP Class A Common Stock.
The transaction committee held a meeting promptly following UCP’s receipt of Party E’s preliminary proposal, which meeting was attended by two additional members of the UCP Board and representatives of UCP’s management, Citi and Paul, Weiss. During this meeting, management provided an update on the status of the parties’ mutual due diligence reviews, noting among other things that during the recent site visits representatives of Century Communities management had indicated that they desired to retain key members of UCP’s management team following the consummation of the proposed merger and that UCP management had reminded the Century Communities representatives that they were not authorized to discuss personal, post-
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closing employment matters. In addition, management presented the transaction committee with five-year UCP projections that management proposed providing to Citi for its use and reliance in connection with Citi’s financial analyses and opinion. The members of management noted that, while UCP traditionally prepares only three-year projections, five-year projections were prepared for purposes of enabling Citi to perform a discounted cash flow analysis of UCP, that the proposed five-year projections were based on UCP’s board-approved three-year business plan, and that management had extrapolated two additional years of projections under a base case scenario and a constrained capital scenario along with the assumptions underlying the two scenarios. After discussion, the transaction committee approved management’s proposed five-year projections for Citi’s use and reliance in connection with its financial analyses and opinion. Also during this meeting, Citi reviewed with the transaction committee certain preliminary financial aspects of Century Communities’ and Party E’s respective proposals and updated the transaction committee as to the solicitation of additional potential counterparties to date, and the representatives of Paul, Weiss reviewed the terms of the latest drafts of the various transaction documents between Century Communities and UCP as well as the UCP directors’ fiduciary duties in connection with the proposed transaction. Additionally, the transaction committee discussed with UCP’s management and advisors the status of efforts to refinance the 2017 Notes, including options for obtaining bridge or backstop financing ensuring UCP’s ability to refinance the 2017 Notes at their maturity in October 2017 on commercially acceptable terms if a business combination transaction had not closed before that time.
Later in the day on April 6, Greenberg Traurig sent Paul, Weiss revised drafts of the merger agreement and Century Communities’ confidential disclosure schedules.
Messrs. Bogue and Francescon also spoke by phone on the evening of April 6. During their conversation, Mr. Francescon stated that he expected the partiespurport to be in a position to sign a definitive merger agreement by the evening of the following Monday, April 10, 2017,complete and to be able to announce the transaction before the trading market opened on April 11, 2017. He also informed Mr. Bogue that Century Communities had concluded that, as a result of anticipated changes to the proposed legislation, the potential negative effects of any future enactment of pending Assembly Bill No. 199 were unlikely to undermine Century Communities’ rationale for a business combination transaction with UCP and that the possible future enactment of Assembly Bill No. 199 would not be a gating item to signing a definitive merger agreement.
On the morning of April 7, 2017, Party F submitted a preliminary proposal for a business combination transaction with UCP. Party F’s preliminary proposal contemplated an all-cash transaction in the range of $14.29 to $16.67 per share of UCP Class A Common Stock, however it also stated among other things that Party F had not yet retained legal or financial advisors and that Party F required two to three months to complete due diligence.
Later in the day on April 7, the transaction committee held a meeting, which was attended by one additional UCP director and representatives of UCP’s management, Citi and Paul, Weiss. During the meeting, Mr. Bogue updated the transaction committee on the status of discussions with Century Communities, including that Century Communities’ representatives were beginning to express a loss of patience with the pace of the transaction process and, in Mr. Bogue’s view, did not appear amenable to continuing negotiations past Monday, April 10. Citi then reviewed with the transaction committee the financial terms of Party F’s preliminary proposal. The representatives of Citi also informed the transaction committee that Party F had executed its confidentiality agreement with UCP only a few days prior on April 4, that Party F appeared to have conducted minimal due diligence of non-public UCP documents provided to Party F through UCP’s virtual data room and that they believed that Party F may have had limited experience with mergers and acquisitions transactions in the United States. The transaction committee, together with UCP’s management and outside financial and legal advisors, then discussed a number of alternative paths to pursue in respect of Party F’s proposal and the various costs and benefits of those alternatives, including in particular the prolonged timeframe Party F had requested to complete its due diligence, the risk of losing the opportunity to enter into a definitive agreement with Century Communities if UCP continued to pursue negotiations with Party F, and the circumstances in which UCP would be permitted to engage in discussions with Party F after entering into a definitive agreement with Century
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Communities, as well as the potential effect that entering into and publicly announcing a definitive agreement with Century Communities could have on Party F’s willingness to make a post-signing, superior proposal in a price range as high as its preliminary proposal. After discussion, the transaction committee directed Citi to inform J.P. Morgan that UCP had received a higher but conditional proposal from another party and request that Century Communities increase its proposed price and significantly reduce the amount of the termination fee payable if UCP terminated the merger agreement to accept a superior proposal from any party contacted before signing a definitive merger agreement with Century Communities. Additionally, in light of the conditional nature of Party F’s proposal and the risks in pursuing further negotiations with Party F at that time, the transaction committee also directed Citi to speak with representatives of Party F regarding the expected provisions of a definitive merger agreement with respect to the ability of third parties to make unsolicited proposals following execution of such agreement. Representatives of Citi subsequently spoke with representatives of each of J.P. Morgan and Party F as directed by the transaction committee.
Later in the day on April 7, Party C informed representatives of Citi that it was withdrawing from the process and would not submit a preliminary proposal.
Representatives of Paul, Weiss and Greenberg Traurig also spoke several times on April 7 to resolve the open issues in the parties’ respective confidential disclosure schedules regarding the UCP employee retention plan and Century Communities’ ability to incur indebtedness between signing and closing. Following these discussions, on April 7 and April 8, 2017, Paul, Weiss and Greenberg Traurig sent one another revised drafts of the merger agreement, UCP confidential disclosure schedules and Century Communities confidential disclosures reflecting the resolution of these issues. Greenberg Traurig also sent several revisions to the draft voting agreement to Cooley and Paul, Weiss resolving the open issue regarding PICO’s and Century Communities’ post-closing covenants with respect to certain tax matters and agreeing to PICO’s reduced (28%) voting obligation if the UCP Board changed its recommendation of the merger agreement due to the occurrence of an intervening event that did not permit UCP to terminate the merger agreement.
Also later in the day on April 7, 2017, Mr. Francescon called Mr. Bogue to discuss the status of negotiations and due diligence reviews of Century Communities and UCP. During this phone call, Mr. Francescon requested that UCP not enter into any bridge or backstop financing facility with respect to the 2017 Notes before closing or the earlier termination of a definitive merger agreement in order to avoid incurring the significant costs that such a facility would impose on UCP and given the limited bases on which Century Communities would not be required to close the proposed merger after entering into a definitive agreement. In addition, he informed Mr. Bogue that Century Communities would insist, as a condition to signing a definitive merger agreement that certain members of the UCP management team whom Century Communities desired to retain post-closing agree to amendments of their existing employment agreements with UCP. The purposes of the requested amendments were to align the employees’ compensation and incentives with Century Communities’ business practices and to reduce the amount of severance and/or accelerated vesting of equity awards potentially payable to the executives immediately following the closing of the transaction. Messrs. Francescon and Bogue spoke several more times throughout the day as well as on April 8 and 9 in respect of these issues.
On the morning of April 8, 2017, J.P. Morgan informed Citi that, despite the receipt by UCP of a preliminary proposal from another party, Century Communities would not agree to increase the proposed merger consideration or agree to a significantly reduced, party-specific termination fee; however, Century Communities indicated that it would agree to reduce the termination fee overall to 3.375% of the total equity value of the proposed transaction.
Beginning on April 8 and continuing through the afternoon of April 10, representatives of Paul, Weiss had a number of discussions with Century Communities’ outside employment and benefits counsel, Fox Rothschild LLP (which we refer to in this proxy statement/prospectus as Fox Rothschild), regarding the amendments to the UCP employment agreements proposed by Century Communities. Paul, Weiss and Fox Rothschild also sent each other a number of drafts of the amendments during this period.
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Also on April 8, Greenberg Traurig sent Cooley and Paul, Weiss a first draft of a joint press release announcing the proposed transaction, assuming the parties would be able to reach a definitive agreement. The parties continued to circulate revised drafts of the joint press release up until the evening of April 10. Paul, Weiss also sent Greenberg Traurig and Cooley revisions to the draft merger agreement, none of which reflected material changes to the terms of the proposed transaction.
Throughout the day on April 9, 2017, and into the morning of April 10, 2017, Mr. Bogue, the other members of the transaction committee and representatives of Paul, Weiss had several discussions regarding Century Communities’ request that UCP not agree to any bridge or backstop financing in respect of the 2017 Notes, as a result of which the transaction committee members determined, with input from UCP’s management and Paul, Weiss, that UCP could bear this risk so long as (1) UCP retained flexibility to negotiate, enter into and incur certain fees under (but not draw on) replacement credit facilities between signing and closing, (2) if closing had not occurred by a date sufficiently in advance of the maturity of the 2017 Notes to afford UCP time to arrange alternative financing, UCP could terminate the merger agreement to refinance the 2017 Notes free from the restrictions on incurring new indebtedness under the merger agreement and (3) the deadline under the merger agreement for filing the Form S-4 registration statement of which this proxy statement/prospectus forms a part were accelerated to permit the timely closing of the proposed merger before the accelerated outside date prior to the maturity of the 2017 Notes just mentioned. Informed by these determinations, Mr. Bogue and the representatives of Paul, Weiss communicated with Mr. Francescon and the representatives of Greenberg Traurig, respectively, several times throughout the day on April 9 and into the morning of April 10, 2017, resulting in additional exceptions to UCP’s ability to incur indebtedness under the merger agreement being included in UCP’s confidential disclosure schedules and revisions to the draft merger agreement so that the outside date would be October 15, 2017 and the deadline to file the Form S-4 registration statement of which this proxy statement/prospectus forms a part would be 21 days after the date of the merger agreement. Paul, Weiss and Greenberg Traurig also sent each other several revised drafts of UCP’s confidential disclosure schedules and the merger agreement reflecting the ongoing discussions and ultimate resolution of these issues throughout the day on April 9 and into the morning of April 10, 2017.
In the early afternoon of April 10, 2017, Greenberg Traurig, Cooley and Paul, Weiss circulated final versions of the merger agreement, voting agreement, UCP confidential disclosure schedules and Century Communities confidential disclosure schedules, and Fox Rothschild and Paul, Weiss circulated final versions of the employment agreement amendments.
The UCP Board and transaction committee held a joint meeting after market close on April 10, 2017, along with representatives of UCP’s management, Citi and Paul, Weiss. Mr. Bogue first reported on the outcome of the weekend’s negotiations and Century Communities’ agreement to reduce the termination fee to 3.375%, to permit UCP certain flexibility to negotiate and enter into but not draw on backstop credit facilities between signing and closing, to accelerate the outside date and deadline for filing the registration statement, and to the final forms of the employment agreement amendments. The members of management in attendance, including Mr. Bogue, then left the meeting to permit the other UCP directors to discuss the employment agreement amendments in executive session with the representatives of Paul, Weiss. During the executive session, the other UCP directors determined that the amendments to the employment agreements generally resulted in reductions to the benefits the employees otherwise would have been entitled to receive following the consummation of a business combination transaction and understood the employees were willing to agree to the amendments as an accommodation to UCP and its stockholders to facilitate reaching a definitive agreement with Century Communities. After the executive session, the representatives of Paul, Weiss again discussed with the UCP Board their fiduciary duties in evaluating the proposed transaction and the final terms of the proposed merger agreement, voting agreement and other ancillary transaction documents. Also at this meeting, Citi reviewed with the UCP Board Citi’s financial analysis of the Merger Consideration and rendered an oral opinion, confirmed bydelivery of a written opinion dated April 10, 2017, to the UCP Board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken described in such opinion, the Merger Consideration to be received by
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holders of UCP Class A Common Stock (other than PICO and its affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. After further discussion, including consideration of the factors described in the section entitled “—UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors” beginning on page 70 of this proxy statement/prospectus, the transaction committee unanimously recommended that the UCP Board approve the proposed merger agreement and, thereafter, the UCP Board unanimously determined that the proposed merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of UCP and itsstockholders and unanimously approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement. The UCP Board also directed the officers of UCP to execute and deliver to Century Communities and thereafter cause UCP to perform the Merger Agreement, resolved that the Merger Agreement be submitted to the UCP stockholders for their approval and recommended that the UCP stockholders voteFOR the adoption of the Merger Agreement. The UCP Board also approved each of the employment agreement amendments and authorized the officers of UCP to execute and deliver them on behalf of UCP.
Later on April 10, Mr. Bogue executed and delivered the Merger Agreement and Voting Agreement on behalf of UCP, Mr. Francescon executed and delivered the Merger Agreement and Voting Agreement on behalf of Century Communities and Mr. Webb executed and delivered the Voting Agreement on behalf of PICO.
Prior to the opening of the U.S. financial markets on April 11, 2017, UCP and Century Communities issued a joint press release announcing the execution of the Merger Agreement and the proposed Merger.
UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors
In evaluating the Merger and other transactions contemplated by the Merger Agreement, the UCP Board consulted with UCP senior management and UCP’s outside legal and financial advisors and, in the course of reaching its determination to approve the Merger Agreement and to recommend that UCP stockholders voteFOR the proposal to adopt the Merger Agreement, the UCP Board considered a wide and complex range of factors, including the following that weighed positively in favor of the its decision, among others and not necessarily in order of relative importance:
Merger Consideration
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Strategic Considerations
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Negotiations with Century Communities and Other Potential Acquirers
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Likelihood of Completion
Opinion of UCP’s Financial Advisor
Terms of the Merger Agreement and Certain Other Agreements
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Stockholder Approval and Availability of Appraisal Rights
The UCP Board also considered a number of potential risks and uncertainties in its deliberations concerning the Merger and the other transactions contemplated by the Merger Agreement, including, but not limited to, the following (not necessarily in order of relative importance):
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The UCP Board concluded that these potential risks and uncertainties were outweighed by the benefits that the UCP Board expected UCP and its stockholders to achieve as a result of the Merger. The UCP Board realized that there can be no assurance about future results, including results considered or expected as disclosed in the foregoing reasons.
The foregoing discussion of information and material factors considered by the UCP Board is not intended to be exhaustive, but it does describe the principal factors considered by the UCP Board as aforementioned herein. In view of the variety of factors and substantial amount of information considered in connection with its evaluation of the Merger Agreement and the Merger, the UCP Board did not find it practicable to, and did not, seek to quantify or otherwise assign relative weights to the factors summarized above in reaching its conclusions and in making its recommendation to UCP stockholders to affirmatively vote for the adoption of the Merger Agreement. In addition, each individual member of the UCP Board applied his or her own personal business judgment to the process and may have given different weight to different factors. Except as specifically described above, the UCP Board did not reach any collective view that any individual factor described above either supported or did not support the overall recommendation of the UCP Board. The factors, potential risks and uncertainties contained in this explanation of the UCP Board’s reasons for the Merger and other information presented in this section contain information that is forward-looking in nature and, therefore, should be read in light of the factors discussed in “Cautionary Information Regarding Forward-Looking Statements” beginning on page 32 of this proxy statement/prospectus.
In considering the recommendation of the UCP Board that UCP stockholders voteFOR the adoption of the Merger Agreement andFOR the adjournment proposal, UCP stockholders should be aware and take into account the fact that certain UCP directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of UCP stockholders generally and that may create potential conflicts of interest. The UCP Board was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation, of the Merger, in approving the Merger Agreement and in
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recommending that UCP stockholders voteFOR the adoption of the Merger Agreement andFOR the adjournment proposal. For more information on the interests of certain UCP directors and executive officers, see “—Interests of Certain UCP Directors and Officers in the Merger” beginning on page 89 of this proxy statement/prospectus.
Opinion of UCP’s Financial Advisor
UCP engaged Citi as its financial advisor in connection with the proposed Merger. In connection with this engagement, UCP requested that Citi evaluate the fairness, from a financial point of view, of the Merger Consideration to be received by holders of UCP Class A Common Stock (other than PICO and its affiliates) pursuant to the Merger Agreement. On April 10, 2017, at a meeting of the UCP Board held to evaluate the Merger, Citi rendered an oral opinion, confirmed by delivery of a written opinion dated April 10, 2017, to the UCP Board to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken described in such opinion, the Merger Consideration to be received by holders of UCP Class A Common Stock (other than PICO and its affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.
The full text of Citi’s written opinion, dated April 10, 2017, to the UCP Board, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, is attached asAnnex C to this proxy statement/prospectus and is incorporated herein by reference. The description of Citi’s opinion set forth below is qualified in its entirety by reference to the full text of Citi’s opinion.Citi’s opinion was provided for the informationall of the UCP Board (interms, conditions and provisions of the Registration Rights Agreement. For further information, please refer to the Registration Rights Agreement filed as an exhibit to the registration statement of which this prospectus forms a part.
Pursuant to the Registration Rights Agreement, we agreed to use our commercially reasonable efforts to cause the registration statement of which this prospectus forms a part to become effective by January 20, 2020 (240 days after the original issuance date of the Initial Notes), and to cause the Exchange Offer to be consummated by February 17, 2020 (270 days after the original issuance date of the Initial Notes).
The form and terms of the Exchange Notes will be identical in all material respects to the form and terms of the Initial Notes, except that the offer and sale of the Exchange Notes will be registered under the Securities Act, and the Exchange Notes will have a different CUSIP number and will not contain terms with respect to transfer restrictions, registration rights and additional payments upon a failure to fulfill certain of our obligations under the Registration Rights Agreement. The Exchange Notes and the Initial Notes (to the extent not surrendered in exchange for Exchange Notes in the Exchange Offer) will be treated together as a single series of debt securities for all purposes under the Indenture and will vote together on all matters under the Indenture.
Pursuant to the Registration Rights Agreement and under the circumstances set forth below, we agreed to use our commercially reasonable efforts to cause the SEC to declare effective a shelf registration statement with respect to the resale of the Initial Notes within the time periods specified in the Registration Rights Agreement and to keep the shelf registration statement effective until the earlier of (i) two years from the original issuance
date of the Initial Notes, and (ii) the date on which no notes are Transfer Restricted Securities (as defined in the Registration Rights Agreement). These circumstances include:
if applicable interpretations of the staff of the SEC do not permit us to effect the Exchange Offer;
if, for any other reason, we do not consummate the Exchange Offer within 270 days of the original issuance date of the Initial Notes;
if an initial purchaser of the Initial Notes notifies us following consummation of the Exchange Offer that Initial Notes held by it are not eligible to be exchanged for Exchange Notes in the Exchange Offer; or
certain holders (other than participating broker-dealers) are prohibited by law or SEC policy from participating in the Exchange Offer or may not resell the Exchange Notes acquired by them in the Exchange Offer to the public without delivering a prospectus.
If we fail to comply with specified obligations under the Registration Rights Agreement, we will be required to pay additional cash interest to holders of the Initial Notes. Such additional interest will generally be required to be paid if:
we fail to file any of the registration statements required by the Registration Rights Agreement on or prior to the date specified for such filing;
on or prior to the 270th day after the original issuance date of the Initial Notes, the Exchange Offer has not been consummated and the shelf registration statement has not been declared effective by the SEC;
the shelf registration statement (if required in lieu of the Exchange Offer) has not been declared effective by the SEC on or prior to the applicable date specified in the Registration Rights Agreement; or
after the registration statement of which this prospectus forms a part or the shelf registration statement, as the case may be, is effective, such registration statement thereafter ceases to be effective or usable (subject to certain exceptions).
If you wish to exchange your Initial Notes for Exchange Notes in the Exchange Offer, you will be required to represent to us that, among other things:
you will acquire the Exchange Notes in the ordinary course of your business;
you are not engaged in, and do not intend to engage in, a distribution of the Exchange Notes;
you do not have an arrangement or understanding with any person or entity to participate in the distribution of the Exchange Notes; and
you are not an “affiliate” of ours or of any guarantor of the Notes within the meaning of Rule 405 under the Securities Act.
In addition, each broker-dealer that will be receiving Exchange Notes for its capacityown account in exchange for Initial Notes must represent that such Initial Notes were acquired by that broker-dealer as such)a result of market-making activities or other trading activities, and must acknowledge that it will deliver a prospectus that meets the requirements of the Securities Act in connection with its evaluationany resale of the Merger Consideration from a financial pointExchange Notes. See “Plan of viewDistribution.”
Resale of Exchange Notes
Based on interpretations by the SEC set forth in no-action letters issued to third parties, we believe that you may resell or otherwise transfer Exchange Notes issued in the Exchange Offer without complying with the registration and did not address any other terms, aspects or implicationsprospectus-delivery provisions of the Merger. Citi expressed no view asSecurities Act, if:
you are acquiring the Exchange Notes in the ordinary course of your business;
you do not have an arrangement or understanding with any person to and its opinion did not address, the underlying business decision of UCP to effect or enter into the Merger, the relative meritsparticipate in a distribution of the Merger as compared to any alternative business strategies that might exist for UCPExchange Notes;
you are not our “affiliate” or the effectan “affiliate” of any other transaction which UCP mightguarantor of the Notes as defined by Rule 405 of the Securities Act; and
you are not engaged in, and do not intend to engage in, a distribution of the Exchange Notes.
If you are our “affiliate,” or are engaging in, or intend to engage in, or consider. Citi’s opinionhave any arrangement or understanding with any person to participate in, a distribution of the Exchange Notes, or are not acquiring the Exchange Notes in the ordinary course of your business, then:
you cannot rely on the position of the SEC set forth in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling, dated July 2, 1993, or similar no-action letters; and
in the absence of an exception from the position stated immediately above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Notes.
This prospectus may be used for an offer to resell, or for the resale or other transfer of Exchange Notes only as specifically set forth in this prospectus. With regard to broker-dealers, only broker-dealers that acquired the Initial Notes as a result of market-making activities or other trading activities may participate in the Exchange Offer. Each broker-dealer that receives Exchange Notes for its own account in exchange for Initial Notes where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of the Exchange Notes. See “Plan of Distribution” for more details regarding the transfer of Exchange Notes.
Terms of the Exchange Offer
On the terms and subject to the conditions set forth in this prospectus and in the accompanying letters of transmittal, we will accept for exchange in the Exchange Offer any Initial Notes that are validly tendered and not validly withdrawn prior to the expiration of the Exchange Offer. Initial Notes may only be tendered in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000. We will issue $2,000 principal amount or an integral multiple of $1,000 in excess thereof of Exchange Notes in exchange for a corresponding principal amount of Initial Notes surrendered in the Exchange Offer. In exchange for each Initial Note surrendered in the Exchange Offer, we will issue Exchange Notes with a like principal amount.
The form and terms of the Exchange Notes will be identical in all material respects to the form and terms of the Initial Notes, except that the offer and sale of the Exchange Notes will be registered under the Securities Act and the Exchange Notes will have a different CUSIP number and will not contain terms with respect to transfer restrictions, registration rights and additional payments upon a failure to fulfill certain of our obligations under the Registration Rights Agreement. The Exchange Notes will be issued under and entitled to the benefits of the Indenture that authorized the issuance of the Initial Notes. The Exchange Notes and the Initial Notes (to the extent not surrendered in exchange for Exchange Notes in the Exchange Offer) will be treated together as a single series of debt securities for all purposes under the Indenture and will vote together on all matters under the Indenture. For a description of the Indenture, see “Description of Notes.”
The Exchange Offer is not intendedconditioned upon any minimum aggregate principal amount of Initial Notes being tendered for exchange. As of the date of this prospectus, $500,000,000 in aggregate principal amount of the Initial Notes is outstanding. This prospectus and the letters of transmittal are being sent to all registered holders of Initial Notes. There will be no fixed record date for determining registered holders of Initial Notes entitled to participate in the Exchange Offer.
We intend to conduct the Exchange Offer in accordance with the provisions of the Registration Rights Agreement, the applicable requirements of the Exchange Act, and the rules and regulations of the SEC. Initial Notes that are not tendered for exchange in the Exchange Offer will remain outstanding and continue to accrue interest and be entitled to the rights and benefits that such holders have under the Indenture relating to such holders’ Initial Notes.
We will be deemed to have accepted for exchange properly tendered Initial Notes when we have given written notice of the acceptance to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purposes of receiving the Exchange Notes from us and delivering Exchange Notes to holders. Subject to the terms of the Registration Rights Agreement, we expressly reserve the right to amend or terminate the Exchange Offer and to refuse to accept Initial Notes for exchange upon the occurrence of any of the conditions specified below under “—Conditions to the Exchange Offer.”
If you tender your Initial Notes in the Exchange Offer, you will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of Initial Notes. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. It is important that you read the information under the caption “—Fees and Expenses” below for more details regarding fees and expenses incurred in the Exchange Offer.
Expiration Date; Extensions; Amendments
As used in this prospectus, the term “Expiration Date” means 5:00 P.M., New York City time, on the evening of [ the 25th business day following commencement of the Exchange Offer ], 2020. However, if we, in our sole discretion, extend the period of time for which the Exchange Offer is open, the term “Expiration Date” will mean the latest time and date to which we shall have extended the expiration of the Exchange Offer.
To extend the period of time during which the Exchange Offer is open, we will notify the Exchange Agent of any extension by written notice, followed by notification by press release or other public announcement to the registered holders of the Initial Notes no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. The notification will set forth, among other things, the approximate number of Initial Notes tendered to date.
We reserve the right, in our sole discretion:
to delay accepting for exchange any Initial Notes (only in the case that we amend or extend the Exchange Offer);
to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under “—Conditions to the Exchange Offer” have not been satisfied by giving written notice of such delay, extension or termination to the Exchange Agent; and
subject to the terms of the Registration Rights Agreement, to amend the terms of the Exchange Offer in any manner. In the event of a material change in the Exchange Offer, including the waiver of a material condition, we will extend the offer period, if necessary, so that at least five business days remain in such offer period following notice of the material change.
Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by written notice to the registered holders of the Initial Notes. If we amend an Exchange Offer in a manner that we determine to constitute a material change, we will promptly disclose the amendment in a manner reasonably calculated to inform the holders of applicable Initial Notes.
Conditions to the Exchange Offer
Despite any other term of the Exchange Offer, we will not be required to accept for exchange, or to issue Exchange Notes in exchange for, any Initial Notes, and we may terminate or amend the Exchange Offer as provided in this prospectus prior to the Expiration Date if in our reasonable judgment:
the Exchange Offer, or the making of any exchange by a holder violates any applicable law or interpretation of the SEC; or
any action or proceeding has been instituted or threatened in writing in any court or by or before any governmental agency with respect to the Exchange Offer that, in our judgment, would reasonably be expected to impair our ability to proceed with the Exchange Offer.
In addition, we will not be obligated to accept for exchange the Initial Notes of any holder that has not made to us:
the representations described under “—Purpose and Effect of the Exchange Offer” and “—Procedures for Tendering Initial Notes” and “Plan of Distribution;” and
any other representations as may be reasonably necessary under applicable SEC rules, regulations, or interpretations to make available to us an appropriate form for registration of the offer and sale of the Exchange Notes under the Securities Act.
We will return any Initial Notes that we do not accept for exchange for any reason without expense to the tendering holder promptly after the Expiration Date or termination of the Exchange Offer.
We expressly reserve the right to amend or terminate the Exchange Offer and to reject for exchange any Initial Notes not previously accepted for exchange upon the occurrence of any of the conditions of the Exchange Offer specified above. We will give oral or written notice of any non-acceptance or termination to the registered holders of the Initial Notes as promptly as practicable.
These conditions are for our sole benefit, and we may assert them regardless of the circumstances that may give rise to them or waive them in whole or in part at any or at various times prior to the Expiration Date in our sole discretion. If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of such right. Each such right will be deemed an ongoing right that we may assert at any time or at various times prior to the Expiration Date.
In addition, we will not accept for exchange any Initial Notes tendered, and will not issue Exchange Notes in exchange for any such Initial Notes, if at such time any stop order is threatened or in effect with respect to the registration statement of which this prospectus forms a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended.
Procedures for Tendering Initial Notes
To tender your Initial Notes in the Exchange Offer, you must comply with either of the following:
complete, sign and date the letter of transmittal or a facsimile of the letter of transmittal, have the signature(s) on the letter of transmittal guaranteed if required by the letter of transmittal and mail or deliver such letter of transmittal or facsimile thereof to the Exchange Agent at the address set forth below under “—Exchange Agent” prior to the Expiration Date; or
comply with DTC’s Automated Tender Offer Program procedures described below.
In addition, you must comply with either of the following conditions:
the Exchange Agent must receive certificates for Initial Notes along with the letter of transmittal prior to the Expiration Date;
the Exchange Agent must receive a timely confirmation of book-entry transfer of Initial Notes into the Exchange Agent’s account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent’s message prior to the Expiration Date; or
you must comply with the guaranteed delivery procedures described below.
Your tender, if not withdrawn prior to the Expiration Date, constitutes an agreement between us and you upon the terms and subject to the conditions described in this prospectus and the letter of transmittal.
The method of delivery of Initial Notes, letters of transmittal and all other required documents to the Exchange Agent is at your election and risk. We recommend that instead of delivery by mail, you use an overnight or hand delivery service, properly insured. In all cases, you should allow sufficient time to assure timely delivery to the Exchange Agent before the Expiration Date. You should not send letters of transmittal or certificates representing Initial Notes to us. You may request that your broker, dealer, commercial bank, trust company or nominee effect the above transactions for you.
If you are a beneficial owner whose Initial Notes are held in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your Initial Notes, you should promptly instruct the registered holder to tender Initial Notes on your behalf. If you wish to tender the Initial Notes yourself, you must, prior to completing and executing the letter of transmittal and delivering your Initial Notes, either:
make appropriate arrangements to register ownership of the Initial Notes in your name; or
obtain a properly completed bond power from the registered holder of Initial Notes.
The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. We are not responsible for any delays in any such transfer.
Signatures on the letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the Financial Industry Regulatory Authority, Inc., a commercial bank or trust company having an office or correspondent in the United States or another “eligible guarantor institution” within the meaning of Rule 17A(d)-15 under the Exchange Act, unless the Initial Notes surrendered for exchange are tendered:
by a registered holder of the Initial Notes who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the letter of transmittal; or
for the account of an eligible guarantor institution.
If the letter of transmittal is signed by a person other than the registered holder of any Initial Notes listed on the Initial Notes, such Initial Notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder’s name appears on the Initial Notes and an eligible guarantor institution must guarantee the signature on the bond power.
If the letter of transmittal or any certificates representing Initial Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, those persons should also so indicate when signing and, unless waived by us, they should also submit evidence satisfactory to us of their authority to so act.
Any financial institution that is a participant in DTC’s system may use DTC’s Automated Tender Offer Program to tender. Participants in the program may, instead of physically completing and signing the letter of transmittal and delivering it to the Exchange Agent, electronically transmit their acceptance of the exchange by causing DTC to transfer the Initial Notes to the Exchange Agent in accordance with DTC’s Automated Tender Offer Program procedures for transfer. DTC will then send an agent’s message to the Exchange Agent. The term
“agent’s message” means a message transmitted by DTC, received by the Exchange Agent and forming part of the book-entry confirmation, which states that:
DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering Initial Notes that are the subject of the book-entry confirmation;
the participant has received and agrees to be bound by the terms of the letter of transmittal, or in the case of an agent’s message relating to guaranteed delivery, that such participant has received and agrees to be bound by the notice of guaranteed delivery; and
we may enforce that agreement against such participant.
DTC is referred to herein as a “book-entry transfer facility.”
Acceptance of Exchange Notes
In all cases, we will promptly issue Exchange Notes for Initial Notes that we have accepted for exchange under the Exchange Offer only after the Exchange Agent timely receives:
Initial Notes or a timely book-entry confirmation of such Initial Notes into the Exchange Agent’s account at the book-entry transfer facility; and
a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message.
By tendering Initial Notes pursuant to the Exchange Offer, you will represent to us that, among other things:
you are acquiring the Exchange Notes in the ordinary course of your business;
you are not engaged in, and do not intend to engage in, a distribution of the Exchange Notes;
you do not have an arrangement or understanding with any person or entity to participate in the distribution of the Exchange Notes; and
you are not an “affiliate” of ours or of any guarantor of the Notes within the meaning of Rule 405 under the Securities Act.
In addition, each broker-dealer that will be receiving Exchange Notes for its own account in exchange for Initial Notes must represent that such Initial Notes were acquired by that broker-dealer as a result of market-making activities or other trading activities, and must acknowledge that it will deliver a prospectus that meets the requirements of the Securities Act in connection with any resale of the Exchange Notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. See “Plan of Distribution.”
Our interpretation of the terms and conditions of the Exchange Offer, including the letters of transmittal and the instructions to the letters of transmittal, and our resolution of all questions as to the validity, form, eligibility, including time of receipt, and acceptance of Initial Notes tendered for exchange will be final and binding on all parties. We reserve the absolute right to reject any and all tenders of any particular Initial Notes not properly tendered or to not accept any particular Initial Notes if the acceptance might, in our or our counsel’s judgment, be unlawful. We also reserve the absolute right to waive any defects or irregularities as to any particular Initial Notes prior to the Expiration Date.
Unless waived, any defects or irregularities in connection with tenders of Initial Notes for exchange must be cured prior to the Expiration Date. Neither we, the Exchange Agent, nor any other person will be under any duty to give notification of any defect or irregularity with respect to any tender of Initial Notes for exchange, nor will we or any of them incur any liability for any failure to give notification. Any Initial Notes received by the
Exchange Agent that are not properly tendered and as to which the irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holder, unless otherwise provided in the letter of transmittal, promptly after the expiration or termination of the Exchange Offer.
Book-Entry Delivery Procedures
Promptly after the date of this prospectus, the Exchange Agent will establish an account with respect to the Initial Notes at DTC and, as the book-entry transfer facility, for purposes of the Exchange Offer. Any financial institution that is a participant in the book-entry transfer facility’s system may make book-entry delivery of the Initial Notes by causing the book-entry transfer facility to transfer those Initial Notes into the Exchange Agent’s account at the facility in accordance with the facility’s procedures for such transfer. To be timely, book-entry delivery of Initial Notes requires receipt of a confirmation of a book-entry transfer, which we refer to as a “book-entry confirmation,” prior to the Expiration Date. In addition, although delivery of Initial Notes may be effected through book-entry transfer into the Exchange Agent’s account at the book-entry transfer facility, the letter of transmittal or a manually signed facsimile thereof, together with any required signature guarantees and any other required documents, or an “agent’s message,” as defined below, in connection with a book-entry transfer, must, in any case, be delivered or transmitted to and received by the Exchange Agent at its address set forth on the cover page of the letter of transmittal prior to the Expiration Date to receive Exchange Notes for tendered Initial Notes, or the guaranteed delivery procedure described below must be complied with. Tender will not be deemed made until such documents are received by the Exchange Agent. Delivery of documents to the book-entry transfer facility does not constitute delivery to the Exchange Agent.
Holders of Initial Notes who are unable to deliver confirmation of the book-entry tender of their Initial Notes into the Exchange Agent’s account at the book-entry transfer facility or all other documents required by the letter of transmittal to the Exchange Agent on or prior to the Expiration Date must tender their Initial Notes according to the guaranteed delivery procedures described below.
Guaranteed Delivery Procedures
If you wish to tender your Initial Notes, but your Initial Notes are not immediately available or you cannot deliver your Initial Notes, the letter of transmittal or any other required documents to the Exchange Agent or comply with the procedures under DTC’s Automatic Tender Offer Program, prior to the Expiration Date, you may still tender if:
the tender is made through an eligible guarantor institution;
prior to the Expiration Date, the Exchange Agent receives from such eligible guarantor institution either a recommendationproperly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail or hand delivery or a properly transmitted agent’s message and notice of guaranteed delivery, that (1) sets forth your name and address, the certificate number(s) of such Initial Notes and the principal amount of Initial Notes tendered; (2) states that the tender is being made thereby; and (3) guarantees that, within three New York Stock Exchange trading days after the Expiration Date, the letter of transmittal, or facsimile thereof, together with the Initial Notes or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the Exchange Agent; and
the Exchange Agent receives the properly completed and executed letter of transmittal or facsimile thereof, as well as certificate(s) representing all tendered Initial Notes in proper form for transfer or a book-entry confirmation of transfer of the Initial Notes into the Exchange Agent’s account at DTC and all other documents required by the letter of transmittal, within three business days after the Expiration Date.
Upon request, the Exchange Agent will send to you a notice of guaranteed delivery if you wish to tender your Initial Notes according to the guaranteed delivery procedures.
Withdrawal Rights
Except as otherwise provided in this prospectus, you may withdraw your tender of Initial Notes at any stockholdertime prior to the Expiration Date. For a withdrawal to be effective:
the Exchange Agent must receive a written notice, which may be by telegram, telex, facsimile or letter, of withdrawal at its address set forth below under “—Exchange Agent;” or
you must comply with the appropriate procedures of DTC’s Automated Tender Offer Program system.
Any notice of withdrawal must:
specify the name of the person who tendered the Initial Notes to be withdrawn;
identify the Initial Notes to be withdrawn, including the certificate numbers and principal amount of the Initial Notes; and
where certificates for Initial Notes have been transmitted, specify the name in which such Initial Notes were registered, if different from that of the withdrawing holder.
If certificates for Initial Notes have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates, you must also submit:
the certificate numbers of the particular certificates to be withdrawn; and
a signed notice of withdrawal with signatures guaranteed by an eligible guarantor institution, unless you are an eligible guarantor institution.
If Initial Notes have been tendered pursuant to the procedures for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Initial Notes and otherwise comply with the procedures of the facility. We will determine, in our reasonable discretion, all questions as to how such stockholderthe validity, form and eligibility, including time of receipt of notices of withdrawal, and our determination will be final and binding on all parties. Any Initial Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Initial Notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder, without cost to the holder, or, in the case of book-entry transfer, the Initial Notes will be credited to an account at the book-entry transfer facility, promptly after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Initial Notes may be retendered by following the procedures described under “—Procedures for Tendering Initial Notes” above at any time on or prior to the Expiration Date.
Exchange Agent
U.S. Bank National Association has been appointed as the Exchange Agent for the Exchange Offer. U.S. Bank National Association also acts as trustee under the Indenture governing the Notes. You should votedirect all executed letters of transmittal and all questions and requests for assistance, requests for additional copies of this prospectus or act on any mattersof the letters of transmittal, and requests for notices of guaranteed delivery to the Exchange Agent addressed as follows:
U.S. Bank National Association
Corporate Trust Support Services
111 Fillmore Avenue East
St. Paul, MN 55107
Attention: Specialized Finance Department
(if by mail, registered or certified recommended)
By Facsimile: | By Email: | |
(651) 466-7372 Attention: Specialized Finance Confirm receipt by calling: (651) 466-7150 | escrowexchangepayments@usbank.com |
If you deliver the letter of transmittal to an address other than the one set forth above, or transmit instructions via facsimile other than the one set forth above, that delivery or those instructions will not be effective.
Fees and Expenses
The Registration Rights Agreement provides that we will bear all expenses in connection with the performance of our obligations relating to the proposed Mergerregistration of the Exchange Notes and the conduct of the Exchange Offer. These expenses include registration and filing fees, accounting and legal fees and printing costs, among others. We will pay the Exchange Agent reasonable and customary fees for its services and reasonable out-of-pocket expenses. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for customary mailing and handling expenses incurred by them in forwarding this prospectus and related documents to their clients that are holders of Initial Notes and for handling or otherwise.tendering for such clients.
In arrivingWe have not retained any dealer-manager in connection with the Exchange Offer and will not pay any fee or commission to any broker, dealer, nominee or other person for soliciting tenders of Initial Notes pursuant to the Exchange Offer.
Accounting Treatment
We will record the Exchange Notes in our accounting records at its opinion, Citi:the same carrying value as the Initial Notes, which is the aggregate principal amount as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes upon the consummation of the Exchange Offer. We will capitalize the expenses of the Exchange Offer and amortize them over the life of the Notes.
Transfer Taxes
We will pay all transfer taxes, if any, applicable to the exchanges of Initial Notes under the Exchange Offer. The tendering holder, however, will be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if:
certificates representing Initial Notes for principal amounts not tendered or accepted for exchange are to Citi on April 10, 2017,be delivered to, or are to be issued in the name of, any person other than the Merger Agreement;registered holder of Initial Notes tendered;
tendered Initial Notes are registered in the name of any person other representatives and advisorsthan the person signing the letter of UCP and certain senior officers and other representatives and advisors of Century Communities concerning the businesses, operations and prospects of UCP and Century Communities;transmittal; or
a transfer tax is imposed for any reason other business and financial information relating to UCP and Century Communities provided to or discussed with Citi bythan the managementsexchange of UCP and Century Communities, including certain internal financial forecasts and other information and data relating to UCP reflecting, for fiscal years 2020 and 2021, alternative home delivery and leverage scenarios for UCP and certain internal financial forecasts and other information and data relating to Century Communities, and discussedInitial Notes under the Exchange Offer.
If satisfactory evidence of payment of such taxes is not submitted with the managementletter of UCPtransmittal, the potential strategic implications and financial and operational benefits anticipated byamount of such transfer taxes will be billed to that tendering holder.
Holders who tender their Initial Notes for exchange will not be required to pay any transfer taxes. However, holders who instruct us to register Exchange Notes in the managementname of, UCPor request that Initial Notes not tendered or not accepted in the Exchange Offer be returned to, result froma person other than the Merger;
Consequences of Failure to Exchange
If you do not exchange your Initial Notes for Exchange Notes under the financial terms ofExchange Offer, your untendered Initial Notes will remain subject to the Mergerrestrictions on transfer as set forth in the Merger Agreement in relation to, among other things, current and historical market prices and trading volumes of UCP Class A Common Stock and Century Communities Common Stock, historical and projected operating data of UCP and Century Communities,Indenture and the capitalization and financial conditionlegend printed on the Initial Notes as a consequence of UCP and Century Communities;
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In general, you may not offer or sell your Initial Notes except in transactions that are registered under the internal financial forecastsSecurities Act or if the offer or sale is exempt from, or not subject to, the registration requirements of the Securities Act and other informationapplicable state securities laws. Except as required by the Registration Rights Agreement, we do not intend to register resales of the Initial Notes under the Securities Act.
To the extent that Initial Notes are tendered and data relatingaccepted in the Exchange Offer, the trading market for Initial Notes could be adversely affected.
Other
Participating in the Exchange Offer is voluntary, and you should carefully consider whether to UCP, Century Communities and the Merger referredparticipate. You are urged to above; and
In rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of allconsult your financial and other information and data publicly availabletax advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered Initial Notes in open market or providedprivately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any Initial Notes that are not tendered in the Exchange Offer or, otherwise reviewedexcept as required by or discussed with Citi and upon the assurances of the managements and other representatives of UCP and Century Communities that they were not awareRegistration Rights Agreement, to file a registration statement to permit resales of any relevant information that was omitted or that remained undisclosed to Citi. With respect to the financial forecasts and other information and data relating to UCP that Citi was directed to utilizeuntendered Initial Notes.
Certain terms used in its analyses (including, without limitation, as to tax attributes expected by the management of UCP to be utilized by UCP on a standalone basis), Citi was advised by the management of UCP and Citi assumed, with UCP’s consent, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of UCP as to, and were a reasonable basis upon which to evaluate, the future financial performance of UCPthis section are defined under the alternative scenarios reflected thereincaption “—Certain Definitions” below. In this section, the words “Company,” “we” and the other matters covered thereby. With respect to the financial forecasts and other information and data relating“our” refer only to Century Communities, Inc. and not to any of its subsidiaries. Certain defined terms used in this description but not defined below under the caption “—Certain Definitions” have the meanings assigned to them in the Indenture.
On May 23, 2019, the Company issued $500 million in aggregate principal amount of 6.750% Senior Notes due 2027 (which we refer to as the “Initial Notes”) in a private offering pursuant to Rule 144A and Regulation S under the Securities Act.
The Company is offering to exchange up to $500 million in aggregate principal amount of 6.750% Senior Notes due 2027 that Citi was directedhave been registered under the Securities Act (which we refer to utilizeas the “Exchange Notes”) for any or all validly tendered and not validly withdrawn Initial Notes on the terms and subject to the conditions set forth in its analyses, Citi was advised bythis prospectus and the managementaccompanying letter of Century Communitiestransmittal (which we refer to as the “Exchange Offer”). The form and Citi assumed, with UCP’s consent, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgmentsterms of the managementExchange Notes will be identical in all material respects to the form and terms of Century Communities as to,the Initial Notes, except that the offer and were a reasonable basis upon which to evaluate,sale of the future financial performance of Century CommunitiesExchange Notes will be registered under the Securities Act and the other matters covered thereby. Citi relied, at UCP’s direction, upon the assessments of the managements of UCPExchange Notes will have a different CUSIP number and Century Communities as to, among other things, (i) the potential impact on UCP and Century Communities ofwill not contain certain market, competitive, cyclical, seasonal and other trends and developments in and prospects for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the real estate and residential homebuilding industries and related credit and financial markets, includingterms with respect to transfer restrictions, registration rights and additional payments upon a failure to fulfill certain of our obligations under the housing markets in which UCP and Century Communities operate, (ii) existing and future relationships, agreements and arrangements with,Registration Rights Agreement. The Exchange Notes and the abilityInitial Notes (to the extent not surrendered in exchange for Exchange Notes in the Exchange Offer) will be treated as a single series of notes under the Indenture, and will vote as a single class of notes for all matters submitted to attract, retain and/or replace, key employees, suppliers and other commercial relationshipsa vote of UCP and Century Communities and (iii)Holders under the ability to integrate the businesses of UCP and Century Communities. Citi assumed, with UCP’s consent, that there would be no developments with respect to any such matters that would have an adverse effect on UCP, Century Communities or the Merger or that otherwise would be meaningful in any respect to Citi’s analyses or opinion.Indenture.
Citi did not make and was not provided with an independent evaluation or appraisal of the assets or liabilities (contingent, derivative, off-balance sheet, accrued or otherwise) of UCP, Century Communities or any other entity and Citi did not make any physical inspection of the properties or assets of UCP, Century Communities or any other entity. Citi also did not make any analysis of, nor did Citi express any opinion or view as to, the adequacy or sufficiency of reserves for warranty or other claims with respect to home sales or any other matters, and Citi assumed, with UCP’s consent, that such reservesThe Initial Notes were, and on a pro forma basis wouldthe Exchange Notes will be, issued under the Indenture, dated as of May 23, 2019 (which we refer to as the “Indenture,” as it has been and may be in the aggregate appropriatefuture amended and/or supplemented from time to cover such warrantytime), by and other claims. Citi assumed, with UCP’s consent, thatamong the Merger would be consummated in accordance with its terms (including, without limitation, with respectCompany, the guarantors party thereto (which we refer to as the exchange by PICO of membership interests in a subsidiary of UCP for shares of UCP Class A Common Stock)“Guarantors”), and in compliance with all applicable laws, documentsU.S. Bank National Association, as trustee (which we refer to as the “Trustee”). The term “Notes” means the Initial Notes and other requirements, without waiver, modification or amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases, waivers and agreements for the Merger, no delay, limitation, restriction or condition, including any divestiture or other requirements, amendments or modifications, would be imposed or occur that would have an adverse effect on UCP, Century Communities or the Merger or thatExchange Notes, unless otherwise would be meaningful in any respect to Citi’s analyses or opinion. Citi also assumed, with UCP’s consent, that the Merger would qualify for the intended tax treatment contemplated by the Merger Agreement. Citi did not express any opinion or view as to the actual value of Century Communities Common
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Stock when issued in the Merger or the prices at which Century Communities Common Stock (or any other securities of or relating to Century Communities) or UCP Class A Common Stock (or any other securities of or relating to UCP) would trade or otherwise be transferable at any time. Representatives of UCP advised Citi, and Citi also assumed, that the finalindicated. The terms of the Merger Agreement would not vary materially fromNotes include those set forthstated in the execution version reviewed by Citi. Citi did not express any opinion or view with respect to tax, accounting, regulatory, legal or similar matters, including tax or other consequencesIndenture and those made part of the Merger, and Citi relied, with UCP’s consent, upon the assessments of representatives of UCP as to such matters.
Citi’s opinion addressed only the fairness, from a financial point of view and as of its date, of the Merger Consideration (to the extent expressly specified in the opinion), without regard to individual circumstances of specific holders of, or any rights, preferences, restrictions or limitations that may be attributable to, shares of UCP Class A Common Stock or other securities of UCP or its affiliates. Citi’s opinion did not address any other terms, aspects or implications of the Merger, including, without limitation, the form of the Merger Consideration, the form or structure of the Merger, any exchange agreement, voting support and transfer restriction agreement, tax receivable agreement or any other agreement, arrangement or understanding to be entered into in connection with or contemplatedIndenture by the Merger or otherwise. Citi expressed no view as to, and its opinion did not address, the underlying business decision of UCP to effect or enter into the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for UCP or the effect of any other transaction which UCP might engage in or consider. Citi also expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation or other payments to any officers, directors or employees of any partiesreference to the Merger or any affiliates of such parties, or any class of such persons, relative to the Merger Consideration or otherwise. Citi’s opinion was necessarily based upon information available, and financial, stock market and other conditions and circumstances existing and disclosed, to Citi as of the date of its opinion. Although subsequent developments may affect Citi’s opinion, Citi has no obligation to update, revise or reaffirm its opinion. As the UCP Board was aware, the credit, financial and stock markets, and the regional housing markets and industries in which UCP and Century Communities operate, have experienced and continue to experience volatility and Citi expressed no opinion or view as to any potential effects of such volatility on UCP or Century Communities (or their respective businesses) or the Merger. In connection with its engagement and at UCP’s direction, Citi held discussions with selected third parties regarding their potential interest in a possible acquisition transaction involving UCP. The issuance of Citi’s opinion was authorized by Citi’s fairness opinion committee.
In preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described below. The summary below is not a complete description of Citi’s opinion or the analyses underlying, and factors considered in connection with, Citi’s opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Citi arrived at its ultimate opinion based on the results of all analyses undertaken by it and factors assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Citi believes that such analyses and factors must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying such analyses and its opinion.
In its analyses, Citi considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of UCP and Century Communities. No company, business or transaction reviewed is identical or directly comparable to UCP, Century Communities or their respective businesses or the Merger and an evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies, businesses or transactions reviewed.
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The estimates contained in Citi’s analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of companies, businesses or securities do not purport to be appraisals or to reflect the prices at which companies, businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citi’s analyses are inherently subject to substantial uncertainty.
Citi was not requested to, and it did not, recommend or determine the specific consideration payable in the Merger. The type and amount of consideration payable in the Merger were determined through negotiations between UCP and Century Communities and the decision to enter into the Merger Agreement and related documents was solely that of the UCP Board. Citi’s opinion was only one of many factors considered by the UCP Board in its evaluation of the Merger and the Merger Consideration and should not be viewed as determinative of the views of the UCP Board or management with respect to the Merger or the consideration payable in the Merger.
Financial AnalysesTrust Indenture Act.
The following is a summary of the material financial analyses presented toterms and provisions of the UCP Board in connection with Citi’s opinion, dated April 10, 2017.Indenture and the Notes. The following summary set forth below does not purport to be a complete description of the financial analyses performedIndenture and the Notes and is subject to the detailed provisions of, and qualified in its entirety by reference to, the Indenture. We urge you to read the Indenture because it, and underlying the opinion of, Citi, nor does the ordernot this description, defines your rights as Holders of the financial analyses described representNotes.
The registered Holder of a Note will be treated as its owner for all purposes. Only registered Holders will have rights under the relative importance or weight given to those financial analyses by Citi. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary as the tables alone do not constitute a complete descriptionIndenture.
Brief Description of the financial analyses. ConsideringNotes and the data in the tables below without considering the full narrative descriptionNote Guarantees
The Notes
The Notes:
are general senior unsecured obligations of the financial analyses, includingCompany;
rank senior in right of payment to the methodologies and assumptions underlying the financial analyses, could create a misleading or incomplete view of such financial analyses. Actual results may differ from those indicated by such financial analyses and such differences may be material.For purposesfuture subordinated Indebtedness of the financial analyses described below,Company that expressly provides for subordination to the term “implied per share Merger Consideration” means $11.37 per share, calculated as (i)Notes;
rank equally in right of payment to all of the cash considerationCompany’s existing and future senior Indebtedness;
are effectively subordinated to the Company’s existing and future secured Indebtedness, to the extent of $5.32 per share and (ii) the implied value of the collateral securing such Indebtedness;
are structurally subordinated to all of the existing and future liabilities, including trade payables, and claims of holders of preferred stock, considerationif any, of $6.05 per share based on the 0.2309 exchange ratioCompany’s non-Guarantor Subsidiaries; and
are fully, unconditionally, jointly and severally guaranteed by the Guarantors, subject to certain customary release provisions contained in the Indenture.
The Note Guarantees
The Company’s obligations under the Notes and the closing priceIndenture are fully, unconditionally, jointly and severally guaranteed by certain of Century Communities Common Stock on April 7, 2017 (the last trading day priorour Subsidiaries, including substantially all of our domestic Wholly-Owned Restricted Subsidiaries, other than Immaterial Subsidiaries, and all of our future Subsidiaries under the circumstances, including certain customary release provisions contained in the Indenture, described below under the caption “—Note Guarantees.”
The Note Guarantees:
are general senior unsecured obligations of the Guarantors;
rank senior in right of payment to the datefuture subordinated Indebtedness of the Merger Agreement). Implied per share equity value reference ranges reflectedGuarantors that expressly provides for their subordination to the Note Guarantees;
rank equally in the summariesright of payment to all of the financial analyses described below were roundedGuarantors’ existing and future senior Indebtedness;
are effectively subordinated to the nearest $0.10. Financial data utilized for UCPGuarantors’ existing and Century Communities in the financial analyses described below,future secured Indebtedness, to the extent based on internal financial forecastsof the value of the collateral securing such Indebtedness; and estimates provided to or discussed with Citi by the managements of UCP and Century Communities, are referred to as the UCP forecasts and the Century Communities forecasts, respectively.
UCP Financial Analyses
Selected Public Companies Analysis.Citi reviewed certain publicly available financial and stock market information of UCP and the following seven selected companies that Citi considered generally relevant as publicly traded companies in the residential homebuilding industry with operations and scale generally similar to those of UCP, collectively referred to as the UCP selected companies:
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Citi reviewed, among other information andare structurally subordinated to the extent publicly available, fully diluted equity values, based on closing stock prices on April 7, 2017, as multiples of latest quarter book value (as of December 31, 2016 and taking into account tax attributesall of the UCP selected companies to the extent publicly available, calculated for certainexisting and future liabilities, including trade payables, and claims of such companies on a present value basis), and calendar years 2017 and 2018 estimated earnings per share, referred to as EPS. Financial dataholders of preferred stock, if any, of Subsidiaries of the UCP selected companies were based on Wall Street research analysts’ estimates and other publicly available information. Financial data of UCP was based on the UCP forecasts, Wall Street research analysts’ estimates and other publicly available information. UCP’s multiples were included in the calculation of median multiples summarized below.
The overall low to high latest quarter book value, calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples observed for the UCP selected companies for which information was publicly available were 0.8x to 1.8x (with a median of 0.9x), 8.0x to 19.3x (with a median of 10.0x) and 6.9x to 16.6x (with a median of 8.3x), respectively. Citi notedGuarantors that the latest quarter book value multiple observed for UCP was 0.8x (based on publicly available information) and that the calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples observed for UCP were 18.7x and 12.6x, respectively (based on Wall Street research analysts’ estimates), and that UCP’s return on invested capital was generally lower than the returns on invested capital of the UCP selected companies. Citi applied selected ranges of latest quarter book value, calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples of 0.9x to 1.2x, 10.0x to 11.4x and 8.3x to 10.3x, respectively, derived from the UCP selected companies to corresponding data of UCP based on publicly available information and the UCP forecasts. This analysis indicated the following approximate implied per share equity value reference ranges for UCP, as compared to the implied per share Merger Consideration:
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Selected Precedent Transactions Analysis.Using publicly available information, Citi reviewed financial data relating to the following nine selected transactions that Citi considered generally relevant as transactions involving target companies in the residential homebuilding industry, collectively referred to as the selected transactions:
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Citi reviewed, among other information, transaction values of the selected transactions, calculated as the purchase prices paid for the fully diluted equity values of the target companies, based on closing stock prices as
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of the announcement dates of the relevant transactions, as multiples of such target companies’ latest quarter book values as of such announcement dates. Financial data of the selected transactions were based on public filings and other publicly available information. Financial data of UCP was based on public filings.
The overall low to high latest quarter book value multiples observed for the selected transactions were 0.7x to 2.0x (with a median of 1.1x). Citi noted that UCP’s return on invested capital was generally lower than the returns on invested capital of other companies in the residential homebuilding industry. Citi applied a selected range of latest quarter book value multiples of 1.0x to 1.2x derived from the selected transactions to UCP’s latest quarter book value (as of December 31, 2016). This analysis indicated the following approximate implied per share equity value reference range for UCP, as compared to the implied per share Merger Consideration:
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Discounted Cash Flow Analysis.Citi performed a discounted cash flow analysis of UCP by calculating the estimated present value (as of March 31, 2017) of the unlevered, after-tax free cash flows that UCP was forecasted to generate during the last nine months of the fiscal year ending December 31, 2017 through the full fiscal year ending December 31, 2021 based on the UCP forecasts (including the alternative home delivery and leverage scenarios for UCP for fiscal years 2020 and 2021 reflected therein, referred to as the base case and constrained capital case), both before and after taking into account the estimated present value (as of March 31, 2017) of deferred tax assets of UCP expected by the management of UCP to be utilized by UCP during such period, collectively referred to as tax attributes. For purposes of this analysis, stock-based compensation was treated as a cash expense. Citi calculated the implied terminal value of UCP by applying to UCP’s fiscal year ending December 31, 2021 estimated real estate inventory less capitalized interest at the end of the projection period, referred to as adjusted real estate inventory, a selected range of adjusted real estate inventory multiples of 0.95x to 1.05x. The present values (as of March 31, 2017) of UCP’s cash flows, terminal values and tax attributes were then calculated using a selected range of discount rates of 10.1% to 11.5%. This analysis indicated the following approximate implied per share equity value reference ranges for UCP, both before and after taking into account the estimated present value (as of March 31, 2017) of UCP’s tax attributes, as compared to the implied per share Merger Consideration:
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Century Communities Financial Analyses
Selected Public Companies Analysis.Citi reviewed certain publicly available financial and stock market information of Century Communities and the following seven selected companies that Citi considered generally relevant as publicly traded companies in the residential homebuilding industry with operations and scale generally similar to those of Century Communities, collectively referred to as the Century Communities selected companies:
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Citi reviewed, among other information and to the extent publicly available, fully diluted equity values, based on closing stock prices on April 7, 2017, as multiples of latest quarter book value (as of December 31, 2016 and taking into account tax attributes of the Century Communities selected companies to the extent publicly available, calculated for certain of such companies on a present value basis), and calendar years 2017 and 2018 estimated EPS. Financial data of the Century Communities selected companies were based on Wall Street research analysts’ estimates and other publicly available information. Financial data of Century Communities was based on the Century Communities forecasts, Wall Street research analysts’ estimates and other publicly available information. Century Communities’ multiples were included in the calculation of median multiples summarized below.
The overall low to high latest quarter book value, calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples observed for the Century Communities selected companies for which information was publicly available were 0.8x to 1.8x (with a median of 0.9x), 8.0x to 19.3x (with a median of 10.0x) and 6.9x to 16.6x (with a median of 8.3x), respectively. Citi noted that the latest quarter book value multiple observed for Century Communities was 1.3x (based on publicly available information) and that the calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples observed for Century Communities were 9.7x and 8.2x, respectively (based on Wall Street research analysts’ estimates). Citi then applied selected ranges of latest quarter book value, calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples of 0.9x to 1.2x, 10.0x to 11.4x and 8.3x to 10.3x, respectively, derived from the Century Communities selected companies to corresponding data of Century Communities based on publicly available information and the Century Communities forecasts. This analysis indicated the following approximate implied per share equity value reference ranges for Century Communities, as compared to the per share closing price of Century Communities Common Stock on April 7, 2017:
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Discounted Cash Flow Analysis.Citi performed a discounted cash flow analysis of Century Communities by calculating the estimated present value (as of March 31, 2017) of the unlevered, after-tax free cash flows that Century Communities was forecasted to generate during the last nine months of the fiscal year ending December 31, 2017 through the full fiscal year ending December 31, 2021 based on the Century Communities forecasts. For purposes of this analysis, stock-based compensation was treated as a cash expense. Citi calculated the implied terminal value of Century Communities by applying to Century Communities’ fiscal year ending December 31, 2021 estimated adjusted real estate inventory a selected range of adjusted real estate inventory multiples of 1.00x to 1.20x. The present values (as of March 31, 2017) of Century Communities’ cash flows and terminal values were then calculated using a selected range of discount rates of 7.0% to 8.0%. This analysis indicated the following approximate implied per share equity value reference range for Century Communities, as compared to the per share closing price of Century Communities Common Stock on April 7, 2017:
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Certain Additional Information
Citi observed certain additional information that was not considered part of its financial analyses for its opinion but was noted for informational purposes, including the following:
Miscellaneous
UCP has agreed to pay Citi for its services in connection with the proposed Merger an aggregate fee currently estimated to be approximately $5.5 million, of which a portion was payable upon delivery of Citi’s opinion and approximately $5 million is payable contingent upon consummation of the Merger. In addition, UCP has agreed to reimburse Citi for Citi’s expenses, including fees and expenses of counsel, and to indemnify Citi and related parties against certain liabilities, including liabilities under federal securities laws, arising out of Citi’s engagement. As the UCP Board was aware, Citi and its affiliates in the past have provided and currently and in the future may provide investment banking, commercial banking and/or other similar financial services to UCP and its affiliates unrelated to the Merger, for which services Citi and its affiliates have received and would expect to receive compensation, including, during the two-year period prior to the date of Citi’s opinion, having assisted UCP in connection with share repurchases under UCP’s stock repurchase program, for which services Citi and its affiliates received during such two-year period aggregate fees of less than $5,000. As the UCP Board also was aware, Citi and its affiliates in the past have provided, currently are providing and in the future may provide investment banking, commercial banking and/or other similar financial services to Century Communities and its affiliates, for which services Citi and its affiliates have received and expect to receive compensation,
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including, during the two-year period prior to the date of Citi’s opinion, having acted or acting as (i) an initial purchaser for a private placement of senior notes of Century Communities, (ii) a sales agent for an at-the-market offering program of Century Communities and (iii) a lender under a revolving credit facility of Century Communities, for which services described in clauses (i) through (iii) above Citi and its affiliates received during such two-year period aggregate fees of approximately $500,000. Although Citi and its affiliates did not provide investment banking, commercial banking or other similar financial services to PICO during the two-year period prior to the date of Citi’s opinion for which Citi and its affiliates received compensation, Citi and its affiliates in the future may provide such services to PICO and/or its affiliates, for which services Citi and its affiliates would expect to receive compensation. In the ordinary course of business, Citi and its affiliates may actively trade or hold the securities of UCP, Century Communities, PICO and their respective affiliates for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citi and its affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with UCP, Century Communities, PICO and their respective affiliates.
UCP selected Citi as its financial advisor in connection with the proposed Merger based on Citi’s reputation, experience and familiarity with UCP and its business. Citi is an internationally recognized investment banking firm that regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.
Century Communities Unaudited Prospective Financial Information
Although Century Communities may periodically publish limited public guidance concerning its expected financial performance, Century Communities does not, as a matter of course, publicly disclose detailed financial forecasts. However, in connection with the negotiation of the proposed Merger and the other transactions contemplated by the Merger Agreement, Century Communities management prepared certain non-public unaudited financial forecasts, which were furnished to the Century Communities Board and UCP and to Citi for its use and reliance in connection with its financial analyses and opinion. A summary of the unaudited financial forecasts is included below to provide UCP stockholders access to certain of such non-public unaudited financial forecasts.
The unaudited financial forecasts were not prepared for the purpose of public disclosure, nor were they prepared in compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or GAAP. The summary of the unaudited financial forecasts is not being included in this proxy statement/prospectus to influence UCP stockholders with respect to the adoption of the Merger Agreement, including whether or not to seek appraisal rights with respect to shares of UCP Class A Common Stock held by UCP stockholders. The inclusion of the unaudited financial forecasts in this proxy statement/prospectus should not be regarded as an indication that any of Century Communities, UCP or any of their respective affiliates, directors, officers, advisors or other representatives, or any other recipient of the unaudited financial forecasts, considered, or now considers, the forecasts to be material or necessarily predictive of actual future results or events, and the unaudited financial forecasts should not be relied upon as such.
All of the unaudited financial forecasts summarized below were prepared by, and are the responsibility of, Century Communities management. No independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the prospective financial information contained in the unaudited financial forecasts and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto, and no independent registered public accounting firm assumes any responsibility for the prospective financial information. The reports of the independent registered public accounting firms incorporated by reference into this proxy statement/prospectus relate to Century Communities’ and UCP’s historical financial information. These reports do not extend toguarantee the unaudited financial forecastsNotes.
Principal, Maturity and should not be read to do so.
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The unaudited financial forecasts do not give effect to the Merger and the other transactions contemplated by the Merger Agreement or any changes to Century Communities’ operations or strategy that may be implemented after the completionAs of the Merger, including any potential synergies realized as a result of the Merger and the other transactions contemplated by the Merger Agreement, or to any costs related to, or that may arise in connection with, the Merger and the other transactions contemplated by the Merger Agreement, including the effect of any failure of the Merger to occur. Certain potential benefits of the Merger discussed by Century Communities’ and UCP’s respective management teams are described below under “—Possible Benefits of the Merger.”
The unaudited financial forecasts were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of Century Communities management. In preparing these unaudited financial forecasts, Century Communities management used assumptions that were substantially based on and consistent with Century Communities’ recent historical results. These assumptions included assumptions with respect to the number of home deliveries anticipated in each fiscal period, average sales prices, gross and contribution margins, general and administrative expenses as a percentage of home sales revenue, and Century Communities’ effective tax rate. The unaudited financial forecasts were prepared by Century Communities management in the first and second quarters of 2017, and Century Communities management believes the unaudited financial forecasts were prepared on a reasonable basis and reflected the best then-currently available estimates and judgments of Century Communities management at that time. Important factors that may affect actual results and cause the unaudited financial forecasts to not be realized include, but are not limited to, the risks, contingencies and other uncertainties described under “Cautionary Information Regarding Forward-Looking Statements” and “Risk Factors” beginning on pages 32 and 34, respectively, of this proxy statement/prospectus. The unaudited financial forecasts are forward-looking in nature. The forecasts relate to expectations of multiple future years’ performance, and such information by its nature becomes less predictive with each succeeding year. As a result, actual results may differ materially, and will differ materially if the Merger and the other transactions contemplated by the Merger Agreement are completed, from the unaudited financial forecasts, and there can be no assurance that the forecasts will be realized. None of Century Communities, UCP, or any of their respective affiliates, directors, officers, advisors or other representatives made or makes any representation to any stockholder or other person regarding Century Communities’ ultimate performance compared to the information contained in the unaudited financial forecasts. Except as may be required under applicable law, Century Communities does not undertake any obligation to update or otherwise revise the unaudited financial forecasts to reflect events or circumstances after the date the forecasts were made, including events or circumstances that may have occurred during the period between that date and the date of this proxy statement/prospectus, or$500 million in aggregate principal amount of Initial Notes is currently outstanding. The Initial Notes are issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. The Notes will mature on June 1, 2027. Subject to reflect the occurrence of unanticipated events, even in the event that any or all of the assumptions are not realized.
Century Communities Unaudited Financial Forecasts
The following table summarizes the unaudited financial forecasts related to Century Communities on a stand-alone basis without giving effect to the Merger or the other transactions contemplated by the Merger Agreement, and were prepared by Century Communities management as described above.
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Total Revenue | $ | 1,088.2 | $ | 1,142.6 | $ | 1,199.8 | $ | 1,247.8 | $ | 1,285.2 | ||||||||||
Gross Margin | $ | 209.1 | $ | 219.5 | $ | 224.5 | $ | 230.3 | $ | 234.0 | ||||||||||
Pre-Tax Income | $ | 81.2 | $ | 85.5 | $ | 89.8 | $ | 96.7 | $ | 103.1 | ||||||||||
CENTURY COMMUNITIES DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE UNAUDITED FINANCIAL FORECASTS SET FORTH ABOVE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE THE FORECASTS WERE MADE, INCLUDING EVENTS OR CIRCUMSTANCES THAT MAY HAVE OCCURRED DURING THE PERIOD BETWEEN THAT
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DATE AND THE DATE OF THIS PROXY STATEMENT/PROSPECTUS, OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THESE UNAUDITED FINANCIAL PROJECTIONS ARE NOT REALIZED.
Possible Benefits of the Merger
In connectionour compliance with the negotiation of the Merger, Century Communities’ and UCP’s respective managements discussed various potential benefits to Century Communities as a result of the Merger and the other transactions contemplated by the Merger Agreement, including, among other things, potential annual cost savings and synergies from a reduction in expenses.
Century Communities expects that approximately $5.0 million of incremental annualized cost synergies will be realized within one year of completion of the Merger. Both Century Communities and UCP were aware that the amounts of any benefits to Century Communities as a result of the Merger were estimates, that they may change, and that achieving any of the benefits would be subject to a number of risks, contingencies and other uncertainties, including thosecovenant described under “Cautionary Information Regarding Forward Looking Statements” and “Risk Factors” beginning on pages 32 and 34, respectively, of this proxy statement/prospectus.
UCP Unaudited Prospective Financial Information
Although UCP may periodically publish limited public guidance concerning its expected financial performance, UCP does not, as a matter of course, publicly disclose detailed financial forecasts. However, in connection with the negotiation of the proposed Merger and the other transactions contemplated by the Merger Agreement, UCP management prepared certain non-public unaudited financial forecasts regarding UCP’s projected future operations for the 2017 through 2021 fiscal years, including, for fiscal years 2020 and 2021, alternative home delivery and leverage scenarios for UCP, which were furnished to the UCP Board and Century Communities and to Citi for its use and reliance in connection with its financial analyses and opinion. We refer to these unaudited financial forecasts as the “UCP Projections.” A summary of the UCP Projections is included below to provide UCP stockholders access to certain of such non-public unaudited financial forecasts.
The UCP Projections were not prepared for the purpose of public disclosure. The summary of the UCP Projections is not being included in this proxy statement/prospectus to influence UCP stockholders with respect to the adoption of the Merger Agreement, including whether or not to seek appraisal rights with respect to shares of UCP Class A Common Stock held by UCP stockholders. The inclusion of the UCP Projections in this proxy statement/prospectus should not be regarded as an indication that any of Century Communities, UCP or any of their respective affiliates, officers, directors, advisors or other representatives or any other recipient of the UCP Projections considered, or now considers, the forecasts to be material or necessarily predictive of actual future results or events, and the UCP Projections should not be relied upon as such.
All of the UCP Projections summarized below were prepared by, and are the responsibility of, UCP management. No independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the prospective financial information contained in the UCP Projections and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto, and no independent registered public accounting firm assumes any responsibility for the UCP Projections. The reports of the independent registered public accounting firms incorporated by reference into this proxy statement/prospectus relate to Century Communities’ and UCP’s historical financial information. These reports do not extend to the UCP Projections and should not be read to do so.
While presented with numeric specificity, the UCP Projections were based on numerous variables and assumptions (including, but not limited to, those related to industry performance and competition and general business, economic, market and financial conditions and additional matters specific to UCP’s businesses) that are
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inherently uncertain and may be beyond the control of UCP management. UCP management prepared the UCP Projections in April 2017 in connection with the negotiation of the proposed Merger, and UCP management believes the UCP Projections were prepared on a reasonable basis and reflect the best then-currently available estimates and judgments of UCP management at that time and, to the best of UCP management’s knowledge and belief at that time, the then-expected course of action and then-expected future financial performance of UCP. For additional information regarding UCP management’s preparation of the UCP Projections see “—Background of the Merger” beginning on page 57 of this proxy statement/prospectus. Important factors that may affect actual results and cause the UCP Projections to not be realized include, but are not limited to, the risks, contingencies and other uncertainties described under “Cautionary Information Regarding Forward-Looking Statements” and “Risk Factors” beginning on pages 32 and 34, respectively, of this proxy statement/prospectus. The UCP Projections are forward-looking in nature. The forecasts relate to expectations of multiple future years’ performance, and such information by its nature becomes less predictive with each succeeding year. The UCP Projections also reflect numerous variables, expectations and assumptions available at the time they were prepared as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in the UCP Projections. Accordingly, there can be no assurance that the forecasted results summarized below will be realized. None of UCP, Century Communities or any of their respective affiliates, officers, directors, advisors or other representatives has made or makes any representation to any stockholder or other person regarding UCP’s ultimate performance compared to the information contained in the UCP Projections summarized below, or that the forecasted results will be achieved. UCP has made no representation to Century Communities, in the Merger Agreement or otherwise, concerning the UCP Projections. The UCP Projections summarized below do not give effect to the Merger. UCP urges all stockholders to review UCP’s reported financial results in its most recent SEC filings. Except as may be required under applicable law, UCP does not undertake any obligation to update or otherwise revise the UCP Projections to reflect events or circumstances after the date the UCP Projections were made, including events or circumstances that may have occurred during the period between that date and the date of this proxy statement/prospectus, or to reflect the occurrence of unanticipated events, even in the event that any or all of the assumptions are not realized.
UCP Projections
The following tables summarize the UCP Projections related to UCP on a stand-alone basis without giving effect to the Merger or the other transactions contemplated by the Merger Agreement and were prepared by UCP management as described above. As noted above and in the section of this proxy statement/prospectus entitled “—Background of the Merger,” the “Base Case” and “Constrained Capital Case” reflect alternative home delivery and leverage scenarios for UCP for fiscal years 2020 and 2021.
Base Case:
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| (amounts in millions) | 2017E | 2018E | 2019E | 2020E | 2021E | |||||||||||||||
Total Revenue | $ | 404.3 | $ | 521.9 | $ | 602.2 | $ | 725.0 | $ | 852.0 | ||||||||||
Gross Margin | $ | 74.8 | $ | 94.1 | $ | 109.3 | $ | 131.2 | $ | 154.1 | ||||||||||
Pre-Tax Income | $ | 15.9 | $ | 26.0 | $ | 34.7 | $ | 41.7 | $ | 52.7 | ||||||||||
Constrained Capital Case:
| For the Years Ending December 31, | ||||||||||||||||||||
| (amounts in millions) | 2017E | 2018E | 2019E | 2020E | 2021E | |||||||||||||||
Total Revenue | $ | 404.3 | $ | 521.9 | $ | 602.2 | $ | 666.8 | $ | 747.3 | ||||||||||
Gross Margin | $ | 74.8 | $ | 94.1 | $ | 109.3 | $ | 120.6 | $ | 134.7 | ||||||||||
Pre-Tax Income | $ | 15.9 | $ | 26.0 | $ | 34.7 | $ | 38.3 | $ | 45.8 | ||||||||||
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UCP DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE UCP PROJECTIONS SET FORTH ABOVE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE THEY WERE MADE, INCLUDING EVENTS OR CIRCUMSTANCES THAT MAY HAVE OCCURRED DURING THE PERIOD BETWEEN THAT DATE AND THE DATE OF THIS PROXY STATEMENT/PROSPECTUS, OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THESE UNAUDITED FINANCIAL PROJECTIONS ARE NOT REALIZED.
Interests of Certain UCP Directors and Officers in the Merger
In considering the recommendation of the UCP Board that UCP stockholders voteFOR the adoption of the merger agreement andFOR the adjournment proposal, UCP stockholders should be aware and take into account the fact thatcertain UCP directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of UCP stockholders generally and that may create potential conflicts of interests. Specifically, (i) Mr. Bogue will be entitled to a one-time transaction bonus equal to $1,972,639, paid 60 days after the closing of the Merger, and may be entitled to up to $1.5 million in accelerated vesting of restricted stock units and $530,000 in cash severance if terminated without “cause” or if he resigns for “good reason” following such closing (plus a COBRA subsidy for 12 months followingtermination), and (ii) Mr. Pirrello, if terminated without “cause” or if he resigns for “good reason” after such closing, may be entitled to up to $1.0 million in accelerated vesting of restricted stock units and $1,126,726 in cash severance (plus a COBRA subsidy for 12 months following termination). The directors and executive officers of UCP will also be entitled to certain indemnification rights under the Merger Agreement.
The UCP Board was aware of and carefully considered these interests, among other matters, in evaluatingcaption “—Certain Covenants—Limitations on Additional Indebtedness,” we are permitted to issue additional notes from time to time under the terms and structure, and overseeing the negotiation of, the Merger, in approving the Merger Agreement and in recommending that the UCP stockholders voteFOR the adoption of the merger agreement andFORthe adjournment proposal. All of the independent and disinterested UCP directors approved the Merger Agreement and made the foregoing recommendations.
UCP’s current named executive officers (who also constitute all of its executive officers) are Dustin L. Bogue, President and Chief Executive Officer, and James M. Pirrello, Chief Financial Officer and Treasurer.
UCP Equity Awards
As described in the sections entitled “—Treatment of UCP Equity Awards” and “The Merger Agreement—Treatment of UCP Equity Awards” below, at the effective time of the Merger, each outstanding option topurchase shares of UCP Class A Common Stock, whether vested or unvested, shall, without any further action on the part of the holder, be converted into an option to purchase a number of shares of Century Communities Common Stock equal to the number of shares of UCP Class A Common Stock underlying such option immediately prior to the effective time of the Merger multiplied by the Equity Award Exchange Ratio (as defined below) (rounded down to the nearest whole share), with an exercise price equal to the exercise price applicable to such option immediately prior to the effective time of the Merger divided by the Equity Award Exchange Ratio (rounded up to the nearest whole cent). Each such converted option shall be subject to the sameIndenture having identical terms and conditions as were applicable immediately prior to the Merger (including vesting terms, conditions,Notes other than the issue date, the issue price, the first interest payment date and schedules). As noted below in the section entitled “—CEO Employment Agreement Amendment,”Mr. Bogue has agreed to forfeit all of his outstanding stock options, whether vested or unvested, upon the closing of the Merger. In addition, pursuant to amendments to employment agreements of certain UCP employees thatfirst date from which interest will become effective as of, and are subject to and conditioned upon, the consummation of the Merger, all of the remaining outstanding options to purchase shares of UCP Class A Common Stock, whether vested or unvested, will be canceled for no consideration upon the consummation of the Merger.
In addition, each outstanding restricted stock unit with respect to a share of UCP Class A Common Stock shall, without any further action on the part of the holder, be converted into a restricted stock unit with respect to
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a number of shares of Century Communities Common Stock equal to the number of shares of UCP Class A Common Stock underlying such award immediately prior to the effective time of the Merger multiplied by the Equity Award Exchange Ratio. Each such converted restricted stock unit shall be subject to the same terms andconditions as were applicable immediately prior to the merger (including vesting terms, conditions, and schedules). However, as noted below in the section entitled “—CEO Employment Agreement Amendment,” Century Communities and Mr. Bogue have agreed to a modified vesting schedule for Mr. Bogue’s outstanding unvested restricted stock units. Pursuant to the terms of Mr. Bogue’s and Mr. Pirrello’s restricted stock unit award agreements, each of Mr. Bogue and Mr. Pirrello are entitled to full vesting of their unvested restricted stock units upon a termination without “cause” or resignation for “good reason”; based on the average closing sale price of a share of Century Communities Common Stock as reported on the NYSE for the five consecutive trading days ending on and including May 1, 2017, the value of such accelerated vesting (after giving effect to the conversion of such restricted stock units as described above) for Mr. Bogue and Mr. Pirrello would be $1.5 million and $1.0 million, respectively.
The “Equity Award Exchange Ratio” means the sum of (i) 0.2309 (the Stock Exchange Ratio) plus (ii) the quotient obtained by dividing (a) $5.32 (the cash consideration) by (b) the average closing sale price of a share of Century Communities Common Stock as reported on the NYSE for the five consecutive trading days ending on and including the second complete trading day immediately preceding the closing date of the Merger, rounded to the nearest ten-thousandth.
CEO Employment Agreement Amendment
On April 10, 2017, in connection with the transactions contemplated by the Merger Agreement, UCP entered into an employment agreement amendmentaccrue (which we refer to as the “CEO Employment Agreement Amendment”“Additional Notes”) with Mr. Bogue.. The CEO Employment Agreement Amendment will become effective as of,Notes and is subject to and conditioned upon, the consummation of the Merger.
Under the CEO Employment Agreement Amendment, Mr. Bogue’s current employment agreement will remain in effect, except that:
Interest on the Exchange Notes will accrue at the rate of directors;
We will make each interest payment to the holders of record of the 2017 fiscal yearNotes on the immediately preceding May 15 and November 15. We will pay interest on overdue principal and interest at a rate that is equal to the then applicable interest rate on the Notes. Interest will be determinedcomputed on the basis of a 360-day year comprised of twelve 30-day months. If any payment date with respect to the Notes is not on a Business Day, it shall be made on the next succeeding Business Day with the same effect as if made on the relevant payment date, without additional interest.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Company at least ten Business Days prior to the applicable payment date, the Company will make all payments on such Holder’s Notes in accordance with those instructions. Otherwise, payments on the annual performance goalsNotes will be made at the office or objectives established as of immediately prior to the closingagency of the Merger;
Mr. Bogue’s “change in control” severance arrangements will be eliminated, such that following any termination without “cause” or resignation for “good reason,” Mr. Bogue will be entitled to receive,
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CFO Severance Benefits
Pursuant to his employment agreement with UCP, upon a termination without “cause” or a resignation for “good reason” within two years following a “change in control”, Mr. Pirrello is entitled to a lump sum severance payment, subject to a release, equal to two times the sum of his base salary and average of his annual bonuses for the three previous fiscal years (such severance payment currently equal to $1,126,726 in total), plus a COBRA subsidy for 12 months following termination.
Indemnification and Insurance
Under the Merger Agreement, Century Communities and Merger Sub are required to honor all of UCP’s obligations to exculpate, indemnify (including to advance expenses), defend or hold harmless the current and former UCP directors and officers in accordance with the terms of the UCP Charter, UCP Bylaws and any individual indemnification agreements or other applicable documents from the effective time of the Merger until the expiration of the applicable statute of limitations with to respect to any claims against such persons relating to acts or omissions by such persons before the effective time of the Merger. Century Communities has further agreed to cause UCP’s directors’ and officers’ liability insurance policies to be maintained for a period of six years after the effective time of the Merger, subject to certain terms and conditions in the Merger Agreement. In addition, Century Communities agreed in the Merger Agreement that, at UCP’s option, UCP may purchase before the effective time of the Merger a six-year prepaid “tail” policy, in which case Century Communities is required to cause such coverage to remain in full force and effect for its full term.
Board of Directors and Management Following the Merger
Upon consummation of the Merger, the board of directors and executive officers of Century Communities are expected to remain unchanged. For information on Century Communities’ current directors and executive officers, please see Century Communities’ proxy statement for its 2017 annual meeting of stockholder filed with the SEC on March 29, 2017. See “Where You Can Find More Information” beginning on page 147.
Treatment of UCP Equity Awards
At the effective time of the Merger:
each option, referred to as the UCP option, to purchase shares of UCP Class A Common Stock that is outstanding immediately prior to the effective time of the Merger will automatically, and without any action on the part of the holder thereof, be converted into an option to purchase shares of Century Communities Common Stock, referred to as an “adjusted option,” on the same terms and conditions as were applicable under such UCP option immediately prior to the effective time of the Merger (including vesting terms, conditions and schedules), with the number of shares of Century Communities Common Stock (rounded down to the nearest whole number of shares) subject to such adjusted option equal to the product of (i) the total number of shares of UCP Class A Common Stock
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The “Equity Award Exchange Ratio” means the sum of (i) 0.2309 (the Stock Exchange Ratio) plus (ii) the quotient obtained by dividing (a) $5.32 (the cash consideration) by (b) the average closing sale price of a share of Century Communities Common Stock as reported on the NYSE for the five consecutive trading days ending on and including the second complete trading day immediately preceding the closing date of the Merger, rounded to the nearest ten-thousandth.
In connection with the transactions contemplated by the Merger Agreement, UCP entered into amendments to employment agreementspaying agent (which we refer to as the “Employment Agreement Amendments”“Paying Agent”) with certain employees of UCP. The Employment Agreement Amendments will become effectiveand registrar (which we refer to as of, and are subjectthe “Registrar”) for the Notes unless the Company elects to and conditioned upon, the consummation of the Merger. Under the Employment Agreement Amendments, such employees of UCP agreed to forfeit all of their outstanding UCP Options, whether vested or unvested, upon the closing of the Merger. The UCP Options which are subjectmake interest payments by check mailed to the Employment Agreement Amendments represent all of the outstanding UCP Options as of the date of the Merger Agreement.
For more information, see “The Merger Agreement—Treatment of UCP Equity Awards”beginning on page 109 of this proxy statement/prospectus.
Material U.S. Federal Income Tax Consequences of the Merger
The following is a discussion of the material U.S. federal income tax consequences of the exchange of shares of UCP Class A Common Stock for a combination of shares of Century Communities Common Stock and cash pursuant to the Merger Agreement.
This discussionHolders at their addresses only “U.S. holders” of UCP Class A Common Stock, meaning persons who hold that stock as a capital asset and are “U.S. persons,” as defined for U.S. federal income tax purposes. For these purposes a “U.S. person” is:
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This discussion does not address any non-income tax or any foreign, state or local tax consequences of the Merger. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a U.S. holder of UCP Class A Common Stock in light of that U.S. holder’s particular circumstances or to a U.S. holder subject to special rules (such as a financial institution, a broker or dealer in securities, an insurance company, a regulated investment company, a real estate investment trust, a tax-exempt organization, a person who holds UCP Common Stock as part of a hedging or conversion transaction or as part of a short-sale or straddle, a partnership or other pass-through entity for U.S. federal income tax purposes or a person who acquired UCP Common Stock pursuant to the exercise of options or otherwise as compensation). This discussion is based on the Code, applicable Treasury regulations, administrative interpretations and court decisions, each as in effect as of the date of this proxy statement/prospectus and all of which are subject to change, possibly with retroactive effect.
If a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds UCP Class A Common Stock, the tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Any partnership or entity or arrangement treated as a partnership for U.S. federal income tax purposes that holds UCP Class A Common Stock, and the partners in such partnership, are urged to consult their own tax advisors.
HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
General
It is a condition to completion of the Merger that Paul, Weiss, tax counsel to UCP, and Greenberg Traurig, tax counsel to Century Communities, each deliver an opinion to both UCP and Century Communities, dated the closing date of the Merger, to the effect that the Merger will qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. Each party may waive the requirement to receive such opinions as a condition to each party’s obligation to complete the Merger, but if the requirement to receive such opinions is waived after the adoption of the Merger Agreement by the UCP stockholders, then the approval of the UCP stockholders must be resolicited. Neither UCP nor Century Communities intends to waive this condition.
The tax opinions regarding the Merger will not address any state, local or foreign tax consequences of the Merger. The opinions will be based on certain assumptions and representations as to factual matters from Century Communities and UCP, as well as certain covenants and undertakings by Century Communities and UCP, substantially in the forms of the letters set forth in the disclosure schedulesregister of Holders. The Trustee is currently acting as the Paying Agent and Registrar. The Company may change the Paying Agent or Registrar without prior notice to the Merger Agreement. If anyHolders, and the Company may act as Paying Agent or Registrar.
Optional Redemption
Except as set forth below, the Company will not be entitled to redeem the Notes at its option.
On and after June 1, 2022, the Company will be entitled at its option on one or more occasions to redeem all or a portion of the assumptions, representations, covenantsNotes upon not less than 30 or undertakings is incorrect, incomplete, inaccuratemore than 60 days’ notice, at the redemption prices set forth below (expressed in percentages of principal amount), plus accrued interest to, but excluding the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on June 1 of the years set forth below:
Period | Redemption Price | |||
2022 | 103.375 | % | ||
2023 | 102.250 | % | ||
2024 | 101.125 | % | ||
2025 and thereafter | 100.000 | % | ||
In addition, any time prior to June 1, 2022, the Company will be entitled at its option on one or is violatedmore occasions to redeem Notes upon not less than 30 or more than 60 days’ notice, in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the Notes issued prior to the effective timeredemption date at a redemption price (expressed as a percentage of principal amount) of 106.75%, plus accrued and unpaid interest to, but excluding, the Merger,redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), with an amount not to exceed the net cash proceeds from one or both of the opinions may not be delivered and, if delivered, the conclusions reached by counsel in their opinions cannot be relied upon. In such case, the tax consequences of the Merger could differ from those described in this proxy statement/prospectus. Neither Century Communities nor UCP is currently aware of, or expects there to be, any facts or circumstancesmore Equity Offerings; provided, however, that would cause any of the assumptions, representations, covenants or undertakings set forth in the forms of the letters set forth in the disclosure schedules to the Merger Agreement to be incorrect, incomplete, inaccurate or violated.
An opinion of counsel represents such counsel’s best legal judgment but is not binding on the IRS or any court, so there can be no certainty that the IRS will not challenge the conclusions reflected in the opinion or that a court would not sustain such a challenge. Neither UCP nor Century Communities intends to obtain a private letter ruling from the IRS on the tax consequences of the Merger. If the IRS were to successfully challenge the “reorganization” status of the Merger, a U.S. holder of UCP Class A Common Stock would recognize taxable
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gain or loss in full for U.S. federal income tax purposes upon the exchange of UCP Class A Common Stock for a combination of Century Communities Common Stock and cash in the Merger.
Assuming that the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, the U.S. federal income tax consequences to U.S. holders of UCP Class A Common Stock who receive a combination of shares of UCP Class A Common Stock and cash in the Merger generally will be as follows.
Exchange of UCP Class A Common Stock for a Combination of Century Communities Common Stock and Cash
Except as discussed in “—Cash in Lieu of Fractional Shares,” a U.S. holder who surrenders shares of UCP Class A Common Stock in exchange for a combination of Century Communities Common Stock and cash generally will recognize gain (but not loss) equal to the lesser of:
| (1) | at least 50% of such aggregate principal amount of Notes remains outstanding immediately after the |
| (2) | the |
InPrior to June 1, 2022, the case of any U.S. holder who acquired different blocks of UCP Class A Common Stock at different times and at different prices, any realized gain or lossCompany will be determined separately for each identifiable blockentitled at its option on one or more occasions to redeem all or a portion of shares surrendered in the Merger,Notes at a redemption price equal to 100% of the principal amount of the Notes plus the Applicable Premium as of, and a loss realizedaccrued and unpaid interest to, but excluding, the redemption date (subject to the right of Holders on the exchange of one block of shares cannot be usedrelevant record date to offset a gain realizedreceive interest due on the exchangerelevant interest payment date). Notice of another blocksuch redemption must be mailed by first-class mail or delivered electronically in accordance with the procedures of shares. Any such U.S. holder is urgedThe Depository Trust Company (which we refer to consult its tax advisoras the “DTC”) to each Holder not less than 30 or more than 60 days prior to the exchangeredemption date.
“Applicable Premium” means with regardrespect to identifyinga Note at any redemption date, the bases or holding periodsgreater of (1) 1.00% of the particular sharesprincipal amount of UCP Common Stock surrenderedsuch Note and (2) the excess of (A) the present value at such redemption date of (i) the redemption price of such Note on June 1, 2022 (such redemption price being described in the Merger.second paragraph
Any gain recognized generally will be long-term capital gain
in this “—Optional Redemption” section exclusive of any accrued interest) plus (ii) all required remaining scheduled interest payments due on such Note to, but excluding, June 1, 2022 (but excluding accrued and unpaid interest to, but excluding, the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 0.50%, over (B) the principal amount of such Note on such redemption date.
“Treasury Rate” means, as of any redemption date, the yield to maturity as of such redemption date of U.S. Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to June 1, 2022; provided, however, that if the period from the redemption date to June 1, 2022 is not equal to the constant maturity of a U.S. holder heldTreasury security for which a weekly average yield is given, the sharesTreasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of UCP Class A Common Stocka year) from the weekly average yields of U.S. Treasury securities for morewhich such yields are given, except that if the period from the redemption date to June 1, 2022 is less than one year, at the effective timeweekly average yield on actually traded U.S. Treasury securities adjusted to a constant maturity of the Merger. Long-term capital gains of an individual generally are subject to favorable rates of U.S. federal income tax. In some limited cases where the U.S. holder actually or constructively owns Century Communities Common Stock before the Merger, such gain mayone year shall be treated as having the effect of the distribution of a dividend to such U.S. holder under the tests set forth in Section 302 of the Code, in which case such gain would be treated as dividend income. These rules are complex and dependent upon the specific factual circumstances particular to each U.S. holder. Consequently, each U.S. holderused.
The Indenture provides that, may be subject to these rules is urged to consult its tax advisor as to their application to the particular facts relevant to such U.S. holder.
Generally, a U.S. holder’s aggregate tax basis in the Century Communities Common Stock received by such U.S. holder in the Merger, including any fractional share deemed received by the U.S. holder under the treatment discussed below in “—Cash in Lieu of Fractional Shares,” will equal such U.S. holder’s aggregate tax basis in the UCP Class A Common Stock surrendered in the Merger, increased by the amount of taxable gain or dividend income, if any, recognized by such U.S. holder in the Merger (other than with respect to any gain recognized onsuch redemption, the receiptCompany will notify the Trustee of cashthe Applicable Premium with respect to the Notes promptly after the calculation thereof and that the Trustee will not be responsible for such calculation.
Notwithstanding the foregoing, in connection with any tender offer or Change of Control Offer, if Holders of not less than 90% in aggregate principal amount of outstanding Notes validly tender and do not validly withdraw such Notes in such offer and the Company, or any third party making such offer in lieu of the Company, purchases all of the Notes validly tendered and not validly withdrawn by such Holders, the Company or such third party will have the right within 60 days thereafter, upon not less than 30 nor more than 60 days’ prior notice as described under “—Selection and Notice of Redemption,” to redeem all Notes that remain outstanding following such purchase at a redemption price equal to the price offered to each other Holder in such offer (which may be less than par) plus, to the extent not included in the offer payment, accrued and unpaid interest, if any, fractional sharethereon, to, but excluding, the date of UCP Classsuch redemption.
Selection and Notice of Redemption
In the event that less than all of the Notes are to be redeemed at any time pursuant to an optional redemption, selection of the Notes for redemption will be made by the Trustee as follows:
in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed; or
if the Notes are not then listed on a national security exchange, on a pro rata basis (or in the case of Notes in global form, the Trustee will select Notes for redemption based on the procedures of DTC that most nearly approximates a pro rata selection), by lot or by such method as the Trustee shall deem fair and appropriate, subject to such rounding as may be determined by the Trustee to ensure that the Notes are redeemed in multiples of $1,000 in principal amount and that no unredeemed portion of a Note redeemed in part is less than $2,000 in principal amount.
Notice of redemption will be mailed by first-class mail or, so long as the Notes are in global form, given electronically in accordance with the procedures of DTC, at least 30 but not more than 60 days before the date of redemption to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount of the Note to be redeemed. A Common Stock)new Note in a principal amount equal to the unredeemed portion of the Note will be issued in the name of the Holder of the Note upon cancellation of the original Note. On and after the date of redemption, interest will cease to accrue on Notes or portions thereof called for redemption so long as the Company has
deposited with the Paying Agent (or, if the Company is the Paying Agent, has segregated and holds in trust) funds in satisfaction of the redemption price of the Notes to be redeemed (including accrued and unpaid interest on the Notes to be redeemed) pursuant to the Indenture. Any redemption notice may, at the Company’s discretion, be subject to one or more conditions precedent, including completion of an Equity Offering or other corporate transaction. If such redemption or notice is subject to the satisfaction of one or more conditions precedent, such notice or redemption may be extended or delayed until such condition or conditions are satisfied (as determined in the Company’s sole discretion).
Mandatory Redemption; Offers to Purchase; Open Market Purchases
The Company is not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, the Company may be required to offer to purchase Notes as described below under the captions “—Change of Control” and “Certain Covenants—Limitations on Asset Sales.” The Company may at any time and from time to time purchase Notes in the open market or otherwise.
Note Guarantees
As of the date of this prospectus, substantially all of the Company’s Subsidiaries are Restricted Subsidiaries, and certain Subsidiaries, including all of the Company’s domestic Wholly-Owned Restricted Subsidiaries (other than any Immaterial Subsidiaries), are Guarantors. The Company’s wholly-owned subsidiary, Parkway Financial Group, LLC, and decreasedits subsidiaries, Inspire Home Loans, Inc., Parkway Title, LLC, and IHL Home Insurance Agency, LLC, which provide mortgage services, title services, and insurance services, respectively, to the Company’s home buyers, and which constitute the Company’s Financial Services operating segment, will be Unrestricted Subsidiaries and will not provide Note Guarantees.
In the future, (i) each Restricted Subsidiary that guarantees Indebtedness for borrowed money of the Company or any Guarantor will become a Guarantor and (ii) each other domestic Wholly-Owned Restricted Subsidiary of the Company (other than any Immaterial Subsidiary) will also become a Guarantor, in each case as described under the caption “Certain Covenants—Additional Note Guarantees.” The Guarantors will fully, unconditionally, jointly and severally guarantee, on a senior unsecured basis, the Company’s obligations under the Notes and the Indenture.
As of September 30, 2019, the Non-Guarantor Subsidiaries accounted for $143.7 million of the Company’s consolidated total assets and $88.0 million of its consolidated total liabilities, including debt and trade payables but excluding intercompany liabilities. For the nine months ended September 30, 2019 and the twelve months ended December 31, 2018, the Non-Guarantor Subsidiaries accounted for $28.7 million and $31.7 million, respectively, of the Company’s consolidated total revenues.
In the event of a bankruptcy, liquidation or reorganization of any Non-Guarantor Subsidiary, such Non-Guarantor Subsidiary will pay the holders of its debts and its trade creditors, and its preferred stock holders, if any, before it will be able to distribute any of its assets to us.
Each Note Guarantee will contain a provision that will limit the obligations of such Guarantor under its Note Guarantee to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, without limitation, any Guarantees under Credit Facilities) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Note Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. If a Note Guarantee was rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Guarantor, and, depending on the amount of cash,such indebtedness, a Guarantor’s liability on its Note Guarantee could be reduced to zero. See “Risk Factors—Risks Related to Our Indebtedness and the Notes—
Federal and state fraudulent transfer laws permit a court to void the Exchange Notes and the guarantees, and, if that occurs, you may not receive any received by such U.S. holderpayments on the Exchange Notes.” Each Guarantor that makes a payment under its Note Guarantee will be entitled upon payment in the Merger (other than any cash received in lieufull of any fractional share of Century Communities Common Stock). The holding period for the shares of Century Communities Common Stock received in the Merger, including any fractional share deemed received by the U.S. holderall guaranteed obligations under the treatment discussed belowIndenture to seek contribution from each other Guarantor in “—Cashan amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in Lieuaccordance with GAAP.
The Note Guarantee of Fractional Shares,” generally will include the holding period for the shares of UCP Class A Common Stock exchanged therefor.
Cash in Lieu of Fractional Shares
No fractional sharesa Guarantor also will be issued to holders of UCP Class A Common Stock in the Merger. A U.S. holder that receives cash in lieu of any fractional share of Century Communities Common Stock in the Merger will
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generally be treated as having received the fractional share in the Mergerautomatically and then as having exchanged the fractional share for cash. As a result, a U.S. holder that receives cash in lieu of any fractional share of Century Communities Common Stock in connection with the Merger will generally recognize capital gain or loss measured by the difference between the cash received for such fractional shareunconditionally released and the U.S. holder’s tax basis in the fractional share. Any capital gain or loss generally will be long-term capital gain or loss if the U.S. holder held the shares of UCP Class A Common Stock for more than one year at the effective time of the Merger. The deductibility of capital losses is subject to limitations. Currently, long-term capital gains of an individual generally are subject to favorable rates of U.S. federal income tax.
Exchange of UCP Class A Common Stock Solely for Cash Pursuant to Stockholder Appraisal Rights under Delaware Law
A U.S. holder who properly exercises its appraisal rights under Section 262 of the DGCL and surrenders all of its shares of UCP Class A Common Stock solely in exchange for cash in the Merger generally will recognize capital gain or loss equal to the difference between the amount of cash received by such U.S. holder and the U.S. holder’s adjusted tax basis in the UCP Class A Common Stock exchanged therefor.
Any capital gain or loss generally will be long-term capital gain or loss if the U.S. holder held the shares of UCP Class A Common Stock for more than one year at the effective time of the Merger. Long-term capital gains of an individual generally are subject to favorable rates of U.S. federal income tax. The deductibility of capital losses is subject to limitations.
Information Reporting and Backup Withholding
Backup withholding, at a rate of 28%, may apply with respect to certain payments unless the holder of the UCP Class A Common Stock receiving such payments (1) is an exempt holder (including corporations, tax-exempt organizations, qualified pension and profit-sharing trusts and individual retirement accounts) who, when required, provides certification as to its status; or (2) provides a certificate containing the holder’s name, address, correct U.S. federal taxpayer identification number and a statement that the holder is exempt from backup withholding. Additional information regarding the required certifications will be provided in the Letter of Transmittal to holders of UCP Class A Common Stock shortly before the effective time of the Merger.
A U.S. holder of UCP Class A Common Stock who does not provide Century Communities (or the Exchange Agent) with its correct taxpayer identification number may be subject to penalties imposed by the IRS. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or credit against the U.S. holder’s U.S. federal income tax liability, provided that the holder timely furnishes certain required information to the IRS.
Reporting Requirements
Each U.S. holder of UCP Class A Common Stock who receives shares of Century Communities Common Stock in the Merger is required to retain records pertaining to the Merger pursuant to Treasury regulations Section 1.368-3(d). U.S. holders who hold 5 percent or more (by vote or value) of the UCP Class A Common Stock immediately prior to the Merger or who hold UCP Class A Common Stock with a basis of $1 million or more will also generally be required to file a statement that contains the information listed in Treasury regulations Section 1.368-3(b) with their U.S. federal income tax returns for the year of the Merger. Such statement must include the U.S. holder’s basis in the shares of UCP Class A Common Stock surrendered in the Merger and other information regarding the Merger.
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Medicare Net Investment Income Tax
A U.S. holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a 3.8% tax on the lesser of:discharged:
| (1) | upon any sale, assignment, transfer, conveyance, exchange or other disposition (by merger, consolidation or otherwise) of Equity Interests of such Guarantor after which the |
| (2) | upon any sale, assignment, transfer, conveyance, exchange or other disposition (by merger, consolidation or otherwise) of all or substantially all of the |
| (3) | unless a Default has occurred and is continuing, upon the release or discharge of |
For this purpose, net investment income generally includes dividend and net capital gain income, for example, net capital gain recognized with respect to a disposition
| (4) | upon the designation of such Guarantor as an Unrestricted Subsidiary, in accordance with the Indenture; |
| (5) | if the Company exercises its legal defeasance option or covenant defeasance option as described under the caption “—Legal Defeasance and Covenant Defeasance” or if the obligations of the Company and the Guarantors under the Indenture are discharged as described under the caption “—Satisfaction and Discharge,” upon such exercise or discharge; or |
| (6) | in connection with the dissolution of such Guarantor under applicable law in accordance with the Indenture. |
Change of shares of UCP Class A Common Stock inControl
Upon the Merger, unless such dividend income or net gain is derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). If you are a U.S. holder that is an individual, estate or trust, you are urged to consult your tax advisors regarding the applicability of the net investment income tax with respect to your disposition of shares of UCP Class A Common Stock in the Merger.
Consequences to Century Communities, UCP, and Merger Sub
None of Century Communities, UCP, or Merger Sub will recognize any gain or loss for U.S. federal income tax purposes as a result of the Merger.
Accounting Treatment of the Merger
The Merger will be accounted for in accordance with GAAP. GAAP requires the Merger to be accounted for using the acquisition method pursuant to which Century Communities has been determined to be the acquirer for accounting purposes. As required by the acquisition method, Century Communities will record UCP’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of consideration transferred (i.e. purchase price) over the fair value of net assets acquired will be recognized as goodwill. Goodwill is not amortized, but is tested for impairment at least annually or more frequently if circumstances indicate potential impairment. The operating results of UCP will be reported as part of the combined company beginning on the closing date of the Merger. The final valuation of the tangible and identifiable intangible assets acquired and liabilities assumed has not yet been completed. The completion of the valuation upon consummation of the Merger could result in significantly different amortization expenses and balance sheet classifications than those presented in Century Communities’ unaudited pro forma condensed combined financial information included in this proxy statement/prospectus.
Regulatory Approvals Required to Complete the Merger
Century Communities and UCP have determined that the Merger is not subject to requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and no other governmental consents to the Merger is required. The Merger may require that notifications be given to governmental agencies that have issued licenses that are held by UCP and its subsidiaries, and other governmental agencies. The shares of Century Communities Common Stock that will be issued to UCP stockholders as a result of the Merger must be approved for listing on the NYSE, subject to official notice of issuance.
Exchange of Shares in the Merger
The conversion of UCP Class A Common Stock into the right to receive the Merger Consideration will occur automatically at the effective time of the Merger. Century Communities has designated U.S. Bank as the
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Exchange Agent and will enter into an exchange agent agreement with the Exchange Agent reasonably acceptable to UCP providing for the Exchange Agent to handle the exchange of certificates or book-entry shares representing shares of UCP Class A Common Stock for the Merger Consideration. Century Communities will deliver to the Exchange Agent as needed the cash and shares of Century Communities Common Stock comprising the Merger Consideration payable in respect of UCP Class A Common Stock. As promptly as practicable after the effective time of the Merger, Century Communities will instruct the Exchange Agent to mail to each holder of record of UCP Class A Common Stock a letter of transmittal specifying that delivery will be effected and risk of loss and title to any certificates representing shares of UCP Class A Common Stock shall pass only upon delivery of such certificates to the Exchange Agent. The letter of transmittal will also include instructions explaining the procedure for surrendering UCP stock certificates or transferring uncertificated shares of UCP Class A Common Stock in exchange for the Merger Consideration.
UCP stockholders who submit a duly executed letter of transmittal, together with their stock certificates or a lost stock certificate affidavit (in the case of certificated shares) or other evidence of transfer requested by the Exchange Agent (in the case of book-entry shares), will receive the Merger Consideration into which the shares of UCP Class A Common Stock were converted in the Merger. UCP stockholders will not receive any fractional shares of Century Communities Common Stock and will instead receive cash in lieu of any such fractional shares in an amount, without interest, rounded up to the nearest whole cent, equal to the product of (i) the fraction of a share of Century Communities Common Stock to which such holder otherwise would have been entitled to receive, multiplied by (ii) the average closing sale price of a share of Century Communities Common Stock as reported on the NYSE for the five consecutive trading days ending on and including the second complete trading day immediately preceding the closing date of the Merger
After the effective time of the Merger, shares of UCP Common Stock will automatically be converted or canceled as provided in the Merger Agreement and will cease to exist, and certificates that previously represented shares of UCP Class A Common Stock will represent only the right to receive the Merger Consideration as described above. Until holders of UCP Class A Common Stock have surrendered their shares to the Exchange Agent for exchange, those holders will not receive dividends or distributions declared or made with respect to shares of Century Communities Common Stock with a record date after the effective time of the Merger. However, upon the surrender of their shares of UCP Class A Common Stock, such holders will receive the amount of dividends, without interest, or other distributions with respect to shares of Century Communities Common Stock theretofore paid with a record date after the effective time of the Merger.
If there is a transfer of ownership of UCP Class A Common Stock that is not registered in the records of UCP, payment of the Merger Consideration as described above will be made to a person other than the person in whose name the certificate or uncertificated share so surrendered is registered only if the certificate is properly endorsed or otherwise is in proper form for transfer or the uncertificated share is properly transferred, and the person requesting the payment must pay to the Exchange Agent any transfer or other similar taxes required as a result of such payment or satisfy the Exchange Agent that any transfer or other similar taxes have been paid or that no payment of those taxes is necessary.
Dividends and Share Repurchases
Neither Century Communities nor UCP currently pays a quarterly dividend on their respective capital stock. Under the terms of the Merger Agreement, until the effective time of the Merger, neither Century Communities nor UCP is permitted to declare, set aside or pay any dividends on, or make any other distributions in respectoccurrence of any of its capital stock or to purchase, redeem or otherwise acquire any sharesthe following events (each a “Change of its capital stock, subject to certain exceptions, including acquiring shares of either company’s capital stock delivered to that company to pay the exercise price or tax withholding obligations under any option or restricted stock unit, and, in the case of Century Communities, repurchases of Century Communities Common Stock under its existing stock repurchase program.
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Listing of Shares of Century Communities Common Stock and Delisting and Deregistration of UCP Class A Common Stock
Under the terms of the Merger Agreement, Century Communities is required to use all reasonable efforts to cause the shares of Century Communities Common Stock to be issued in the Merger to be approved for listing on the NYSE prior to the effective time of the Merger, subject to official notice of issuance. Accordingly, application will be made to have the shares of Century Communities Common Stock to be issued in the Merger approved for listing on the NYSE, where shares of Century Communities Common Stock are currently listed for trading under the ticker symbol “CCS.”
If the Merger is completed, there will no longer be any publicly held shares of UCP Class A Common Stock. Accordingly, UCP Class A Common Stock will no longer be listed on NYSE and will be deregistered under the Exchange Act.
Pursuant to Section 262 of the DGCL, UCP stockholders who do not vote in favor of adoption of the Merger Agreement, who continuously hold their shares of UCP Class A Common Stock through the effective time of the Merger and who otherwise comply with the applicable requirements of Section 262 of the DGCLControl”), each Holder shall have the right to seek appraisalrequire that the Company repurchase such Holder’s Notes at a purchase price in cash equal to 101% of the fair value of their shares of UCP Common Stock, as determined by the Delaware Court of Chancery, if the Merger is completed. The “fair value” of shares of UCP Common Stock as determined by the Delaware Court of Chancery could be greater than, the same as, or less than the value of the Merger Consideration that UCP stockholders would otherwise be entitled to receive under the terms of the Merger Agreement.
The right to seek appraisal will be lost if a UCP stockholder votesFOR adoption of the Merger Agreement. However, abstaining or voting against adoption of the Merger Agreement is not in itself sufficient to perfect appraisal rights because additional actions must also be taken to perfect such rights.
UCP stockholders who wish to exercise the right to seek an appraisal of their shares must so advise UCP by submitting a written demand for appraisal prior to the taking of the voteprincipal amount thereof on the Merger Agreement at the UCP special meeting, and must otherwise follow the procedures prescribed by Section 262 of the DGCL. A person having a beneficial interest in shares of UCP Class A Common Stock held of record in the name of another person, such as a nominee or intermediary, must act promptly to cause the record holder to follow the steps required by Section 262 of the DGCL and in a timely manner to perfect appraisal rights. In view of the complexity of Section 262 of the DGCL, UCP stockholders that may wish to pursue appraisal rights are urged to consult their legal and financial advisors. In addition, under Section 262 of the DGCL, the Delaware Court of Chancery will dismiss any appraisal proceedings as to all stockholders who have perfected their appraisal rights unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of UCP Class A Common Stock, or (ii) the value of the Merger Consideration provided in the Merger Agreement for the total number of shares of UCP Class A Common Stock entitled to appraisal exceeds $1 million. See “Appraisal Rights” beginning on page 138 of this proxy statement/prospectus.
Corporate Headquarters
Century Communities’ principal executive offices are located at 8390 East Crescent Parkway, Suite 650, Greenwood Village, Colorado 80111. Its main telephone number is (303) 770-8300.
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The following section summarizes material provisions of the Merger Agreement, which is included in this proxy statement/prospectus asAnnex A, is incorporated by reference herein in its entirety, and qualifies the following summary in its entirety. The rights and obligations of Century Communities, Merger Sub, and UCP, as parties to the Merger Agreement, are governed by the Merger Agreement and not by this summary or any other information contained in or incorporated by reference into this proxy statement/prospectus. UCP stockholders are urged to read the Merger Agreement carefully and in its entirety, as well as this proxy statement/prospectus and the information incorporated by reference into this proxy statement/prospectus, before making any decisions regarding the proposals.
The following summary of the Merger Agreement is included in this proxy statement/prospectus to provide you with information regarding the terms of the Merger Agreement and is not intended to provide any factual information about Century Communities or UCP. Such information can be found elsewhere in this proxy statement/prospectus and in the other public filings Century Communities and UCP, respectively, have made and will make with the SEC. See “Where You Can Find More Information” beginning on page 147 of this proxy statement/prospectus.
The Merger Agreement contains representations and warranties and covenants by each of the parties to the Merger Agreement. These representations and warranties have been made by UCP solely for the benefit of Century Communities, on the one hand, and by Century Communities and Merger Sub, solely for the benefit of UCP, on the other hand, and:
Moreover, information concerning the subject matter of the representations and warranties in the Merger Agreement and described below may have changed since the date of purchase (the “Change of Control Purchase Price”) plus accrued and unpaid interest, if any, to, but excluding, the Merger Agreement, and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement/prospectus. In addition, if specific material facts arise that contradictdate of purchase (subject to the representations and warranties inright of Holders of record on the Merger Agreement, each of Century Communities and UCP, as applicable, will disclose those material facts in public filings that it makes withrelevant record date to receive interest due on the SEC if it determines that it has a legal obligation to do so. Accordingly, the representations and warranties and other provisions of the Merger Agreement should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement/prospectus and in the documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 147 of this proxy statement/prospectus.
Structure and Effect of the Merger
The Merger Agreement provides that Century Communities will acquire UCP, UCP’s separate corporate existence will cease to exist and UCP will no longer be a publicly traded company. Specifically, in the Merger, UCP will be merged with and into Merger Sub, with Merger Sub surviving the Merger as a wholly-owned subsidiary of Century Communities.
The forward triangular Merger structure was viewed by Century Communities and UCP as an important element in creating the tax effects of the Merger described in the section entitled “Proposal I: Adoption of the Merger Agreement—Material U.S. Federal Income Tax Consequences of the Merger.”
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| (1) | any “person” or “group” of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than any Permitted Holder, becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause (1) such person or group shall be deemed to have “beneficial ownership” of all shares that any such person or group has |
| the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of “beneficial ownership” (as defined above) of more than 50% of the total voting power of the Voting Stock of the Company; provided that the acquisition of “beneficial ownership” (as defined above) of 100% of the Voting Stock of the Company by any direct or indirect holding company shall not constitute a Change of Control under this clause (1) if immediately after such acquisition, no “person” or “group” of related persons (as such terms are defined above) (other than any Permitted Holder) is or becomes the “beneficial owner” (as defined above) of more than 50% of the total voting power of the Voting Stock of such holding company; |
From and after
| (2) | the members or stockholders, as applicable, of the Company adopt a plan or proposal for liquidation or dissolution of the Company; or |
| (3) | the sale, assignment, conveyance, transfer, lease or other disposition (other than by way of a merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and the Restricted Subsidiaries (determined on a consolidated basis) taken as a whole to any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than a Wholly-Owned Restricted Subsidiary or a Permitted Holder. |
No later than 30 days following any Change of Control, the effective time of the Merger, all of the rights, privileges, powers, franchises, properties, liabilities, duties and debts previously in the name of and owned by, belonging to, and owed and owing to, UCP,Company will be in the name of and owned by, belong to, and be owed and owing to, Merger Sub (as the surviving corporation of the Merger).
From and after the effective time of the Merger, the certificate of incorporation and bylaws of Merger Sub in effect immediately prior to the effective time of the Merger will remain the certificate of incorporation and bylaws, respectively, of Merger Sub, as the surviving corporation of the Merger until amended, modifiedmail or replaceddeliver electronically in accordance with the certificateprocedures of incorporation or bylaws of Merger Sub and Delaware law, and the directors and officers of Merger Sub immediately priorDTC a notice to each Holder with a copy to the effective timeTrustee (the “Change of Control Offer”) stating:
| (1) | that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder’s Notes at the Change of Control Purchase Price, plus accrued and unpaid interest, if any, to, but excluding, the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); |
| (2) | the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and |
| (3) | the instructions, as determined by the Company, that a Holder must follow in order to have its Notes purchased. |
The Company will not be required to make a Change of Control Offer following a Change of Control if a third party makes the Merger will beChange of Control Offer in the directorsmanner, at the times and officers, respectively,otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Merger Sub, asControl Offer made by the surviving corporationCompany and purchases all Notes validly tendered and not withdrawn under such Change of the Merger until hisControl Offer or her successorif notice of redemption has been elected and qualified, subject to his or her earlier death, resignation or removal.
Merger Consideration
At the effective time of the Merger, each share of UCP Class A Common Stock issued and outstanding immediately prior to the effective time of the Merger, except for any (i) shares held by UCP in its treasury, (ii) shares owned by Century Communities or any subsidiary of Century Communities or UCP, and (iii) sharesgiven with respect to which appraisal rights have been properly demandedall Notes as described above under the caption “—Optional Redemption.”
Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in accordance with Section 262advance of a Change of Control, conditioned upon the occurrence of such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the DGCL, which will haveChange of Control Offer.
To the rights described in “Appraisal Rights,” beginning on page 138 of this proxy statement/prospectus, will be converted intoextent that the right to receive, (a) $5.32 in cash, without any interest thereon, and (b) 0.2309 of a validly issued, fully paid and non-assessable share of Century Communities Common Stock; provided, that UCP stockholders will not receive any fractional shares of Century Communities Common Stock and will instead receive cash in lieuprovisions of any such fractional shares in an amount, without interest, rounded up tosecurities laws or regulations conflict with the nearest whole cent, equal to the product of (x) the fraction of a share of Century Communities Common Stock to which such holder otherwise would have been entitled to receive, multiplied by (y) the average closing sale price of a share of Century Communities Common Stock as reported on the NYSE for the five consecutive trading days ending on and including the second complete trading day immediately preceding the closing dateprovisions of the Merger. Shares of UCP Class B Common Stock outstanding atcovenant described hereunder, the effective time of the Merger, if any, will be canceled for no consideration.
No adjustment will be made to the Stock Exchange Ratio of 0.2309 of a share of Century Communities Common Stock payable in the Merger to the holders of UCP Class A Common Stock due to any increase or decrease, as applicable, to the price of a share of Century Communities Common Stock at any time from and after April 10, 2017 (the date of the execution of the Merger Agreement). However, if, between April 10, 2017 and the effective time of the Merger, the outstanding shares of Century Communities Common Stock have been changed into a different number of shares or a different series or class of shares of capital stock of Century Communities by reason of any reclassification, recapitalization, split-up, combination, recombination, exchange of shares or adjustment, or a stock dividend thereonCompany shall be declared with a record date within such period, the Stock Exchange Ratio and related provisions will be appropriately and proportionately adjusted.
Representations and Warranties
The Merger Agreement contains substantially reciprocal representations and warranties of Century Communities and Merger Sub, on the one hand, and UCP, on the other hand, regarding, among other things:
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In addition, UCP has further made representations and warranties regarding, among other things:
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In addition, Century Communities has further made representations and warranties regarding, among other things:
Many of the representations and warranties in the Merger Agreement are qualified by a “materiality” or “material adverse effect” standard (that is, they will not be deemed to be untruehave breached its obligations under the covenant described hereunder by virtue of its compliance with such securities laws or incorrect unless their failure to be trueregulations.
The Change of Control purchase feature of the Notes may, in certain circumstances, make more difficult or correct would be material todiscourage a sale or havetakeover of the Company and, thus, the removal of incumbent management. The Change of Control purchase feature was a material adverse effect with respectresult of negotiations between the Company and the initial purchasers of the Initial Notes. Subject to the party makinglimitations discussed below, the representationCompany could, in the future, enter into certain transactions, including acquisitions, refinancings or warranty)other recapitalizations, that would not constitute a Change of
Control under the Indenture, but that could increase the amount of Indebtedness outstanding at such time or speak only tootherwise affect the actual knowledge (after due inquiry) of specified officers of Century Communitiescapital structure or UCP, as applicable.
For purposescredit ratings of the Merger Agreement, a “material adverse effect” means, with respectCompany and the Restricted Subsidiaries. Restrictions on the ability of the Company and the Restricted Subsidiaries to a party, any effect, or any change, event, development, state of facts or occurrence, individually orincur additional Indebtedness are contained in the aggregate, materially adversecovenants described below under the captions “—Certain Covenants—Limitations on orAdditional Indebtedness” and “—Certain Covenants—Limitations on Liens.” Such restrictions are subject to the (i) business, assets, liabilities, financial condition or results of operations of such partynumerous exceptions and its subsidiaries, taken as a whole, or (ii) ability of such party to consummate the Merger prior to the Outside Date, except that that none of the following shallcan be taken into account in determining whether a “material adverse effect” has occurred or would be reasonably likely to occur:
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The representations and warranties contained inNotes then outstanding. Accordingly, the Merger Agreement will not survive the effective time of the Merger.
Conduct of Business
Each of Century Communities and UCP has agreed, between the date of the Merger Agreement and the effective time of the Merger, to conduct its business in the ordinary course of business, consistent with past practices, including by using reasonable efforts to (i) preserve intact its current business organization, (ii) maintain its rights and permits, (iii) keep available the services of its current officers and employees, (iv) keep its relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with it, and (v) maintain its properties and assets in their current state of repair, order, functionality and condition, reasonable wear and tear excepted, to the end that its goodwill and ongoing business shall be unimpaired.
In addition, each of Century Communities and UCP has agreed not to take certain actions between the date of the Merger Agreement and the effective time of the Merger without the prior written consent (not be unreasonably withheld, conditioned or delayed) of the other party, including the following (subject to exceptions described below or in the Merger Agreement, or ascovenants set forth in disclosure schedulesthe Indenture may not afford holders of the Notes protection in the event of a highly leveraged transaction.
In the event a Change of Control occurs at a time when the Company is contractually prohibited from purchasing Notes, the Company may seek the consent of the applicable lenders to the purchase of Notes or may attempt to refinance the borrowings that were exchanged between Century Communitiescontain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company’s failure to offer to purchase Notes would constitute a Default under the Indenture, which could, in turn, constitute a default under other Indebtedness of the Company and UCP atits Subsidiaries, including indebtedness outstanding under the time they entered intoRevolving Credit Facility, the Merger Agreement):
The agreements governing certain current Indebtedness of the Company do, and any future Indebtedness that the Company and its subsidiaries may incur may, contain prohibitions on the occurrence of its capital stock, other than dividends and distributions bycertain events that would constitute a directChange of Control or indirect subsidiaryrequire the repayment or repurchase of such partyindebtedness upon a Change of Control. Moreover, the exercise by the Holders of their right to its parent;
The definition of complete or partial liquidation or resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;
acquiring or agreeing to acquire (i) by merging or consolidating with, or by purchasing“Change of Control” includes the sale of all or substantially all the assets of orthe Company and the Restricted Subsidiaries (determined on a consolidated basis). Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “all or substantially all” of the assets of the Company and the Restricted Subsidiaries (determined on a consolidated basis). As a result, it may be unclear as to whether a Change of Control has occurred and whether a holder of Notes may require the Company to make an offer to repurchase the Notes as described above. See “Risk Factors—Risks Related to Our Indebtedness and the Notes—There is uncertainty about the meaning of the phrase “all or substantially all” under applicable laws in connection with determining whether a Change of Control has occurred.”
The provisions under the Indenture relative to our obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of Notes, prior to the time the obligation to make such offer arises.
Certain Covenants
As of the date of this prospectus, substantially all of the outstanding equity interestsCompany’s Subsidiaries are “Restricted Subsidiaries.” Under the circumstances described below under the caption “—Limitations on Designation of Unrestricted Subsidiaries,” the Company is permitted to designate any of its other Subsidiaries as “Unrestricted Subsidiaries.” The effect of a Subsidiary being an “Unrestricted Subsidiary” is:
an Unrestricted Subsidiary will generally not be subject to the restrictive covenants in the Indenture;
a Subsidiary that has previously been a Guarantor and that is Designated an Unrestricted Subsidiary will be released from its Note Guarantee; and
the assets, income, cash flow and other financial results of an Unrestricted Subsidiary will not be consolidated with those of the Company for purposes of calculating compliance with the restrictive covenants contained in the Indenture.
Suspension of Covenants on Achievement of Investment Grade Status
At any businesstime after the Notes have received Investment Grade Ratings from Standard & Poor’s Ratings Group, Inc. (which we refer to as “S&P”) and Moody’s Investors Service, Inc. (which we refer to as “Moody’s”) or, if one or both shall not make a rating on the Notes publicly available, another Rating Agency selected by the Company which shall be substituted for one or both, as the case may be (which we refer to as a “Covenant Suspension Event”), upon notice by the Company to the Trustee in an officers’ certificate certifying that a Covenant Suspension Event has occurred and that at the time of the giving of such notice no Default has occurred and is continuing under the Indenture (which we refer to as a “Covenant Suspension Event Notice”), then, beginning on the day such notice is given and continuing until the Reversion Date (as defined below), the Company and the Restricted Subsidiaries will not be subject to the following provisions of the Indenture (which we refer to, collectively, as the “Suspended Covenants”):
“—Limitations on Additional Indebtedness”;
“—Limitations on Restricted Payments”;
“—Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries”;
“—Limitations on Asset Sales”;
“—Limitations on Transactions with Affiliates”;
“—Additional Note Guarantees”; and
the provisions of clause (3) of the first paragraph of “—Limitations on Mergers, Consolidations, Etc.”;
and, in each case, any related default provision of the Indenture will not be applicable to the Company and its Restricted Subsidiaries.
If at any time the Notes cease to have Investment Grade Ratings from both S&P and Moody’s or, if one or both shall not make a rating on the Notes publicly available, another Rating Agency selected by the Company which shall be substituted for one or both, as the case may be, then the Suspended Covenants will at such time be reinstated as if such covenants had never been suspended (which we refer to as the “Reversion Date”) and be applicable pursuant to the terms of the Indenture (including in connection with performing any calculation or assessment to determine compliance with the terms of the Indenture), unless and until a subsequent Covenant Suspension Event occurs and a Covenant Suspension Event Notice is delivered to the Trustee (in which event the Suspended Covenants shall no longer be in effect unless and until the Notes cease to have such Investment Grade Ratings from S&P and Moody’s or, if one or both shall not make a rating on the Notes publicly available, another Rating Agency selected by the Company which shall be substituted for one or both, as the case may be); provided that no Default or Event of Default or breach of any kind shall be deemed to exist under the Indenture or the Notes (or any Security Guarantee) with respect to the Suspended Covenants based on, and none of the Company or any corporation, partnership, joint venture, limitedof its Subsidiaries shall bear any liability companyunder the Suspended Covenants for, any actions taken or events occurring during the Suspension Period (as defined below), or any actions taken at any time pursuant to any contractual obligation arising prior to the Reversion Date, regardless of whether such actions or events would have been permitted if the applicable Suspended Covenants remained in effect during such period. The period of time between the date of suspension of the covenants and the Reversion Date is referred to as the “Suspension Period”.
On the Reversion Date, all Indebtedness Incurred during the Suspension Period will be classified to have been incurred pursuant to the first paragraph of “—Limitations on Additional Indebtedness” or one of the clauses set forth in the second paragraph of “—Limitations on Additional Indebtedness” (to the extent such Indebtedness would be permitted to be incurred thereunder as of the Reversion Date and after giving effect to the Indebtedness incurred prior to the Suspension Period and outstanding on the Reversion Date). To the extent such Indebtedness would not be so permitted to be incurred pursuant to the first or second paragraph of “—Limitations on Additional Indebtedness”, such Indebtedness will be deemed to have been outstanding on the Issue Date, so that it is classified as permitted under clause (3) of the second paragraph of “—Limitations on Additional Indebtedness”. Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under “—Limitations on Restricted Payments” will be made as though the covenants described under “—Limitations on Restricted Payments” had been in effect since the Accrual Date and throughout the Suspension Period. Accordingly, Restricted Payments made during the Suspension Period and not otherwise permitted under the second paragraph of the covenant will reduce the amount available to be made as Restricted Payments under the first paragraph of “—Limitations on Restricted Payments”. During the Suspension Period, any obligation to grant Security Guarantees with respect to any Restricted Subsidiary that would otherwise be required to become a Subsidiary Guarantor after the Suspension Date and prior to the Reversion Date shall be suspended. Such obligation to grant Security Guarantees shall be reinstated upon the Reversion Date, if applicable.
Additionally, upon the occurrence of a Covenant Suspension Event, the amount of Excess Proceeds from Asset Sales shall be reset to zero. Any Affiliate Transaction entered into after the Reversion Date pursuant to an agreement entered into during any Suspension Period shall be deemed to be permitted pursuant to clause (4) of the second paragraph of the covenant described below under the caption “—Limitations on Transactions with Affiliates”. Any encumbrance or restriction on the ability of any Restricted Subsidiary to take any action described in clauses (a) through (c) of the first paragraph of the covenant described below under the caption “—Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries” shall be deemed to be permitted pursuant to clause (1) of the second paragraph of the covenant described below under the caption “—Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries.”
There can be no assurance that the Notes will ever achieve or maintain Investment Grade Ratings.
Limited Condition Acquisitions
When calculating the availability under any threshold based on a dollar amount, percentage of Consolidated Tangible Assets or other company, associationfinancial measure (a “basket” or “cap”) or ratio under the Indenture, in each case, in connection with a Limited Condition Acquisition, the date of determination of such basket or ratio and of any requirement that there be no Default or Event of Default may, at the option of the Company, be the date the definitive agreement(s) for such Limited Condition Acquisition is entered into. Any such ratio or basket shall be calculated on a pro forma basis, including with such adjustments as are appropriate and consistent with the pro forma adjustment provisions set forth in the definitions of Consolidated Fixed Charge Coverage Ratio and Indebtedness to Tangible Net Worth Ratio, after giving effect to such Limited Condition Acquisition and other business organization,transactions in connection therewith (including any incurrence or issuance of Indebtedness and the use of proceeds thereof) as if they had been consummated at the beginning of the applicable period (in the case of Consolidated Cash Flow Available for Fixed Charges and Consolidated Interest Incurred), as of the date of determination (in the case of Indebtedness to Tangible Net Worth Ratio) and at the end of the applicable period (in the case of Consolidated Tangible Assets) for purposes of determining the ability to consummate any such Limited Condition Acquisition; provided that if the Company elects to make such determination as of the date of such definitive agreement(s), then (i) if any of such ratios are no longer complied with or baskets are exceeded as a result of fluctuations in such ratio or basket (including due to fluctuations in Consolidated Net Income, Consolidated Tangible Assets or Consolidated Tangible Net Worth of the Company or the target company) subsequent to such date of determination and at or prior to the consummation of the relevant Limited Condition Acquisition, such ratios or baskets will not be deemed to have been no longer complied with or exceeded as a result of such fluctuations solely for purposes of determining whether the Limited Condition Acquisition is
permitted under the Indenture, (ii) such ratios or baskets shall not be tested at the time of consummation of such Limited Condition Acquisition or related transactions, (iii) any such transactions (including any incurrence or issuance of Indebtedness or preferred stock and the use of proceeds thereof, the granting, creation, incurrence or suffering to exist of any Lien and the making of any Investment) shall be deemed to have occurred on the date the definitive agreement(s) is entered into and shall be deemed outstanding thereafter for purposes of calculating any ratios or baskets (other than Consolidated Tangible Assets) under the Indenture after the date of such definitive agreement(s) and before the consummation of such Limited Condition Acquisition, unless such definitive agreement(s) is terminated or such Limited Condition Acquisition or incurrence or issuance of Indebtedness or such other transaction to which pro forma effect is being given is abandoned or with respect to which the Company has notified the Trustee in writing will not occur and (iv) to the extent that baskets were utilized in satisfying any covenants, such baskets shall be deemed utilized, but any calculation of Consolidated Tangible Assets, Consolidated Tangible Net Worth, Consolidated Net Income or Consolidated Cash Flow Available for Fixed Charges for purposes of other incurrences of Indebtedness or Liens or making of Restricted Payments (not related to such Limited Condition Acquisition) shall not reflect such Limited Condition Acquisition until it is closed.
Limitations on Additional Indebtedness
The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness); provided, however; that the Company or any Guarantor may incur additional Indebtedness (including Acquired Indebtedness) if no Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of the Indebtedness and if, after giving effect thereto on a pro forma basis, either (i) the Consolidated Fixed Charge Coverage Ratio would be at least 2.00 to 1.00, or (ii) any assets or real property, which acquisition or acquisitionsthe Indebtedness to Tangible Net Worth Ratio would be material, individually or inno more than 3.00 to 1.00.
The first paragraph of this covenant will not prohibit the aggregate, to it and its subsidiaries, taken as a whole, except
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| (1) |
|
| (2) | the Notes and the Note Guarantees issued on the Initial Issue Date and the Exchange Notes issued in exchange therefor (including any guarantee thereof); |
| (3) | Indebtedness of the Company and the Restricted Subsidiaries to the extent existing on the Initial Issue Date (other than Indebtedness referred to in clauses (1), (2), (4), (5), (6), (9), (10), (12), (14), (15), (16) and (18) of the second paragraph of this covenant); |
| (4) | Indebtedness of the Company and the Restricted Subsidiaries under Hedging Obligations; |
| (5) | Indebtedness of the Company owed to and held by a Restricted Subsidiary and Indebtedness of any Restricted Subsidiary owed to and held by the Company or any other Restricted Subsidiary; provided, however, that (a) any Indebtedness of the Company owed to a Non-Guarantor Subsidiary is unsecured and subordinated, pursuant to a written agreement, to the Company’s obligations under the Indenture and the Notes, (b) any Indebtedness of a Guarantor owed to a Non-Guarantor Subsidiary is unsecured and subordinated, pursuant to a written agreement, to such Guarantor’s obligations under the Indenture, the Notes or its Note Guarantee, as applicable, and (c) upon any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any Person other than the Company or a Restricted Subsidiary, such Restricted Subsidiary shall be deemed to have incurred Indebtedness not permitted by this clause (5); |
| (6) | Indebtedness in respect of workers’ compensation claims, self-insurance obligations, bankers’ acceptances, letters of credit, performance bonds, completion bonds, bid bonds, surety bonds, appeal bonds, performance, completion and compliance guarantees or other similar obligations incurred in the ordinary course of business; provided, however, that upon the drawing of letters of credit for reimbursement obligations, or the incurrence of other reimbursement-type Indebtedness with respect to the foregoing, such obligations are reimbursed within 30 days following such drawing or incurrence; |
| (7) | Purchase Money Indebtedness incurred by the Company or any Restricted Subsidiary in an aggregate amount, together with any Refinancing Indebtedness incurred in respect thereof pursuant to clause (11) below, not to exceed at any time outstanding the greater of (a) $25.0 million and (b) 3.0% of Consolidated Tangible Assets at the time of incurrence; |
| (8) | Non-Recourse Indebtedness of the Company or any Restricted Subsidiary incurred for the acquisition, development and/or improvement of real property and secured by Liens only on such real property and Directly Related Assets; |
| (9) | Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days of incurrence; |
| (10) | Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business; |
| (11) | Refinancing Indebtedness with respect to Indebtedness incurred pursuant to the first paragraph of this covenant and clauses (2), (3), (7), (13), (19) or this clause (11) of the second paragraph of this covenant; |
| (12) | the guarantee by (a) the Company or any Guarantor of Indebtedness (other than Indebtedness incurred pursuant to clause (8) or (15) hereof) of the Company or a Restricted Subsidiary that was permitted to be incurred by another provision of this covenant provided, that to the extent such Indebtedness is a subordinated obligation, the guarantee thereof by the Company or such Guarantor shall be subordinated in right of payment to the Notes or the applicable Note Guarantee, as the case may be and (b) Non-Guarantor Subsidiaries of Indebtedness incurred by Non-Guarantor Subsidiaries in accordance with the provisions of the Indenture; |
| (13) | Indebtedness (i) outstanding on the date on which a Person becomes a Restricted Subsidiary or is merged, consolidated, amalgamated or otherwise combined with (including pursuant to any acquisition of assets and assumption of related liabilities) the Company or any Restricted Subsidiary or (ii) Incurred to provide all or a portion of the funds utilized to consummate the transaction or series of related transactions pursuant to which a Person became a Restricted Subsidiary or was otherwise acquired by (including pursuant to any acquisition of assets and assumption of related liabilities) the Company or a Restricted Subsidiary; provided, however, that, in each of clauses (i) and (ii) of this clause (13), at the time of such acquisition or other transaction, either |
| (a) | the Company would have been able to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of this covenant on a pro forma basis after giving effect to the incurrence of such Indebtedness pursuant to this clause (13); |
| (b) | on a pro forma basis, the Consolidated Fixed Charge Coverage Ratio of the Company and the Restricted Subsidiaries is higher than or equal to such ratio immediately prior to such acquisition or merger; or |
| (c) | on a pro forma basis, the Indebtedness to Tangible Net Worth Ratio of the Company and the Restricted Subsidiaries is less than or equal to such ratio immediately prior to such acquisition or merger; |
| (14) | Indebtedness incurred in connection with a Sale and Leaseback Transaction of any Model Home Unit; |
| (15) | the incurrence of Indebtedness by the Company or a Restricted Subsidiary deemed to exist pursuant to the terms of a joint venture agreement as a result of the failure of the Company or any Restricted Subsidiary to make a required capital contribution therein; provided that the only recourse on such Indebtedness is limited to the Company’s or such Restricted Subsidiary’s equity interests in the related joint venture; |
| (16) | obligations of the Company or any Restricted Subsidiary under an agreement with any governmental authority, adjoining (or common masterplan) landowner or seller of real property, in each case entered into in the ordinary course of business |
| (17) | Indebtedness of any Mortgage Subsidiary under warehouse lines of credit and repurchase agreements, and Indebtedness secured by mortgage loans and related assets of such Mortgage Subsidiary, in each case incurred in the ordinary course of such business; provided that the only legal recourse for collection of obligations owing on such Indebtedness is against such Restricted Subsidiary, any other Mortgage Subsidiaries and/or their respective assets; |
| (18) | the incurrence of Indebtedness by the Company or a Restricted Subsidiary in respect of a PAPA; and |
| (19) | Indebtedness of the Company or any Restricted Subsidiary in an aggregate amount, together with any Refinancing Indebtedness incurred in respect thereof pursuant to clause (11) above, not to exceed at any time outstanding the |
For purposes of determining compliance with this covenant:
| (1) | in the event that Indebtedness meets the criteria of more than one of the types of Permitted Indebtedness described in the second paragraph of this covenant or is permitted under first paragraph of this covenant, the Company, in its sole discretion, will classify such item of Permitted Indebtedness on the date of incurrence and may later reclassify such item of Indebtedness in any manner that then complies with this covenant and will be entitled to divide the amount and type of such |
| (2) | if obligations in respect of letters of credit are incurred pursuant to a revolving credit facility and relate to other Indebtedness, then such letters of credit shall be treated as incurred pursuant to clause (1) of the second paragraph above and such other Indebtedness shall not be included; and |
| (3) | except as provided in clause (2) of this paragraph, Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness that is otherwise included in the determination of a particular amount of Indebtedness shall not be included. |
Accrual of interest, accrual of dividends, the accretion of accreted value, the amortization of debt discount, the payment of interest in the form of additional Indebtedness, the reclassification of any obligation as Indebtedness due to a change in accounting principles and the payment of dividends in the form of additional shares of preferred stock or Disqualified Equity Interests will not be deemed to be an incurrence of Indebtedness for purposes of this covenant.
Limitations on Restricted Payments
| (A) | The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment unless at the time of and after giving effect to such Restricted Payment: |
| (1) | no Default shall have occurred and be continuing or shall occur as a consequence thereof; |
| (2) | immediately after giving effect to such transaction on a pro forma basis, the Company could incur $1.00 of additional Indebtedness under the provisions of the first paragraph of the “—Limitations on Additional Indebtedness” covenant; and |
| (3) | the amount of such Restricted Payment, when added to the aggregate amount of all other Restricted Payments made after May 5, 2014 (the “Accrual Date”) (other than Restricted Payments made pursuant to clauses (2) through (5) and (7) through (13) of the next paragraph), would not exceed the sum (the “Restricted Payments Basket”) of (without duplication): |
| (a) | 50% of Consolidated Net Income for the period (taken as one accounting period) from April 1, 2014 to and including the last day of the fiscal quarter ended immediately prior to the date of such calculation for which consolidated financial statements are available (or, if such Consolidated Net Income shall be a deficit, minus 100% of such aggregate deficit), plus |
| (b) | 100% of the aggregate net cash proceeds or the Fair Market Value of any assets to be used in a Permitted Business or Capital Stock of a Person engaged in a Permitted Business (provided, that, such Person becomes a Restricted Subsidiary of the Company or such Person is merged or consolidated into the Company or any of the Restricted Subsidiaries) received by the Company either (i) as contributions to the common equity of the Company after the Accrual Date or (ii) received by the Company from the issuance and sale of Qualified Equity Interests after the Accrual Date, other than net cash proceeds received from an issuance or sale of such Qualified Equity Interests to a Subsidiary of the Company or to an employee stock ownership plan, option plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination, plus |
| (c) | the aggregate amount by which Indebtedness of the Company or any Restricted Subsidiary is reduced on the Company’s balance sheet upon the conversion or exchange (other than in respect of Indebtedness held by a Subsidiary of the Company) of Indebtedness issued subsequent to the Accrual Date into Qualified Equity Interests (less the amount of any cash, or the fair value of assets, distributed by the Company or any Restricted Subsidiary upon such conversion or exchange), plus |
| (d) | in the case of the disposition or repayment of or return on any Investment that was treated as a Restricted Payment made after the Accrual Date, an amount (to the extent not included in the computation of clause (a) above) equal to the net reduction of the portion of such Investment that was treated as a Restricted Payment, plus |
| (e) | upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, to the extent not already included in the computation of clause (a) above, the lesser of (i) the Fair Market Value of the Company’s proportionate interest in such Subsidiary immediately following such Redesignation, and (ii) the aggregate amount of the Company’s Investments in such Subsidiary to the extent such Investments reduced the amount available for subsequent Restricted Payments under this clause (3) and were not previously repaid or otherwise reduced, plus |
| (f) | 100% of the principal amount of, or, if issued at a discount, the accreted value of, any guarantee by the Company or any Restricted Subsidiary incurred after the Accrual Date that is subsequently released or discharged (other than due to a payment on such guarantee), but only to the extent that such guarantee was treated as a Restricted Payment pursuant to this clause (3) when made. |
| (B) | The foregoing provisions will not prohibit: |
| (1) | the payment by the Company or any Restricted Subsidiary of any dividend or similar distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of |
| such dividend or distribution or the giving of the redemption notice, if on the date of declaration or notice, the dividend or redemption payment would have complied with the provisions of the Indenture; |
| (2) | any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Indebtedness of the Company or any Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Subordinated Indebtedness that constitutes Refinancing Indebtedness; |
| (3) | the repurchase, redemption, defeasance or other acquisition or retirement for value of Equity Interests of the Company held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates) of the Company or any Restricted Subsidiary, pursuant to any equity subscription agreement, stock option agreement, shareholders’ agreement or similar agreement or benefit plan of any kind; provided that the aggregate cash consideration paid for all such payments shall not exceed $5.0 million during any calendar year (it being understood, however, that unused amounts permitted to be paid pursuant to this proviso are available to be carried over to subsequent calendar years, so long as the cash consideration applied to the repurchase, redemption, defeasance or other acquisition or retirement for value of Equity Interests pursuant to this clause (3) shall in no event exceed $10.0 million in any calendar year); provided, further, that such amount in any calendar year under this clause may be increased by an |
| (a) | the cash proceeds from the sale of Equity Interests (other than Disqualified Equity Interests) of the Company to any future, present or former employees, directors, officers, members of management, or consultants of the Company or any Restricted Subsidiary that occurs after the Issue Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of the preceding paragraph; plus |
| (b) | the cash proceeds of key man life insurance policies received by the Company or its Restricted Subsidiaries after the Issue Date; less |
| (c) | the amount of any Restricted Payments previously made with the cash proceeds described in clauses (a) and (b) of this clause (3); |
| (4) | repurchases of Equity Interests deemed to occur upon the exercise of stock options or stock appreciation rights if the Equity Interests represent a portion of the exercise price thereof; |
| (5) | the repurchase of Equity Interests upon vesting of restricted stock, restricted stock units, performance share units or similar equity incentives to satisfy tax withholding or similar tax obligations with respect thereto; |
| (6) | the payment of dividends on the Company’s Qualified Equity Interests (other than preferred stock) (or the payment of any dividend to any parent of the Company to fund the payment by such parent of a dividend on such entity’s Qualified Equity Interests (other than preferred stock) of up to 6% per annum of the net proceeds received by the Company from any public equity offering after the Accrual Date of such Qualified Equity Interests of the Company or contributed to the Company as common equity capital by any parent from any public equity offering of such Qualified Equity Interests of any direct or indirect parent of the Company; |
| (7) | Restricted Payments in an aggregate amount, when taken together with all Restricted Payments made pursuant to this clause (7) and then outstanding, does not exceed the greater of $50.0 million and 2.5% of Consolidated Tangible Assets; |
| (8) | any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Equity Interests, Disqualified Equity Interests or Subordinated Indebtedness of the Company or any |
| Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Equity Interests of the Company (other than Disqualified Equity Interests and other than Equity Interests issued or sold to a Subsidiary or an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); provided, however, that the net cash proceeds from such sale of Equity Interests will be excluded from clause (a)(3)(b) above to the extent so applied; |
| (9) | any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Disqualified Equity Interests of the Company or a Restricted Subsidiary made by exchange for or out of the proceeds of the substantially concurrent sale of Disqualified Equity Interests of the Company or such Restricted Subsidiary, as the case may be, so long as such refinancing Disqualified Equity Interests constitute Refinancing Indebtedness; |
| (10) | any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness (a) at a purchase price not greater than 101% of the principal amount of such Subordinated Indebtedness in the event of a Change of Control in accordance with provisions similar to the “—Change of Control” covenant or (b) at a purchase price not greater than 100% of the principal amount thereof in accordance with provisions similar to the “—Limitations on Asset Sales” covenant; provided that, prior to or simultaneously with such purchase, repurchase, redemption, defeasance or other acquisition or retirement, the Company has made the Change of Control Offer or Asset Sale Offer, as applicable, as provided in such covenant with respect to the Notes and has completed the repurchase or redemption of all Notes validly tendered for payment in connection with such Change of Control Offer or Asset Sale Offer; |
| (11) | cash payments in lieu of the issuance of fractional shares of the Company’s Equity Interests upon the exercise, conversion or exchange of any stock options, warrants, other rights to purchase Equity Interests or other convertible or exchangeable securities or any other transaction otherwise permitted by this covenant; |
| (12) | payments or distributions to holders of Equity Interests of the Company or any of the Restricted Subsidiaries pursuant to appraisal or dissenter rights required under applicable law or pursuant to a court order in connection with any merger, amalgamation, arrangement, consolidation or sale, assignment, conveyance, transfer, lease or other disposition of assets; and |
| (13) | the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Equity Interests of the Company or preferred stock of any Restricted Subsidiary issued on or after the Accrual Date in accordance with the covenant described above under the caption “—Limitations on Additional Indebtedness” to the extent such dividends are included in the definition of “Consolidated Interest Expense.” |
The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or a Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The amount of any Restricted Payment paid in cash shall be its face amount.
Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to:
| (a) | pay dividends or make any other distributions on or in respect of its Equity Interests to the Company or any Restricted Subsidiary, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness or other obligations owed to the Company or any Restricted |
| Subsidiary (it being understood that the priority of any preferred stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common equity capital shall not be deemed a restriction on the ability to make distributions on Equity Interests); |
| (b) | make loans or advances to the Company or any other Restricted Subsidiary; or |
| (c) | sell, lease or transfer any of its property or assets to the Company or any other Restricted Subsidiary (it being understood that such transfers shall not include any type of transfer described in clause (a) or (b) above); except for: |
| (1) | encumbrances or restrictions existing under or by reason of applicable law, regulation, rule, permit or other regulatory restrictions; |
| (2) | encumbrances or restrictions existing under the Indenture, the Notes and the Note Guarantees; |
| (3) | non-assignment provisions of any contract or any license or lease entered into in the ordinary course of business; |
| (4) | encumbrances or restrictions existing under Credit Facilities and other agreements entered into prior to the Initial Issue Date; |
| (5) | in the case of clause (c) above, restrictions on the transfer of assets subject to any Lien permitted under the Indenture; |
| (6) | provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements, which limitations are applicable only to the assets that are the subject of such agreements; |
| (7) | any encumbrance or restriction with respect to a Restricted Subsidiary or its property or assets in existence on or before the date on which such Restricted Subsidiary or its property or assets were acquired (directly or indirectly) by the Company or a Restricted Subsidiary (other than encumbrances or restrictions relating to Indebtedness Incurred as consideration in, or to provide all or any portion of the funds utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company or a Restricted Subsidiary), which encumbrance or restriction is not applicable to any Person, or the assets of any Person, other than the Person so acquired or any of its Subsidiaries, or the assets of the Person so acquired or any of its Subsidiaries (including after-acquired property); |
| (8) | encumbrances or restrictions arising in connection with Refinancing Indebtedness; provided, however, that any such encumbrances and restrictions are not materially more restrictive than those contained in the agreements creating or evidencing the Indebtedness being refinanced (for which a determination in good faith by the Company’s Board of Directors shall be conclusive); |
| (9) | customary provisions in leases, licenses, partnership agreements, limited liability company organizational governance documents, joint venture agreements and other similar agreements entered into in the ordinary course of business that restrict the transfer of leasehold interests, licensed interests or ownership interests in such partnership, limited liability company, joint venture or similar Person; |
| (10) | Purchase Money Indebtedness incurred in the ordinary course of business and in compliance with the covenant described under the caption “—Limitations on Additional Indebtedness” to the extent they impose restrictions of the nature described in clause (c) above on the assets acquired; |
| (11) | Non-Recourse Indebtedness incurred in the ordinary course of business and in compliance with the covenant described under the caption “—Limitations on Additional Indebtedness” to the extent it imposes restrictions of the nature described in clause (c) above on the assets securing such Non-Recourse Indebtedness or on the Equity Interests in the Person holding |
| (12) | customary restrictions in other Indebtedness incurred in compliance with the covenant described under the caption “—Limitations on Additional Indebtedness”; provided that such restrictions, taken as a whole, in the good faith determination of the Board of Directors of the Company (a) are not materially more restrictive with respect to such encumbrances and restrictions than those contained in the existing agreements referenced in clause (4) above or (b) will not have a material adverse effect on the Company’s ability to make payments of interest on, and principal of, the Notes (for which a determination in good faith by the Company’s Board of Directors shall be conclusive); |
| (13) | any encumbrances or restrictions existing under (A) development agreements or other contracts entered into with municipal entities, agencies or sponsors in connection with the entitlement or development of real property or (B) agreements for funding of infrastructure, including in respect of the issuance of community facility district bonds, metro district bonds and subdivision improvement bonds, and similar bonding requirements arising in the ordinary course of business of a homebuilder; |
| (14) | restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and |
| (15) | any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (14) above; provided that such amendments or refinancings are not materially more restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing (for which a determination in good faith by the Company’s Board of Directors shall be conclusive). |
Limitations on Transactions with Affiliates
The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its assets to, or purchase any assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate involving aggregate consideration in excess of $2.5 million (an “Affiliate Transaction”), unless:
| (1) | such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that could be obtained in a comparable transaction at such time on an arm’s-length basis by the Company or that Restricted Subsidiary from a Person that is not an Affiliate of the Company or that Restricted Subsidiary; and |
| (2) | the Company delivers to the Trustee |
| (a) | with respect to any Affiliate Transaction involving aggregate value expended or received by the Company or any Restricted Subsidiary in excess of $10.0 million, an Officers’ Certificate of the Company certifying that such Affiliate Transaction complies with clause (1) above and either (x) a Secretary’s Certificate which sets forth and authenticates a resolution that has been adopted by the Board of Directors approving such Affiliate Transaction or (y) a written opinion or appraisal of the type described in clause (b) below; and |
| (b) | with respect to any Affiliate Transaction involving aggregate value expended or received by the Company or any Restricted Subsidiary exceeding $25.0 million, a written opinion as to the fairness of such Affiliate Transaction to the Company or such Restricted Subsidiary from a financial point of view or a written appraisal supporting the value of such Affiliate Transaction, in either case, issued by an Independent Financial Advisor. |
The foregoing restrictions shall not apply to:
| (1) | transactions exclusively between or among (a) the Company and one or more Restricted Subsidiaries or (b) Restricted Subsidiaries; |
| (2) | reasonable director, officer, employee and consultant compensation (including bonuses) and other benefits (including retirement, health, stock and other benefit plans) and indemnification and insurance arrangements; |
| (3) | any Permitted Investment (other than any Permitted Investment made in accordance with clause (2) of the definition of “Permitted Investments”); |
| (4) | any agreement as in effect as of the Initial Issue Date or any extension, amendment, modification, restatement or renewal thereof (so long as any such extension, amendment, modification, restatement or renewal satisfies the requirements set forth in clause (1) of the first paragraph of this covenant) or any transaction contemplated thereby; |
| (5) | Restricted Payments which are made in accordance with the covenant described under the caption “—Limitations on Restricted Payments”; |
| (6) | issuances, sales or other dispositions of Qualified Equity Interests by the Company to an Affiliate; |
| (7) | transactions with customers, clients, suppliers, contractors, joint venture partners or purchasers or sellers of goods or services, in each case in the ordinary course of the business of the Company and the Restricted Subsidiaries (including pursuant to joint venture agreements) and otherwise in compliance with the terms of the Indenture; provided that in the reasonable determination of the disinterested members of the Board of Directors of the Company, such transactions are on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that could have been obtained at the time of such transactions in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; |
| (8) | any agreement between any Person and an Affiliate of such Person existing at the time such Person is acquired by or merged into the Company or a Restricted Subsidiary; provided that such agreement was not entered into in contemplation of such acquisition or merger, and any amendment thereto, so long as any such amendment is not disadvantageous to the Holders in the good faith judgment of the Board of Directors of the Company, when taken as a whole, as compared to the applicable agreement as in effect on the date of such acquisition or merger; |
| (9) | transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls (including pursuant to a joint venture or shareholders agreement), such Person; and |
| (10) | transactions in the ordinary course of business with Unrestricted Subsidiaries that are primarily engaged in the mortgages origination and lending business; provided, however, that such transactions are no less favorable to the Company or the relevant Restricted Subsidiary than those that could be obtained in a comparable transaction at such time on an arm’s-length basis from a Person that is not an Affiliate. |
Limitations on Liens
The Company shall not, and shall not permit any changeRestricted Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer to exist any Lien (a “Triggering Lien”) of any nature whatsoever against any property or assets now owned or hereafter acquired by the Company or such Restricted Subsidiary (including Equity Interests of a Subsidiary), or any proceeds, income or profits therefrom, securing any Indebtedness, except Permitted Liens, unless all payments and other obligations due under the Indenture and the Notes (or under a Note Guarantee in accounting methods, principles or practices materially affecting its reported consolidated assets, liabilities or resultsthe case of operations, exceptLiens of a Guarantor) are secured on an equal and ratable basis (or on a senior priority basis, in the event the other Indebtedness is Subordinated Indebtedness) with the obligations so secured until such time as may be requiredsuch obligations are no longer secured by a changeTriggering Lien.
Limitations on Asset Sales
The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, cause, make, suffer to exist or consummate any Asset Sale unless:
| (1) | the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value (such Fair Market Value to be determined on the date of contractually agreeing to such Asset Sale) of the assets subject to such Asset Sale; and |
| (2) | at least 75% of the total consideration received by the Company or such Restricted Subsidiary, as the case may be, in such Asset Sale or series of related Asset Sales consists of cash or Cash Equivalents; provided that the foregoing requirement shall not apply with respect to any Asset Sale by way of loss, damage or destruction of property or assets or condemnation or other involuntary disposition of such property or assets. |
For purposes of clause (2) above and for no other purpose, the following shall be deemed to be cash:
| (a) | the amount (without duplication) of any Indebtedness (other than Subordinated Indebtedness) of the Company or such Restricted Subsidiary (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet) that is expressly assumed by the transferee in such Asset Sale and with respect to which the Company and all Restricted Subsidiaries have been validly and unconditionally released by the holder of such Indebtedness in writing; |
| (b) | the amount of any securities, notes or other obligations received by the Company or any Restricted Subsidiary from such transferee that are within 180 days following the closing of such Asset Sale converted by the Company or such Restricted Subsidiary to cash or Cash Equivalents (to the extent of the cash or Cash Equivalents actually so received); |
| (c) | the Fair Market Value of any assets (other than securities, unless such securities represent Equity Interests in an entity engaged in a Permitted Business, such entity becomes a Restricted Subsidiary and the Company or a Restricted Subsidiary acquires voting and management control of such entity) received by the Company or any Restricted Subsidiary to be used by it in the Permitted Business; and |
| (d) | any Designated Non-cash Consideration received by the Company or any Restricted Subsidiary in such Asset Sale the Fair Market Value of which, when taken together with all other Designated Non-cash Consideration received since the Initial Issue Date pursuant to this clause (d) (and not subsequently converted into Cash Equivalents that are treated as Net Available Proceeds of an Asset Sale), does not exceed the greater of (i) $20.0 million and (ii) 4.0% of Consolidated Tangible Assets at the time of the receipt of such Designated Non-cash Consideration, with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value. |
If the Company or any Restricted Subsidiary engages in GAAP;
| (1) | to repay, prepay, redeem or repurchase and, with respect to any revolving Indebtedness, permanently reduce Indebtedness and commitments with respect thereto (provided that to the extent such Indebtedness is a Borrowing Base Facility, the Company or such Restricted Subsidiary shall not be obligated to permanently reduce Indebtedness or commitments thereunder) any: |
| (x) | Obligations under (i) secured Indebtedness under any Credit Facility and (ii) secured Indebtedness of the Company (other than any Disqualified Equity Interests or Subordinated Indebtedness) or secured Indebtedness of a Guarantor, in each case other than Indebtedness owed to the Company or an Affiliate of the Company; |
| (y) | Obligations under the Notes or any other Pari Passu Indebtedness of the Company or any Guarantor; provided that if the Company or any Restricted Subsidiary shall so repay or prepay any |
| such other Pari Passu Indebtedness, the Company will reduce Obligations under the Notes on a pro rata basis (based on the amount so applied to such repayments or prepayments) by, at their option, (A) redeeming Notes as described under the caption “—Optional Redemption,” (B) making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all Holders to purchase their Notes at a purchase price of at least 100% of the principal amount thereof, plus the amount of accrued but unpaid interest, if any, thereon up to the principal amount of Notes to be repurchased or (C) purchasing Notes through privately negotiated transactions or open market purchases, in a manner that complies with the Indenture and applicable securities law; or |
| (z) | Indebtedness of a Non-Guarantor Subsidiary with proceeds of Asset Sales by such Non-Guarantor Subsidiary, other than Indebtedness owed to the Company or any Restricted Subsidiary of the Company; |
| (2) | to acquire all or substantially all of the assets of, or any Equity Interests of another Person engaged in a Permitted Business, if, after giving effect to any such acquisition of Equity Interests, such Person is or becomes a Restricted Subsidiary of the Company; |
| (3) | to make a capital expenditure; |
| (4) | to acquire Additional Assets or improve or develop existing assets to be used in a Permitted Business; or |
| (5) | to make any combination of the foregoing payments, redemptions, repurchases, expenditures or investments; |
provided, that in the ordinary coursecase of business;
UCP has further agreed not to take certain actions betweenAsset Sale and 180 days from the date of the Merger Agreement andAcceptable Commitment.
Pending the effective timefinal application of any Net Available Proceeds, the Merger withoutCompany may temporarily reduce revolving credit borrowings or otherwise invest the prior written consent (not be unreasonably withheld, conditionedNet Available Proceeds in any manner that is not prohibited by the Indenture.
Any Net Available Proceeds from Asset Sales that are not applied or delayed) of Century Communities, including the following (subject to exceptions described below orinvested as provided in the Merger Agreement, or as set forth in disclosure schedules that were previously provided to Century Communities at the timesecond paragraph of entry into the Merger Agreement):
(i) making (except for elections made in the ordinary coursecase of business) or changing any material tax election, (ii) changing any tax accounting period for purposes ofPari Passu Indebtedness represented by securities sold at a material tax or material method of tax accounting, (iii) filing any material amended tax return, (iv) settling or compromising any audit or proceeding relating to a materialdiscount, not more than the amount of taxes, exceptthe accreted value thereof at such time, plus accrued and unpaid interest to the date fixed for the closing of such offer, in accordance with the procedures set forth in the ordinary courseIndenture. After the completion of business, (v) agreeingan Asset Sale, the Company may make an Asset Sale Offer prior to the time it is required to do so by the first sentence of this paragraph. If the Company completes such an extension or waiver of the statute of limitations with respect to a material amount of taxes, (vi) entering into any “closing agreement” within the meaning of Section 7121 of the Code (or
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No Solicitation of Alternative Proposals
UCP has agreed that, from April 10, 2017 until the earlier to occur of (i) the effective time of the Merger and (ii) the termination of the Merger Agreement (in accordance with its terms), it will not, nor will it authorize any of its representatives or permit any of its controlled affiliates to, and it will instruct each of its representatives not to, on its behalf, directly or indirectly:
by the Company and the Restricted Subsidiaries for any purpose not prohibited by the Indenture. If the aggregate principal amount of Notes and other Pari Passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and the Company or its agent will select such other Pari Passu Indebtedness to enforce, release any person from, terminate or waive or render inapplicable, or amendbe purchased on a pro rata basis (subject to adjustments so no note in any manner less favorablean authorized denomination remains outstanding after such purchase) based on the aggregate principal amount of the Notes and the other Pari Passu Indebtedness to UCP,be purchased validly tendered and not withdrawn. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.
To the extent that the provisions of any confidentiality, standstillsecurities laws or other similar agreement currently in effectregulations conflict with the Asset Sale provisions of the Indenture, the Company shall not be deemed to have breached its obligations under the Asset Sale provisions of the Indenture by virtue of its compliance with such securities laws or regulations.
Agreements relating to Indebtedness to which UCP or anythe Company (or one of its subsidiaries isAffiliates) may become a party with respectfrom time to a Takeover Proposal;
Provisions under the Indenture relative to our obligation to make has informed UCPan offer to repurchase the Notes pursuant to this “—Limitations on Asset Sales” covenant may be waived or any of its controlled affiliates of any intention to make, or has publicly announced an intention to make, any proposal that constitutes, or reasonably would be expected to lead to, any Takeover Proposal.
Notwithstanding the restrictions described above, if, prior to obtaining the requisite stockholder approval in connectionmodified with the Merger, UCP receives from any person or group an unsolicited written Takeover Proposal that the UCP Board determines in good faith, after consultation with UCP’s financial advisor and outside legal counsel, constitutes, or would reasonably be expected to lead to, a Superior Proposal (as defined and described below), then, subject to compliance with the Merger Agreement, UCP and any of its representatives will be permitted to (i) furnish to such person or group and its or their representatives, pursuant to a confidentiality agreement (a copy of which will be furnished to Century Communities), information with respect to UCP and its subsidiaries, and (ii) engage or participate in any discussions or negotiations with such person, group and its or their representatives regarding any Takeover Proposal. UCP will make available to Century Communities copies of all material non-public information (to the extent such information has not previously been furnished or made available to Century Communities) that it has furnished or made available to any such person or group in accordance with the preceding sentence before or substantially concurrently with the time such information is furnished or made available to such person or group.
A “Takeover Proposal” means any offer or proposal made by any person (other than UCP, any subsidiary of UCP, PICO, Century Communities or Merger Sub) or “group” (within the meaning of Section 13(d)consent of the Exchange Act), relating to or providing for,Holders of a majority in any single transaction or seriesprincipal amount of related transactions (other than
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the Merger and the other transactions contemplated by the Merger Agreement), directly or indirectly, any (i) purchase, sale, lease, license, assignment, transfer, exchange or other disposition of assets of UCP or any of its subsidiaries representing 20% or more of the consolidated assets of UCP or to which 20% or more of UCP’s earnings power or revenues are attributable; (ii) acquisition of 20% or more of the aggregate voting power of the then-outstanding shares of capital stock of UCP; (iii) tender or exchange offer that, if consummated, would result in any such person or group owning 20% or more of the aggregate voting power of the then-outstanding shares of capital stock of UCP; (iv) issuance by UCP or any of its subsidiaries of equity interests representing 20% or more of the aggregate voting power of the then-outstanding capital stock of UCP; (v) merger, business combination, consolidation, share exchange, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving UCP or any of its subsidiaries pursuant to which any such person, group or such person’s or group’s stockholders (other than UCP stockholders (as a group) immediatelyNotes, prior to the consummation of such transaction) would beneficially own 20% or more oftime the aggregate voting power of the then-outstanding shares of capital stock of UCP or other equity securities of UCP resulting, directly or indirectly, from any such transaction; or (vi) any combination of the foregoing types of transactions if the total percentage of the UCP’s consolidated assets, earnings power and/or revenues involved is 20% or more, or if such person or group (or the stockholders of such person or group) would acquire beneficial ownership or the right to acquire beneficial ownership of equity interests representing 20% or more of the aggregate voting power of the then-outstanding capital stock of UCP.
A “Superior Proposal” means a bona fide, written Takeover Proposal (except that references in the definition of “Takeover Proposal” to “20% or more” shall be replaced by “80%” for purposes of this definition) made by any person(s) or “group” (within the meaning of Section 13(d) of the Exchange Act) that UCP’s board of directors determines in good faith, after consultation with UCP’s financial advisor and outside legal counsel, and after (i) taking into account all legal, regulatory and other aspects of such proposal (including any break-up and expense reimbursement fees, conditions to consummation, and whether the transactions contemplated by the proposal are reasonably capable of being consummated on a timely basis in accordance with their terms), and (ii) giving effect to any binding proposal made by Century Communities and considered and negotiated in good faith by UCP in accordance with the terms of the Merger Agreement, is more favorable to the holders of UCP Class A Common Stock, from a financial point of view, than the Merger and the other transactions contemplated by the Merger Agreement, and for which, in the case of any cash consideration, all requisite cash funds are or will be immediately available or will be committed by identified financing sources at the time of signing a definitive transaction agreement.
Change of UCP Board Recommendation
UCP has agreed that neither the UCP Board nor any duly authorized committee thereof will (i) fail to include in this proxy statement/prospectus the UCP Board’s recommendation in favor of the adoption of the Merger Agreement (which we refer to as the “UCP Board Recommendation”) or otherwise fail to make the UCP Board Recommendation; (ii) change, modify, withhold, qualify or withdraw, in a manner adverse to Century Communities, the UCP Board Recommendation; (iii) make any recommendation or public announcement in response to a tender or exchange offer commenced by any person(s), other than an express recommendation (made pursuant to Rule 14e-2(a)(1) under the Exchange Act) that UCP stockholders reject such tender or exchange offer, or a temporary “stop-look-listen” communication by the UCP Board (made pursuant to Rule 14d-9(f) under the Exchange Act); (iv) fail to publicly recommend against a Takeover Proposal, or fail to publicly reaffirm the UCP Board Recommendation, in each case, within 10 business days after any written request by Century Communities to do so, which is transmitted to UCP subsequent to any public announcement by any person of a Takeover Proposal; or (v) enter into, approve, adopt or recommend, or resolve or propose publicly to enter into, approve, adopt or recommend, any Takeover Proposal or any letter of intent, agreement-in-principle, expression of interest, term sheet, Merger Agreement, acquisition or business combination agreement, asset sale or transfer agreement, restructuring, reorganization or recapitalization agreement, option agreement, joint venture agreement, partnership agreement, or other contract contemplating, or providing for, a Takeover Proposal. We refer to the actions described in clauses (i) through (v) of the previous sentence as a “UCP Recommendation Change.”
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Notwithstanding the restrictions described above, the UCP Board, at any time before UCP stockholders adopt the Merger Agreement, may make a UCP Recommendation Change in response to either (i) a Superior Proposal that did not result from a violation of UCP’s non-solicitation obligations or (ii) an Intervening Event (as defined below), in each case only if the UCP Board determines in good faith, after consultation with UCP’s outside legal counsel, that a failure to do so would be inconsistent with the fiduciary duties of the UCP Board under applicable law.
UCP may not make a UCP Recommendation Change unless:
Limitations on Designation of Unrestricted Subsidiaries
The Company may designate any Subsidiary of the Merger Agreement to enable the UCP Board to determine that (i) the Superior Proposal leading to the UCP Recommendation Change no longer constitutes a Superior Proposal,Company (including any newly acquired or (ii) the failure to make a UCP Recommendation Change in respect of the Intervening Event leading to the UCP Recommendation Change would no longer be inconsistent with the fiduciary duties of the UCP Board under applicable law; and
An “Intervening Event” means an event, state of facts, change, discovery, development or circumstance that is material to UCP and its subsidiaries (and not of a general economic, industry or market nature, except to the extent UCP is affected in a beneficially disproportionate manner compared to other companies that operate in UCP’s industry sector and conduct substantially the same businesses as UCP and its subsidiaries), taken as a whole, that was not known or reasonably foreseeable by UCP as of or prior to April 10, 2017, and which event, state of facts, change, discovery, development or circumstance becomes known to the UCP Board prior to UCP stockholders adopting the Merger Agreement. However, none of the following events will constitute an “Intervening Event”: (i) any Takeover Proposal or Superior Proposal, or any inquiry, offer or proposal that constitutes or that reasonably can be expected to lead to or result in any Takeover Proposal or Superior Proposal; or (ii) any change in the price or trading volume of the UCP Class A Common Stock or UCP’s credit rating in and of itself, although the facts underlying any such change may be, or contribute to the occurrence of, an Intervening Event.
Efforts to Complete the Merger
Each of Century Communities, Merger Sub, and UCP has agreed to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in
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doing, all things necessary, proper or advisable to complete and make effective, in the most expeditious manner practicable, the Merger, including:
In connection with and without limiting the foregoing, each of UCP, the UCP Board, Century Communities, and the Century Communities Board has agreed to (i) take all action necessary to ensure that no state anti-takeover law or similar statute or regulation is or becomes applicable to the Merger Agreement, the Merger or any other transaction contemplated by the Merger Agreement, and (ii) if any state anti-takeover law or similar statute or regulation becomes or may become applicable to the Merger Agreement, the Merger or any other transaction contemplated by the Merger Agreement, take all action necessary to ensure that the Merger and the other transactions contemplated by the Merger Agreement be consummated as promptly as practicable on the terms contemplated by the Merger Agreement and otherwise to minimize the effect of such anti-takeover law or similar statute or regulation on the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.
Employee Benefits Matters
From the effective time of the Merger until the first anniversary of such time (we refer to such period as the “Benefit Protection Period”), Century Communities will provide or cause its subsidiaries to provide:
For all purposes under any employee benefit plan of Century Communities and any other employee benefit program, policy or arrangement maintained by Century Communities or any of its subsidiaries (except for any defined benefit pension plan or equity compensation plan or arrangement), including any vacation, paid time off and severance plans, each UCP employee’s service with or otherwise credited by UCP or any UCP subsidiary will be treated as service with Century Communities or any of its subsidiaries; provided, however, that such service need not be recognized to the extent that such recognition would result in any duplication of benefits.
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Century Communities will, or will cause its subsidiaries to, (i) use all reasonable efforts to waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods under any welfare benefit plan maintained by Century Communities or any of its subsidiaries in which UCP employees (and their eligible dependents) will be eligible to participate from and after the effective time of the Merger, except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived“Unrestricted Subsidiary” under the comparable UCP benefit plan immediately prior to the effective time, and (ii) use all reasonable efforts to recognize, or cause to be recognized, the dollar amount of all co-payments, deductibles and similar expenses incurred by each UCP employee (and his or her eligible dependents) during the calendar year in which the effective time of the Merger occurs for purposes of satisfying such year’s deductible and co-payment limitations under the relevant welfare benefit plans in which such UCP employee (and his or her eligible dependents) will be eligible to participate from and after the effective time of the Merger.
Nothing in the Merger Agreement will (i) be treated as an amendment of any benefit plan of Century Communities or any of its subsidiaries, (ii) give any UCP employee or former UCP employee or any other individual associated therewith or any employee benefit plan or trustee thereof or any other third person any right to enforce the provisions of the Merger Agreement, or (iii) obligate Century Communities or any of its affiliates to (a) maintain any particular benefit plan, except in accordance with the terms of such plan, or (b) retain the employment of any particular UCP employee.
Treatment of UCP Equity Awards
Stock Options. At the effective time of the Merger, each outstanding equity award granted under the UCP, Inc. 2013 Long-Term Incentive Plan (which we refer to as the “UCP Stock Plan”Indenture (a “Designation”) that is an option to purchase shares of UCP Class A Common Stock (which we refer to as a “UCP Option”), whether vested or unvested, will, by virtue of the Merger and without any action on the part of the holder thereof, be converted into an option to purchase shares of Century Communities Common Stock (which we refer to as an “Adjusted Option”) on the same terms and conditions as were applicable under such UCP Option immediately prior to the effective time of the Merger (including vesting terms, conditions and schedules), with the number of shares of Century Communities Common Stock (rounded down to the nearest whole number of shares) subject to such Adjusted Option equal to the product of (i) the total number of shares of UCP Class A Common Stock underlying such UCP Option immediately prior to the effective time of the Merger, multiplied by (ii) the Equity Award Exchange Ratio (as defined below), and with the exercise price applicable to such Adjusted Option to equal the quotient (rounded up to the nearest whole cent) obtained by dividing (a) the exercise price per share applicable to such UCP Option immediately prior to the effective time of the Merger, by (b) the Equity Award Exchange Ratio; provided, that the exercise price and the number of shares of Century Communities Common Stock underlying the Adjusted Option will be determined in a manner consistent with the requirements of Section 409A of the Code; and provided, further, that, in the case of any UCP Option to which Section 422 of the Code applies, the exercise price and the number of shares of Century Communities Common Stock underlying the corresponding Adjusted Option will be determined in accordance with the foregoing, subject to such adjustments as are necessary in order to satisfy the requirements of Section 424(a) of the Code.only if:
Restricted Stock Units. At the effective time of the Merger, each outstanding equity award granted under the UCP Stock Plan that is a restricted stock unit with respect to a share of UCP Class A Common Stock (which we refer to as a “UCP Restricted Stock Unit”) will, by virtue of the Merger and without any action on the part of the holder thereof, be converted into a restricted stock unit award with respect to a share of Century Communities Common Stock, with the same terms and conditions as were applicable under such UCP Restricted Stock Unit immediately prior to the effective time of the Merger (including vesting and settlement terms, conditions and schedules), and relating to the number of shares of Century Communities Common Stock equal to the product of (i) the number of shares of UCP Class A Common Stock subject to such UCP Restricted Stock Unit immediately prior to the effective time of the Merger, multiplied by (ii) the Equity Award Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares of Century Communities Common Stock.
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The “Equity Award Exchange Ratio” means the sum of (i) 0.2309 (the Exchange Ratio) plus (ii) the quotient obtained by dividing (a) $5.32 (the cash consideration) by (b) the average closing sale price of a share of Century Communities Common Stock as reported on the NYSE for the five consecutive trading days ending on and including the second complete trading day immediately preceding the closing date of the Merger, rounded to the nearest ten-thousandth.
Other Covenants and Agreements
The Merger Agreement contains certain other covenants and agreements, including covenants relating to:
Conditions to Completion of the Merger
The obligations of Century Communities, the Merger Sub and UCP to effect the Merger are subject to the satisfaction or waiver of each of the following conditions:
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In addition, the obligations of Century Communities and Merger Sub to effect the Merger are further subject to the satisfaction or waiver of each of the following conditions:
In addition, the obligations of UCP to effect the Merger are further subject to the satisfaction or waiver of each of the following conditions:
the representations and warranties of Century Communities relating to (i) its capitalization, except for such inaccuracies that are not reasonably expected to result, individually or in the aggregate, in an increase in the number of authorized, issued or outstanding shares of Century Communities Common Stock or preferred stock of Century Communities, on a fully diluted basis, of more than a number of shares equal to the quotient of (a) $250,000 divided by (b) the average closing sale price of a share of Century Communities Common Stock as reported on the NYSE for the five consecutive trading days ending on the second complete trading day immediately preceding the date of the Merger Agreement, (ii) the due authorization, execution and validity of the Merger Agreement, and the applicability of state anti-takeover statutes, and (iii) the execution and delivery by each of Century Communities and
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Termination of the Merger Agreement
The Merger Agreement may be terminated at any time before the effective time of the Merger, notwithstanding the receipt of the requisite approval of UCP stockholders, under the following circumstances:
no Default shall have |
(A) such Subsidiary has total assets of $1,000 or less or (B) the Company would be permitted to make, and shall be deemed to make, at the time of such Designation, (a) a |
neither the Company nor any |
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Under the Merger Agreement, UCP is not permitted to terminate the Merger Agreement in respect of, or due to, any UCP Recommendation Change made by the UCP Board solely in response to an Intervening Event. If the Merger Agreement is validly terminated, the Merger Agreement will become void and have no effect, without any liability or obligation on the part of any party, except in the case of intentional fraud or willful breach. The provisions of the Merger Agreement relating to non-reliance on representations and warranties, fees and expenses, effects of termination, governing law, waiver of jury trial, and certain other provisions of the Merger Agreement, as well as the non-disclosure agreement (as amended) entered into among UCP, Century Communities, and PICO, will survive any termination of the Merger Agreement.
Fees and Expenses and Termination Fees
All fees and expenses incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated, except that (i) UCP will bear all fees and expenses incurred in connection with preparing the proxy statement portion of this proxy statement/prospectus, (ii) Century Communities will bear all fees and expenses incurred in connection with preparing the prospectus portion of this proxy statement/prospectus, and (iii) Century Communities and UCP will each bear 50% of all fees and expenses incurred in connection with (a) filing (including SEC registration fees), printing and mailing this proxy statement/prospectus, and (b) any regulatory filings, or obtaining any consents or approvals from governmental entities or third parties necessary for the consummation of the Merger.
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UCP will be obligated to pay a termination fee of $7,050,000 to Century Communities if:
such Subsidiary is not party to any agreement, contract, arrangement or |
| (5) | such Subsidiary is a Person with respect to which neither the Company nor any |
such Subsidiary has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any Restricted Subsidiary. |
If, at any time after the Designation, any Unrestricted Subsidiary fails to meet the requirements set forth in the preceding paragraph, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of the date and, if the Indebtedness is not permitted to be incurred under the covenant described above under the caption “—Limitations on Additional Indebtedness” or the Lien is not permitted under the covenant described above under the caption “—Limitations on Liens,” the Company shall be in default of the applicable covenant.
The Company may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a “Redesignation”) only if:
| (1) | no Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation; |
| (2) | (a) the Company would be able to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of the “—Limitations on Additional Indebtedness” covenant, (b) the Consolidated Fixed Charge Coverage Ratio of the Company and the Restricted Subsidiaries would be equal to or greater than such ratio for the Company and the Restricted Subsidiaries immediately prior to such Redesignation, or (c) the Indebtedness to Tangible Net Worth Ratio of the Company and the Restricted Subsidiaries would be equal to or less than such ratio immediately prior to such Redesignation, in each case on a pro forma basis taking into account such Redesignation; and |
| (3) | all Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding immediately following such Redesignation would, if incurred or made at such time, have been permitted to be incurred or made for all purposes of the Indenture. |
All Designations and Redesignations must be evidenced by resolutions of the Board of Directors of the Company and an Officers’ Certificate delivered to the Trustee and certifying compliance with the foregoing provisions.
Limitations on Mergers, Consolidations, Etc.
The Company will not, directly or indirectly, in a single transaction or a series of related transactions, (a) consolidate or merge with or into any Person (other than a merger that satisfies the requirements of clause (1) below with a Wholly-Owned Restricted Subsidiary solely for the purpose of changing the Company’s jurisdiction of formation to another State of the United States), or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of the Company to any Person or (b) adopt a Plan of Liquidation unless, in either case:
| (1) | either: |
| (a) | the Company will be the surviving or continuing Person; or |
| (b) | the Person formed by |
| corporation, limited liability company or limited partnership organized and existing under the laws of any State of |
| (2) | immediately prior to and immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, no Default shall have occurred and be continuing; |
| (3) | immediately after and giving effect to such transaction and the assumption of the obligations set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, either (a) the Company or the Successor, as the case may be, could incur $1.00 of additional Indebtedness pursuant to the first paragraph of the covenant described under the caption “—Limitations on Additional Indebtedness,” (b) the Consolidated Fixed Charge Coverage Ratio of the Company and the Restricted Subsidiaries or the Successor and the Restricted Subsidiaries, as the case may be, would be greater than or equal to such ratio for the Company and the Restricted Subsidiaries immediately prior to such transaction or (c) the Indebtedness to Tangible Net Worth Ratio of the Company and the Restricted Subsidiaries or the Successor and the Restricted Subsidiaries, as the case may be, would be less than or equal to such ratio for the Company and the Restricted Subsidiaries immediately prior to such transaction; and |
| (4) | the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, disposition or Plan of Liquidation and such supplemental indenture, if any, comply with the Indenture, and in the case of the Opinion of Counsel, that such supplemental indenture constitutes the legal, valid and binding obligation of the Successor, enforceable against the Successor. |
For purposes of this covenant, any Indebtedness of the Successor which was not Indebtedness of the Company immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction.
Except as provided in the fifth paragraph under the caption “—Note Guarantees,” no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person (other than the Company or a Guarantor), whether or not affiliated with such Guarantor, unless:
| (1) | either: |
| (a) | such Guarantor will be the surviving or continuing Person; or |
| (b) | the Person formed by or surviving any such |
| (2) | immediately after giving effect to |
| (3) | the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such |
within 12 months
Notwithstanding the foregoing, (a) any Restricted Subsidiary may merge into the Company or another Restricted Subsidiary, (b) the above provisions shall not apply to any transfer of assets between or among the Company and any Restricted Subsidiaries and (c) the requirements of the immediately preceding paragraph will not apply to any transaction pursuant to which such Guarantor is permitted to be released from its Note Guarantee in accordance with the provisions described above under the caption “Note Guarantees.”
For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the assets of one or more Subsidiaries, whose properties and assets, if held by the Company instead of such termination, UCP entersSubsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, will be deemed to be the transfer of all or substantially all of the assets of the Company.
Upon any consolidation, combination or merger of the Company or a Guarantor, or any sale, lease, transfer, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with the foregoing, in which the Company or such Guarantor is not the continuing obligor under the Notes or its Note Guarantee, the surviving entity formed by such consolidation or into which the Company or such Guarantor is merged or to which such sale, lease, transfer, conveyance or other disposition is made will succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor under the Indenture, the Notes and the Note Guarantees with the same effect as if such surviving entity had been named therein as the Company or such Guarantor and, except in the case of a definitive agreementlease, the Company or such Guarantor, as the case may be, will be released from the obligation to consummate,pay the principal of, and premium, if any and interest on the Notes or consummates,in respect of its Note Guarantee, as the case may be, and all of the Company’s or such Guarantor’s other obligations and covenants under the Notes, the Indenture and its Note Guarantee, if applicable.
The description above includes a phrase relating to the sale or disposition of “all or substantially all” of the assets of the Company Qualifying Transaction.and the Restricted Subsidiaries, taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law.
A “Company Qualifying Transaction” meansAdditional Note Guarantees
After the Initial Issue Date, the Company will cause (i) each Restricted Subsidiary that guarantees Indebtedness for borrowed money of the Company or any Guarantor and (ii) each other domestic Wholly-Owned Restricted Subsidiary, other than any Immaterial Subsidiary (until such Immaterial Subsidiary is no longer an Immaterial Subsidiary), to execute and deliver to the Trustee, within 30 days of incurring such guarantee (in the case of clause (i) above) or the applicable date of acquisition or creation (or change in status of an Immaterial Subsidiary) (in the case of clause (ii) above), a transactionsupplemental indenture to the Indenture pursuant to which such Restricted Subsidiary will provide a Note Guarantee. Each Note Guarantee shall be subject to the terms and limitations, including certain customary release provisions contained in the Indenture, described above under the caption “—Note Guarantees.”
The Company at any time at its sole option may cause any Non-Guarantor Subsidiary to become a Guarantor by executing a supplemental indenture to the Indenture and delivering the documents required by the Indenture.
Conduct of Business
The Company will not, and will not permit any Restricted Subsidiary to, engage in any material respect in a business other than a Permitted Business.
Payments for which a Takeover ProposalConsent
The Company will not, and will not permit any Subsidiary to, directly or indirectly, pay or cause to be paid any consideration, to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement; provided that if consents, waivers or amendments are sought in connection with an exchange offer where participation in such exchange offer is limited to Holders who are “qualified institutional buyers,” within the meaning of Rule 144A, or non-U.S. persons, within the meaning of Regulation S, then such consideration need only be offered to all Holders to whom the exchange offer is made and publicly disclosedto be paid to all such Holders that consent, waive or announced (substituting,agree to amend in such time frame.
Reports
Whether or not the Company is subject to Section 13 or 15(d) of the Exchange Act, for purposesso long as the Notes are outstanding, the Company will furnish to Holders of this definition, “80%” for each reference to “20%”Notes, within the time periods specified in the definition of “Takeover Proposal”).SEC’s rules and regulations (including any grace periods or extensions permitted by the SEC):
Amendments, Extensions, Waivers, and Consents
| (1) | all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file these Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, an audit report on the annual financial statements by the Company’s certified independent accountants; and |
The Merger Agreement may be amended at any time by a written instrument signed on behalf of each
| (2) | all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file these reports. |
In addition, whether or not the Company is subject to Section 13 or 15(d) of the parties, except that (i) afterExchange Act, for so long as the adoptionNotes are outstanding, the Company will, to the extent permitted by the SEC, file a copy of all of the Merger Agreementinformation and reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the SEC’s rules and regulations (including any grace periods or extensions permitted by UCP stockholders, no amendment may be made that requires the approval of such stockholders under applicable law without such approval,SEC) and (ii) no amendment shall be mademake the information available to the Merger Agreement after the effective time of the Merger.securities analysts and prospective investors upon request.
At any time beforethat there shall be one or more Unrestricted Subsidiaries that, in the effective timeaggregate, hold more than 15.0% of Consolidated Tangible Assets, the quarterly and annual financial information required by the preceding paragraphs shall include a reasonably detailed presentation, either on the face of the Merger, any party may (i) extendfinancial statements or in the time for the performance of anynotes thereto of the obligations or other actsfinancial condition and results of operations of the other party, (ii) waive any inaccuracies inCompany and the representationsRestricted Subsidiaries separate from the financial condition and warrantiesresults of operations of the other party contained inUnrestricted Subsidiaries.
In addition, to the Merger Agreement or inextent not satisfied by the foregoing, the Company and the Guarantors have agreed that, for so long as any documentNotes remain outstanding, the Company will furnish to the Holders of the Notes and prospective investors, upon their request, information required to be delivered pursuant to Rule 144A(d)(4) under the Merger Agreement,Securities Act.
In addition, the Company will:
| (1) | hold a quarterly conference call to discuss the information contained in the reports not later than ten Business Days from the time the Company furnishes the reports to the Holders; and |
| (2) | no fewer than three Business Days prior to the date of the conference call required to be held in accordance with clause (1) above, issue a press release to the appropriate U.S. wire services announcing the time and date of such conference call and directing the Holders or beneficial owners of, and prospective investors in the Notes and securities analysts and market makers to contact an individual at the Company (for whom contact information shall be provided in such press release) to obtain the reports and information on how to access such conference call. |
Any information filed with, or (iii) waive compliancefurnished to, the SEC within the time periods specified in this covenant shall be deemed to have been furnished to the Holders of Notes and prospective investors as required by this covenant,
and to the extent such filings comply with anythe rules and regulations of the agreements or conditions contained in the Merger Agreement. AnySEC regarding such extension or waiverfilings, they will be valid only if set forthdeemed to comply with the requirements of this covenant.
Events of Default
Each of the following is an “Event of Default”:
| (1) | failure by the Company to pay interest on any of the Notes when it becomes due and payable and the continuance of any such failure for 30 days; |
| (2) | failure by the Company to pay the principal or premium on any of the Notes when it becomes due and payable, whether at its Stated Maturity, upon redemption, upon required purchase, upon acceleration or otherwise; |
| (3) | failure by the Company or the Guarantors to comply with any of its agreements or covenants described above under the caption “—Certain Covenants—Limitations on Mergers, Consolidations, Etc.”; |
| (4) | failure by the Company or any Restricted Subsidiary to comply with any other agreement or covenant in the Indenture and continuance of this failure for 60 days after written notice of the failure has been given to the Company by the Trustee or by the Holders (with a copy to the Trustee) of at least 25% of the aggregate principal amount of the Notes then outstanding; |
| (5) | default under any mortgage, indenture or other instrument or agreement under which there may be issued or by which there may be secured or evidenced Indebtedness (other than Non-Recourse Indebtedness) of the Company or any Restricted Subsidiary, or the payment of which is guaranteed by the Company or any Restricted Subsidiary, whether such Indebtedness or guarantee now exists or is incurred after the Initial Issue Date, which default: |
| (a) | is caused by a failure to pay when due principal on such Indebtedness within the applicable express grace period, or |
| (b) | results in the acceleration of such Indebtedness prior to its express final maturity, and in each case, the principal amount of such Indebtedness, together with any other Indebtedness with respect to which an event described in clause (a) or (b) has occurred and is continuing, aggregates $40.0 million or more; provided, however, that if any such default is cured or waived or any acceleration rescinded or such Indebtedness is repaid within a period of 10 days from the continuation of such default beyond any applicable grace period or the occurrence of such acceleration, as the case may be, such Event of Default under the Indenture and any consequential acceleration of the Notes shall automatically be rescinded so long as such rescission does not conflict with any judgment or decree; |
| (6) | one or more judgments or orders that exceed $40.0 million in the aggregate (net of any amounts covered by insurance issued by a creditworthy insurance company to the extent such insurer has not denied coverage therefor (other than reserving its rights) or that are bonded) for the payment of money have been entered by a court or courts of competent jurisdiction against the Company or any Restricted Subsidiary and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered; |
| (7) | certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the date of the latest audited consolidated financial statements of the Company and the Restricted Subsidiaries), would constitute a Significant Subsidiary; or |
| (8) | the Note Guarantee of any Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Note Guarantee and the Indenture) or is declared null and void and unenforceable or found to be invalid or any Guarantor denies its liability under its Note Guarantee (other than by reason of release of a Guarantor from its Note Guarantee in accordance with the terms of the Indenture and the Note Guarantee). |
The foregoing will constitute Events of Default whatever the reason for any such Event of Default, and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.
If an Event of Default (other than an Event of Default specified in aclause (7) above with respect to the Company) shall have occurred and be continuing under the Indenture, the Trustee, by written instrument signed on behalfnotice to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding by written notice to the Company and the Trustee, may, and the Trustee at the request of such party.
For any matter under the Merger Agreement requiring the consent or approval of any party, such consent or approval will be valid and binding on such party only if delivered in a written instrument signed on behalf of such party.
No Third Party Beneficiaries
The Merger Agreement is not intended to confer upon you or any person, other than Century Communities, Merger Sub, and UCP, any rights or remedies, except with the respect (i) to the rights to indemnification and continuing maintenance after the completion of the Merger of directors’ and officers’ liability insurance coverage maintained by UCP and its subsidiaries, (ii) after the effective time of the Merger, the rights of former UCP stockholders to receive the Merger Consideration, and (iii) after the effective time of the Merger, the rights of
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former holders of UCP options or restricted stock units to receive new options or restricted stock units, respectively, in respect of Century Communities Common StockHolders in accordance with the termsIndenture shall, declare all amounts owing under the Notes to be due and payable immediately. Upon such declaration of acceleration, the aggregate principal of and accrued and unpaid interest on the outstanding Notes shall immediately become due and payable. If an Event of Default specified in clause (7) with respect to the Company occurs, all outstanding Notes shall become due and payable without any further action or notice. In the event of a declaration of acceleration of the Merger Agreement.Notes because an Event of Default described in clause (5) has occurred and is continuing, the declaration of acceleration of the Notes shall be automatically annulled if the default triggering such Event of Default pursuant to clause (5) shall be remedied or cured by the Company or a Restricted Subsidiary or waived by the holders of the relevant Indebtedness within 30 days after the declaration of acceleration with respect thereto and if (1) the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction and (2) all existing Events of Default, except nonpayment of principal, premium, if any, or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived. The Holders of a majority in principal amount of the outstanding Notes may waive all past defaults (except with respect to nonpayment of principal, premium or interest) and rescind any such acceleration with respect to the Notes and its consequences if (1) such rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (2) all existing Events of Default, other than the nonpayment of the principal, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived.
Specific Performance
Century Communities and UCP agreedThe Trustee shall, within 90 days after becoming aware of the occurrence of any Default with respect to the Notes, give the Holders notice of all uncured Defaults thereunder known to it; provided, however, that, except in the Merger Agreementcase of an Event of Default in payment with respect to the Notes or a Default in complying with the covenant described under the caption “—Certain Covenants—Limitations on Mergers, Consolidations, Etc.,” the Trustee shall be protected in withholding such notice if and so long as a committee of its trust officers in good faith determines that irreparable damagethe withholding of such notice is in the interest of the Holders.
No Holder will have any right to institute any proceeding with respect to the Indenture or the Notes or for any remedy thereunder, unless:
| (1) | such Holder or Holders give to the Trustee written notice that an Event of Default is continuing; |
| (2) | the Holders of at least 25% in aggregate principal amount of Notes outstanding make a written request to the Trustee to pursue the remedy; |
| (3) | such Holder or Holders offer to the Trustee security or indemnity satisfactory to it against any loss, liability or expense; |
| (4) | the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security of indemnity; and |
| (5) | the Holders of a majority in principal amount of the Notes do not give the Trustee a direction inconsistent with the request during such 60-day period. |
However, such limitations do not apply to a suit instituted by a Holder of any Note for enforcement of payment of the principal, premium (if any), or interest on such Note on or after the due date therefor (after giving effect to the grace period specified in clause (1) of the first paragraph of this “—Events of Default” section).
Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes may occurdirect the time, method and place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Indenture provides that in the event an Event of Default has occurred and is continuing, the Trustee will be required in the exercise of its powers to use the degree of care that a prudent person would use under the circumstances in the conduct of its own affairs. The Trustee, however, may refuse to follow any direction that conflicts with law, the Indenture, the Notes or any Note Guarantee, or that the Trustee determines in good faith is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability.
The Company shall notify the Trustee of any Default within 30 days of becoming aware of such Default. The Company is also required to deliver to the Trustee annually a statement regarding compliance with the Indenture and, if any Officer of the Company is aware of any Default, a statement specifying such Default and what action the Company is taking or proposes to take with respect thereto.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors discharged with respect to the outstanding Notes (which we refer to as “Legal Defeasance”). Legal Defeasance means that the Company and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the Notes and the Note Guarantees, and the Indenture shall cease to be of further effect as to all outstanding Notes and Note Guarantees, except as to
| (1) | rights of Holders to receive payments in respect of the principal of, premium and interest on the Notes when such payments are due from the trust funds referred to below, |
| (2) | the Company’s obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an office or agency for payment and money for security payments held in trust, |
| (3) | the rights, powers, trust, duties, and immunities of the Trustee, and the Company’s obligations in connection therewith, and |
| (4) | the Legal Defeasance provisions of the Indenture. |
In addition, the Company may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors released with respect to most of the covenants under the Indenture, except as described otherwise in the Indenture (which we refer to as “Covenant Defeasance”), and thereafter any omission to comply with such obligations shall not constitute a Default. In the event Covenant Defeasance occurs, certain Events of Default (not including non-payment and bankruptcy, reorganization and insolvency events relating to the Company) will no longer apply. The Company may exercise its Legal Defeasance option regardless of whether it has previously exercised Covenant Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance:
| (1) | the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, U.S. Government Obligations or a combination thereof, in such amounts as will be sufficient (without reinvestment) as confirmed, certified or attested to by an Independent Financial Advisor in writing to the Trustee to pay the principal of, premium and interest on the Notes on the stated date for payment or on the applicable redemption date, as the case may be, of the principal or installment of principal of, premium or interest on the Notes, |
| (2) | in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that: |
| (a) | the Company has received from, or there has been published by the Internal Revenue Service, a ruling, or |
| (b) | since the date of the Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon this Opinion of Counsel shall confirm that, |
| the beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred, |
| (3) | in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred, |
| (4) | (x) no Default shall have occurred and be continuing on the date of such deposit or will occur as a result of such deposit (other than a Default resulting from the borrowing of funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith) and (y) the deposit will not result in a breach or violation of, or constitute a default under, any material agreement or material instrument (other than the Indenture and any other agreement governing Pari Passu Indebtedness to which a similar and simultaneous deposit relates) to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound, |
| (5) | the Company shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by it with the intent of preferring the Holders over any other of its creditors or with the intent of defeating, hindering, delaying or defrauding any other of its creditors or others, |
| (6) | the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that the conditions provided for in this paragraph have been complied with, and |
| (7) | the Company has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or on the date of redemption, as the case may be (which instructions may be contained in the Officers’ Certificate referred to in clauses (5) or (6) above). |
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect (except as to rights of registration of transfer or exchange of Notes which shall survive until all Notes have been canceled, and rights of the Trustee) as to all outstanding Notes when
| (a) | either: |
| (1) | all the Notes that have been authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from this trust) have been delivered to the Trustee for cancellation, or |
| (2) | all Notes not delivered to the Trustee for cancellation otherwise have become due and payable or will become due and payable within one year by reason of the mailing of a notice of redemption or otherwise and the Company has irrevocably deposited or caused to be deposited with the Trustee trust funds in trust for the Holders in an amount of money in cash in U.S. dollars or U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient, as confirmed, certified or attested to by an Independent Financial Advisor in writing to the Trustee, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness (including all principal, premium and accrued interest to the date of maturity or redemption, as the case may be) on the Notes not theretofore delivered to the Trustee for cancellation, |
| (b) | the Company has paid all sums payable by it under the Indenture, |
| (c) | the Company has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or on the date of redemption, as the case may be, and |
| (d) | no Default has occurred and is continuing on the date of such deposit (other than a Default resulting from the borrowing of funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith) and the deposit will not result in a breach or violation of, or constitute a default under, any material agreement or material instrument (other than the Indenture and any other agreement governing Pari Passu Indebtedness to which a similar and simultaneous deposit relates) to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound. |
In addition, the Company must deliver an Officers’ Certificate and an Opinion of Counsel stating that all conditions precedent to satisfaction and discharge have been complied with.
Transfer and Exchange
A Holder will be able to register the transfer of or exchange Notes only in accordance with the provisions of the Merger Agreement wereIndenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Without the prior consent of the Company, the Registrar is not performedrequired (1) to register the transfer of or exchange any Note selected for redemption, (2) to register the transfer of or exchange any Note for a period of 15 days before a selection of Notes to be redeemed or (3) to register the transfer or exchange of a Note between a record date and the next succeeding interest payment date.
The Notes are issued in accordanceregistered form and the registered Holder will be treated as the owner of such Note for all purposes. See also “Transfer Restrictions.”
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture, the Notes and the Note Guarantees may be amended with their specific termsthe consent (which may include consents obtained in connection with a tender offer or were otherwise breached,exchange offer for Notes) of the Holders of at least a majority in principal amount of the Notes then outstanding, and that monetary damages, even if available,any existing Default under, or compliance with any provision of, the Indenture may be waived with the consent (which may include consents obtained in connection with a tender offer or exchange offer for Notes) of the Holders of a majority in principal amount of the Notes then outstanding.
However, without the consent of each Holder affected (or in the case of clause (8) below, Holders holding not less than 75% of the then outstanding principal amount of the Notes), the Company, the Guarantors and the Trustee may not be an adequate remedy therefor. Century Communities(with regard to a non-consenting Holder):
| (1) | change the Stated Maturity of any Note; |
| (2) | reduce the amount, extend the due date or otherwise affect the terms of any scheduled payment of interest on or principal of the Notes; |
| (3) | reduce any premium payable upon the redemption of any Note, change the date on which any Notes are subject to redemption or otherwise alter the provisions with respect to the redemption of the Notes as described above under the caption “—Optional Redemption,” (other than provisions specifying the notice periods for effecting a redemption); |
| (4) | amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer or an Asset Sale Offer after such Change of Control has occurred or the obligation to make such Asset Sale Offer has arisen, respectively; |
| (5) | make any Note payable in money or currency other than that stated in the Notes; |
| (6) | reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver to the Indenture or the Notes; |
| (7) | impair the rights of Holders to receive payments of principal of, premium or interest on the Notes or to institute suit for the enforcement thereof; |
| (8) | modify the Note Guarantees in any manner adverse to the Holders, or release any Guarantor from any of its obligations under its Note Guarantee or the Indenture, except a release in accordance with the terms of the Indenture; |
| (9) | waive a Default in the payment of principal of, premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes with respect to a nonpayment default and a waiver of the payment default that resulted from such acceleration as described above under the caption “Events of Default”); or |
| (10) | make any change in the amendment provisions which require each Holder’s consent. |
Notwithstanding the foregoing, the Company, the Guarantors and UCP further agreed that, exceptthe Trustee may amend the Indenture, the Note Guarantees or the Notes, without the consent of any Holder,
| (1) | to cure any ambiguity, omission, mistake, defect or inconsistency; |
| (2) | to provide for uncertificated Notes in addition to or in place of certificated Notes provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code; |
| (3) | to provide for the assumption by a successor entity of the obligations of the Company or any Guarantor to the Holders in accordance with the covenant described under “—Limitations on Mergers, Consolidations, Etc.”; |
| (4) | to add Guarantors with respect to the Notes or to release any Guarantor from any of its obligations under its Note Guarantee or the Indenture, in each case, in accordance with the applicable provisions of the Indenture; |
| (5) | to make any change that would provide any additional rights or benefits (including the addition of collateral for the purpose of securing the Notes or the Note Guarantees) to the Holders of Notes or that does not adversely affect in any material respect the legal rights under the Indenture, the Notes or the Note Guarantees of any such Holder; |
| (6) | to comply with applicable SEC rules and regulations or changes to applicable law; |
| (7) | to conform the text of the Indenture, the Note Guarantees or the Notes to any provision of the “Description of Notes” section of the final offering memorandum under which the Initial Notes were offered; |
| (8) | to provide for the issuance of Additional Notes in compliance and in accordance with the limitations set forth in the Indenture; |
| (9) | to evidence or provide for the acceptance of appointment under the Indenture of a successor trustee or to comply with any requirements under the Trust Indenture Act; |
| (10) | to allow any Guarantor to execute a supplemental indenture or a Note Guarantee with respect to the Notes; or |
| (11) | to comply with the rules of any applicable securities depository. |
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company or any Guarantor will have any liability for any obligations of the Company under the Notes or the Indenture or of any Guarantor under its Note
Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Note Guarantees.
Concerning the Trustee
U.S. Bank National Association is the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes. The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, where Century Communities is paid the termination fee described above under “—Fees and Expenses and Termination Fee,” the parties shall be entitledor to an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement, without any proof of actual damages and without the necessity of securing or postingrealize on certain assets received in respect of any bondsuch claim as security or suretyotherwise. The Trustee will be permitted to engage in connection withother transactions; however, if it acquires any conflicting interest (as defined in the Indenture), it must eliminate such remedy.conflict or resign.
Governing Law
The Merger Agreement is governed by Delaware law.
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The following section summarizes material provisions ofIndenture, the Voting SupportNotes and Transfer Restriction Agreement, dated April 10, 2017, by and among Century Communities, Merger Sub, PICO, for the limited purposes set forth therein, UCP, and for the limited purposes set forth therein, UCP, LLC (which we refer to as the “Voting Agreement”), which is included in this proxy statement/prospectus asAnnex B, is incorporated by reference herein in its entirety, and qualifies the following summary in its entirety. The rights and obligations of Century Communities, Merger Sub, PICO, UCP and UCP, LLC, as parties to the Voting Agreement,Note Guarantees are governed by, and construed in accordance with, the Voting Agreement and not by this summary or any other information contained in or incorporated by reference into this proxy statement/prospectus. UCP stockholders are urged to readlaws of the Voting Agreement carefully and in its entirety, as well as this proxy statement/prospectus and the information incorporated by reference into this proxy statement/prospectus, before making any decisions regarding the proposals.State of New York.
The followingCertain Definitions
Set forth below is a summary of the Voting Agreement is included in this proxy statement/prospectus to provide you with information regarding the termscertain of the Voting Agreement and is not intended to provide any factual information about Century Communities, PICO, UCP or UCP, LLC. Such information can be found elsewhere in this proxy statement/prospectus anddefined terms used in the other public filings Century Communities and UCP, respectively, haveIndenture. Reference is made and will make with the SEC. See “Where You Can Find More Information” beginning on page 147 of this proxy statement/prospectus.
Holders of UCP Class A Common Stock and UCP Class B Common Stock vote together as a single class on all matters presented to UCP stockholders for their vote or approval. PICO holds all of the outstanding shares of UCP Class B Common Stock, which provides PICO with no economic rights but entitles PICO, without regard to the numberIndenture for the full definition of shares of UCP Class B Common Stock held by it, to one vote on matters presented to UCP stockholders for each Series A Unit of UCP, LLC held by PICO, multiplied by the Exchange Rate. As of the close of business on the Record Date, there were outstanding shares of UCP Class A Common Stock, and PICO held 10,593,000 Series A Units of UCP, LLC (which are exchangeable for 10,401,722 shares of UCP Class A Common Stock), which provides PICO with approximately 57% of the aggregate voting power attributable to all outstanding shares of capital stock of UCP.such terms.
Pursuant to the terms of, and subject to the conditions set forth in, the Voting Agreement, PICO has agreed to:“Accrual Date” means May 5, 2014.
In addition, under the Voting Agreement, PICO has agreed to vote and cause to be voted all PICO Shares against, and not provide any written consent“Acquired Indebtedness” means with respect to or for, the adoption or approval of:
any action or agreement (including, without limitation, any amendmentPerson, (1) Indebtedness of any agreement to which UCPsuch Person or any of its subsidiariesSubsidiaries existing at the time such Person becomes a Restricted Subsidiary, (2) Indebtedness assumed in connection with the acquisition of an asset or assets from such Person, or (3) Indebtedness secured by a Lien encumbering any asset acquired by such Person, in each case whether or not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary or such merger or acquisition. Acquired Indebtedness shall be deemed to have been incurred, with respect to clause (1) of the preceding sentence, on the date such Person becomes a Restricted Subsidiary and, with respect to clauses (2) and (3) of the preceding sentence, on the date of consummation of such acquisition of assets.
“Additional Assets” means any property or assets (other than Indebtedness and Equity Interests) to be used by the Company or any of the Restricted Subsidiaries in a Permitted Business.
“Affiliate” of any Person means any other Person which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referent Person. For purposes of the covenants described above under the captions “—Certain Covenants—Limitations on Asset Sales,” and “—Certain Covenants—Limitations on Transactions with Affiliates,” Affiliates shall be deemed to include, with respect to any Person, any other Person which beneficially owns or holds, directly or indirectly, 10% or more of any class of the Voting Stock of the referent Person. For purposes of this definition, “control” of a partyPerson shall mean possession of the power, directly or indirectly, to whichdirect the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
“Asset Acquisition” means
| (1) | an Investment by the Company or any Restricted Subsidiary in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary or shall be merged with or into the Company or any Restricted Subsidiary, or |
| (2) | the acquisition by the Company or any Restricted Subsidiary of all or substantially all of the assets of any other Person or any division or line of business of any other Person. |
“Asset Sale” means any direct or indirect sale, issuance, conveyance, transfer, lease (other than an operating lease entered into in the ordinary course of business), assignment or other disposition by the Company or any Restricted Subsidiary to any Person other than the Company or any Restricted Subsidiary (including by means of a Sale and Leaseback Transaction or a merger, consolidation or similar transaction) (collectively, for purposes of this definition, a “transfer”), in one transaction or a series of related transactions, of any assets or properties(including Equity Interests) of UCPthe Company or any of its subsidiaries is subject or bound) that PICO knows, or would reasonably be expected to know, would result in (a) a breach or violationSubsidiaries. For purposes of or non-compliance with, any representation, warranty, covenant, agreement, or other obligation of UCP or any of its subsidiaries or affiliates set forth inthis definition, the Merger Agreement, or (b) the failure of any of the conditions to the obligations of Century Communities or
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| (1) |
|
| (2) | transfers of assets (including Equity Interests) that are governed by, and made in accordance with, the covenant described under the caption “—Certain Covenants—Limitations on Mergers, Consolidations, Etc.”; |
| (3) | the making of Permitted Investments and Restricted Payments permitted under the covenant described under the caption “—Certain Covenants—Limitations on Restricted Payments” (and transfers expressly excluded from the definition of Restricted Payments by the definition thereof); |
| (4) | the creation or realization of any Permitted Lien; |
| (5) | any transaction in the ordinary course of business, including, without limitation, dedications and other donations to governmental authorities pursuant to or in connection with a development agreement, sales (directly or indirectly), leases, Sale and Leaseback Transactions and other dispositions of (A) homes, improved land and unimproved land, whether in single or multiple lots, (B) real estate (including related amenities and improvements), whether in single or multiple lots and (C) Equity Interests of a Subsidiary, the assets of which consist entirely of amenities and improvements related to real estate, such as golf courses, and real estate underlying such amenities and improvements; |
| (6) | dispositions of mortgage loans and related assets and mortgage-backed securities in the ordinary course of a mortgage lending business; |
| (7) | any transfer or series of related transfers that, but for this clause, would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the assets transferred in such transaction or any such series of related transactions does not exceed $15.0 million; |
| (8) | dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements; |
| (9) | any swap or exchange of assets, or lease, assignment or sublease of any real or personal property, in exchange for property or services (including in connection with any outsourcing arrangements) of comparable or greater value or usefulness to the business of the Company and the Restricted Subsidiaries as a whole, as determined in good faith by the senior management of the Company, in each case, in the ordinary course of business; |
| (10) | surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind; |
| (11) | the licensing of intellectual property in the ordinary course of business or in accordance with industry practice; |
| (12) | the disposition of assets or property that are obsolete or that are no longer useful in the conduct of the business of the Company and/or any Restricted Subsidiaries; and |
| (13) | an issuance of Equity Interests by a Restricted Subsidiary to the Company or to a Restricted Subsidiary. |
“Attributable Indebtedness,” when used with respect to any change inSale and Leaseback Transaction, means, as at the size, term in office, or compositiontime of determination, the present value (discounted at a rate equivalent to the Company’s then-current
weighted average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the UCP Board, and
Furthermore, as part“Bankruptcy Law” means Title 11 of the Voting Agreement, andUnited States Code, as securityamended, or any similar federal or state law for and in furtherancethe relief of the agreements describeddebtors.
“Board of Directors” means, with respect to any Person, (i) in the preceding paragraph, tocase of any corporation, the extent that PICO fails to comply withboard of directors of such Person, (ii) in the case of any limited liability company, the managing member or members or any controlling committee of its voting and other obligations as to voting pursuant to the Voting Agreement, PICO has irrevocably granted to, constituted and appointed Century and eachmanaging members thereof or board of the executive officersdirectors of Century Communities, in their respective capacities as executive officers of Century,such Person, as the case may be, as PICO’s proxy and attorney-in-fact (with full power of substitution), for and(iii) in the name, placecase of any partnership, the board of directors of the general partner of such Person and stead(iv) in any other case, the functional equivalent of PICO,the foregoing or, in each case, other than for purposes of the definition of “Change of Control,” any duly authorized committee of such body.
“Borrowing Base Facility” means one or more revolving debt facilities, in each case, with banks or other institutional lenders or other credit providers that provide for committed advances calculated by reference to vote all PICO Shares that are owned beneficially and/or heldthe value of record by PICOassets of the Company and its affiliatesRestricted Subsidiaries, whether or not pledged as collateral to secure borrowings thereunder.
“Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions in New York, New York or in the place of payment are authorized or required by law to close.
“Capitalized Lease” means an obligation required to be capitalized and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP.
“Capitalized Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under a Capitalized Lease, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP at the time any determination thereof is to be made and the Stated Maturity thereof will be the date of the Voting Agreement and, from time to time, with full and unconditional authority to grantlast payment of rent or withhold a consent or approval in respect of such PICO Shares and to execute and deliver a proxy (or proxies) to vote such PICO Shares at each meeting of UCP stockholders convened in respect of the matters set forth in the preceding paragraph. The proxy granted pursuant to the Voting Agreement shall be deemed to be a proxy coupled with an interest, is irrevocable (subject to the termination of the Voting Agreement), and shall not be terminated by operation of law or upon the occurrence of any other event.
Under the Voting Agreement, PICO also agreed, except as expressly contemplated by the Voting Agreement or the Merger Agreement, not to:
Furthermore, under the Voting Agreement, PICO, UCP, and UCP, LLC, as applicable, irrevocably terminated, subject to and contingent upon the occurrence of the effective time of the Merger, the following related party agreements (without any payments or other obligations due or owing from, or any cost or expense to, UCP, Century Communities, Merger Sub or the Surviving Corporation): (i) the Exchange Agreement, dated as of July 23, 2013, by and among UCP, UCP, LLC, and PICO, (ii) the Tax Receivable Agreement, dated as of July 23, 2013, by and among the UCP, UCP, LLC, and PICO, (iii) the Transition Services Agreement, dated as of July 23, 2013, by and between PICO and the Company, and (iv) the Registration Rights Agreement, dated July 23, 2013, by and between the UCP and PICO.
The Voting Agreement terminates automatically on the first to occur of (i) the termination of the Merger Agreement in accordance with its terms, and (ii) the effective time of the Merger.
Notwithstanding the foregoing, if a UCP Recommendation Change is made by the UCP Board in response to an Intervening Event, and Century Communities does not exercise its right to terminate the Merger Agreement, PICO’s voting obligations and the proxy granted by PICO pursuant to the Voting Agreement as described in the preceding paragraphs will no longer be in respect of all PICO Shares, but, in lieu and instead thereof, will be in respect of that number of PICO Shares equal to 28% of the aggregate voting power attributable to all outstanding shares of UCP Class A Common Stock and UCP Class B Common Stock.
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PROPOSAL II: ADJOURNMENT OF UCP SPECIAL MEETING
UCP stockholders are being asked to approve a proposal that will give the UCP Board authority to adjourn the UCP special meeting one or more times, if necessary or appropriate, as determined by UCP, to solicit additional proxies if there are insufficient votes at the time of the UCP special meeting or any adjournments thereof to adopt the Merger Agreement.
If this proposal is approved, the UCP special meeting could be adjourned to any date. If the UCP special meeting is adjourned, UCP stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use. If you sign and return a proxy and do not indicate how you wish to vote on any proposal, or if you indicate that you wish to voteFOR the proposal to adopt the Merger Agreement but do not indicate a choice on the adjournment proposal, your shares of UCP Common Stock will be votedFOR the adjournment proposal. If you indicate, however, that you wish to vote against the proposal to adopt the Merger Agreement, your shares of UCP Common Stock will only be votedFOR the adjournment proposal if you indicate that you wish to voteFOR that proposal.
The affirmative vote, in person or by proxy, of holders of a majority of the votes which could be cast by the holders of all classes of stock entitled to vote on such question which are present in person or by proxy at the UCP special meeting is required to approve the adjournment proposal.
The UCP Board recommends that UCP stockholders vote FOR the approval of the adjournment of the UCP special meeting, if necessary or appropriate, as determined by UCP, to solicit additional proxies if there are insufficient votes at the time of the UCP special meeting or any adjournments thereof to adopt the Merger Agreement.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements have been prepared to illustrate the effect of the proposed business combination of Century Communities and UCP, which was announced on April 11, 2017. The unaudited pro forma condensed combined financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what the financial condition or results of operations would have been had Century Communities operated historically on a stand-alone basis or if the Merger had occurred on the dates indicated. The unaudited pro forma condensed combined financial information should not be considered representative of future consolidated financial condition or consolidated results of operations. Assumptions underlying the pro forma adjustments are described in the accompanying notes and should be read in conjunction with the unaudited pro forma condensed combined financial statements.
Immediatelylease prior to the consummation of the Merger, each share of UCP Class A Common Stock outstanding atfirst date such time shall be converted into the right to receive (i) $5.32 in cash, without any interest thereon, and (ii) 0.2309 of a duly authorized, fully paid and non-assessable share of Century Communities Common Stock.
The Merger will be accounted for as a business combination using the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, Business Combinations, which will establish a new basis of accounting for all identifiable assets acquired and liabilities assumed at fair value as of the date control is obtained. Century Communities will be treated as the acquirer in the Merger for accounting purposes. Accordingly, Century Communities’ cost to purchase UCP will be allocated to the assets acquired and the liabilities assumed based upon their respective fair values on the date the Merger is consummated. The total purchase price will be paid with approximately $97.7 million in cash and 4.2 million shares of Century Communities Common Stock that will be issued in exchange for all outstanding shares of UCP Class A Common Stock. The equity consideration is valued at $115.7 million, assuming a per share price of $27.30 for Century Communities Common Stock, which is the closing price of Century Communities Common Stock on April 28, 2017. The transaction has a total enterprise value of approximately $374.6 million, including assumed debt and without deducting acquired cash.
Additionally, each option (each, a “UCP Option”) to purchase shares of UCP Class A Common Stock that is outstanding immediately prior to the Merger will automatically, and without any action on the part of the holder thereof, be converted into an option to purchase shares of Century Communities Common Stock (an “Adjusted Option”) on the same terms and conditions as were applicable under such UCP Option immediately prior to the effective time of the Merger (including vesting terms, conditions and schedules), with the number of shares of Century Communities Common Stock (rounded down to the nearest whole number of shares) subject to such Adjusted Option equal to the product of (i) the total number of shares of UCP Class A Common Stock underlying such UCP Option immediately prior to the effective time of the Merger, multiplied by (ii) the Equity Award Exchange Ratio (as defined below), and with the exercise price applicable to such Adjusted Option to equal the quotient (rounded up to the nearest whole cent) obtained by dividing (a) the exercise price per share applicable to such UCP Option immediately prior to the effective time, by (b) the Equity Award Exchange Ratio. In connection with the transactions contemplated by the Merger Agreement, UCP entered into amendments to employment agreements (which we refer to as the “Employment Agreement Amendments”) with certain employees of UCP. The Employment Agreement Amendments will become effective as of, and are subject to and conditioned upon, the consummation of the Merger. Under the Employment Agreement Amendments, such employees of UCP agreed to forfeit all of their outstanding UCP Options, whether vested or unvested, upon the closing of the Merger. The UCP Options which are subject to the Employment Agreement Amendments represent all of the outstanding UCP Options as of the date of the Merger Agreement.
Furthermore, each restricted stock unit award with respect to shares of UCP Class A Common Stock (each, a “UCP Restricted Stock Unit”) that is outstanding immediately prior to the effective time of the Merger will
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automatically, and without any action on the part of the holder thereof, be converted into a restricted stock unit award with respect to shares of Century Communities Common Stock, with the same terms and conditions as were applicable under such UCP Restricted Stock Unit immediately prior to the effective time of the Merger (including vesting and settlement terms, conditions and schedules), and relating to the number of shares of Century Communities Common Stock equal to the product of (i) the number of shares of UCP Class A Common Stock subject to such UCP Restricted Stock Unit immediately prior to the effective time, multiplied by (ii) the Equity Award Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares of Century Communities Common Stock.
The “Equity Award Exchange Ratio” means the sum of (i) 0.2309 plus (ii) the quotient obtained by dividing (a) $5.32 by (b) the average closing sale price of a share of Century Communities Common Stock as reported on the New York Stock Exchange for the five consecutive trading days ending on and including the second complete trading day immediately preceding the closing date of the Merger, rounded to the nearest ten-thousandth.
The following unaudited pro forma condensed combined balance sheet of Century Communities gives effect to the Merger as if it had been consummated on March 31, 2017, and includes estimated pro forma adjustments for the preliminary valuations of assets acquired and liabilities assumed. The following unaudited pro forma condensed combined statement of operations of Century Communities for the three months ended March 31, 2017 and the year ended December 31, 2016 give effect to the Merger as if it had been consummated on January 1, 2016, the beginning of the earliest period presented. The following unaudited pro forma condensed combined financial statements have been derived from Century Communities’ financial statements and accompanying notes, which are contained in Century Communities’ Annual Report onForm 10-K for the fiscal year ended December 31, 2016 and Century Communities’ Quarterly Report onFrom 10-Q for the period ended March 31, 2017, as well as UCP’s financial statements and accompanying notes, which are contained in UCP’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and UCP’s Quarterly Report onForm 10-Q for the period ended March 31, 2017, each of which is incorporated by reference into this proxy statement/prospectus.
The historical financial information is adjusted in the unaudited pro forma condensed combined financial statements to give effect to unaudited pro forma adjustments that are (i) directly attributable to the Merger, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statement of operations, expected to have a continuing impact on the consolidated operating results. The unaudited pro forma condensed combined financial statements include certain pro forma adjustments that are intended to provide information about the continuing impact of the Merger on Century Communities’ financial position and results of operations. The pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements reflect the following:
The unaudited pro forma adjustments included herein are preliminarily based on currently available information, andlease may be revised as additional information becomes available and as additional analyses are performed. The unaudited pro forma condensed combined statement of operations does not reflect the expected benefits to be derived from synergies and cost reduction actions expected to be implemented in connection with
“Cash Equivalents” means:
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the Merger, or the impact of one-time non-recurring costs relating to the Merger, including the costs to achieve expected synergies and cost savings. These revisions, if any, could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and Century Communities’ future results of operations and financial position. Changes in the price of Century Communities Common Stock may increase or decrease the total value of the Merger Consideration. Increases or decreases in the estimated fair value of the net assets acquired may change the amount of the purchase price allocated to goodwill, if any, resulting from the Merger and other acquired assets and liabilities. This may impact the unaudited pro forma condensed combined statement of operations due to an increase or decrease in the amount of amortization or depreciation of the adjusted assets.
These unaudited pro forma condensed combined financial statements reflect adjustments that, in the opinion of Century Communities’ management, are necessary to present fairly the unaudited pro forma condensed combined results of operations and the unaudited pro forma condensed combined financial position of Century Communities as of and for the periods indicated.
Certain amounts in UCP’s historical financial statements have been reclassified to conform to Century Communities’ presentation, including “Restricted cash” presented in “Prepaid expenses and other assets;” “Customer deposits” presented in “Accrued expenses and other liabilities;” and “Senior Notes, net” presented in “Notes payable and revolving line of credit” on the unaudited pro forma condensed combined balance sheet; and “Sales and marketing” presented in “Selling, general, and administrative” on the unaudited pro forma condensed combined statement of operations.
The following unaudited pro forma condensed combined financial statements constitute forward-looking information and is subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Risk Factors” and “Cautionary Information Regarding Forward-Looking Statements” beginning on pages 34 and 32, respectively, of this proxy statement/prospectus.
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Century Communities, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2017
| (in thousands) | Historical Century Communities | Historical UCP | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 23,465 | $ | 34,270 | $ | (8,508 | ) (f) | $ | 45,127 | |||||||
| (1,000 | ) (g) | |||||||||||||||
| (3,100 | ) (g) | |||||||||||||||
Cash held in escrow | 17,216 | — | 17,216 | |||||||||||||
Accounts receivable | 7,037 | 3,677 | 10,714 | |||||||||||||
Inventories | 884,072 | 389,379 | (34,298 | ) (a) | 1,263,148 | |||||||||||
| 23,995 | (b) | |||||||||||||||
Prepaid expenses and other assets | 40,259 | 8,628 | 48,887 | |||||||||||||
Property and equipment, net | 11,365 | 855 | 12,220 | |||||||||||||
Investment in unconsolidated subsidiaries | 18,680 | — | 18,680 | |||||||||||||
Deferred tax asset, net | — | 5,227 | (450 | ) (i) | 6,746 | |||||||||||
| 1,969 | (i) | |||||||||||||||
Amortizable intangible assets, net | 2,567 | 82 | 1,400 | (c) | 4,049 | |||||||||||
Goodwill | 21,365 | — | — | 21,365 | ||||||||||||
|
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|
|
|
|
|
| |||||||||
Total assets | $ | 1,026,026 | $ | 442,118 | $ | (19,992 | ) | $ | 1,448,152 | |||||||
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|
|
|
| |||||||||
Liabilities and stockholders’ equity | ||||||||||||||||
Liabilities: | ||||||||||||||||
Accounts payable | $ | 8,280 | $ | 16,533 | $ | $ | 24,813 | |||||||||
Accrued expenses and other liabilities | 72,883 | 35,524 | 108,407 | |||||||||||||
Deferred tax liability, net | 450 | — | (450 | ) (i) | — | |||||||||||
Notes payable and revolving line of credit | 447,948 | 161,551 | 233 | (d) | 712,458 | |||||||||||
| (574 | ) (h) | |||||||||||||||
| 5,625 | (e) | |||||||||||||||
| 97,675 | (d) | |||||||||||||||
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|
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| |||||||||
Total liabilities | 529,561 | 213,608 | 102,509 | 845,678 | ||||||||||||
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Stockholders’ equity: | ||||||||||||||||
Total stockholders’ equity | 496,465 | 102,184 | 115,734 | (j) | 602,474 | |||||||||||
| (102,184 | ) (j) | |||||||||||||||
| (5,625 | ) (e) | |||||||||||||||
| (4,100 | ) (g) | |||||||||||||||
Noncontrolling interests | — | 126,326 | (126,326 | ) (j) | — | |||||||||||
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|
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|
|
|
| |||||||||
Total stockholders’ equity | 496,465 | 228,510 | (122,501 | ) | 602,474 | |||||||||||
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|
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|
|
|
| |||||||||
Total liabilities and stockholders’ equity | $ | 1,026,026 | $ | 442,118 | $ | (19,992 | ) | $ | 1,448,152 | |||||||
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See notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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Century Communities, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2017
| (dollars in thousands, except for share and per share data) | Historical Century Communities | Historical UCP | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||
Revenues | ||||||||||||||||
Homebuilding revenues | ||||||||||||||||
Home sales revenues | $ | 226,420 | $ | 94,002 | $ | — | $ | 320,422 | ||||||||
Land sales and other revenues | 1,896 | 496 | — | 2,392 | ||||||||||||
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|
|
|
|
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| |||||||||
| 228,316 | 94,498 | — | 322,814 | |||||||||||||
Financial services revenue | — | — | — | — | ||||||||||||
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| |||||||||
Total revenues | 228,316 | 94,498 | — | 322,814 | ||||||||||||
Homebuilding Cost of Revenues | ||||||||||||||||
Cost of home sales revenues | (182,324 | ) | (76,653 | ) | 1,286 | (a) | (257,691 | ) | ||||||||
Cost of land sales and other revenues | (1,144 | ) | (475 | ) | — | (1,619 | ) | |||||||||
Impairment on real estate | — | (102 | ) | — | (102 | ) | ||||||||||
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|
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| |||||||||
| (183,468 | ) | (77,230 | ) | 1,286 | (259,412 | ) | ||||||||||
Financial services costs | (754 | ) | — | — | (754 | ) | ||||||||||
Selling, general, and administrative | (33,212 | ) | (13,651 | ) | (175 | ) (c) | (47,038 | ) | ||||||||
Equity in income of unconsolidated subsidiaries | 1,255 | — | — | 1,255 | ||||||||||||
Other income (expense) | (86 | ) | 460 | 425 | (e) | 1,391 | ||||||||||
| 592 | (f) | |||||||||||||||
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Income before income tax expense | 12,051 | 4,077 | 2,128 | 18,256 | ||||||||||||
Income tax expense | (3,252 | ) | (621 | ) | (745 | ) (i) | (4,618 | ) | ||||||||
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Net income before noncontrolling interests | 8,799 | 3,456 | 1,383 | 13,638 | ||||||||||||
Net income (loss) attributable to noncontrolling interest | — | 2,310 | (2,310 | ) | — | |||||||||||
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Net income available to common stockholders | $ | 8,799 | $ | 1,146 | $ | 3,693 | $ | 13,638 | ||||||||
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Earnings per share: | ||||||||||||||||
Basic | $ | 0.40 | $ | 0.14 | $ | 0.52 | (k) | |||||||||
Diluted | $ | 0.40 | $ | 0.14 | $ | 0.51 | (k) | |||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 21,512,289 | 7,950,723 | 25,751,621 | (k) | ||||||||||||
Diluted | 21,722,540 | 8,102,962 | 26,209,762 | (k) | ||||||||||||
See notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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Century Communities, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2016
| (in thousands, except share and per share amounts) | Historical Century Communities | Historical UCP | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||
Revenues | ||||||||||||||||
Homebuilding revenues | ||||||||||||||||
Home sales revenues | $ | 978,733 | $ | 343,919 | $ | — | $ | 1,322,652 | ||||||||
Land sales and other revenues | 15,707 | 5,449 | — | 21,156 | ||||||||||||
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|
|
|
|
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| |||||||||
| 994,440 | 349,368 | — | 1,343,808 | |||||||||||||
Financial Services revenues | — | — | — | — | ||||||||||||
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| |||||||||
Total revenues | 994,440 | 349,368 | — | 1,343,808 | ||||||||||||
Homebuilding Cost of Revenues | ||||||||||||||||
Cost of home sales revenues | (786,127 | ) | (280,614 | ) | 5,360 | (a) | (1,061,381 | ) | ||||||||
Cost of land sales and other revenues | (14,217 | ) | (4,637 | ) | — | (18,854 | ) | |||||||||
Impairment on real estate | — | (2,589 | ) | — | (2,589 | ) | ||||||||||
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|
|
|
|
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| |||||||||
| (800,344 | ) | (287,840 | ) | 5,360 | (1,082,824 | ) | ||||||||||
Financial services costs | — | — | — | — | ||||||||||||
Selling, general, and administrative | (122,224 | ) | (48,418 | ) | (700 | ) (c) | (171,342 | ) | ||||||||
Goodwill impairment | — | (4,223 | ) | — | (4,223 | ) | ||||||||||
Equity in income of unconsolidated subsidiaries | 191 | — | — | 191 | ||||||||||||
Other income (expense) | 1,086 | 276 | — | 1,362 | ||||||||||||
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| |||||||||
Income before income tax expense | 73,149 | 9,163 | 4,660 | 86,972 | ||||||||||||
Income tax benefit (expense) | (23,609 | ) | 5,285 | (1,631 | ) (i) | (19,955 | ) | |||||||||
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| |||||||||
Net income before noncontrolling interests | 49,540 | 14,448 | 3,029 | 67,017 | ||||||||||||
Net income (loss) attributable to noncontrolling interest | — | 5,210 | (5,210 | ) | — | |||||||||||
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| |||||||||
Net income available to common stockholders | $ | 49,540 | $ | 9,238 | $ | 8,239 | $ | 67,017 | ||||||||
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| |||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 2.34 | $ | 1.16 | $ | 2.64 | (k) | |||||||||
Diluted | $ | 2.33 | $ | 1.15 | $ | 2.57 | (k) | |||||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic | 20,679,189 | 7,969,028 | 24,906,938 | (k) | ||||||||||||
Diluted | 20,791,937 | 8,064,728 | 25,655,745 | (k) | ||||||||||||
See notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. Basis of Presentation
On April 10, 2017, Century Communities, Inc., a Delaware corporation (“Century Communities”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Casa Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Century Communities (“Merger Sub”), and UCP, Inc., a Delaware corporation (“UCP”), pursuant to which UCP will be merged with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger as the surviving corporation (the “Surviving Corporation”). As a result of the Merger, the Surviving Corporation, together with the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities.
Contemporaneously with the Merger, each issued and outstanding share of Class A Common Stock, par value $0.01 per share, of UCP (“UCP Class A Common Stock”) will be converted into the right to receive (i) $5.32 in cash, without any interest thereon, and (ii) 0.2309 of a duly authorized, fully paid and non-assessable share of common stock, par value $0.01 per share, of Century Communities (“Century Communities Common Stock”). No fractional shares of Century Communities Common Stock will be issued in the Merger, and UCP stockholders will receive cash in lieu of any fractional shares. As of March 31, 2017, PICO held 10,593,000 Series A Units of UCP, LLC, which are exchangeable for 10,401,722 shares of UCP Class A Common Stock. The exchange of all Series A Units of UCP, LLC held by PICO into shares of UCP Class A Common Stock is a required condition to the closing of the Merger, and as such, the effect of such exchange is reflected in the total number of shares of UCP Class A Common Stock outstanding.
The accompanying unaudited pro forma condensed combined financial statements present the pro forma consolidated financial position and results of operations of the combined company based upon the historical financial statements of Century Communities and UCP, after giving effect to the Merger and adjustments described in these notes, and are intended to reflect the impact of the Merger on Century Communities’ consolidated financial statements. The accompanying unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings due to operating efficiencies expected to result from the Merger. Certain amounts in the historical consolidated financial statements of UCP have been reclassified to conform to the Century Communities’ presentation.
The unaudited pro forma condensed combined balance sheet gives effect to the Merger as if it had been consummated on March 31, 2017 and includes estimated pro forma adjustments for the preliminary valuations of assets acquired and liabilities assumed. These adjustments are subject to further revision as additional information becomes available and additional analyses are performed. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2017 and the year ended December 31, 2016 give effect to the Merger as if it had been consummated on January 1, 2016, the beginning of the earliest period presented.
The unaudited pro forma condensed combined balance sheet has been adjusted to reflect the preliminary valuation of the net assets acquired. The valuation of the assets and liabilities in these unaudited pro forma condensed combined financial statements is based upon a purchase price of the net assets of approximately $213.4 million, inclusive of acquired cash and cash equivalents. This amount was derived as described above and outlined below in accordance with the Merger Agreement, based on the outstanding shares of UCP Class A Common Stock at April 10, 2017. The actual number of shares of Century Communities Common Stock to be issued in the Merger will be based upon the actual number of shares of UCP Class A Common Stock outstanding when the Merger closes, and the valuation of those shares will be based on the trading price of Century Communities Common Stock when the Merger closes.
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The preliminary purchase price, inclusive of cash acquired, is calculated as follows:
UCP Shares (including noncontrolling interest ) as of April 10, 2017(1) | 18,360,036 | |||
Cash paid per share | $ | 5.32 | ||
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Total cash consideration | $ | 97,675,392 | ||
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UCP Shares (including noncontrolling interest ) as of April 10, 2017(1) | 18,360,036 | |||
Exchange ratio | 0.2309 | |||
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Number of shares of Century Communities Common Stock to be issued | 4,239,332 | |||
Closing price of Century Communities Common Stock on April 28, 2017(2) | $ | 27.30 | ||
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Consideration attributable to common stock | $ | 115,733,764 | ||
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Total consideration in cash and equity | $ | 213,409,156 | ||
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marketable obligations with a maturity of 24 months or less issued or directly and fully guaranteed or insured by the |
| (2) | demand and time deposits and certificates of deposit or acceptances with a |
| (3) | commercial paper maturing no more than 365 days from the date of creation thereof issued by a corporation organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-2 by S&P or at least P-2 by Moody’s; |
| (4) | repurchase obligations with a term of not more than ten days for |
| (5) | investments in money market or other mutual funds substantially all |
“Code” means the Internal Revenue Code of 1986, as amended.
“Consolidated Amortization Expense” for any period means the amortization expense of the Company and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.
“Consolidated Cash Flow Available for Fixed Charges” for any period means, without duplication, the sum of the amounts for such period of
| (1) | Consolidated Net Income, plus |
| (2) | in each case only to the |
The following is a summary of the assets acquired and the liabilities anticipated to be assumed in the Merger. Century Communities made an estimate of the fair value of the acquired assets and assumed liabilities based on information currently available. Assets acquired include certain intangible assets, including a tradename. Once Century Communities finalizes a valuation analysis, assumptions utilized to estimate fair value may change and accordingly estimated allocations may change.
| (in thousands) | Historical UCP Balance as of March 31, 2017 | Pro Forma Adjustment for UCP Transaction Costs | Adjusted Historical Balances of UCP as of March 31, 2017 | Purchase Accounting Adjustment | Estimated Fair Value as of March 31, 2017 | |||||||||||||||
Cash and cash equivalents | $ | 34,270 | $ | (8,508 | ) | $ | 25,762 | $ | — | $ | 25,762 | |||||||||
Restricted cash | — | — | — | — | ||||||||||||||||
Accounts receivable | 3,677 | 3,677 | — | 3,677 | ||||||||||||||||
Inventories | 389,379 | 389,379 | (10,303 | ) | 379,076 | |||||||||||||||
Prepaid expenses and other assets | 8,628 | 8,628 | — | 8,628 | ||||||||||||||||
Property and equipment, net | 855 | 855 | — | 855 | ||||||||||||||||
Deferred tax asset, net | 5,227 | 5,227 | 1,969 | 7,196 | ||||||||||||||||
Amortizable intangible assets, net | 82 | 82 | 1,400 | 1,482 | ||||||||||||||||
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Total assets | $ | 442,118 | $ | (8,508 | ) | $ | 433,610 | $ | (6,934 | ) | $ | 426,676 | ||||||||
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Accounts payable | $ | 16,533 | $ | $ | 16,533 | $ | — | $ | 16,533 | |||||||||||
Accrued expenses and other liabilities | 35,524 | 35,524 | — | 35,524 | ||||||||||||||||
Notes payable and revolving loan agreement | 161,551 | 161,551 | (341 | ) | 161,210 | |||||||||||||||
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Total liabilities | $ | 213,608 | $ | $ | 213,608 | $ | (341 | ) | $ | 213,267 | ||||||||||
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Purchase price/Net equity | $ | 228,510 | $ | (8,508 | ) | $ | 220,002 | $ | (6,593 | ) | $ | 213,409 | ||||||||
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The unaudited pro forma condensed combined financial statements reflect the following adjustments:
| (a) | Consolidated Income Tax Expense to |
The step-down in inventories owned is reflected in the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2017 and the year ended December 31, 2016 as a decrease in cost of home sales revenues of $1.3 million and $5.4 million, respectively. The adjustments to the unaudited pro forma condensed combined statement of operations represent the anticipated recognition of the step-down in inventories owned based on UCP’s historical inventory turn.
| (b) | Consolidated Amortization Expense, |
| (c) | Consolidated Depreciation Expense, |
| (d) |
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| (e) | all other non-cash items reducing the Consolidated Net Income (excluding any non-cash charge to the extent it represents or results in an accrual of a reserve for cash charges in any future period or amortization of a prepaid cash expense that |
in each case determined on a consolidated basis in accordance with GAAP, minus
| (3) | the aggregate amount of |
“Consolidated Depreciation Expense” for any period means the depreciation expense of the Company and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.
“Consolidated Fixed Charge Coverage Ratio” means the ratio of Consolidated Cash Flow Available for Fixed Charges during the most recent four consecutive full fiscal quarters for which internal financial statements are available (the “Four-Quarter Period”) ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the “Transaction Date”) to Consolidated Interest Incurred for the Four-Quarter Period. For purposes of this definition, Consolidated Cash Flow Available for Fixed Charges and Consolidated Interest Incurred shall be calculated after giving effect on a pro forma basis for the period of such calculation to:
| (1) | the |
any Asset Sale or disposition or Asset Acquisition (including any Asset Acquisition giving rise to the need to make such calculation as a result of the Company or any Restricted Subsidiary (including any |
| Person who becomes a Restricted Subsidiary as a result of such Asset Acquisition) incurring Acquired Indebtedness and also including any Consolidated Cash Flow Available for |
the |
If the Company or any Restricted Subsidiary directly or indirectly guarantees Indebtedness of a third Person (other than a Restricted Subsidiary, in the case of the Company, or the Company or another Restricted Subsidiary, in the case of a Restricted Subsidiary), the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if the Company or such Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness.
If since the beginning of the Four-Quarter Period and on or prior to the Transaction Date, any Person (A) shall have become a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary and (B) shall have incurred any Indebtedness or discharged any Indebtedness or made any asset sale or disposition or any Asset Acquisition that would have required an adjustment pursuant to clause (1) or (2) above if made by the Company or a Restricted Subsidiary during such period, Consolidated Cash Flow Available for Fixed Charges and Consolidated Interest Incurred for such period will be calculated after giving pro forma effect thereto as if such transaction bonusesoccurred on the first day of $3.1 millionsuch period.
For purposes of this definition, whenever pro forma effect is to certain executives and other employees; and
In calculating Consolidated Interest Incurred for purposes of determining the denominator (but not the numerator) of this Consolidated Fixed Charge Coverage Ratio:
interest on |
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notwithstanding clause (1) and (2) above, interest on Indebtedness determined on a fluctuating basis, to |
“Consolidated Interest Expense” for any period means the sum, without duplication, of Century Communities Common Stock which increases stockholders’ equity by $115.7 million,the total interest expense of the Company and
interest expense attributable to Capitalized Lease Obligations and |
| (2) | commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations, bankers’ acceptance financing and receivables financings, |
| (3) | the net costs associated with interest rate Hedging Obligations (including amortization of fees), |
| (4) | amortization of debt issuance costs, debt discount (including the amortization of original issue discount resulting from the issuance of Indebtedness at less than par) or premium and other financing fees and expenses; provided, however, that any amortization of bond premium will be credited to reduce Consolidated Interest Expense unless, pursuant to GAAP, such amortization of bond premium has otherwise reduced Consolidated Interest Expense, |
| (5) | the interest portion of any deferred payment obligations that constitute Indebtedness, |
| (6) | all other non-cash interest expense; provided, however, that any non-cash interest expense or income attributable to the movement in the mark-to-market valuation of Hedging Obligations or other derivative instrument pursuant to GAAP shall be excluded from the calculation of Consolidated Interest Expense, |
| (7) | all dividend payments on any series of Disqualified Equity Interests of the Company or any preferred stock of any Restricted Subsidiary (other than any such Disqualified Equity Interests or any preferred stock held by the Company or a Restricted Subsidiary or paid in Qualified Equity Interests), and |
| (8) | all interest on any Indebtedness of any other Person (other than a Restricted Subsidiary, in the case of the Company, or the Company or another Restricted Subsidiary, in the case of a Restricted Subsidiary) guaranteed by the Company or any Restricted Subsidiary or secured by a Lien on assets of the Company or one of the Restricted Subsidiaries, in each case to the extent paid by the Company or a Restricted Subsidiary. |
“Consolidated Interest Incurred” for any period means the sum, without duplication, of (1) Consolidated Interest Expense and (2) interest capitalized for such period (including interest capitalized with respect to discontinued operations).
“Consolidated Net Income” for any period means the net income (or loss) of the Company and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from calculations of such net income (to the extent otherwise included therein), without duplication:
| (1) | the net income (or loss) of any Person (other than a Restricted Subsidiary) in which any Person other than the Company or any of the Restricted Subsidiaries has an ownership interest, except to the extent that cash in an amount equal to any such income has actually been received by the Company or any of the Restricted Subsidiaries during such period or such loss has been funded with cash or assets of the Company or any Restricted Subsidiary; |
| (2) | for the |
| (3) | for the purposes of calculating the Restricted Payments Basket only, in the case of a successor to the Company by consolidation, merger or transfer of its assets, any income (or loss) of the successor prior to such merger, consolidation or transfer of assets; |
| (4) | for the purposes of calculating the Restricted Payments Basket only, except to the extent includible in the consolidated net income of the Company pursuant to the foregoing clause (1), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Restricted Subsidiary or is merged into |
| (5) | any gain (or loss), together with any related provisions for taxes on any such gain (or the tax effect of any such loss), realized during such period by the Company or any Restricted Subsidiary upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness or early termination of Hedging Obligations or other derivative instruments, of the |
| (6) | any extraordinary gain (or extraordinary loss), together with any related provision for taxes on any such extraordinary gain (or the tax effect of |
| (7) | the cumulative effect of a change in accounting principles; |
| (8) | any unrealized net gain or loss resulting in such period from Hedging Obligations or other derivative instruments; |
| (9) | any non-cash impairment charge or asset write-off (other than with respect to inventory), in each case pursuant to GAAP; and |
| (10) | any non-cash compensation expense recorded from grants of stock appreciation or similar rights, stock options, restricted stock |
The following table sets forthAny return of capital with respect to an Investment that increased the computationRestricted Payments Basket pursuant to clause (3)(d) of pro forma basicthe first paragraph under the caption “—Certain Covenants—Limitations on Restricted Payments” or decreased the amount of Investments outstanding pursuant to clause (18) of the definition of “Permitted Investments” shall be excluded from Consolidated Net Income for purposes of calculating the Restricted Payments Basket.
“Consolidated Tangible Assets” means, as of any date, the total amount of assets of the Company and diluted earnings per sharethe Restricted Subsidiaries less Intangible Assets of the Company and the Restricted Subsidiaries, in each case as shown on the consolidated balance sheet of the Company for the three monthsthen most recently ended March 31, 2017fiscal quarter for which internal financial statements are available.
“Consolidated Tangible Net Worth” means, as of any date, the stockholders’ or members’ equity of the Company and the year ended December 31, 2016, (in thousands, except share and per share information):
| Three months ended March 31, 2017 | Year Ended December 31, 2016 | |||||||
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Pro forma net income | $ | 13,638 | $ | 67,017 | ||||
Less: Pro forma undistributed earnings allocated to participating securities | (152 | ) | (1,183 | ) | ||||
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Pro forma net income allocable to common stockholders | $ | 13,486 | $ | 65,834 | ||||
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Pro forma weighted average common shares outstanding—basic | 25,751,621 | 24,906,938 | ||||||
Pro forma dilutive effect of restricted stock units | 458,141 | 748,807 | ||||||
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Pro forma weighted average common shares outstanding—diluted | 26,209,762 | 25,655,745 | ||||||
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Pro forma earnings per share: | ||||||||
Pro forma—Basic | $ | 0.52 | $ | 2.64 | ||||
Pro forma—Diluted | $ | 0.51 | $ | 2.57 | ||||
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DESCRIPTION OF CENTURY COMMUNITIES CAPITAL STOCK
The following is a summaryRestricted Subsidiaries less Intangible Assets of the material terms of Century Communities’ capital stock. Because it is only a summary, it may not contain allCompany and the Restricted Subsidiaries, in each case as shown on the consolidated balance sheet of the information that may be importantCompany for the then most recently ended fiscal quarter for which internal financial statements are available.
“Credit Facilities” means one or more debt facilities (including, without limitation, the Revolving Credit Facility), commercial paper facilities or debt securities or other forms of debt financing, in each case, with banks, institutional investors or other lenders or credit providers or a trustee providing for the revolving credit loans, term loans, project loans, receivables financing (including through the sale of receivables to yousuch lenders or to special purpose entities formed to borrow from such lenders against such receivables), bankers acceptances, letters of credit or issuances of debt securities, including any related notes, guarantees, collateral documents, instruments, indentures, documents and is qualifiedagreements executed in its entirety by referenceconnection therewith and in each case, as amended, restated, modified, renewed, extended, supplemented, restructured, refunded, replaced in any manner
(whether upon or after termination or otherwise) or in part from time to the Century Communities Charter and the Century Communities Bylaws. Accordingly, you should read the more detailed provisions of the Century Communities Charter and the Century Communities Bylaws.
Century Communities’ authorized capital stock consists of 100,000,000 shares of common stock, par value $0.01 per share, and 50,000,000 shares of preferred stock, par value $0.01 per share, issuabletime, in one or more series. Asinstances and including any amendment increasing the amount of March 31, 2017, there were 22,291,222 shares of Century Communities Common Stock issued and outstanding, and no shares of preferred stock issued and outstanding.
Common Stock
Voting. Each holder of Century Communities Common Stock is entitled to one vote per each share on all mattersIndebtedness incurred or available to be voted uponborrowed thereunder (provided that such additional Indebtedness is incurred in accordance with the covenant described under the caption “Certain Covenants—Limitations on Additional Indebtedness”), extending the maturity of any Indebtedness incurred thereunder or contemplated thereby or deleting, adding or substituting one or more parties thereto (whether or not such added or substituted parties are banks or other institutional lenders), including one or more separate instruments or facilities, in each case, whether any such amendment, restatement, modification, renewal, extension, supplement, restructuring, refunding, replacement or refinancing occurs simultaneously or not with the termination or repayment of a prior Credit Facility.
“Default” means (1) any Event of Default or (2) any event, act or condition that, after notice or the passage of time or both, would be an Event of Default.
“Designated Non-cash Consideration” means the Fair Market Value of non-cash consideration received by the common stockholders of Century Communities, and there are no cumulative voting rights. Subject to applicable law and the rights, ifCompany or any of the holdersRestricted Subsidiaries in connection with an Asset Sale that is designated as “Designated Non-cash Consideration” pursuant to an Officers’ Certificate, setting forth the basis of outstanding sharessuch valuation.
“Designation” has the meaning given to this term in the covenant described under the caption “—Certain Covenants—Limitations on Designation of Unrestricted Subsidiaries”; and “Designate” and “Designated” shall have correlative meanings.
“Designation Amount” has the meaning given to this term in the covenant described under the caption “—Certain Covenants—Limitations on Designation of Unrestricted Subsidiaries.”
“Directly Related Assets” means, with respect to any particular property, assets directly related thereto or derived therefrom, such as proceeds (including insurance proceeds), products, rents, and profits thereof and improvements and accessions thereto.
“Disqualified Equity Interests” of any seriesPerson means any class of preferred stock Century Communities may designate and issue in the future, holdersEquity Interests of Century Communities Common Stock will be entitled to vote on all matters on which stockholders generally are entitled to vote.
Dividends. Subject to the rights, if any, of the holders of outstanding shares of any series of preferred stock Century Communities may designate and issue in the future, holders of Century Communities Common Stock will be entitled to receive ratably the dividends, if any, as may be declared from time to timesuch Person that, by the Century Communities Board out of funds legally available for that purpose.
Liquidation, Dissolutiontheir terms, or Winding Up. If there is a liquidation, dissolution or winding up of Century Communities, subject to the rights, if any, of the holders of outstanding shares of any series of preferred stock Century Communities may designate and issue in the future, holders of Century Communities Common Stock would be entitled to ratable distribution of its assets remaining after the payment in full of its liabilities.
Other Rights. Underby the terms of any related agreement or of any security into which they are convertible, puttable or exchangeable, are, or upon the Century Communities Charter,happening of any event or the holderspassage of Century Communities Common Stock have no preemptivetime would be, (i) required to be redeemed by such Person, whether or conversion rights or other subscription rights, and there are no redemption or sinking fund provisions applicable tonot at the Century Communities Common Stock. All currently outstanding shares of Century Communities Common Stock are fully paid and non-assessable. The rightsoption of the holders of Century Communities Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that Century Communities may designate and issue in the future.
Preferred Stock
The Century Communities Charter provides that the Century Communities Board is expressly authorized to provide for the issuance of shares of preferred stock in one or more series and, by filing a certificate of designation pursuant to the applicable law of the State of Delaware (which we refer to as a “preferred stock designation”), to establish from time to time for each such series the number of shares to be included in each such series and to fix the designations, powers, rights and preferences of the shares of each such series, if any, and the qualifications, limitations and restrictions, if any, thereof. The authority of the Century Communities Board with respect to each series of preferred stock includes, but is not limited to, establishing the following:
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securities into which it is convertible or exchangeable or for which it is redeemable) pursuant to such provision prior to compliance by the Company with the provisions of the Indenture described above under the captions “—Change of Control” and “—Certain Covenants—Limitations on Asset Sales” and such repurchase or redemption complies with the provisions of the Indenture described above under the caption “—Certain Covenants—Limitations on Restricted Payments.”
“Equity Interests” of any Person means (1) any and all shares or other equity interests (including common stock, preferred stock, limited liability company interests and partnership interests) in such Person and (2) all rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such shares or other interests in such Person but excluding any debt securities convertible or exchangeable into such equity.
“Equity Offering” means a public or private equity offering or sale after the Accrual Date of Qualified Equity Interests by the Company.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
“Exchange Notes” means the debt securities of the Company to be issued pursuant to the Indenture in exchange for, and in an aggregate principal amount not to exceed, the aggregate principal amount of the Notes to be exchanged, in compliance with the terms of the applicable Registration Rights Agreement, which debt securities will have terms substantially identical in all material respects to the Notes to be exchanged (except that such debt securities will not contain terms with respect to transfer restrictions).
“Fair Market Value” means, with respect to any asset or liability, the fair market value of such asset or liability as is determined in good faith by an officer of the Company; provided that such determination of Fair Market Value shall be made in good faith by the Board of Directors of the Company or a duly authorized committee thereof, as evidenced by a resolution of such Board or committee, if such Fair Market Value would exceed $25.0 million.
“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect from time to time. Unless otherwise specified, all ratios and computations, contained in the Indenture will be computed in conformity with GAAP, except that in the event the Company is acquired in a transaction that is accounted for using purchase accounting, the effects of the application of purchase accounting shall be disregarded in the calculation of such ratios and other computations contained in the Indenture.
“Guarantee” or “guarantee” means a direct or indirect guarantee by any Person of any Indebtedness of any other classPerson and includes any obligation, direct or seriesindirect, contingent or otherwise, of Century Communities, and, if so,such Person: (1) to purchase or pay (or advance or supply funds for the specificationpurchase or payment of) Indebtedness of such other classPerson (whether arising by virtue of partnership arrangements, or series,by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm’s-length terms and are entered into in the conversion priceordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise); or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part). “Guarantee” or “guarantee” when used as a verb, and “guaranteed” have correlative meanings.
“Guarantors” means each Person that executes a Note Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns, in each case, until such Person is released from its Note Guarantee in accordance with the provisions of the Indenture.
“Hedging Obligations” of any Person means the obligations of such Person pursuant to (1) any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in or manage exposure to interest rates, (2) agreements or arrangements designed to protect such Person against fluctuations in or manage exposure to foreign currency exchange rates in the conduct of its operations, or (3) any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in or manage exposure to commodity prices, in each case entered into for bona fide hedging purposes and not for the purpose of speculation.
“Holder” means any registered holder, from time to time, of the Notes.
“Housing Unit” means a detached or rateattached home (including a townhouse or rates,condominium) owned by the Company or a Subsidiary of the Company (i) which is completed or for which there has been a start of construction and (ii) which has been or is being constructed on any adjustments thereto,real estate which immediately prior to the start of construction constituted a Lot.
“Immaterial Subsidiary” means, at any date of determination, any Restricted Subsidiary whose total assets at the last day of the most recently ended fiscal quarter ending prior to such date for which internal financial statements are available were less than $10.0 million, determined in accordance with GAAP.
“incur” means, with respect to any Indebtedness or obligation, incur, create, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to such Indebtedness or obligation; provided that (1) the Indebtedness of a Person existing at the time such Person became a Restricted Subsidiary or at the time such Person merged with or into the Company or a Restricted Subsidiary shall be deemed to have been incurred at such time and (2) neither the accrual of interest nor the accretion of original issue discount shall be deemed to be an incurrence of Indebtedness.
“Indebtedness” of any Person at any date means, without duplication:
| (1) | all liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof); |
| (2) | all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; |
| (3) | all obligations of such Person in respect of letters of credit, letters of guarantee, bankers’ acceptances or other similar instruments (or reimbursement obligations with respect thereto); |
| (4) | all obligations of such Person to pay the deferred and unpaid purchase price of property or services due more than 365 days after such property is acquired or such services are completed, except (a) trade payables and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services and (b) any earn-out or similar obligation until the amount of such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP; |
| (5) | the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the principal component or liquidation preference of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Equity Interests or, with respect to any Restricted Subsidiary, any preferred stock (but excluding, in each case, any accrued dividends); |
| (6) | all Capitalized Lease Obligations of such Person; |
| (7) | all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; |
| (8) | all Indebtedness of other Persons guaranteed by such Person to the extent of such guarantee (whether or not such items would appear on the balance sheet of such Person in accordance with GAAP); |
| provided that Indebtedness of the Company or its Subsidiaries that is guaranteed by the Company or its Subsidiaries shall be counted only once in the calculation of the amount of Indebtedness of the Company and its Subsidiaries on a consolidated basis; |
| (9) | all Attributable Indebtedness; and |
| (10) | to the extent not otherwise included in this definition, net obligations of such Person under Hedging Obligations (the amount of any such obligations to be equal at any time to the net termination values of such agreements or arrangements giving rise to such obligations that would be payable by such Person at such time). |
Notwithstanding the foregoing, the following shall not be considered Indebtedness:
| (a) | accrued expenses, trade payables, customer deposits or deferred income taxes arising in the ordinary course of business; |
| (b) | completion guarantees entered into in the ordinary course of business; |
| (c) | obligations in respect of district improvement bonds pertaining to roads, sewers and other infrastructure; and |
| (d) | Indebtedness that has been discharged or defeased in accordance with its governing documents. |
Except as provided in this paragraph, the amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (7), the lesser of (a) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of other Persons on the date that the Lien attaches and (b) the amount of the Indebtedness secured. The outstanding balance at any date of all unconditional obligations of an instrument having a principal amount shall be the outstanding principal amount thereof. The amount outstanding as of any date of any Indebtedness issued with original issue discount shall be the accreted value thereof. Except to the extent provided in the preceding sentence, the amount of any Indebtedness that is convertible into or datesexchangeable for Equity Interests of the Company outstanding as of any date shall be deemed to be equal to the principal and premium, if any, in respect of such Indebtedness, notwithstanding the provisions of GAAP (including Accounting Standards Codification Topic 470-20, Debt-Debt with Conversion and Other Options). For purposes of clause (5), the “maximum mandatory redemption or repurchase price” of any Disqualified Equity Interests or preferred stock that do not have a fixed redemption or repurchase price shall be calculated in accordance with the terms of such Disqualified Equity Interest or preferred stock as if such Disqualified Equity Interests or preferred stock were redeemed on any date on which such sharesan amount of Indebtedness outstanding shall be convertiblerequired to be determined pursuant to the Indenture.
“Indebtedness to Tangible Net Worth Ratio” means, with respect to any determination date, the ratio of (i) total consolidated Indebtedness of the Company and the Restricted Subsidiaries to (ii) the Consolidated Tangible Net Worth of the Company, in each case, as of the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available immediately preceding the date of the transaction giving rise to the need to calculate the Indebtedness to Tangible Net Worth Ratio. The Indebtedness to Tangible Net Worth Ratio shall be calculated on a pro forma basis consistent with the pro forma adjustments set forth in the definition of Consolidated Fixed Charge Coverage Ratio.
“Independent Financial Advisor” means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Company’s Board of Directors, qualified to perform the task for which it has been engaged and disinterested and independent with respect to the Company and its Affiliates; provided, however, that the prior rendering of service to the Company or an Affiliate of the Company shall not, by itself, disqualify the advisor.
“Initial Issue Date” means May 23, 2019.
“Intangible Assets” means, with respect to any Person, all goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and all other items which would be treated as intangibles on the consolidated balance sheet of such Person prepared in accordance with GAAP.
“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent), in the case of Moody’s, and BBB- (or the equivalent), in the case of S&P, or an equivalent rating in the case of any other Rating Agency.
“Investments” of any Person means, without duplication:
| (1) | all direct or indirect investments by such Person in any other Person in the form of loans, advances or capital contributions or other credit extensions constituting Indebtedness of such other Person, and any guarantee of Indebtedness of any other Person; |
| (2) | all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Equity Interests or other securities of any other Person; |
| (3) | all other items that would be classified as investments on a balance sheet of such Person prepared in accordance with GAAP; and |
| (4) | the Designation of any Subsidiary as an Unrestricted Subsidiary. |
Except as otherwise expressly specified in this definition, the amount of any Investment (other than an Investment made in cash) shall be the Fair Market Value thereof on the date such Investment is made. The amount of any Investment pursuant to clause (4) shall be the Designation Amount determined in accordance with the covenant described under the caption “—Certain Covenants—Limitations on Designation of Unrestricted Subsidiaries.” Notwithstanding the foregoing, redemptions of Equity Interests of the Company shall be deemed not to be Investments.
“Lien” means, with respect to any asset, any mortgage, deed of trust, lien (statutory or other), pledge, hypothecation, lease, easement, restriction, covenant, charge, security interest, priority or other encumbrance of any kind or nature in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, and any lease in the nature thereof, any option or other agreement to sell or give a security interest in, and any filing of, or agreement to give, any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction (other than cautionary filings in respect of operating leases).
“Limited Condition Acquisition” means any acquisition or other Investment, including by way of merger, amalgamation or consolidation, by the Company or one or more of the Restricted Subsidiaries, with respect to which the Company or such Restricted Subsidiaries have entered into an agreement or are otherwise contractually committed to consummate and the consummation of which is not expressly conditioned upon the availability of, or on obtaining, financing from a third party non-Affiliate.
“Lots” means all land owned by the Company or a Subsidiary of the Company which is zoned by the applicable governmental authority having jurisdiction for construction and use as Housing Units.
“Model Home Unit” means a completed Housing Unit to be used as a model home in connection with the sale of Housing Units in a residential housing project.
“Mortgage Subsidiary” means any Restricted Subsidiary engaged primarily in the mortgage originations and lending business.
“Net Available Proceeds” means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents (including any cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise and net proceeds from the sale or other disposition of any securities or other assets received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Sale or received in any other non-cash form), net of
| (1) | brokerage commissions and other fees and expenses (including fees and expenses of legal counsel, accountants and investment banks) of such Asset Sale; |
| (2) | provisions for taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements); |
| (3) | amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale or having a Lien thereon in accordance with the terms thereof; |
| (4) | payments of unassumed liabilities (not constituting Indebtedness) relating to the assets sold; and |
| (5) | appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including pensions and other postemployment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale; provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds. |
“Non-Guarantor Subsidiary” means any Restricted Subsidiary that is not a Guarantor.
“Non-Recourse Indebtedness” with respect to any Person means Indebtedness of such Person for which (1) the sole legal recourse for collection of principal and interest on such Indebtedness is against the specific property identified in the instruments evidencing or securing such Indebtedness and such property was acquired, developed or improved with the proceeds of such Indebtedness or such Indebtedness was incurred within 365 days after the acquisition, development or improvement of such property and (2) no other assets of such Person may be realized upon in collection of principal or interest on such Indebtedness. Indebtedness that is otherwise Non-Recourse Indebtedness will not lose its character as Non-Recourse Indebtedness because there is recourse for (a) environmental warranties or indemnities, (b) indemnities for and liabilities arising from fraud, misrepresentation, misapplication or non-payment of rents, profits, insurance and condemnation proceeds and other sums actually received by the obligor from secured assets to be paid to the lender, waste and mechanics liens or (c) similar customary “bad-boy” guarantees.
“Note Guarantee” means, individually, any guarantee of payment of the Notes and the Company’s other obligations under the Indenture by a Guarantor pursuant to the terms of the Indenture and conditionsany supplemental indenture thereto, and, collectively, all such Guarantees.
“Officer” of any Person means any of the following of such Person: the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary.
“Officers’ Certificate” of any Person means a certificate signed by two Officers of such Person.
“PAPA” means an arrangement between the Company or any Restricted Subsidiary and any other Person (other than an Affiliate of the Company) entered into in connection with the acquisition of real estate by the Company or a Restricted Subsidiary from such Person, that provides for one or more future payments to such Person or any of its Affiliates, the amount of which is calculated by reference to the sales price of such real estate upon a disposition by the Company or a Restricted Subsidiary of such real estate (or parts thereof).
“Pari Passu Indebtedness” means any Indebtedness of the Company or any Guarantor that ranks equally in right of payment with the Notes or the Note Guarantee of such Guarantor, as applicable (without giving effect to collateral arrangements).
“Permitted Business” means (i) any business engaged in by the Company or any of the Restricted Subsidiaries on the Initial Issue Date, (ii) any business or other activities that are reasonably similar, ancillary, complementary or related to, or a reasonable extension, development or expansion of, or necessary to, the business described in clauses (i) or (iii) of this definition, and (iii) any business in the homebuilding, real estate development, commercial real estate development or management, brokerage and the sale, rental or management of homes and other real estate, mortgage lending or servicing, title or title-related services, homeowners’ insurance or community planning industries, or (iv) any other business which is not otherwise material to the business of the Company and its Restricted Subsidiaries, taken as a whole.
“Permitted Holders” means (i) Messrs. Dale Francescon and Robert J. Francescon; (ii) any spouse, civil partner or relative (or the spouse or civil partner of such relative) of either Person specified in clause (i) of this definition; (iii) any Person directly or indirectly controlled by, or any trust for the benefit of, any Person specified in clauses (i) and (ii) of this definition; (iv) the estate, executors, administrators or similar Persons for any Person specified in clauses (i), (ii) or (iii) of this definition; (v) any Person or any of the Persons who were a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) whose ownership of assets or Voting Stock has triggered a Change of Control in respect of which a Change of Control Offer has been made and all Notes that were tendered therein have been accepted and paid; and (vi) any corporation, limited liability company or other entity more than 50% of the voting and economic rights of the equity interests of which are held, directly or indirectly, by any one or more of the foregoing Persons.
“Permitted Investment” means:
| (1) | Investments by the Company or any Restricted Subsidiary in any Restricted Subsidiary; |
| (2) | Investments by the Company or any of the Restricted Subsidiaries in a Person that is engaged in a business permitted under the covenant described above under the caption “—Conduct of Business” if as a result of or immediately following such Investment: |
| (a) | such Person becomes a Restricted Subsidiary; or |
| (b) | such Person, in one transaction or a series of related transactions, is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary, |
and, in each case, any Investment held or committed to by such Person at the time of such acquisition, merger, consolidation or transfer; provided that such Investment was not acquired by such Person in contemplation of such acquisition, merger, consolidation or transfer; and any extension, modification or renewal of any such Investment, but only to the extent such extension, modification or renewal does not involve additional advances, contributions or other Investments of cash or other assets, or other increases thereof (other than as a result of the appreciation, accrual or accretion of interest or original issue discount or the issuance of pay-in-kind securities, in each case, pursuant to the terms of such Investment as in effect on the date such Person was acquired);
| (3) | Investments in the Company by any Restricted Subsidiary; |
| (4) | loans and advances to directors, employees and officers of the Company and the Restricted Subsidiaries in the ordinary course of business not in excess of $2.0 million with respect to all loans or advances outstanding at any time (without giving effect to the forgiveness of any such loan); |
| (5) | Hedging Obligations incurred pursuant to clause (4) of the second paragraph under the covenant described under the caption “—Certain Covenants—Limitations on Additional Indebtedness”; |
| (6) | cash or Cash Equivalents; |
| (7) | receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; |
| (8) | Investments received (i) in compromise, settlement or resolution of obligations of trade creditors or customers that were incurred in the ordinary course of business of the Company or any Restricted Subsidiary, including pursuant to any plan of reorganization or similar arrangement, including foreclosure, perfection or enforcement of any Lien, upon the bankruptcy or insolvency of such trade creditors or customers, (ii) in compromise, settlement or resolution of litigation, arbitration or other disputes with Persons who are not Affiliates or (iii) as a result of a foreclosure by the Company or any Restricted Subsidiary of any Lien; |
| (9) | Investments made by the Company or any Restricted Subsidiary as a result of non-cash consideration received in connection with an Asset Sale made in compliance with the covenant described under the caption “—Certain Covenants—Limitations on Asset Sales”; |
| (10) | Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers’ compensation performance and other similar deposits in the ordinary course of business; |
| (11) | Investments in existence or committed to on the Initial Issue Date and any extension, modification or renewal of such Investments, but only to the extent not involving additional advances, contributions or other Investments of cash or other assets or other increases thereof to which the Company or any Subsidiary was not bound on the Initial Issue Date (other than as a result of the appreciation, accrual or accretion of interest or original issue discount or the issuance of pay-in-kind securities, in each case, pursuant to the terms of such Investment as in effect on the Initial Issue Date); |
| (12) | Guarantees issued in accordance with the covenant described under the caption “—Certain Covenants—Limitations on Additional Indebtedness;” |
| (13) | obligations (but not payments thereon) with respect to homeowners association obligations, community facility district bonds, metro district bonds, mello-roos bonds and subdivision improvement bonds and similar bonding requirements arising in the ordinary course of business of a homebuilder; |
| (14) | guarantee obligations, including completion guarantee or indemnification obligations (other than for the payment of borrowed money), entered into in the ordinary course of business and incurred for the benefit of any adjoining landowner, lender, seller of real property or municipal government authority (or enterprises thereof) in connection with the acquisition, construction, subdivision, entitlement and development of real property; |
| (15) | Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in the joint venture arrangements and similar binding arrangements in the ordinary course of business; |
| (16) | extensions of trade credit, asset purchases (including purchases of inventory, supplies and materials) and the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons, in each case in the ordinary course of business; |
| (17) | Investments by the Company or any Restricted Subsidiary in Unrestricted Subsidiaries engaged in a Permitted Business at any one time outstanding not to exceed the greater of (a) $15.0 million and (b) 5.00% of Consolidated Tangible Assets determined at the time of such Investment (with each Investment being valued as of the date made and without regard to subsequent changes in value); |
| (18) | other Investments in an aggregate amount at any one time outstanding not to exceed the greater of (a) $50.0 million and (b) 7.125% of Consolidated Tangible Assets determined at the time of such Investment (with each Investment being valued as of the date made and without regard to subsequent changes in value); |
| (19) | lease, utility, marketing and business development and other similar deposits made in the ordinary course of business; |
| (20) | any Investment (other than any Investment made in accordance with clause (2) of this definition) to the extent made in exchange for the issuance of Qualified Equity Interests of the Company; and |
| (21) | any Investments made by a Mortgage Subsidiary in the ordinary course of its business related to mortgage origination and other lending. |
The amount of Investments outstanding at any time pursuant to clauses (17) and (18) above shall be deemed to be reduced:
| (a) | upon the disposition or repayment of or return on any Investment made pursuant to clauses (17) and (18) above, by an amount equal to the return of capital with respect to such Investment to the Company or any Restricted Subsidiary (to the extent not included in the computation of Consolidated Net Income), less the cost of the disposition of such Investment and net of taxes; and |
| (b) | upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, by an amount equal to the lesser of (x) the Fair Market Value of the Company’s proportionate interest in such Subsidiary immediately following such Redesignation, and (y) the aggregate amount of Investments in such Subsidiary that increased (and did not previously decrease) the amount of Investments outstanding pursuant to clauses (17) or (18) above. |
“Permitted Liens” means the following types of Liens:
| (1) | Liens securing Permitted Indebtedness incurred pursuant to and outstanding under clause (1) of the second paragraph under the caption “—Certain Covenants—Limitations on Additional Indebtedness” not to exceed the greater of (a) $400.0 million and (b) 20.0% of Consolidated Tangible Assets, measured at the time of incurrence of any such Indebtedness secured by such Liens; |
| (2) | (a) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, construction contractors, repairmen and other Liens imposed by law incurred in the ordinary course of business and (b) Liens for taxes, assessments or governmental or quasi-governmental charges or claims, in either case, for sums not yet delinquent or being contested in good faith by appropriate proceedings, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; |
| (3) | Liens incurred or deposits and pledges made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, public or statutory obligations, surety, stay, customs and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds, development obligations, progress payments, utility services, developer’s or other obligations to make on-site or off-site improvements and other similar obligations (including those to secure health, safety and environmental obligations) (exclusive of obligations for the payment of borrowed money); |
| (4) | Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person in the ordinary course of business to facilitate the purchase, shipment or storage of such inventory or other goods; provided, however, that such bankers’ acceptances do not constitute Indebtedness; |
| (5) | Liens securing reimbursement obligations with respect to commercial letters of credit issued pursuant to the request of and for the due account of such Person in the ordinary course of its business which encumber documents, goods covered thereby and other assets relating to such letters of credit and products and proceeds thereof; |
| (6) | Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or any Restricted Subsidiary, including rights of offset and setoff; |
| (7) | bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by the Company or any Restricted Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that (a) such account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company or such Restricted Subsidiary in excess of those set forth by regulations promulgated by the Federal Reserve Board, (b) such account is not intended by the Company or any Restricted Subsidiary to provide collateral to the depository institution and (c) in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness; |
| (8) | leases or subleases, licenses or sublicenses, (or any Liens related thereto) granted to others that do not materially interfere with the ordinary course of business of the Company or any Restricted Subsidiary; |
| (9) | Liens arising from filing Uniform Commercial Code financing statements regarding operating leases entered into by the Company and the Restricted Subsidiaries in the ordinary course of business; |
| (10) | Liens securing all of the Notes and Liens securing any Note Guarantee with respect to all of the Notes; |
| (11) | Liens in favor of the Trustee under and as permitted by the Indenture and similar Liens in favor of other trustees, agents and representatives; |
| (12) | Liens existing on the Initial Issue Date securing Indebtedness outstanding on the Initial Issue Date (other than Liens permitted under clause (1)), plus renewals and extensions of such Liens secured by the same or similar property (without increase in the amount, or change in any direct or contingent obligor, of the Indebtedness or other obligations secured thereby); |
| (13) | Liens in favor of the Company or any Restricted Subsidiary; |
| (14) | Liens securing Non-Recourse Indebtedness of the Company or any Restricted Subsidiary permitted to be incurred under the Indenture; provided, that such Liens apply only to (a) the property financed out of the net proceeds of such Non-Recourse Indebtedness within 270 days after the incurrence of such Non-Recourse Indebtedness and (b) Directly Related Assets; |
| (15) | Liens securing Purchase Money Indebtedness and Refinancing Indebtedness in respect thereof permitted to be incurred by clause (7) of the second paragraph of the covenant described under the caption “—Certain Covenants—Limitations on Additional Indebtedness,” provided that such Liens apply only to (a) the asset acquired, installed, designed, constructed or improved with the proceeds of such Purchase Money Indebtedness and, except with respect to Refinancing Indebtedness, within 270 days after the incurrence of such Purchase Money Indebtedness and (b) Directly Related Assets; |
| (16) | Liens securing Acquired Indebtedness permitted to be incurred under the Indenture; provided that the Liens do not extend to assets not subject to such Lien at the time of acquisition (other than Directly Related Assets); provided, however that such Liens are limited to all or part of the same property, other assets or stock (plus improvements, accession, proceeds or dividends or distributions in connection with the original property, other assets or stock) that secured (or, under the written arrangements under which such Liens arose, could secure) the obligations to which such Liens relate; |
| (17) | Liens on assets of a Person existing at the time such Person is acquired or merged with or into or consolidated with the Company or any such Restricted Subsidiary (and not created in anticipation or contemplation thereof); provided, that such Liens may not extend to any other assets owned by the Company or any Restricted Subsidiary; |
| (18) | Liens to secure Attributable Indebtedness permitted to be incurred under the Indenture; provided that any such Lien shall not extend to or cover any assets of the Company or any Restricted Subsidiary other than (a) the assets which are the subject of the Sale and Leaseback Transaction in which the Attributable Indebtedness is incurred and (b) Directly Related Assets; |
| (19) | Liens deemed to exist by reason of (i) any encumbrance or restriction (including put and call arrangements) with respect to the Equity Interests of any joint venture or similar arrangement pursuant to any joint venture or similar agreement or (ii) any encumbrance or restriction imposed under any contract for the sale by the Company or any Subsidiary of the Company of the Equity Interests of any Subsidiary of the Company, or any business unit or division of the Company or any Restricted Subsidiary permitted by the Indenture; provided that in each case such Liens shall extend only to the relevant Equity Interests; |
| (20) | Liens to secure Indebtedness which is incurred in compliance with the covenant described above under the caption “—Certain Covenants—Limitations on Additional Indebtedness” and that refinances, refunds, replaces, amends, extends or modifies, as a whole or in part, any Indebtedness that was previously so secured pursuant to clauses (10), (12), (16), (17), (18) and (20) of this definition; provided that in each case (i) such Liens do not extend to any additional assets than those that secured the Indebtedness being refinanced, refunded, replaced, amended, extended, or modified (other than Directly Related Assets) and (ii) the Indebtedness secured by the new Lien is not increased to an amount greater than the sum of (x) the outstanding principal amount, or, if greater, the committed amount, of the Indebtedness being refinanced, refunded, replaced, amended, extended or modified, plus accrued and unpaid interest thereon and (y) the amount of any premium paid (including tender premiums), and the amount or expenses incurred by the Company or a Restricted Subsidiary in connection with such refunding, refinancing, replacement, amendment, extension or modification; |
| (21) | attachment or judgment Liens not giving rise to a Default and which are adequately bonded and being contested in good faith by appropriate proceedings; |
| (22) | survey exceptions, easements, rights-of-way, dedications, covenants, conditions, restrictions, reservations, assessment district and other similar charges or encumbrances not materially interfering with the ordinary course of business of the Company and its Subsidiaries; |
| (23) | zoning restrictions, easements, licenses, reservations, encroachments, protrusion permits, servitudes, covenants, conditions, waivers, restrictions on the use of real property or minor irregularities in title thereto (and with respect to leasehold interests, mortgages, obligations, liens and other encumbrances recorded against the fee estate, with or without consent of the lessee), which do not materially impair the use of such real property in the ordinary course of business of the Company and its Subsidiaries or the value of such real property for the purpose of such business; |
| (24) | Liens on Equity Interests in an Unrestricted Subsidiary to the extent that such Liens secure Indebtedness of such Unrestricted Subsidiary; |
| (25) | Liens for homeowner, condominium and similar association fees and assessments and other payments; |
| (26) | Licenses of intellectual property granted in the ordinary course of business and not interfering in any material respect with the ordinary conduct of business of the Company or any Restricted Subsidiary; |
| (27) | pledges, deposits and other Liens existing under, or required to be made in connection with, (i) earnest money obligations, escrows or similar purpose undertakings or indemnifications in connection with any option agreements or purchase and sale agreement, (ii) development agreements or other contracts entered into with governmental authorities (or an entity sponsored by a governmental authority), in connection with the entitlement of real property or (iii) agreements for the funding of infrastructure, including in respect of the issuance of community facility district bonds, metro district bonds, mello-roos bonds and subdivision improvement bonds, and similar bonding requirements arising in the ordinary course of business of a homebuilder; |
| (28) | Liens securing Hedging Obligations and Cash Management Obligations; |
| (29) | Liens on Model Home Units and additions, accessions, improvements and replacements and customary deposits in connection therewith and proceeds and products therefrom; |
| (30) | rights of purchasers and borrowers with respect to security deposits, escrow funds and other amounts held by the Company or any Restricted Subsidiary; |
| (31) | any interest or title of a lessor under a Capitalized Lease Obligation or an operating lease; |
| (32) | Liens securing Indebtedness; provided that the principal amount of such Indebtedness secured pursuant to this clause (32) together with all other Indebtedness then outstanding and incurred under this clause (32) does not exceed the greater of $40.0 million and 4.0% of Consolidated Tangible Assets at the time of incurrence; |
| (33) | Liens securing obligations of the Company or any Restricted Subsidiary to any third party in connection with PAPAs, provided that such Liens do not at any time encumber any property, other than the property (and additions, accessions, improvements and replacements and customary deposits in connection therewith and proceeds and products therefrom) acquired in connection with such PAPA and the proceeds and products thereof; and |
| (34) | any right of first refusal, right of first offer, option, contract or other agreement to sell an asset; provided such sale is not otherwise prohibited under the Indenture. |
“Person” means any individual, corporation, partnership, limited liability company, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind.
“Plan of Liquidation” with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (1) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety; and (2) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition of all or substantially all of the remaining assets of such Person to creditors and holders of Equity Interests of such Person.
“principal” means, with respect to the Notes, the principal of, and premium, if any, on the Notes.
“Purchase Money Indebtedness” means Indebtedness, including Capitalized Lease Obligations, of the Company or any Restricted Subsidiary incurred for the purpose of financing all or any part of the purchase price of property, plant or equipment used in the business of the Company or any Restricted Subsidiary or the cost of installation, design, construction or improvement thereof; provided, however, that (1) the amount of such Indebtedness shall not exceed such purchase price or cost (including financing costs), (2) such Indebtedness shall not be secured by any asset other than the specified asset being financed or, in the case of real property or fixtures, including additions and improvements, the real property to which such conversionasset is attached and Directly Related Assets, and (3) such Indebtedness shall be incurred within 365 days after such acquisition of such asset by the Company or such Restricted Subsidiary or such installation, design, construction or improvement.
“Qualified Equity Interests” means Equity Interests of such Person other than Disqualified Equity Interests; provided, however, that such Equity Interests shall not be deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary of any Person or financed, directly or indirectly, using funds (1) borrowed from such Person or any Subsidiary of such Person and not repaid or (2) contributed, extended, guaranteed or advanced by such Person or any Subsidiary of such Person (including, without limitation, in respect of any employee stock ownership or benefit plan) and not repaid. Unless otherwise specified, Qualified Equity Interests refer to Qualified Equity Interests of the Company.
“Rating Agency” means each of S&P and Moody’s or, if S&P or Moody’s or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, made.selected by the Company (as certified by a resolution of the Board of Directors) which shall be substituted for S&P or Moody’s or both, as the case may be.
“redeem” means to redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire or retire for value; and “redemption” shall have a correlative meaning.
“Redesignation” has the meaning given to such term in the Century Communities Charter and Century Communities Bylaws With PossibleAnti-Takeover Effectscovenant described under the caption “—Certain Covenants—Limitations on Designation of Unrestricted Subsidiaries.”
The Century Communities Charter,“Refinancing Indebtedness” means Indebtedness of the Century Communities Bylaws, and Delaware law contain provisions that may delay or prevent a transactionCompany or a changeRestricted Subsidiary issued in controlexchange for, or the proceeds from the issuance and sale or disbursement of Century Communities that might involvewhich are used to refund, replace, repurchase, renew, extend, redeem or refinance in whole or in part, any Indebtedness of the Company or any Restricted Subsidiary existing on the Initial Issue Date or incurred in compliance with the Indenture (the “Refinanced Indebtedness”) in a principal amount (or if issued with original issue discount, an issue price) not in excess of the principal amount of the Refinanced Indebtedness (plus, in each case, the amount of any premium paid for shares(including tender premiums), accrued and unpaid interest and the amount of Century Communities Common Stockexpenses incurred by the Company or otherwiseany Restricted Subsidiary in connection with such repayment or amendment); provided that:
| (1) | if the Refinanced Indebtedness was subordinated in right of payment to the Notes or the Note Guarantees, as the case may be, then such Refinancing Indebtedness, by its terms, is expressly subordinated in right of payment to the Notes or the Note Guarantees, as the case may be, at least to the same extent as the Refinanced Indebtedness and if the Refinanced Indebtedness was pari passu with the Notes or the Note Guarantees, as the case may be, then the Refinancing Indebtedness ranks pari passu with, or is expressly subordinated in right of payment to, the Notes or the Note Guarantees, as the case may be; |
| (2) | the Refinancing Indebtedness has a Stated Maturity that is not earlier than the earlier of (a) the Stated Maturity of the Refinanced Indebtedness being repaid or amended or (b) the date that is 91 days after the Stated Maturity of the Notes; |
| (3) | the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the Stated Maturity of the Notes has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled to mature on or prior to the Stated Maturity of the Notes; and |
| (4) | Refinancing Indebtedness shall not include Indebtedness of a Non-Guarantor Subsidiary that refinances Indebtedness of the Company or a Guarantor. |
“Registration Rights Agreement” means (i) with respect to the Initial Notes, the registration rights agreement, dated as of the Initial Issue Date, among the Company, the Guarantors, and the representative of the initial purchasers of the Initial Notes, as the same may be amended, supplemented or modified from time to time, and (ii) with respect to any Additional Notes issued after the issue date of the Exchange Notes pursuant to an exemption from registration under the Securities Act, the registration rights agreement among the Company and the initial purchasers of such Additional Notes, as the same may be amended, supplemented or modified from time to time.
“Restricted Payment” means any of the following:
| (1) | the declaration or payment of any dividend or any other distribution (whether made in cash, securities or other property) on Equity Interests of the Company or any Restricted Subsidiary or any payment made to the direct or indirect holders (in their capacities as such) of Equity Interests of the Company or any Restricted Subsidiary, including any payment in connection with any merger or consolidation involving the Company, but excluding (a) dividends or distributions payable solely in Qualified Equity Interests and (b) in the case of Restricted Subsidiaries, dividends or distributions payable to the Company or to a Restricted Subsidiary and pro rata dividends or distributions payable to minority stockholders of any Restricted Subsidiary; |
| (2) | the redemption, purchase, retirement, defeasance or other acquisition for value of any Equity Interests of the Company, including any payment in connection with any merger or consolidation involving the Company, but excluding any such Equity Interests held by the Company or any Restricted Subsidiary; |
| (3) | any Investment other than a Permitted Investment; or |
| (4) | any payment on or with respect to, or purchase, repurchase, defeasance, redemption or other acquisition or retirement for value of, any Subordinated Indebtedness of the Company or any Guarantor (excluding any intercompany Indebtedness between or among the Company and any Guarantor), except (i) a payment of interest or principal at or after the stated date for payment thereof or (ii) the purchase, repurchase, defeasance, redemption or other acquisition or retirement of any such Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or payment at the stated date for payment thereof, in each case due within one year of the date of purchase, repurchase, defeasance, redemption or other acquisition or retirement. |
“Restricted Payments Basket” has the meaning given to such term in the first paragraph of the covenant described under the caption “—Certain Covenants—Limitations on Restricted Payments.”
“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.
“Revolving Credit Facility” means the revolving line of credit provided under the Amended and Restated Credit Agreement, dated as of June 5, 2018, among the Company, the lenders from time to time party thereto, and Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, as it has been and may be in the best interests of the stockholders of Century Communities, which could adversely affect the market price of Century Communities Common Stock. Certain of these provisions are described below.
Selected provisions of the Century Communities Charter and the Century Communities Bylaws. The Century Communities Charterfuture amended and/or the Century Communities Bylaws contain anti-takeover provisions that, subjectsupplemented from time to the rights, if any, of any preferred stock Century Communities may designatetime.
“Sale and issue in the future:
“SEC” means the U.S. Securities and preferencesExchange Commission.
“Secretary’s Certificate” means a certificate signed by the Secretary of the sharesCompany.
“Securities Act” means the Securities Exchange Act of that series,1933, as amended, and the qualifications, limitationsrules and restrictionsregulations of the SEC promulgated thereunder.
“Significant Subsidiary” means any Restricted Subsidiary that series;
“Stated Maturity” means, with respect to any security, the date specified in the agreement governing or certificate relating to such Indebtedness as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision, but not including any contingent obligations to repay, redeem or repurchase any such principal prior to the date originally scheduled for the payment thereof.
“Subordinated Indebtedness” means Indebtedness of the Company or any Guarantor that is subordinated in right of payment to the Notes or the Note Guarantees, respectively, by written agreement to that effect.
“Subsidiary” means, with respect to any specified Person:
| (1) | any corporation, association or other business entity (other than a partnership) of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any |
| contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and |
| (2) | any partnership (a) the sole general partner or the sole managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). |
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.
“Unrestricted Subsidiary” means (1) any Subsidiary that actions toat the time of determination shall be takendesignated an Unrestricted Subsidiary by the stockholdersBoard of Century Communities may be taken only at an annual or special meeting of stockholders and not by written consent;
“U.S. Government Obligations” means direct non-callable obligations of, or obligations guaranteed by, the Century Communities Board,United States of America for the chairmanpayment of which guarantee or obligations the full faith and credit of the Century Communities Board, or the chief executive officer or presidentUnited States is pledged.
“Voting Stock” with respect to any Person, means securities of Century Communities;
“Weighted Average Life to Maturity” when applied to any Indebtedness at any date, means the number of directors may be filled onlyyears obtained by a votedividing (1) the sum of a majoritythe products obtained by multiplying (a) the amount of directorseach then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in office, even though less than a quorum;
“Wholly-Owned Restricted Subsidiary” means a Restricted Subsidiary of which 100% of the holdersEquity Interests (except for directors’ qualifying shares or certain minority interests owned by other Persons solely due to local law requirements that there be more than one stockholder, but which interest is not in excess of at least 662/3% of the voting power of the capital stock of Century Communities entitled to vote generally in the election of directors;
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Delaware Anti-Takeover Statute. In the Century Communities Charter, Century Communities elected to be subject to Section 203 of the DGCL, an antitakeover statute. In general, Section 203 of the DGCL prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” (as such termspurpose) are defined in Section 203) for a period of three years following the time the person became an interested stockholder, unless: (i) prior to such time the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the “voting stock” (as defined in Section 203) of the corporation outstanding at the time the transaction commenced; or (iii) the business combination is approveddirectly by the board of directors and by the stockholders (acting at a meeting and not by written consent) by the affirmative vote of at least 66-2/3% of the outstanding voting stock which is not “owned” (as defined in Section 203) by the interested stockholder. Generally, a “business combination” includes a merger, assetCompany or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns 15%through one or more of a corporation’s voting stock or is an affiliate or associate of the corporation and was the owner of 15% or more of Century Communities’ outstanding voting stock at any time within the three-year period immediately before the date of determination. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the Century Communities Board, including discouraging attempts that might result in a premium over the market price for the shares of Century Communities Common Stock.Wholly-Owned Restricted Subsidiaries.
Authorized but Unissued Shares
Authorized but unissued shares of Century Communities Common Stock will be available for future issuance without stockholder approval. Century Communities may use additional shares for a variety of purposes, including future offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of authorized but unissued shares of Century Communities Common Stock could render more difficult or discourage an attempt to obtain control of Century Communities by means of a proxy contest, tender offer, merger or otherwise.
Transfer Agent and Registrar
The transfer agent and registrar for Century Communities Common Stock is American Stock Transfer & Trust Company, LLC.
National Securities Exchange
Century Communities Common Stock is listed for trading on the NYSE under the ticker symbol “CCS.”
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COMPARISON OF STOCKHOLDER RIGHTSCERTAIN MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
Century Communities and UCP are both Delaware corporations subject to the provisions of the DGCL. At the effective time of the Merger, each share of UCP Class A Common Stock (other than dissenters’ shares or treasury shares held by UCP and any shares of UCP Class A Common Stock owned by any UCP subsidiary, Century Communities or Century Communities subsidiary) will be converted into the right to receive the Merger Consideration, consisting of 0.2309 of a fully paid and nonassessable share of Century Communities Common Stock and $5.32 cash. No fractional shares will be issued in the Merger, and UCP stockholders will receive cash in lieu of any fractional shares. As a result, UCP stockholders will become stockholders of Century Communities and will have their rights as stockholders governed by the Century Communities Charter and the Century Communities Bylaws. The Century Communities Charter and the Century Communities Bylaws will differ from the UCP Charter and the UCP Bylaws that currently govern the rights of UCP stockholders.
Set forth below are the material differences between the rights of a holder of Century Communities Common Stock under the Century Communities Charter and the Century Communities Bylaws, on the one hand, and a holder of UCP Class A Common Stock under the UCP Charter and the UCP Bylaws, on the other hand.
The following discussion is a summary does not reflect any rules of NYSE or anycertain material United States federal securities laws that may applyincome tax considerations relevant to Century Communities or UCP in connection with the matters discussed. In addition, this summaryexchange of the Initial Notes for Exchange Notes pursuant to the Exchange Offer, but does not purport to be a complete analysis of all potential tax effects. The discussion of,is based upon the Code, United States Treasury regulations issued thereunder, Internal Revenue Service (which we refer to as the “IRS”) rulings and is qualified in its entirety by reference to, the DGCLpronouncements, and the constituent documents of Century Communities and UCP.
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General
This section summarizes certain material provisions of Delaware law pertaining to appraisal rights. The following discussion, however, is not a full summary of the law pertainingdate hereof and all of which are subject to appraisal rights under the DGCL and is qualifiedchange at any time. Any such change may be applied retroactively in its entirety by the full text of Section 262 of the DGCLa manner that is attached asAnnex D to this proxy statement/prospectus and incorporated by reference herein. All references in Section 262 of the DGCL to “stockholder” are to the recordcould adversely affect a holder of the shares of UCP Common Stock. The following discussion doesNotes. We have not constitutesought any legal or other advice, nor does it constitute a recommendation as to whether or not a UCP stockholder should exercise its right to seek appraisal under Section 262 of the DGCL.
If you hold one or more shares of UCP Common Stock continuously through the effective date of the Merger, you are entitled to appraisal rights under Delaware law and have the right to demand appraisal of your shares in connection with the Merger, have your shares appraised by the Delaware Court of Chancery and receive the “fair value” of such shares (as determined by the Delaware Court of Chancery, exclusive of any element of value arisingruling from the accomplishment or expectation of the Merger) as of the completion of the Merger in place of the Merger Consideration, if you comply with the procedures specified in Section 262 of the DGCL. Any such UCP stockholder awarded “fair value” for the holder’s shares by the court would receive payment of that fair value in cash, together with interest, if any, in lieu of the right to receive the Merger Consideration. It is possible that any such “fair value” as determined by the Delaware Court of Chancery may be more or less than, or the same as, that which UCP stockholders will receive pursuant to the Merger Agreement.
Under Section 262 of the DGCL, because UCP stockholders are being asked to adopt the Merger Agreement, not less than 20 days prior to the UCP special meeting to adopt such agreement, UCP must notify each stockholder who was a UCP stockholder on the record date for notice of such meeting and who is entitled to exercise appraisal rights, that appraisal rights are available and include in the notice a copy of Section 262 of the DGCL. This proxy statement/prospectus constitutes the required notice, and the copy of applicable statutory provisions is attached asAnnex D to this proxy statement/prospectus.
A HOLDER OF UCP COMMON STOCK WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO SHOULD REVIEW THE FOLLOWING SUMMARY ANDANNEX D CAREFULLY. FAILURE TO COMPLY WITH THE PROCEDURES OF SECTION 262 OF THE DGCL IN A TIMELY AND PROPER MANNER MAY RESULT IN THE LOSS OF APPRAISAL RIGHTS. BECAUSE OF THE COMPLEXITY OF THE PROCEDURES FOR EXERCISING THE RIGHT TO SEEK APPRAISAL, IF A HOLDER OF UCP COMMON STOCK WISHES TO EXERCISE ITS APPRAISAL RIGHTS, THE HOLDER IS URGED TO CONSULT WITH ITS OWN LEGAL AND FINANCIAL ADVISORS IN CONNECTION WITH COMPLIANCE UNDER SECTION 262 OF THE DGCL. A UCP STOCKHOLDER WHO LOSES HIS, HER OR ITS APPRAISAL RIGHTS WILL BE ENTITLED TO RECEIVE THE PER SHARE MERGER CONSIDERATION.
How to Exercise and Perfect Your Appraisal Rights
If you are a UCP stockholder and wish to exercise the right to seek an appraisal of your shares of UCP Common Stock, you must comply with ALL of the following:
you must deliver to UCP a written demand for appraisal before the taking of the vote on the adoption of the Merger Agreement at the UCP special meeting, and such demand must reasonably inform UCP of
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In addition, the Delaware Court of Chancery will dismiss appraisal proceedings as to all shares of UCP capital stock if, immediately before the Merger, such shares were listed on a national securities exchange unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of UCP stock eligible for appraisal, or (ii) the value of the consideration provided in the Merger for such total number of shares entitled to appraisal exceeds $1 million. We refer to these conditions as the “ownership thresholds.” Because UCP Class A Common Stock is listed on a national securities exchange and is expected to continue be listed on such exchange immediately before the Merger, at least one of the ownership thresholds must be met in order for UCP stockholders to be entitled to seek appraisal with respect to such shares of UCP Class A Common Stock.
Voting, in person or by proxy, against, abstaining from voting on or failing to vote on the adoption of the Merger Agreement will not constitute a written demand for appraisal as required by Section 262 of the DGCL. The written demand for appraisal is in addition to and separate from any proxy or vote.
Who May Exercise Appraisal Rights
Only a holder of record of shares of UCP Common Stock issued and outstanding immediately prior to the effective time of the Merger may assert appraisal rights for the shares of UCP Common Stock registered in that holder’s name. A demand for appraisal must be executed by or on behalf of the stockholder of record. The demand should set forth, fully and correctly, the stockholder’s name as it appears on the stock certificates (or in the stock ledger). The demand must reasonably inform UCP of the identity of the stockholder and that the stockholder intends to demand appraisal of his, her or its UCP Common Stock. Beneficial owners who do not also hold their shares of UCP Common Stock of record may not directly make appraisal demands to UCP. The beneficial owner must, in such cases, have the holder of record, such as a bank, broker or other nominee, submit the required demand in respect of those shares of UCP Common Stock of record. A holder of record, such as a bank, broker or other nominee, who holds shares of UCP Common Stock as a nominee or intermediary for others, may exercise his, her or its right of appraisalIRS with respect to the shares of UCP Common Stock held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case,statements made and the written demand should state the number of shares of UCP Common Stock as to which appraisal is sought. Where no number of shares of UCP Common Stock is expressly mentioned, the demand will be presumed to cover all shares of UCP Common Stock heldconclusions reached in the namefollowing discussion, and there can be no assurance that the IRS will agree with such statements and conclusions.
This discussion does not address all of the United States federal income tax consequences that may be relevant to a holder in light of record.such holder’s particular circumstances or to holders subject to special rules, including, without limitation:
IF YOU HOLD YOUR SHARES IN BANK OR BROKERAGE ACCOUNTS
banks, insurance companies and other financial institutions;
United States expatriates and certain former citizens or long-term residents of the United States;
holders subject to the alternative minimum tax;
dealers in securities;
traders in securities;
partnerships, S corporations or other pass-through entities;
real estate investment trusts or regulated investment companies;
U.S. persons (as defined in the Code) whose functional currency is not the U.S. dollar;
tax-exempt organizations;
persons holding the Notes as part of a “straddle,” “conversion transaction” or other risk reduction transaction; and
persons deemed to sell the Notes under the constructive sale provisions of the Code.
HOLDERS OF NOTES SHOULD CONSULT THEIR TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE TAX CONSEQUENCES DISCUSSED BELOW TO THEIR PARTICULAR SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER NOMINEE FORMS,TAX LAWS, INCLUDING GIFT AND YOU WISH TO EXERCISE APPRAISAL RIGHTS, YOU ARE URGED TO CONSULT WITH YOUR BANK, BROKER OR NOMINEE TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKERAGE FIRM OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. IF YOU HAVE A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A NOMINEE OR INTERMEDIARY, YOU MUST ACT PROMPTLY TO CAUSE THE HOLDER OF RECORD TO
Exchange Pursuant to the Exchange Offer
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FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT YOUR APPRAISAL RIGHTS. IF YOU HOLD YOUR SHARES THROUGH A BANK OR BROKERAGE WHO IN TURN HOLDS THE SHARES THROUGH A CENTRAL SECURITIES DEPOSITORY NOMINEE, SUCH AS THE DEPOSITORY TRUST COMPANY, A DEMAND FOR APPRAISAL OF SUCH SHARES MUST BE MADE BY OR ON BEHALF OF THE DEPOSITORY NOMINEE AND MUST IDENTIFY THE DEPOSITORY NOMINEE AS THE HOLDER OF RECORD.
If you own sharesThe exchange of UCP Common Stock jointly with one or more other persons, as in a joint tenancy or tenancy in common, demand for appraisal must be executed by or for you and all other joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the holder or holders of record and expressly disclose the fact that, in exercising the demand, such person is acting as agentInitial Notes for the holderExchange Notes in the Exchange Offer will not be treated as an “exchange” for U.S. federal income tax purposes because the Exchange Notes will not be considered to differ materially in kind or extent from the Initial Notes. Accordingly, the exchange of Initial Notes for Exchange Notes will not be a taxable event to holders of record. If you hold shares of UCP Common Stock through a nominee or intermediary who in turn holdsfor U.S. federal income tax purposes. Moreover, the shares through a central securities depository nominee such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as record holder.
If you elect to exercise appraisal rights under Section 262 of the DGCL, you should mail or deliver a written demand to:
UCP, Inc.
99 Almaden Boulevard, Suite 400
San Jose, California 95113
Attention: Secretary
Surviving Corporation’s Actions After Completion of the Merger
If the Merger is consummated, the surviving corporation will give written notice of the effective time within 10 days after the effective time to UCP stockholders who did not vote in favor of the Merger Agreement and who made a written demand for appraisal in accordance with Section 262 of the DGCL. At any time within 60 days after the effective time of the Merger, any UCP stockholder that made a demand for appraisal but did not commence an appraisal proceeding or join in such a proceeding as a named partyExchange Notes will have the rightsame tax attributes as the Initial Notes exchanged therefor and the same tax consequences to withdrawholders as the demandExchange Notes have to holders, including, without limitation, the same issue price, adjusted issue price, adjusted tax basis and holding period.
Each broker-dealer that receives Exchange Notes for its own account pursuant to accept the Merger ConsiderationExchange Offer must acknowledge that it will deliver a prospectus in accordanceconnection with the Merger Agreement for his, her or its sharesany resale of UCP Common Stock, but after such 60-day period a demand for appraisalExchange Notes. This prospectus, as it may be withdrawn only with the written approval of the surviving corporation. Within 120 days after the effective time of the Merger, either the record holderamended or a beneficial owner of UCP Common Stock, provided such person has complied with the requirements of Section 262 of the DGCL and are otherwise entitled to appraisal rights, or the surviving corporation may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the surviving corporation in the case of a petition filed by a stockholder or beneficial owner, demanding an appraisal of the value of the shares of UCP Common Stock held by all stockholders who have properly demanded appraisal. The surviving corporation is under no obligation to file an appraisal petition and has no intention of doing so. If you desire to have your shares appraised, you should initiate any petitions necessary for the perfection of your appraisal rights within the time periods and in the manner prescribed in Section 262 of the DGCL.
Within 120 days after the effective time of the Merger, any stockholder or beneficial owner who has complied with the provisions of Section 262 of the DGCL will be entitled to receive from the surviving corporation, upon written request, a statement setting forth the aggregate number of shares of UCP Common Stock not voted in favor of the adoption of the Merger Agreement and with respect to which UCP has received demands for appraisal, and the aggregate number of holders of those shares. The surviving corporation must mail this statement to you within the later of (1) 10 days after receipt by the surviving corporation of the request therefor or (2) 10 days after expiration of the period for delivery of demands for appraisal. If you are the beneficial owner of shares of stock of UCP Common Stock held in a voting trust or by a nominee or intermediary
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on your behalf you may, in your own name, file an appraisal petition or request from the surviving corporation the statement described in this paragraph.
If a petition for appraisal is duly filed by you or another holder of record or beneficial owner of UCP Common Stock who has properly exercised his, her or its appraisal rights in accordance with the provisions of Section 262 of the DGCL, and a copy of the petition is delivered to the surviving corporation, the surviving corporation will then be obligated, within 20 days after receiving service of a copy of the petition, to provide the Delaware Court of Chancery with a duly verified list containing the names and addresses of all holders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached by the surviving corporation. The Delaware Court of Chancery will then determine which UCP stockholders are entitled to appraisal rights and may require the stockholders of UCP demanding appraisal who hold certificated shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and the Delaware Court of Chancery may dismiss the proceedings as to any UCP stockholder who fails to comply with this direction. The Delaware Court of Chancery will also dismiss proceedings as to all UCP stockholders if neither of the ownership thresholds described above is met. Where proceedings are not dismissed or the demand for appraisal is not successfully withdrawn, the appraisal proceeding will be conducted as to the shares of UCP Common Stock owned by such stockholders, in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. The Delaware Court of Chancery will thereafter determine the fair value of the shares of UCP Common Stock at the effective time of the Merger held by all UCP stockholders who have properly perfected appraisal rights, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective time of the Merger through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as establishedsupplemented from time to time, duringmay be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired as a result of market-making activities or other trading activities. We have agreed that we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale for a period ending on the period betweenearlier of (i) 180 days from the date on which the registration statement of which this prospectus forms a part is declared effective by the SEC, and (ii) the date on which a broker-dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities. In addition, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the Mergerform of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an “underwriter” within the date of paymentmeaning of the judgment. However,Securities Act, and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the surviving corporation hasSecurities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the right, at any point prior to the Delaware Court of Chancery’s entry of judgment in the proceedings, to make a voluntary cash payment to each stockholder entitled to appraisal. If the surviving corporation makes a voluntary cash payment pursuant to subsection (h) of Section 262meaning of the DGCL, interest will accrue thereafter only on the sumSecurities Act.
For a period of (i) the difference, if any, between the amount paid by the surviving corporation in such voluntary cash payment and the fair value of the shares as determined by the Delaware Court of Chancery and (ii) interest accrued before such voluntary cash payment, unless paid at that time. When the value is determined, the Delaware Court of Chancery will direct the payment of such value, with interest thereon, if any, to the stockholders of UCP entitled to receive the same, forthwith in the case of uncertificated stockholders or upon surrender by certificated stockholders of their stock certificates.
In determining the fair value, the Delaware Court of Chancery is required to take into account all relevant factors. InWeinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other factors which were known or which could be ascertained as of the date of the Merger which throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” InCede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. InWeinberger, the Delaware Supreme Court construed Section 262 of the DGCL to mean that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” In addition, Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances,
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may or may not be a dissenter’s exclusive remedy. An opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a merger is not an opinion as to, and does not in any manner address, fair value under Section 262 of the DGCL. The fair value of shares of UCP Common Stock as determined under Section 262 of the DGCL could be greater than, the same as, or less than the value of the Merger Consideration. Century Communities does not anticipate offering more than the per share Merger Consideration to any UCP stockholder exercising appraisal rights and reserves the right to make a voluntary cash payment pursuant to subsection (h) of Section 262 of the DGCL and to assert, in any appraisal proceeding, that, for purposes of Section 262, the “fair value” of a share of UCP Common Stock is less than the per share Merger Consideration. No representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery.
If no party files a petition for appraisal within 120180 days after the effective timeconsummation of the Exchange Offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the caseletter of demandstransmittal. We have agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for appraisalthe holders) other than commissions or concessions of UCP Class A Common Stock, if neither of the ownership thresholds above has been satisfied in respect of such shares, then all UCP stockholders will lose the right to an appraisal,any brokers or dealers and will instead receiveindemnify the per share Merger Consideration described in the Merger Agreement, without interest thereon, lessholders (including any withholding taxes.
The Delaware Court of Chancery may determine the costs of the appraisal proceeding and may allocate those costs to the parties as the Delaware Court of Chancery determines to be equitablebroker-dealers) against certain liabilities, including liabilities under the circumstances. Each UCP stockholder party to the appraisal proceeding is responsible for its own attorneys’ fees and expert witnesses’ fees and expenses, although, upon application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares of UCP Common Stock entitled to appraisal.Securities Act.
If you have duly demanded an appraisal in compliance with Section 262 of the DGCL you may not, on or after the effective time, vote the shares of UCP Common Stock subject to the demand for any purpose or receive any dividends or other distributions on those shares, except dividends or other distributions payable to holders of record of UCP Common Stock as of a record date prior to the effective time of the Merger.
If you have not commenced an appraisal proceeding or joined such a proceeding as a named party you may withdraw a demand for appraisal and accept the Merger Consideration by delivering a written withdrawal of the demand for appraisal and an acceptance of the Merger to the surviving corporation, except that any attempt to withdraw made more than 60 days after the effective time of the Merger will require written approval of the surviving corporation, and no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery. Such approval may be conditioned on the terms the Delaware Court of Chancery deems just; provided, however, that this provision will not affect the right of any UCP stockholder that has made an appraisal demand but who has not commenced an appraisal proceeding or joined such proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms offered in the Merger within 60 days after the effective time of the Merger. If you fail to perfect, successfully withdraw your demand for appraisal, or lose the appraisal right, your shares of UCP Common Stock will be converted into the right to receive the per share Merger Consideration, without interest thereon, less any withholding taxes.
Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of your appraisal rights. In that event, you will be entitled to receive the per share Merger Consideration for your shares of UCP Common Stock in accordance with the Merger Agreement. In view of the complexity of the provisions of Section 262 of the DGCL, if you are a UCP stockholder and are considering exercising your appraisal rights under the DGCL, you are urged to consult your own legal and financial advisor.
THE PROCESS OF DEMANDING AND EXERCISING APPRAISAL RIGHTS REQUIRES COMPLIANCE WITH THE PREREQUISITES OF SECTION 262 OF THE DGCL. IF YOU WISH TO
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EXERCISE YOUR APPRAISAL RIGHTS, YOU ARE URGED TO CONSULT WITH YOUR OWN LEGAL AND FINANCIAL ADVISORS IN CONNECTION WITH COMPLIANCE UNDER SECTION 262 OF THE DGCL. TO THE EXTENT THERE ARE ANY INCONSISTENCIES BETWEEN THE FOREGOING SUMMARY AND SECTION 262 OF THE DGCL, THE DGCL WILL GOVERN.
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The validity of the shares of Century Communities Common Stock to be issuedExchange Notes offered hereby and certain other legal matters in connection with the Merger will be passed upon by Greenberg Traurig, counsel to Century Communities. The ability of the Merger to qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the CodeExchange Offer will be passed upon for Century Communitiesus by Greenberg Traurig, and for UCP by Paul, Weiss.LLP, Los Angeles, California.
The consolidated financial statements of Century Communities, Inc. appearing in itsour Annual Report (Form 10-K) for the fiscal year ended December 31, 20162018, and the effectiveness of Century Communities, Inc.’s internal control over financial reporting as of December 31, 2018, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reportreports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such reportreports given on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements incorporated in this proxy statement/prospectus by reference from UCP, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and the effectiveness of UCP Inc.’s internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports, which are incorporated herein by reference. Such consolidated financial statements have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
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If the Merger is completed on the expected timetable, UCP does not intend to hold a 2017 annual meeting of its stockholders. If, however, the Merger is not completed and the UCP 2017 annual meeting is held, proposals that stockholders wish to submit for inclusion in UCP’s proxy statement for its 2017 annual meeting of stockholders pursuant to Rule 14a-8 under the Exchange Act must have been received by UCP’s Corporate Secretary at UCP, Inc., 99 Almaden Boulevard, Suite 400, San Jose, California 95113 no later than December 7, 2016, unless the date of UCP’s 2017 annual meeting is more than 30 days before or after May 18, 2017, in which case the proposal must be received a reasonable time before UCP begins to print and mail its proxy materials for its 2017 annual meeting. Any stockholder proposal submitted for inclusion must be eligible for inclusion in UCP’s proxy statement in accordance with the rules of the SEC.
With respect to proposals submitted by a UCP stockholder for consideration at UCP’s 2017 annual meeting but not for inclusion in UCP’s proxy statement for such annual meeting, timely written notice of any stockholder proposal must have been received by UCP at its principal executive offices in accordance with the UCP Bylaws not later than February 6, 2017, unless the date of UCP’s 2017 annual meeting is more than 30 days before or after May 18, 2017, in which case such written notice by the stockholder to be timely must be received not earlier than the date which is 120 days prior to the date of UCP’s 2017 annual meeting and not later than the later of the date which is 90 days prior to the date of UCP’s 2017 annual meeting and the close of business on the tenth day following the date on which the first public disclosure of the date of UCP’s 2017 annual meeting was made. Such notice must contain the information required by the UCP Bylaws.
Proposals intended to be presented at the 2017 annual meeting of Century Communities stockholders and included in Century Communities’ proxy statement must have been received by Century Communities no later than December 2, 2016, and must have otherwise complied with Rule 14a-8. Under the Century Communities Bylaws, for a proposal to be properly presented at Century Communities’ 2017 annual meeting, other than a proposal included in the proxy statement pursuant to Rule 14a-8, such proposal must have been received by Century Communities’ Corporate Secretary at Century Communities’ principal executive offices at 8390 East Crescent Parkway, Suite 650, Greenwood Village, Colorado 80111, Attention: Corporate Secretary no later than February 10, 2017.
Pursuant to Rule 14a-8 under the Exchange Act, Century Communities stockholders may present proper proposals for inclusion in Century Communities’ proxy statement and for consideration at its next annual meeting of stockholders. To be eligible for inclusion in the 2018 proxy statement, a proposal must be received by Century Communities no later than November 28, 2017, and must otherwise comply with Rule 14a-8. While the Century Communities Board will consider stockholder proposals, it reserves the right to omit from the Century Communities proxy statement stockholder proposals that Century Communities is not required to include under the Exchange Act, including Rule 14a-8.
Under the Century Communities Bylaws, a stockholder wishing to nominate a candidate for election to the Century Communities Board, or propose other business for consideration, at the Century Communities 2018 annual meeting of stockholders is required to give written notice of such stockholder’s intention to make such a nomination or proposal to Century Communities’ Corporate Secretary at Century Communities’ principal executive offices at 8390 East Crescent Parkway, Suite 650, Greenwood Village, Colorado 80111, Attention: Corporate Secretary. In order for a stockholder proposal for director nominations or other business, outside of Rule 14a-8 under the Exchange Act, to come before the Century Communities 2018 annual meeting of stockholders, such notice of nomination or proposal must be made in accordance with the Century Communities Bylaws, which require appropriate notice to Century Communities of the nomination or proposal not less than 90 days nor more than 120 days prior to the date of such annual meeting of stockholders. A notice of nomination or proposal is also required to contain specific information as required by the Century Communities Bylaws. A nomination which does not comply with the requirements of the Century Communities Bylaws may not be considered. The Nominating and Corporate Governance Committee of the Century Communities Board will
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consider validly nominated director candidates and will provide its recommendations to the Century Communities Board. In general, to be timely, Century Communities must receive the notice of nomination or proposal not later than the 90th day nor earlier than the 120th day prior to the date of the first anniversary of the Century Communities 2017 annual meeting. In this regard, Century Communities must receive the notice of nomination or proposal no earlier than January 10, 2018 and no later than February 9, 2018.
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WHERE YOU CAN FIND MORE INFORMATION
Century Communities hasWe have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to register with the SECExchange Offer and the shares of Century Communities Common Stock to be issued to UCP stockholders asExchange Notes and the stock portion of the Merger Consideration.related guarantees. This proxy statement/prospectus, is awhich constitutes part of that registration statement, and constitutes a prospectusdoes not contain all of Century Communitiesthe information set forth in addition to being a proxy statement of UCP for its special meeting. Thethe registration statement includingor the attached annexesexhibits and exhibits, contains additional relevant information about Century Communities andschedules which are part of the Century Communities Common Stock. Theregistration statement. Some items included in the registration statement are omitted from the prospectus in accordance with the rules and regulations of the SEC allow Century CommunitiesSEC. For further information with respect to us, the Exchange Offer and UCPthe Exchange Notes, we refer you to omit certain information included in the registration statement fromand the accompanying exhibits. With respect to statements in this proxy statement/prospectus.prospectus about the contents of any contract, agreement or other document, we refer you to the copy of such contract, agreement or other document filed or incorporated by reference as an exhibit to the registration statement, and each such statement is qualified in all respects by reference to the document to which it refers.
Century CommunitiesWe are subject to the information and UCP eachperiodic reporting requirements of the Exchange Act, and we file annual, quarterly and currentperiodic reports, proxy statements and other information with the SEC. Our filings with the SEC underare available to the Exchange Act.public on the SEC’s website at www.sec.gov.
We maintain a website at www.centurycommunities.com. You may read and copy any of this information at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC also maintains a website that containsaccess our periodic reports, proxy and information statements and other information regarding issuers, including Century Communities and UCP, whothat we file with, or furnish to, the SEC free of charge at this website as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC. The address ofinformation contained in, or that can be accessed through, our website, is www.sec.gov. Investors may also consult Century Communities’ and UCP’s website for more information about Century Communities or UCP, respectively. Century Communities’ website is www.centurycommunities.com. UCP’s website is www.unioncommunityllc.com. Information included on these websiteshowever, is not incorporated by reference into, and is not and should not be deemed to be a part of, this proxy statement/prospectus.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows Century Communities and UCPSEC’s rules allow us to “incorporate by reference” into this proxy statement/prospectus information that Century Communities and UCPwe file with the SEC, whichSEC. This means that we can disclose important information can be disclosed to you by referring you to those documents and those documents will be considered part of this proxy statement/prospectus.another document filed separately with the SEC. The information incorporated by reference is an importantdeemed to be part of this proxy statement/prospectus. Certainprospectus, and subsequent information that is subsequently filedwe file with the SEC under the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”) will automatically update and supersede informationthat information. Any statement contained in a previously filed document incorporated by reference will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this proxy statement/prospectus and in earlier filings with the SEC. This proxy statement/prospectus also contains summaries of certain provisions contained in some of the Century Communitiesmodifies or UCP documents described in this proxy statement/prospectus, but reference is made to the actual documents for complete information. All of these summaries are qualified in their entirety by reference to the actual documents.
replaces that statement. The information and documents listed below, which Century Communities and UCPfollowing have been filed with the SEC and are incorporated by reference into this proxy statement/prospectus:
Century Communities’ SEC Filings
| • | our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 13, 2019, including portions of our Definitive Proxy Statement on Schedule 14A filed with the SEC on March 27, 2019 to the extent specifically incorporated by reference therein; |
| • | our Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2019 filed with the SEC on May 3, 2019, for the quarterly period ended June 30, 2019 filed with the SEC on July 31, 2019, and for the quarterly period ended September 30, 2019 filed with the SEC on October 30, 2019; and |
| • | our Current Reports on Form 8-K filed with the SEC on February 15, 2019, May 9, 2019, May 14, 2019, May 23, 2019, November 27, 2019, and December 17, 2019. |
Any documents we file pursuant to Section 13(a), 13(c), 14 or 15(d) of the fiscal year ended December 31, 2016, filed withExchange Act after the SEC on February 15, 2017, including portionsdate of Century Communities’ Definitive Proxy Statement on Schedule 14A filed withfiling of the SEC on March 29, 2017registration statement and prior to the extent specifically incorporated by reference therein;
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In addition, all documents filed by Century Communities and UCP with the SEC under SectionsSection 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement/prospectus and beforeprior to the datetermination of the UCP special meeting shallExchange Offer to which this prospectus relates, will automatically be deemed to be incorporated by reference into, this proxy statement/prospectus and made ato be part of, this proxy statement/prospectus from the respective datesdate of filing; provided, however,filing those documents. Any statement contained in this prospectus or in a document incorporated by reference shall be deemed to be modified or superseded for all purposes to the extent that Century Communities and UCPa statement contained in this prospectus or in any other document which is also incorporated by reference modifies or supersedes that statement. We are not, however, incorporating by reference any documents or portions thereof, whether specifically listed above or filed in the future, that are not deemed “filed” with the SEC, including any information furnished under Itemspursuant to Item 2.02 or Item 7.01 of Form 8-K or related exhibits furnished pursuant to Item 9.01 of Form 8-K.
We will provide without charge to each person, including any Current Report on Form 8-K unless specifically stated otherwise.
Century Communities has supplied allbeneficial owner, to whom a copy of this prospectus is delivered, upon such person’s written or oral request, a copy of any of the information contained in or incorporated by reference into this proxy statement/prospectus relating to Century Communities, as well as all pro forma financial information, and UCP has supplied all such information relating to UCP.
Documents incorporated by reference are available from Century Communities or UCP, as the case may be, without charge, excluding any(other than exhibits to thosesuch documents, unless the exhibit issuch exhibits are specifically incorporated by reference into the information that this proxy statement/prospectus. Stockholders may obtain these documents incorporated by reference by requesting them in writing or by telephone from the appropriate party at the following addresses and telephone numbers:prospectus incorporates). Requests should be directed to:
Century Communities, Inc.
Attention: Corporate Secretary
8390 East Crescent Parkway, Suite 650
Greenwood Village, Colorado 80111
Telephone: (303) 770-8300
Attention: Corporate Secretary
UCP, Inc.
99 Almaden Boulevard, Suite 400
San Jose, California 95113
Telephone: (408) 207-9499
Attention: Investor Relations
You should not rely on information that purports to be made by or on behalf of Century Communities or UCP other than the information contained in or incorporated by reference into this proxy statement/prospectus. Neither Century Communities nor UCP has authorized anyone to provide you with information on behalf of Century Communities or UCP, respectively, that is different from what is contained in this proxy statement/prospectus.
If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this proxy statement/prospectus or solicitations of proxies are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement/prospectus does not extend to you.
This proxy statement/prospectus is dated , 2017. You should not assume that the information in it is accurate as of any date other than that date, and neither its mailing to stockholders nor the issuance of Century Communities Common Stock in the Merger will create any implication to the contrary.
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AGREEMENTAND PLANOF MERGER
among
CENTURY COMMUNITIES, INC.,
CASA ACQUISITION CORP.,Offer to Exchange
6.750% Senior Notes due 2027 and Related Guarantees
UCP, INC.for
Dated April 10, 20176.750% Senior Notes due 2027 and Related Guarantees
PROSPECTUS
, 2020
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A-v
AGREEMENTAND PLANOF MERGER
This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into on April 10, 2017 by and among Century Communities, Inc., a Delaware corporation (“Parent”), Casa Acquisition Corp., a Delaware corporation and a wholly-owned Subsidiary of Parent (“Merger Sub”), and UCP, Inc., a Delaware corporation (the “Company”).
WHEREAS, Parent, Merger Sub, and the Company desire to effect a business combination through the merger of the Company with and into Merger Sub, with Merger Sub as the surviving entity in such merger (the “Merger”);
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have duly approved the Merger on the terms and subject to the conditions set forth in this Agreement, whereby, at the Effective Time, each issued and outstanding share of Class A Common Stock, par value $0.01 per share, of the Company (the “Company Common Stock”), not owned by Parent, Merger Sub or the Company, and not otherwise constituting Appraisal Shares, shall be converted into the right to receive $5.32 in cash and a number of duly authorized, validly issued, fully paid andnon-assessable shares of common stock, par value $0.01 per share, of Parent (“Parent Common Stock”) equal to the Stock Exchange Ratio as set forth inSection 2.01(b) (Conversion of Company Common Stock);
WHEREAS, as a material inducement and condition to Parent’s decision to enter into, and concurrently with the execution and delivery of, this Agreement, that certain Exchange Agreement, dated as of July 23, 2013 (the “Exchange Agreement”), by and among the Company, UCP, LLC, a Delaware limited liability company and Affiliate of the Company (“UCP LLC”), and PICO Holdings, Inc., a California corporation (“PICO”), has been amended, effective as of immediately prior to the Effective Time, to facilitate the transactions referred to in the immediately following recital and required bySection 6.11 (Exchange of PICO Membership Interests), which, as expressly set forth inSection 7.01(c) (Exchange of PICO Membership Interests), is a condition precedent to the consummation of the Merger;
WHEREAS, PICO will exercise its right, effective as of immediately prior to the Effective Time, to exchange the PICO Membership Interests in UCP LLC, and to receive in respect thereof 10,401,722 newly issued shares of Company Common Stock in accordance with the terms and subject to the conditions of the Exchange Agreement;
WHEREAS, as a material inducement and condition to Parent’s decision to enter into, and concurrently with the execution and delivery of, this Agreement, Parent has entered into with PICO a voting support and transfer restriction agreement (the “Voting Agreement”), pursuant to which, subject to the terms thereof, PICO has agreed to, among other things, waive all rights to appraisal under Section 262 pertaining to its shares of Company Capital Stock, attend and otherwise be present for quorum and voting purposes at the Company Stockholders Meeting, and affirmatively vote all its shares of Class B Common Stock, par value $0.01 per share, of the Company (“Class B Stock”) and any shares of Company Common Stock it may acquire after the date hereof for the adoption of this Agreement;
WHEREAS, Parent, Merger Sub, and the Company intend that the Merger shall qualify as a “reorganization” under Section 368(a) of the Code and that this Agreement shall constitute a “plan of reorganization” within the meaning of the Code; and
WHEREAS, Parent, Merger Sub, and the Company desire to make certain representations, warranties, covenants and agreements in this Agreement and with respect to the Merger and the other Transactions, and also to prescribe various conditions precedent to the consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements set forth herein, and intending to be legally bound, each of Parent, Merger Sub, and the Company hereby agrees as follows:
ARTICLE I
THE MERGER
Section 1.01 The Merger. On the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), the Company shall be merged with and into Merger Sub at the Effective Time. At the Effective Time, the separate corporate existence of the Company shall cease, and Merger Sub shall continue as the surviving corporation (the “Surviving Corporation”). The Merger and the other transactions contemplated by this Agreement, the Voting Agreement, and the Exchange Agreement are referred to herein as the “Transactions.”
Section 1.02 Closing. The closing of the Merger (the “Closing”) shall take place at the offices of Greenberg Traurig, LLP, 1840 Century Park East, Suite 1900, Los Angeles, CA 90067, at 10:00 a.m. Eastern Time, on the third Business Day following the date on which each of the conditions set forth inArticle VII (Conditions Precedent) is satisfied or, to the extent permitted by Law, waived by the party entitled to waive such condition (except in any such case for any conditions that by their nature can be satisfied only on the Closing Date, but subject to the satisfaction of such conditions or waiver by the party entitled to waive such conditions). The date on which the Closing occurs is referred to herein as the “Closing Date.”
Section 1.03 Effective Time. Before the Closing, Merger Sub shall prepare and, on the Closing Date, shall file with the Secretary of State of the State of Delaware, a certificate of merger or other appropriate documents (in any such case, the “Certificate of Merger”) executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with such Secretary of State, or at such other time as Parent and the Company shall agree and specify in the Certificate of Merger (the time the Merger becomes effective being the “Effective Time”).
Section 1.04 Effects. The Merger shall have the effects set forth in Section 259 of the DGCL.
Section 1.05 Certificate of Incorporation and By-laws.
(a) The Certificate of Incorporation of Merger Sub, attached asExhibit A, as in effect immediately before the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation, until, subject toSection 6.05 (Indemnification), thereafter changed or amended as provided therein or by Law.
(b) TheBy-laws of Merger Sub as in effect immediately before the Effective Time shall be theBy-laws of the Surviving Corporation, until, subject toSection 6.05 (Indemnification), thereafter changed or amended as provided therein or by Law.
Section 1.06 Directors. The directors of Merger Sub immediately before the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their death, resignation or removal, or until their respective successors are duly elected and qualified, as the case may be.
Section 1.07 Officers. The officers of Merger Sub immediately before the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their death, resignation or removal, or until their respective successors are duly elected or appointed and qualified, as the case may be.
Section 1.08 Plan of Reorganization. Parent, Merger Sub, and the Company intend that, for U.S. federal income Tax purposes, the Merger will constitute a “plan of reorganization” within the meaning of Treasury Regulation Sections1.368-2(g) and1.368-3, which plan of reorganization has been adopted by Parent, the Company and Merger Sub by means of executing this Agreement.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.01 Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Capital Stock or any shares of capital stock of Merger Sub:
(a) Cancelation of Company Treasury Stock, Class B Stock, and Parent-Owned Stock. Each share of (i) Company Treasury Stock, (ii) Class B Stock, and (iii) Company Common Stock that is owned by the Company, Parent, Merger Sub, or any of the Company’s or Parent’s wholly-owned Subsidiaries (such shares referred to inclauses (i),(ii) and(iii), collectively, “Canceled Shares”), shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and no Merger Consideration shall be delivered or deliverable in exchange therefor.
(b) Conversion of Company Common Stock.
(i) Subject toSections 2.01(a) (Cancelation of Company Treasury Stock, Class B Stock, and Parent-Owned Stock) and2.01(c) (Appraisal Rights), each issued and outstanding share of Company Common Stock (other than Canceled Shares and Appraisal Shares) shall be converted into the right to receive and become exchangeable for (A) $5.32 in cash, without any interest thereon (the “Cash Consideration”), and (B) 0.2309 (the “Stock Exchange Ratio”) of a duly authorized, fully paid andnon-assessable share of Parent Common Stock (the “Stock Consideration”).
(ii) The Stock Consideration to be issued, and Cash Consideration payable, upon the conversion of shares of Company Common Stock pursuant to thisSection 2.01(b), and Cash Consideration for Fractional Shares payable in lieu of fractional shares of Parent Common Stock as contemplated bySection 2.02(d) (No Fractional Shares of Parent Common Stock), are referred to collectively herein as the “Merger Consideration.” As of the Effective Time, subject toSection 2.01(c) (Appraisal Rights), all shares of Company Common Stock shall no longer be outstanding, shall automatically be canceled and shall cease to exist, and each holder of a certificate or certificates that immediately prior to the Effective Time represented any such shares of Company Common Stock (the “Certificates”) shall cease to have any rights with respect thereto, except the right to receive Merger Consideration and certain dividends and other distributions underSection 2.02(j) (Distributions with Respect to Unexchanged Shares), without interest, upon surrender of such Certificate in accordance withSection 2.02 (Exchange of Certificates).
(iii) Notwithstanding anything in this Agreement to the contrary, if from and after the date of this Agreement until the Effective Time, the outstanding shares of Parent Common Stock shall have been changed into a different number of shares or a different series or class of shares of Parent Capital Stock by reason of any reclassification, recapitalization,split-up, combination, re-combination, exchange of shares or adjustment, or a stock dividend thereon shall be declared with a record date within such period, the Stock Exchange Ratio shall be appropriately and proportionately adjusted. For purposes of clarification, nothing in the preceding sentence shall be deemed to imply or provide that the Stock Exchange Ratio shall be adjusted by reason or in respect of any change in price or value of a share of Parent Common Stock from and after the date hereof.
(c) Appraisal Rights. Notwithstanding anything in this Agreement to the contrary, shares (“Appraisal Shares”) of Company Common Stock that are outstanding immediately before the Effective Time and that are held by any Person who is entitled to demand and properly demands appraisal of such Appraisal Shares pursuant to, and who complies in all respects with, Section 262 of the DGCL (“Section 262”), shall not be converted into Merger Consideration as provided inSection 2.01(b) (Conversion of Company Common Stock), but rather shall entitle the holder thereof to only those rights provided under Section 262;provided,however, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262,
then the right of such holder to receive such rights provided under Section 262 shall cease and such Appraisal Shares shall be deemed to have been converted as of the Effective Time into solely the right to receive the Merger Consideration as provided inSection 2.01(b) (Conversion of Company Common Stock). The Company shall deliver prompt notice to Parent of any demands received by the Company for appraisal of any shares of Company Common Stock, and the Company shall give Parent the right to participate in all negotiations and Proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle, compromise or offer to settle or compromise, any such demands, or otherwise agree to do any of the foregoing.
(d) Capital Stock of Merger Sub. Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall remain outstanding, and all such shares shall constitute the only issued and outstanding shares of capital stock of the Surviving Corporation immediately following the Effective Time.
Section 2.02 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall deposit or cause to be deposited in an account (the “Exchange Fund”) established by a bank or trust company designated by the Company and reasonably acceptable to Parent (the “Exchange Agent”), (i) sufficient funds for the payment of the aggregate Cash Consideration, and (ii) evidence of shares of Parent Common Stock in book-entry form representing the aggregate Stock Consideration, for the benefit of the holders of shares of Company Common Stock as of immediately prior to the Effective Time, in each case for exchange in accordance with thisArticle II, through the Exchange Agent. Parent shall also make available to the Exchange Agent, from time to time as needed, funds sufficient to pay the Cash Consideration for Fractional Shares in lieu of any fractional shares of Parent Common Stock pursuant toSection 2.02(d) (No Fractional Shares of Parent Common Stock). In the event the Exchange Fund shall be insufficient to make any payments of Cash Consideration pursuant toSection 2.01(b) or Cash Consideration for Fractional Shares contemplated bySection 2.02(d), Parent shall promptly deposit, or cause to be deposited, additional funds with the Exchange Agent in an amount sufficient to make such payments. Funds made available to the Exchange Agent shall be invested by the Exchange Agent, as directed by Parent, in direct short-term obligations of, or direct short-term obligations fully guaranteed as to principal and interest by, the United States of America with maturities of no more than 30 days, pending payment thereof by the Exchange Agent to the holders of shares of Company Common Stock pursuant toSection 2.02(d);provided,however, that no investment of such deposited funds shall relieve Parent, the Surviving Corporation, or the Exchange Agent from promptly making the payments required bySection 2.02(d), and following any losses from any such investment, Parent shall promptly provide additional funds to the Exchange Agent in the amount of such losses, which additional funds will be held and disbursed in the same manner as funds initially deposited with the Exchange Agent for payment of the Cash Consideration and Cash Consideration for Fractional Shares to the holders of Company Common Stock and/or Company Options entitled thereto. Parent shall direct the Exchange Agent to hold the Exchange Fund for the benefit of such holders of Company Common Stock and/or Company Options, and to make payments from the Exchange Fund in accordance with thisSection 2.02. The Exchange Fund shall not be used for any purpose other than to fund payments pursuant to thisArticle II.
(b) Exchange Procedures. The Surviving Corporation shall instruct the Exchange Agent to mail, as soon as reasonably practicable after the Effective Time, to each holder of record of Certificates that immediately before the Effective Time represented outstanding shares of Company Common Stock whose shares were converted into the right to receive Merger Consideration pursuant toSection 2.01(b) (Conversion of Company Common Stock), (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as the Company may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for Merger Consideration. Upon surrender of a Certificate for cancelation to the Exchange Agent or to such other agent or agents as may be appointed by the Company, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required
by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor, in respect of the aggregate number of shares of Company Common Stock represented by such Certificate immediately prior to the Effective Time, (1) a check in the amount of the (A) aggregate Cash Consideration that such holder has the right to receive pursuant toSection 2.01(b) plus (B) aggregate Cash Consideration for Fractional Shares that such holder has the right to receive pursuant toSection 2.02(d) (No Fractional Shares of Parent Common Stock), if any, and (2) the number of shares of Parent Common Stock representing the Stock Consideration (which shall be in uncertificated book-entry form) that such holder has the right to receive pursuant toSection 2.01(b), and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Company Common Stock that is not registered in the transfer records of the Company, payment may be made and shares may be issued to a Person other than the Person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer, and the Person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a Person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been fully paid or is not applicable. Subject to the last sentence ofSection 2.02(c) (No Further Ownership Rights in Company Common Stock), until surrendered as contemplated by thisSection 2.02, each Certificate that immediately prior to the Effective Time represented shares of Company Common Stock shall be deemed from and after the Effective Time to represent only the right to receive the Merger Consideration into which such shares of Company Common Stock have been converted pursuant toSection 2.01(b) and certain dividends and other distributions underSection 2.02(j) (Distributions with Respect to Unexchanged Shares). No interest shall be paid or accrue on any cash payable upon surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. The Merger Consideration paid in accordance with the terms of thisArticle II, upon the conversion of shares of Company Common Stock at the Effective Time, shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares of Company Common Stock. After the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of shares of Company Common Stock that were outstanding immediately before the Effective Time. If, after the Effective Time, any Certificates that immediately prior to the Effective Time represented shares of Company Common Stock are presented to the Surviving Corporation or the Exchange Agent for any reason, they shall be canceled and exchanged as provided in thisArticle II.
(d) No Fractional Shares of Parent Common Stock. No certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the conversion of Company Common Stock pursuant toSection 2.01(b) (Conversion of Company Common Stock), and such fractional share interests shall not entitle the owner thereof to any Parent Common Stock or to vote or to any other rights of a holder of Parent Common Stock. All fractional shares to which a single record holder of Company Common Stock would be otherwise entitled to receive shall be aggregated and calculations shall be rounded to three decimal places. In lieu of any such fractional shares, each holder of Company Common Stock and/or Company Options who would otherwise be entitled to receive such fractional shares shall be entitled to receive an amount in cash, without interest, rounded up to the nearest whole cent (such amount, “Cash Consideration for Fractional Shares”), equal to the product of (i) the amount of the fractional share interest in a share of Parent Common Stock to which such holder would, but for thisSection 2.02(d), be entitled underSection 2.01(b),multiplied by (ii) the Parent Stock Value.
As promptly as practicable after the determination of the amount of cash, if any, to be paid to holders of Company Common Stock and/or Company Options in lieu of any fractional share interests in Parent Common Stock, the Exchange Agent shall make available such amounts, without interest, to the holders of Company Common Stock and/or Company Options entitled to receive such cash subject to and in accordance with the terms hereof.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund that remains undistributed to the holders of Company Common Stock and/or Company Options for one year after the Effective Time shall be delivered to the Surviving Corporation, upon demand, and any holder of Company Common Stock who has not theretofore complied with thisArticle II shall thereafter look only to the Surviving Corporation or Parent for payment of its claim for Merger Consideration.
(f) No Liability. None of Parent, Merger Sub, the Surviving Corporation or the Exchange Agent shall be liable to any Person in respect of any cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any Certificate has not been surrendered before five years after the Effective Time (or immediately before such earlier date on which Merger Consideration would otherwise escheat to or become the property of any Governmental Entity), any such cash in respect of such Certificate shall, to the extent permitted by Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto.
(g) Lost, Stolen or Destroyed Certificates. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond in customary amount as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate any cash that would be payable or deliverable in respect thereof pursuant to this Agreement had such lost, stolen or destroyed Certificate been surrendered.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash included in the Exchange Fund, as directed by the Surviving Corporation in accordance withSection 2.02(a) (Exchange Agent), on a daily basis. Any interest and other income resulting from such investments shall be paid to the Surviving Corporation.
(i) Uncertificated Shares. In the case of any outstanding shares of Company Common Stock that are not represented by Certificates, the parties shall make such adjustments to thisSection 2.02 as are necessary or appropriate to implement the same purpose and effect that thisSection 2.02 has with respect to shares of Company Common Stock that are represented by Certificates.
(j) Distributions with Respect to Unexchanged Shares. All shares of Parent Common Stock to be issued pursuant to the Merger shall be deemed issued and outstanding as of the Effective Time and, whenever a dividend or other distribution is declared by Parent in respect of the Parent Common Stock, the record date for which is at or after the Effective Time, that declaration shall include dividends or other distributions in respect of all shares issuable pursuant to this Agreement. No dividends or other distributions in respect of the Parent Common Stock shall be paid to any holder of any unsurrendered Certificate until such Certificate (or affidavits of loss in lieu of the Certificate as provided inSection 2.02(g)) is surrendered for exchange in accordance with thisArticle II. Subject to the effect of applicable Laws, following surrender of any such Certificate (or affidavits of loss in lieu of the Certificate as provided inSection 2.02(g)), there shall be issued and/or paid to the holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (A) at the time of such surrender, the dividends or other distributions with a record date at or after the Effective Time theretofore payable with respect to such whole shares of Parent Common Stock and not paid and (B) at the appropriate payment date, the dividends or other distributions payable with respect to such whole shares of Parent Common Stock with a record date at or after the Effective Time and a payment date subsequent to the time of such surrender.
Section 2.03 Treatment of Company Options, Company Restricted Stock Units and Equity Plans.
(a) Treatment of Company Options. Prior to the Effective Time, the Parent Board and the Company Board (or, if appropriate, any duly authorized committee thereof) each, as applicable, shall take all corporate actions necessary, including adopting appropriate resolutions and obtaining consents if required, to provide that, at the Effective Time, each outstanding equity award granted under the Company Stock Plan that is an option to purchase shares of Company Common Stock (each, a “Company Option”), whether vested or unvested, shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into an option to purchase shares of Parent Common Stock (an “Adjusted Option”) on the same terms and conditions as were applicable under such Company Option immediately prior to the Effective Time (including vesting terms, conditions and schedules), with the number of shares of Parent Common Stock (rounded down to the nearest
whole number of shares) subject to such Adjusted Option equal to the product of (i) the total number of shares of Company Common Stock underlying such Company Option immediately prior to the Effective Time, multiplied by (ii) the Equity Award Exchange Ratio, and with the exercise price applicable to such Adjusted Option to equal the quotient (rounded up to the nearest whole cent) obtained by dividing (1) the exercise price per share applicable to such Company Option immediately prior to the Effective Time, by (2) the Equity Award Exchange Ratio;provided, that the exercise price and the number of shares of Parent Common Stock underlying the Adjusted Option shall be determined in a manner consistent with the requirements of Section 409A of the Code;andprovided, further, that, in the case of any Company Option to which Section 422 of the Code applies, the exercise price and the number of shares of Parent Common Stock underlying the corresponding Adjusted Option shall be determined in accordance with the foregoing, subject to such adjustments as are necessary in order to satisfy the requirements of Section 424(a) of the Code.
(b) Treatment of Company Restricted Stock Units. Prior to the Effective Time, the Parent Board and the Company Board (or, if appropriate, any duly authorized committee thereof) each, as applicable, shall take all corporate actions necessary, including adopting appropriate resolutions and obtaining consents if required, to provide that, at the Effective Time, each outstanding equity award granted under the Company Stock Plan that is a restricted stock unit with respect to a share of Company Common Stock (each, a “Company Restricted Stock Unit”) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into a restricted stock unit award with respect to a share of Parent Common Stock, with the same terms and conditions as were applicable under such Company Restricted Stock Unit immediately prior to the Effective Time (including vesting and settlement terms, conditions and schedules), and relating to the number of shares of Parent Common Stock equal to the product of (i) the number of shares of Company Common Stock subject to such Company Restricted Stock Unit immediately prior to the Effective Time, multiplied by (ii) the Equity Award Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares of Parent Common Stock.
(c) Termination of Company Stock Plan. Prior to the Effective Time, the Company Board (or, if appropriate, any duly authorized committee thereof) shall take all such actions necessary to provide that, as of the Effective Time, the Company Stock Plan shall terminate, and no further Company Options, Company Restricted Stock Units or other rights with respect to shares of Company Common Stock shall be granted thereunder.
(d) Equity Award Exchange Ratio. For purposes of this Agreement, the “Equity Award Exchange Ratio” shall be equal to the sum of (i) the Stock Exchange Ratio and (ii) the quotient obtained by dividing (x) the Cash Consideration by (y) the Parent Stock Value, rounded to the nearestten-thousandth.
Section 2.04 Tax Withholding. Notwithstanding anything to the contrary contained in this Agreement, Parent and the Exchange Agent shall be entitled to withhold, from any amounts payable pursuant to this Agreement, such amounts as may be required to be deducted or withheld therefrom under the Code or under any provision of state, local or foreign Tax Law, or under any other applicable legal requirement, as determined by Parent or the Exchange Agent in good faith. To the extent amounts are withheld in accordance with thisSection 2.04, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedules of the Company delivered to Parent and Merger Sub prior to the execution of this Agreement (collectively, the “Company Schedules,” and individually, a “Company Schedule”) (but only to the extent that any disclosure in the Company Schedules contains a reference to the Section in thisArticle III to which such disclosure relates or the Section in thisArticle III to which such disclosure relates is otherwise reasonably apparent on its face) or in the Filed Company SEC Documents to the
extent publicly available at least two Business Days prior to the date of this Agreement (but excluding statements in any “Risk Factors” section that do not constitute statements of fact and any disclosures of risks or other matters included in any “forward-looking statement” disclaimers or other statements that are cautionary, predictive or forward-looking in nature), the Company represents and warrants to Parent and Merger Sub as follows:
Section 3.01 Organization, Standing and Power.
(a) The Company and each of its Subsidiaries (the “Company Subsidiaries”) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized.Company Schedule 3.01(a) lists each Significant Company Subsidiary and its jurisdiction of organization. The Company and each Company Subsidiary is duly qualified and in good standing to do business in each jurisdiction in which the conduct or nature of its business or the ownership, leasing or holding of its properties make such qualification necessary, except such jurisdictions where the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. For purposes of this Agreement, “Significant Company Subsidiary” means any Company Subsidiary that constitutes a significant Subsidiary within the meaning ofRule 1-02 ofRegulation S-X of the SEC.
(b) The Company has made available to Parent true and complete copies of the Amended and Restated Certificate of Incorporation of the Company, as amended to the date of this Agreement (as so amended, the “Company Charter”), and the Amended and RestatedBy-laws of the Company, as amended to the date of this Agreement (as so amended, the “Company By-laws”), and the comparable charter and organizational documents of each Significant Company Subsidiary, in each case as amended to the date of this Agreement.
Section 3.02 Capital Stock of the Company and the Company Subsidiaries.
(a) The authorized capital stock of the Company consists of 500,000,000 shares of Company Common Stock, 1,000,000 shares of Class B Stock and 50,000,000 shares of Preferred Stock, par value $0.01 per share (the “Company Preferred Stock” and, together with the Company Common Stock and the Class B Stock, the “Company Capital Stock”). At the close of business on March 31, 2017 (the “Reference Date”), (i) 7,958,314 shares of Company Common Stock and no shares of Company Preferred Stock were issued and outstanding, (ii) 146,346 shares of Company Common Stock were held by the Company in its treasury (the “Company Treasury Stock”), (iii) 582,214 Company Restricted Stock Units were outstanding, (iv) 116,652 shares of Company Common Stock were subject to outstanding Company Options, (v) 780,774 additional shares of Company Common Stock were reserved for issuance pursuant to the Company Stock Plan, and (vi) 100 shares of Class B Stock were issued and outstanding.Company Schedule 3.02(a)(i) sets forth certain details regarding all outstanding Company Restricted Stock Units and Company Options, including whether or not they are vested and vesting schedules.Company Schedule 3.02(a)(ii) sets forth for each Significant Company Subsidiary the amount of its authorized capital stock or comparable equity interests, the amount of its outstanding capital stock or comparable equity interests and the record and beneficial owners of its outstanding capital stock or comparable equity interests, and there are no other shares of capital stock or comparable equity interests or other equity securities of any Significant Company Subsidiary issued, reserved for issuance or outstanding, in each case as of the date hereof. Except as set forth above, at the close of business on the Reference Date, no shares of capital stock or other voting securities of the Company were issued, reserved for issuance or outstanding. Since the Reference Date to the date of this Agreement, (A) there have been no issuances by the Company of shares of Company Capital Stock or other voting securities of the Company, other than issuances of Company Common Stock pursuant to the exercise of Company Options, and (B) there have been no issuances by the Company of options, warrants, other rights to acquire shares of Company Capital Stock or other rights that give the holder thereof any economic benefit accruing to the holders of any Company Capital Stock. All outstanding shares of Company Capital Stock and all the outstanding shares of capital stock or comparable equity interest of each Company Subsidiary are, and all such shares or interests that may be issued before the Effective Time will be, when issued, duly authorized, validly issued, fully paid andnon-assessable and not subject to, or issued in violation of, any purchase option, call option, right of first refusal, preemptive right, subscription right or any
similar right under any provision of Law (including the DGCL), the Company Charter, the CompanyBy-laws, the certificate of incorporation orby-laws (or comparable documents) of any Company Subsidiary or any contract, lease, license, indenture, agreement, commitment or other legally binding arrangement (“Contract”) to which the Company or any Company Subsidiary is a party or otherwise bound. There are no bonds, debentures, notes or other indebtedness of the Company or any Company Subsidiary having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of common stock of the Company or any Company Subsidiary may vote (“Voting Company Debt”). Except as contemplated by the Exchange Agreement or as set forth above, as of the date hereof, there are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units or Contracts to which the Company or any Significant Company Subsidiary is a party or by which any of them is bound (x) obligating the Company or any Significant Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other Equity Interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other Equity Interest in, the Company or any Significant Company Subsidiary or any Voting Company Debt, or (y) obligating the Company or any Significant Company Subsidiary to issue, grant, extend or enter into any such option, warrant, call, right, security or Contract. As of the date hereof, there are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock, membership interests, partnership interests, joint venture interests or other Equity Interests of the Company or any Company Subsidiary, other than pursuant to the Exchange Agreement.
(b) Immediately prior to the Effective Time, after giving effect to the consummation of the Exchange and assuming no other changes to the Company Capital Stock since the Reference Date, 18,368,036 shares of Company Common Stock and no shares of Company Preferred Stock will be issued and outstanding.
(c) Immediately prior to the Effective Time, after giving effect to the consummation of the Exchange, all the membership interests in UCP LLC shall be held by the Company, such that the Company shall hold all the economic interests, all the voting power, and all the management power, in UCP LLC.
(d) Company Schedule 3.02(d) sets forth a true and complete list of all capital stock, membership interests, partnership interests, joint venture interests and other Equity Interests with a fair market value as of the date hereof in excess of $500,000 in any Person (other than a Company Subsidiary) owned as of the date hereof, directly or indirectly, by the Company or any Company Subsidiary.
Section 3.03 Authority; Execution and Delivery; Enforceability; State Takeover Statutes.
(a) The Company has all requisite corporate power and authority to execute and deliver this Agreement and the Voting Agreement, to perform and comply with each of its obligations under this Agreement and the Voting Agreement, and to consummate the Merger and the other Transactions. The execution and delivery by the Company of this Agreement and the Voting Agreement, the performance and compliance by the Company with each of its obligations herein, and the consummation by the Company of the Merger and the other Transactions, have been duly authorized by all necessary corporate action on the part of the Company, subject, in the case of the adoption of this Agreement pursuant to Section 251 of the DGCL, to receipt of the Company Stockholder Approval. The Company has duly executed and delivered this Agreement and this Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting the enforcement of creditors’ rights and remedies, and Laws relating to the availability of specific performance, injunctive relief and similar equitable remedies (collectively, the “Enforceability Exceptions”).
(b) The Board of Directors of the Company (the “Company Board”), at a meeting duly called and held, has duly adopted resolutions (i) approving this Agreement, the Voting Agreement, the Merger and the other Transactions, (ii) determining that the terms of the Merger and the other Transactions are fair to and in the best
interests of the Company and its stockholders, (iii) recommending that the Company’s stockholders adopt this Agreement, and (iv) declaring that this Agreement is advisable (the resolutions, actions and determinations referred to inclauses (ii),(iii) and(iv) of thisSection 3.03(b) being hereafter referred to as, the “Company Recommendation”), which resolutions have not been withdrawn or modified as of the date hereof. Assuming the accuracy of the representations set forth inSection 4.23 (Ownership of Company Common Stock), the Company Board has taken all necessary action, including adopting the foregoing resolutions and all such other such resolutions necessary, to render inapplicable to Parent and Merger Sub, and to this Agreement, the Voting Agreement, the Exchange Agreement, the Merger and the other Transactions, the limitations on ownership of Company Common Stock set forth in Article XII of the Company Charter and the restrictions on business combinations contained in Section 203 of the DGCL. To the Knowledge of the Company, no other “business combination,” “interested stockholder,” “freeze out,” “control share acquisition,” “fair price,” “supermajority,” “moratorium,” or other anti-takeover Laws (collectively with Section 203 of the DGCL, “Anti-Takeover Laws”), or similar provision in the Company Charter or CompanyBy-laws apply to this Agreement, the Voting Agreement, the Exchange Agreement, the Merger or the other Transactions. Other than with respect to the Confidentiality Agreement and the Standstill Agreements, the Company has not amended, waived, failed to enforce in the case of any counterparty breach or otherwise modified the terms or conditions of any standstill, confidentiality or other similar agreement entered into in connection with the possible sale of, or a business combination or other similar extraordinary corporate transaction involving, the Company and currently in effect to which the Company or any of the Company Subsidiaries is a party.
(c) The only vote of holders of any class or series of Company Capital Stock necessary to adopt this Agreement under applicable Law, the Company Charter and the CompanyBy-laws is the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding voting power of shares of the Company Capital Stock, with the holders of Company Common Stock and holders of Class B Stock voting together as a single class (the “Company Stockholder Approval”).
Section 3.04 No Conflicts; Consents.
(a) The execution and delivery by the Company hereof do not, and the consummation of the Merger and the other Transactions and compliance with the terms hereof will not, contravene, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any obligation, to a right to challenge the Transactions or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of the Company or any Company Subsidiary under, any provision of (i) the Company Charter, the CompanyBy-laws or the comparable charter or organizational documents of any Company Subsidiary, (ii) any Contract or Company Benefit Plan to which the Company or any Company Subsidiary is a party or by which any of their respective properties or assets is bound, or (iii) subject to the filings and other matters referred to inSection 3.04(b), any Judgment or Law applicable to the Company or any Company Subsidiary or their respective properties or assets, other than, in the case ofclauses (ii) and(iii) of thisSection 3.04(a), any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. All Contracts, Permits, registrations and licenses necessary to conduct the Company’s and the Company Subsidiaries’ businesses as substantially conducted on the date hereof are in the name of UCP LLC or a direct or indirect wholly owned Subsidiary of UCP LLC, and UCP LLC or such Subsidiary, as applicable, is the principal party thereto, except for those Contracts, Permits, registrations and licenses for which the loss thereof would not reasonably be expected to have a Company Material Adverse Effect.
(b) No consent, approval, waiver, license, order, permit, franchise, authorization or Judgment (“Consent”) of, or material registration, declaration, notice, report, submission or other filing (“Filing”) with, any government or any arbitrator, tribunal or court of competent jurisdiction, administrative or regulatory agency or commission or other governmental or public authority or instrumentality or subdivision (in each case whether federal, state, local, municipal, foreign, international or multinational) (a “Governmental Entity”) is required to be obtained or made by or with respect to the Company, any Company Subsidiary or any controlled Affiliate of the Company in
connection with the execution, delivery and performance hereof or the consummation of the Transactions, other than (i) the filing with the SEC of (A) the Proxy Statement, and (B) such Filings under Sections 13 and 16 of the Exchange Act as may be required in connection with this Agreement, the Voting Agreement, the Exchange Agreement, the Merger and the other Transactions, (ii) such Filings and Consents as may be required under the rules and regulations of the NYSE, (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of the other jurisdictions in which the Company is qualified to do business, (iv) such Filings and Consents as may be required in connection with the Taxes described inSection 6.08 (Certain Tax and Structure Matters), (v) such Filings and Consents as may be required solely by reason of Parent’s (as opposed to any other generic third party acquiror’s) participation in the Transactions and (vi) such other Filings and Consents the failure of which to obtain or make, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.
Section 3.05 SEC Documents; Financial Statements; Internal Controls.
(a) The Company has filed or furnished all reports, schedules, forms, statements and other documents required to be filed by the Company prior to the date hereof with the SEC since December 31, 2014 (the “Relevant Date”) pursuant to Sections 13(a), 14(a) and 15(d) of the Exchange Act (the “Company SEC Documents”). As of its respective date, or, if amended, as of the date of the last such amendment, each Company SEC Document complied in all material respects, and all documents required to be filed or furnished by the Company with the SEC after the date hereof and prior to the Effective Time (the “Subsequent Company SEC Documents”) will comply in all material respects, with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such Company SEC Document, subject to the last sentence ofSection 3.06 (Information Supplied) with respect to the Proxy Statement, and none of the Company SEC Documents contained, and none of the Subsequent Company SEC Documents will contain, any untrue statement of a material fact or omitted, or will omit, to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, or are to be made, not misleading.
(b) With respect to each annual report onForm 10-K, each quarterly report onForm 10-Q and each amendment of any such report included in the Company SEC Documents filed since January 1, 2014 or to be included in the Subsequent Company SEC Documents, the chief executive officer and chief financial officer of the Company have made or will make all certifications required by the Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC and the NYSE, and the statements contained or to be contained in any such certifications are or will be when made complete and correct.
(c) The consolidated financial statements of the Company included in the Company SEC Documents or to be included in the Subsequent Company SEC Documents, including the notes thereto and all related compilations, reviews and other reports issued by the Company’s accountants with respect thereto (the “Company Financial Statements”), complied at the time it was filed, and will comply at the time it is filed in the Subsequent Company SEC Documents, as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. The Company Financial Statements included in the Company SEC Documents fairly present in all material respects, and the Company Financial Statements included in the Subsequent Company SEC Documents will fairly present in all material respects, the financial condition and the results of operations, cash flows and changes in stockholders’ equity of the Company (on a consolidated basis) as of the respective dates of and for the periods referred to in the Company Financial Statements, all in accordance with GAAP, subject, in the case of interim Company Financial Statements, to normalyear-end adjustments and the absence of notes.
(d) To the Knowledge of the Company, the Company and the Company Subsidiaries do not have any liabilities or obligations of a nature required by GAAP to be reflected on a consolidated balance sheet of the Company, except (i) as disclosed, reflected or reserved against in the most recent balance sheet prior to the date of this Agreement included in the Company Financial Statements or the notes thereto and (ii) for liabilities and
obligations incurred in the Ordinary Course of Business since the date of such balance sheet. This representation shall not be deemed breached as a result of changes in GAAP or in Law after the date hereof. There are nooff-balance sheet special purpose entities and financing arrangements of the Company or any Company Subsidiaries required to be disclosed pursuant to Item 303(a)(4) of RegulationS-K promulgated under the Securities Act that have not been so described in the Company SEC Documents.
(e) The Company has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, ofRule 13a-15 under the Exchange Act) as required byRule 13a-15 under the Exchange Act. The Company’s disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by the Company in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.
(f) The internal controls over financial reporting of the Company and its Subsidiaries provide reasonable assurance regarding the reliability of the financial reporting of the Company and its Subsidiaries and the preparation of the financial statements of the Company and its Subsidiaries for external purposes in accordance with GAAP.
(g) The Company has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s auditors and the audit committee of the Company Board (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the internal controls of the Company or the Company Subsidiaries. The Company has made available to Parent all such disclosures made by management to the Company’s auditors and the audit committee of the Company Board.
(h) As of the date of this Agreement, there are no outstanding or unresolved comments in comment letters received from the SEC with respect to any Company SEC Documents. From January 1, 2015 to the date hereof, the Company has not received written notice from the SEC or any other Governmental Entity that any of its accounting policies or practices are or may be the subject of any review, inquiry, investigation or challenge by the SEC or other Governmental Entity. From January 1, 2015 to the date hereof, the Company’s independent public accounting firm has not informed the Company that it has any material questions, challenges or disagreements regarding or pertaining to the Company’s accounting policies or practices. From January 1, 2015 to the date hereof, to the Knowledge of the Company, no officer or director of the Company has received, or is entitled to receive, any material compensation from any entity that has engaged in or is engaging in any material transaction with the Company or any Company Subsidiary.
(i) The Company is in compliance, in all material respects, with all rules, regulations and requirements of the Sarbanes-Oxley Act and the SEC.
Section 3.06 Information Supplied. None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in (a) the Proxy Statement will, at the date it is first mailed to the Company’s stockholders or at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Company Stockholders Meeting, and (b) theS-4 Registration Statement will, at the time theS-4 Registration Statement is filed with the SEC, or at any time it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing in thisSection 3.06, no representation is made by the Company with respect to statements made or incorporated by reference in the Proxy Statement and/or theS-4 Registration Statement based on information supplied by Parent, Merger Sub or any of their representatives expressly (or conspicuously on its face) for inclusion or incorporation by reference in the Proxy Statement and/or theS-4 Registration Statement.
Section 3.07 Absence of Certain Changes or Events. Except as disclosed in the Filed Company SEC Documents, from the date of the most recent financial statements included in the Filed Company SEC Documents prior to the date hereof, there has not occurred any event, change, effect or development that has had, or is likely to have, individually or in the aggregate, a Company Material Adverse Effect. Parent acknowledges that there may have been or may be disruption to the Company’s and the Company Subsidiaries’ business as a result of the intention to sell the Company (and there may be disruption to the Company’s and the Company Subsidiaries’ business as a result of the announcement of the execution of this Agreement and the consummation of the Transactions), and Parent acknowledges that such disruptions do not and shall not constitute a breach of thisSection 3.07. From the date of the most recent financial statements included in the Filed Company SEC Documents prior to the date hereof, the business of the Company and the Company Subsidiaries has been conducted in the Ordinary Course of Business (other than in connection with the process to sell the Company).
Section 3.08 Other Assets. The Company or a Company Subsidiary has good and valid title to all the material assets reflected on the most recent financial statements included in the Filed Company SEC Documents prior to the date hereof or thereafter acquired, other than assets disposed of in the Ordinary Course of Business, in each case free and clear of all Liens other than Permitted Liens, except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 3.09 Real Property.
(a) With respect to the real property owned by the Company or any Company Subsidiary (individually, an “Owned Property”), except for matters that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Company Material Adverse Effect, either the Company or a Company Subsidiary has good and insurable fee title to such Owned Property, in each case free and clear of all Liens other than Permitted Liens and other conditions, covenants, encroachments, easements, restrictions and other encumbrances that do not materially adversely affect the use of the Owned Property by the Company or a Company Subsidiary for residential home building.
(b) Except for matters that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Company Material Adverse Effect, (i) each material lease, sublease, license, easement and other agreement under which the Company or any Company Subsidiary uses or occupies or has the right to use or occupy any material real property at which the material operations of the Company and the Company Subsidiaries are conducted (the “Leased Property”; an Owned Property or Leased Property being sometimes referred to herein, individually, as a “Company Property”), is valid, binding and in full force and effect and (ii) the Company or a Company Subsidiary has a good and valid leasehold interest, subject to the terms of any lease, sublease or other agreement applicable thereto, in each parcel of Leased Property, in each case free and clear of all Liens other than Permitted Liens and other conditions, covenants, encroachments, easements, restrictions and other encumbrances that do not adversely affect the use of the Leased Property by the Company or a Company Subsidiary for residential home building.
(c) The occupancies and uses of the Company Properties, as well as the development, construction, management, maintenance, servicing and operation of the Company Properties, comply in all material respects with all Laws.
(d) To the Knowledge of the Company, there are no material new (or increases in existing) development fees, impact fees or other fees that will be levied by any Governmental Entity in connection with the development of any Company Property. To the Knowledge of the Company, none of the Company or the Company Subsidiaries has received any notice of any material violation of any ordinance, regulation, law, or statute of any Governmental Entity pertaining to any Company Property.
(e) None of the Company or the Company Subsidiaries has received any written notice of any condemnation or eminent domain Proceedings relating to any Company Property, or negotiations for the purchase of any Company Property in lieu of condemnation, and no condemnation or eminent domain Proceedings or negotiations have been commenced or threatened in connection with any of the foregoing.
Section 3.10 Intellectual Property.
(a) Company Schedule 3.10(a) contains a complete list of all registered Company Intellectual Property owned or purported to be owned by the Company or the Company Subsidiaries as of the date hereof that is material to the business of the Company and its Subsidiaries (collectively, “Company Registered IP”). The Company or the Company Subsidiaries owns the Company Registered IP free and clear of all mortgages, pledges, charges, liens, equities, security interests, or other encumbrances other than Permitted Liens or except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) To the Knowledge of the Company, each item of Company Registered IP (i) has been duly registered in, filed in, or issued by the appropriate Governmental Entity where such registration, filing or issuance is necessary for the conduct of the business of the Company and the Company Subsidiaries as presently conducted, and (ii) has been maintained by the Company or the Company Subsidiaries, except for such issuances, registrations or applications that (A) the Company or any of its Subsidiaries has permitted to expire or has canceled or abandoned in its reasonable business judgment, or (B) if not maintained would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(c) Since the Relevant Date through the date hereof, none of the Company or the Company Subsidiaries has received any written communication from any Person asserting any ownership interest in the Company Intellectual Property.
(d) To the Knowledge of the Company, there is no material infringement by any Person of any of the Company Intellectual Property in a manner that would have, individually or in the aggregate, a Company Material Adverse Effect.
(e) To the Knowledge of the Company, the conduct of the business of the Company and the Company Subsidiaries as presently conducted does not violate, conflict with, or infringe in any material respect the Intellectual Property of any other Person.
(f) The Company and the Company Subsidiaries have taken reasonable security measures to protect the confidentiality of the Company Trade Secrets.
(g) Notwithstanding anything to the contrary contained herein, none of the representations or warranties contained elsewhere in thisArticle III shall relate to intellectual property matters, which are instead the subject of thisSection 3.10 exclusively.
Section 3.11 Information Technology. The software and content forming part of the websites owned and/or operated by the Company or a Company Subsidiary and the software systems, servers and other information technology hardware or communications systems or services used by the Company or any Company Subsidiary (collectively, the “Company IT Systems”) are, to the Knowledge of the Company, owned exclusively by or are licensed or leased to the Company or a Company Subsidiary, as applicable. All Company IT Systems are in good working condition to perform, in all material respects, all information technology operations necessary to conduct the business of the Company and the Company Subsidiaries as presently conducted.
Section 3.12 Contracts.
(a) Company Schedule 3.12(a) sets forth a list of each Company Contract that has not been filed as an exhibit to a Company SEC Document. “Company Contracts” means the following Contracts to which the Company or any Company Subsidiary is a party:
(i) any Contract that is a “material contract” (as such term is defined in Item 601(b)(10) ofRegulation S-K of the Exchange Act) required to be filed as an exhibit to a Company SEC Document;
(ii) any collective bargaining Contract with any labor organization, union or association, except for terms of employment required by Law;
(iii) any change in control, retention, separation or other similar Contract with any officer or employee that may result in material liabilities to the Company, any Company Subsidiary and/or Parent (as a result of or in connection with the Merger or any of the other Transactions);
(iv) any Contract or covenant not to compete (other than pursuant to any radius restriction contained in any lease, reciprocal easement or development, construction, operating or similar Contract);
(v) any Contract with any Affiliate of the Company (other than a Company Subsidiary) that will continue in effect after the Closing;
(vi) any Contract under which the Company or a Company Subsidiary has borrowed any money from any Person (other than the Company or a Company Subsidiary) or any other note, bond, debenture, guarantee or other evidence of indebtedness for borrowed money of the Company or a Company Subsidiary (other than in favor of the Company or a Company Subsidiary) in any such case that, individually, is in excess of $1,000,000;
(vii) any Contract or any form of Contract providing for indemnification by the Company or a Company Subsidiary of any current or former employee of the Company or any Company Subsidiary;
(viii) any Contract under which a claim for indemnification has been made by any Person prior to the date hereof;
(ix) any Contract involving payment by the Company or a Company Subsidiary of more than $500,000 (unless terminable without payment of a material penalty upon no more than 60 days’ notice), other than vendor agreements entered in the Ordinary Course of Business and Contracts for borrowed money not otherwise required to be disclosed pursuant to clause (vi) of thisSection 3.12(a);
(x) any Contract for the sale or purchase of any land asset of the Company or a Company Subsidiary with a purchase price in excess of $1,000,000 (other than home sales in the Ordinary Course of Business); or
(xi) any Contract for any material joint venture, partnership or similar arrangement.
(b) To the Knowledge of the Company, all Company Contracts are valid, binding and in full force and effect and are enforceable by the Company or the applicable Company Subsidiary in accordance with their respective terms, except as limited by Laws affecting the enforcement of creditors’ rights generally or by general equitable principles. To the Knowledge of the Company, the Company or the applicable Company Subsidiary has performed all material obligations required to be performed by it since the Relevant Date to the date hereof under the Company Contracts, and it is not (with or without notice or lapse of time, or both) in breach or default in any material respect thereunder and, to the Knowledge of the Company, no other party to any Company Contract is (with or without notice or lapse of time, or both) in breach or default in any material respect thereunder. To the Knowledge of the Company, since the Relevant Date through the date hereof, (i) none of the Company and the Company Subsidiaries has received written notice of any material breach of any Company Contract and (ii) none of the Company and the Company Subsidiaries has received any written notice of the intention of any party to terminate any Company Contract. True and complete copies of all Company Contracts not filed as an exhibit to a Company SEC Document have been made available to Parent.
Section 3.13 Permits. The Company and each Company Subsidiary is in possession, and in material compliance with the terms, of all certificates, licenses, permits, franchises, registrations, authorizations, consents and approvals (“Permits”) of each Governmental Entity necessary for the conduct of the business of the Company and the Company Subsidiaries as presently conducted, all such Permits are in full force and effect, and the Company is not in default thereunder and has not received notice of any pending or threatened revocation, modification or suspension thereof, the loss of which, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
Section 3.14 Insurance. All insurance policies maintained with respect to the Company and the Company Subsidiaries, their respective assets and properties (including all Owned Properties and Leased Properties), and their directors, officers and employees are in full force and effect, and none of the Company or the Company Subsidiaries is in default thereunder, all premiums due and payable thereon have been paid (other than retroactive or retrospective premium adjustments that are not yet, but may be, required to be paid with respect to any period ending before the Closing Date), and, except in connection with ordinary renewals, no written notice of cancellation, suspension, denial, limitation of coverage, or termination has been received or threatened with respect to any such policy.
Section 3.15 Taxes.
(a) The Company and each Company Subsidiary has timely filed, or has caused to be timely filed on its behalf, all material Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate in all material respects. All Taxes shown to be due on such Tax Returns, or material Taxes otherwise owed, have been timely paid.
(b) All material assessments for Taxes due with respect to any completed and settled examinations or any concluded litigation have been fully paid. No deficiency or proposed adjustment with respect to Taxes has been proposed, asserted or assessed in writing against the Company or any Company Subsidiary which has not been fully paid or adequately reserved in the Company Financial Statements, in accordance with GAAP.
(c) Each of the Company and the Company Subsidiaries has withheld, collected and paid over to the appropriate Governmental Entity all material Taxes required by Law to be withheld or collected.
(d) There are no material Liens for Taxes (other than Permitted Liens) on the assets of the Company or any Company Subsidiary. Other than as set forth inCompany Schedule 3.15, none of the Company or the Company Subsidiaries is a party to any Tax allocation, Tax indemnity, or Tax sharing agreement. No written claim has been made by a Governmental Entity in any jurisdiction where the Company or a Company Subsidiary does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.
(e) Except for any group of which the Company is the common parent, none of the Company or the Company Subsidiaries is or has been (i) a member of an affiliated group within the meaning of Section 1504(a) of the Code (or any similar group defined under a similar provision of state, local, or foreign Law), (ii) filing a consolidated U.S. federal income Tax Return with any other Person, or (iii) liable for the Taxes of any Person (other than the Company or Company Subsidiary) under Treasury RegulationSection 1.1502-6 or any analogous or similar provision of Law, or as a transferee or successor, by Contract, or otherwise.
(f) None of the Company or the Company Subsidiaries has been notified in writing that it is currently under audit by any Governmental Entity or that any Governmental Entity intends to conduct such an audit, and no material action, suit, investigation, claim, assessment, administrative or other court proceeding is pending or, to the Knowledge of the Company, proposed with respect to any alleged deficiency in Taxes.
(g) None of the Company or the Company Subsidiaries has waived any statute of limitations in respect of any Taxes or agreed to any extension of time with respect to any material Taxes.
(h) None of the Company or the Company Subsidiaries has distributed the stock of any corporation in a transaction satisfying the requirements of Section 355 of the Code within the last five (5) years, and none of the Company Capital Stock or the capital stock of, or equity interests in, any Company Subsidiary has been distributed in a transaction satisfying the requirements of Section 355 of the Code within the last five (5) years.
(i) None of the Company or the Company’s Subsidiaries will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) use of an improper method of accounting for a taxable period ending on or prior to the Closing Date, (iii) “closing agreement” as described in Code Section 7121 (or any corresponding or similar provision of state, local, ornon-U.S. Law) executed on or prior to the Closing Date, (iv) installment sale or open transaction entered into on or prior to the Closing Date, (v) prepaid amounts (including for the avoidance of doubt deferred revenue) received on or prior to the Closing Date, or (vi) election under Code Section 108(i).
(j) None of the Company or the Company Subsidiaries is or has been a party to any “listed transaction,” as defined in Code Section 6707A(c)(2) and Treasury RegulationSection 1.6011-4(b).
(k) Each of the Company Subsidiaries, other than UCP LLC, has been, since its formation, treated as a disregarded entity for federal and where applicable, state, income Tax purposes as defined in Treasury RegulationSection 301.7701-3(b).
(l) Apart from any regular and normal dividend, the Company has not paid any dividend in anticipation of, or to facilitate the Merger, or asbargained-for consideration in the Merger or any similar transaction involving the combination of the parties.
(m) None of the Company or the Company Subsidiaries has taken any action or knows of any fact, Contract, plan or other circumstance that would reasonably be expected to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code (the “Intended Tax Treatment”).
(n) Notwithstanding anything to the contrary contained herein, none of the representations and warranties contained elsewhere in thisArticle III shall relate to Tax matters, which are instead the subject of thisSection 3.15 andSection 3.19 exclusively.
Section 3.16 Proceedings. As of the date of this Agreement, there is no Proceeding pending or, to the Knowledge of the Company threatened, against the Company, any Company Subsidiary, any Owned Property or any Leased Property, nor is there any Judgment outstanding against the Company, any Company Subsidiary, any Owned Property or any Leased Property, that (a) seeks or imposes any material injunctive or other equitable relief, (b) relates to any of the Transactions, or (c) would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 3.17 Compliance with Laws. The Company and the Company Subsidiaries are in compliance with all Laws and Judgments applicable to the Company or any Company Subsidiary, except for such noncompliance that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. None of the Company or the Company Subsidiaries has received any written communication during the two years before the date hereof from a Governmental Entity that alleges that the Company or a Company Subsidiary is not in compliance in any material respect with any Law. Neither the Company nor any Significant Company Subsidiary, nor, to the Knowledge of the Company, any of their respective directors, officers, employees or agents or any other Person authorized to act, and acting, on behalf of the Company or any Significant Company Subsidiary has, directly or indirectly, in connection with the business activities of the Company used any corporate funds for unlawful contributions, gifts, entertainment, or other unlawful expenses relating to political activity to or for the benefit of any government official, candidate for public office, political
party or political campaign, for the purpose of (A) influencing any act or decision of such government official, candidate, party or campaign, (B) inducing such government official, candidate, party or campaign to do or omit to do any act in violation of a lawful duty, (C) obtaining or retaining business for or with any Person, (D) expediting or securing the performance of official acts of a routine nature or (E) otherwise securing any improper advantage, in each case in violation of the Foreign Corrupt Practices Act of 1977, 15 U.S.C.§§ 78dd-1, et seq.
Section 3.18 Environmental Matters.
(a) Each of the Company and the Company Subsidiaries is, and, except with respect to matters that have been fully resolved, has been since July 18, 2013, in compliance in all material respects with all Environmental Laws applicable to their respective operations as currently conducted (including possessing and complying with any required Environmental Permits), and, as of the date hereof, there are no administrative or judicial proceedings pending against the Company or any Company Subsidiary that allege, and, none of the Company or the Company Subsidiaries has received any written communication during the past two years from a Governmental Entity that alleges, that the Company or a Company Subsidiary is not in compliance with or is liable or potentially liable under any Environmental Law, except for any such noncompliance, proceedings or written communications that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Each required Environmental Permit is valid and in effect or has been timelyre-applied for, except for the lack of such Environmental Permits that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
(b) As of the date hereof, none of the Company or the Company Subsidiaries has received any written notice, demand, request for information, or claim alleging liability on the part of the Company or any Company Subsidiary as a result of a Release of Hazardous Materials.
(c) None of the Company or the Company Subsidiaries has received any written notice or request for information with respect to any Offsite Facility regarding potential or actual liability for cleanup or environmental remediation thereof for which the potential or actual liability of the Company or Company Subsidiary remains unresolved.
(d) Notwithstanding any other provision of this Agreement to the contrary, the representations and warranties made in thisSection 3.18 andSection 3.05 (SEC Documents; Financial Statements; Internal Controls) are the sole and exclusive representations and warranties made by the Company in this Agreement with respect to Hazardous Materials, Environmental Laws, Environmental Permits and any other matter related to the environment or the protection of human health or worker safety.
Section 3.19 Employee Benefits.
(a) Company Schedule 3.19(a) sets forth a list of all “employee pension benefit plans” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974 (“ERISA”)) (“Company Pension Plans”), “employee welfare benefit plans” (as defined in Section 3(1) of ERISA) and all other material bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical and other plans, arrangements or understandings (collectively, “Company Benefit Plans”) maintained, or contributed to, by the Company or any Company ERISA Affiliate for the benefit of any current or former employees, directors, and/or independent contractors of the Company or any Company Subsidiary. The Company has made available to Parent copies of (i) the most recent version of each Company Benefit Plan and any amendments made thereto, (ii) the three most recent annual report on Form 5500 filed with the Internal Revenue Service with respect to each Company Benefit Plan or equivalent filing in any relevant jurisdiction (if any such report was required) and all attachments thereto, (iii) the most recent summary plan description for each Company Benefit Plan for which such summary plan description is required; (iv) each trust agreement and group annuity contract relating to any
Company Benefit Plan; (v) the nondiscrimination testing results for the last three plan years for each Company Benefit Plan that is subject to nondiscrimination testing under ERISA and/or the Code; and (vi) the most recent Internal Revenue Service favorable determination or opinion letter for each such Company Benefit Plan that is intended to qualify under Section 401(a) of the Code.
(b) With respect to each Company Benefit Plan: (i) each has been administered in compliance, in all material respects, with its terms and with applicable Laws including, without limitation, ERISA and the Code; (ii) no actions, suits, claims, audits, inquiries, reviews, proceedings, claims, or demands are pending or to the Knowledge of the Company, threatened; (ii) all premiums, contributions, or other payments required to have been made by Law or under the terms of any Company Benefit Plan or any contract or agreement relating thereto as of the Closing Date have been made; and (iv) there have been no acts or omissions by the Company or any Company ERISA Affiliate that have given or could give rise to any fines, penalties, taxes or related charges under Sections 502 or 4071 of ERISA or Section 511 or Chapter 43 of the Code, or under any other applicable Law.
(c) With respect to the United States of America, all Company Pension Plans have been the subject of determination or opinion letters from the Internal Revenue Service to the effect that such Company Pension Plans are qualified and exempt from U.S. federal income Taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such determination letter has been revoked nor, to the Knowledge of the Company, has revocation been threatened.
(d) None of the Company, any Company Subsidiary, any officer of the Company or any Company Subsidiary or any of the Company Benefit Plans that are subject to ERISA, including the Company Pension Plans, any trusts created thereunder or any trustee or administrator thereof, has engaged in a “prohibited transaction” (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any other breach of fiduciary responsibility that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
(e) No Company Benefit Plan is, and none of the Company or any Company ERISA Affiliate contributes to, is required to contribute to, or otherwise participates in or in any way has any material liability, directly or indirectly, with respect to (i) any plan subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, (ii) any “multiemployer plan” (within the meaning of Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code), (iii) any single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) that is subject to Sections 4063, 4064 or 4069 of ERISA or Section 413(c) of the Code, that covers or has covered any employee of the Company or any Company ERISA Affiliate; or (iv) any plan or arrangement that provides for post-employment medical benefits (other than health continuation coverage required by Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA or otherwise as required by Law.
(f) Other than payments that may be made to the Persons listed inCompany Schedule 3.19(f), any amount that could be received (whether in cash or property or the vesting of property) as a result, directly or indirectly, of the Merger or any other Transaction by any employee, officer or director of the Company or any of its Affiliates who is a “disqualified individual” (as such term is defined in proposed Treasury RegulationSection 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Company Benefit Plan currently in effect would not reasonably expected to be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).
(g) Other than as set forth inCompany Schedule 3.19(g), the execution and delivery by the Company of this Agreement do not, and the consummation of the Merger and the other Transactions and compliance with the terms hereof will not (i) entitle any employee, officer or director of the Company or any Company Subsidiary to severance pay, (ii) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any Company Benefit Plan or (iii) result in any breach or violation of, or a default under, any Company Benefit Plan.
Section 3.20 Labor. As of the date hereof, no employee of the Company or any of the Company Subsidiaries is represented by any union or covered by any collective bargaining agreement. As of the date hereof, no labor organization or group of employees of the Company or any of the Company Subsidiaries has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Knowledge of the Company, threatened to be brought or filed, with the National Labor Relations Board or any other labor relations Governmental Entity.
Section 3.21 Affiliate Transactions.
(a) Since January 1, 2014, there has been no transaction, or series of similar transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions, or series of similar transactions, agreements, arrangements or understandings to which the Company or any of Company Subsidiary was or is to be a party that would be required to be disclosed under Item 404 of RegulationS-K promulgated under the Securities Act that has not been so disclosed.
(b) There are no loans by the Company or any Company Subsidiary to any officer of the Company or any officer of any Company Subsidiary outstanding as of the date hereof.
Section 3.22 Brokers; Fees and Expenses. No broker, investment banker, financial advisor or other Person, other than Citigroup Global Markets Inc. (the “Company Financial Advisor”), the fees and expenses of which will be paid by the Company, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the Merger and the other Transactions based upon arrangements made by or on behalf of the Company. The Company has furnished to Parent a true and complete copy of any Contract between the Company and the Company Financial Advisor pursuant to which the Company Financial Advisor could be entitled to any payment(s) from the Company or any Company Subsidiary (or any successor to the Company) relating to the Transactions.
Section 3.23 Opinion of Financial Advisor. The Company Board has received the opinion of the Company Financial Advisor, dated the date of this Agreement, to the effect that, as of such date and subject to the qualifications and assumptions set forth therein, the Merger Consideration to be received in the Merger by holders of Company Common Stock (other than holders that enter into the Voting Agreement and their Affiliates) is fair, from a financial point of view, to such holders, and such opinion, as of the date of this Agreement, has not been modified or withdrawn. Promptly after receipt by the Company of the Company Financial Advisor’s written confirmation of its opinion and, in any event, not until after the execution of this Agreement, the Company shall deliver to Parent a true and complete signed copy of such opinion solely for Parent’s informational purposes and on anon-reliance basis.
Section 3.24 Ownership of Parent Common Stock. None of the Company or any of its “affiliates” or “associates” is, or at any time during the three-year period ending on the date hereof has been, an “interested stockholder” of Parent, in each case as defined in Section 203 of the DGCL. The Company does not beneficially own (within the meaning of Section 13 of the Exchange Act and the rules and regulations promulgated thereunder), or will not at any time prior to the Closing Date beneficially own, any shares of Parent Common Stock or other securities convertible into, exchangeable for or exercisable for shares of Parent Common Stock or any securities of any Parent Subsidiary, or is a party, or will at any time prior to the Closing Date become a party, to any Contract, arrangement or understanding (other than this Agreement) for the purpose of acquiring, holding, voting or disposing of any shares of Parent Common Stock or other securities convertible into, or exchangeable or exercisable for, shares of Parent Common Stock or any securities of any Parent Subsidiary.
Section 3.25 No Additional Representations; ExtrinsicNon-Reliance. The Company acknowledges that it and its Representatives have been permitted full and complete access to the books and records, facilities, equipment, Tax returns, Contracts, insurance policies (or summaries thereof) and other properties and assets of
Parent and the Parent Subsidiaries that it and its Representatives have desired or requested to see or review, and that it and its Representatives have had a full opportunity to meet with the officers and employees of the Parent and the Parent Subsidiaries to discuss the business of Parent and the Parent Subsidiaries. The Company acknowledges that (a) neither Parent nor any other Person has made any representation or warranty, express or implied, as to Parent or any Parent Subsidiary or the accuracy or completeness of any information regarding the Parent and the Parent Subsidiaries furnished or made available to the Company and its Representatives, except as expressly set forth in this Agreement, (b) the Company has not relied on and hereby waives any reliance on any representation or warranty from Parent, any Parent Subsidiary or any other Person in determining to enter into this Agreement, except those representations and warranties expressly set forth in this Agreement, and (c) no Person shall have or be subject to any liability to the Company or any other Person resulting from the distribution to the Company, or the Company’s use, of any such information, including any information, documents or material made available to the Company in any physical or electronic “data rooms,” management presentations or in any other form in expectation of the Transactions. Without limiting the generality of the foregoing, the Company acknowledges that neither Parent nor any other Person has made any representation or warranty, express or implied, as to the financial projections, forecasts, capital budgets, cost estimates and other predictions relating to Parent and the Parent Subsidiaries made available to the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedules of Parent delivered to the Company prior to the execution of this Agreement (collectively, the “Parent Schedules,” and individually, a “Parent Schedule”) (but only to the extent that any disclosure in the Parent Schedules contains a reference to the Section in thisArticle IV to which such disclosure relates or the Section in thisArticle IV to which such disclosure relates is otherwise reasonably apparent on its face) or in the Filed Parent SEC Documents to the extent publicly available at least two Business Days prior to the date of this Agreement (but excluding statements in any “Risk Factors” section that do not constitute statements of fact and any disclosures of risks or other matters included in any “forward-looking statement” disclaimers or other statements that are cautionary, predictive or forward-looking in nature), Parent and Merger Sub, jointly and severally, represent and warrant to the Company as follows:
Section 4.01 Organization, Standing and Power.
(a) Parent and each of its Subsidiaries, including Merger Sub (the “Parent Subsidiaries”), is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized.Parent Schedule 4.01(a) lists each Significant Parent Subsidiary and its jurisdiction of organization. Parent, Merger Sub and each Significant Parent Subsidiary is duly qualified and in good standing to do business in each jurisdiction in which the conduct or nature of its business or the ownership, leasing or holding of its properties make such qualification necessary, except such jurisdictions where the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. For purposes of this Agreement, “Significant Parent Subsidiary” means any Parent Subsidiary that constitutes a significant Subsidiary within the meaning ofRule 1-02 ofRegulation S-X of the SEC.
(b) Parent has made available to the Company true and complete copies of the organizational documents of Parent, as amended to the date of this Agreement (as so amended, the “Parent Charter”), and theby-laws of Parent, as amended to the date of this Agreement (as so amended, the “Parent By-laws”), and the comparable charter and organizational documents of each Significant Parent Subsidiary, in each case as amended to the date of this Agreement.
Section 4.02 Capital Stock of Parent and the Parent Subsidiaries.
(a) The authorized capital stock of Parent consists of 100,000,000 shares of Parent Common Stock, and 50,000,000 shares of Preferred Stock, par value $0.01 per share (the “Parent Preferred Stock” and, together with
the Parent Common Stock, the “Parent Capital Stock”). At the close of business on the Reference Date, (i) 22,291,203 shares of Parent Common Stock and no shares of Parent Preferred Stock were issued and outstanding, (ii) no shares of Parent Common Stock were held by Parent in its treasury, (iii) 221,972 shares of Parent Restricted Stock were outstanding, (iv) 533,183 Parent Restricted Stock Units were outstanding, (v) no shares of Parent Common Stock were subject to outstanding Parent Options, and (vi) 546,629 additional shares of Parent Common Stock were reserved for issuance pursuant to the Parent Stock Plan. Parent Schedule 4.02(a)(i) sets forth certain details regarding all outstanding Parent Restricted Stock and Parent Restricted Stock Units, including whether or not they are vested and vesting schedules.Parent Schedule 4.02(a)(ii) sets forth for each Significant Parent Subsidiary the amount of its authorized capital stock or comparable equity interests, the amount of its outstanding capital stock or comparable equity interests and the record and beneficial owners of its outstanding capital stock or comparable equity interests, and there are no other shares of capital stock or comparable equity interests or other equity securities of any Significant Parent Subsidiary issued, reserved for issuance or outstanding, in each case as of the date hereof. Except as set forth above, at the close of business on the Reference Date, no shares of capital stock or other voting securities of Parent were issued, reserved for issuance or outstanding. Since the Reference Date to the date of this Agreement, (x) there have been no issuances by Parent of shares of Parent Capital Stock or other voting securities of Parent, other than issuances of Parent Common Stock under itsat-the-market offering program, and (y) there have been no issuances by Parent of options, warrants, other rights to acquire shares of Parent Capital Stock or other rights that give the holder thereof any economic benefit accruing to the holders of any Parent Capital Stock. All outstanding shares of Parent Capital Stock and all the outstanding shares of capital stock or comparable equity interests of each Parent Subsidiary are, and all such shares or interests that may be issued before the Effective Time will be, when issued, duly authorized, validly issued, fully paid andnon-assessable and not subject to, or issued in violation of, any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of Law (including the DGCL), the Parent Charter, the ParentBy-laws, the certificate of incorporation orby-laws (or comparable documents) of any Parent Subsidiary or any Contract to which Parent or any Parent Subsidiary is a party or otherwise bound. There are no bonds, debentures, notes or other indebtedness of Parent or any Parent Subsidiary having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of common stock of Parent or any Parent Subsidiary may vote (“Voting Parent Debt”). As of the date hereof, there are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units or Contracts to which Parent or any Significant Parent Subsidiary is a party or by which any of them is bound (i) obligating Parent or any Significant Parent Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other Equity Interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other Equity Interest in, Parent or of any Significant Parent Subsidiary or any Voting Parent Debt or (ii) obligating Parent or any Significant Parent Subsidiary to issue, grant, extend or enter into any such option, warrant, call, right, security or Contract. As of the date hereof, there are no outstanding contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock, membership interests, partnership interests, joint venture interests or other Equity Interests of Parent or any Parent Subsidiary.
(b) Parent Schedule 4.02(b) sets forth a true and complete list of all capital stock, membership interests, partnership interests, joint venture interests and other Equity Interests with a fair market value as of the date hereof in excess of $500,000 in any Person (other than a Parent Subsidiary) owned as of the date hereof, directly or indirectly, by Parent or any Parent Subsidiary.
Section 4.03 Authority; Execution and Delivery; Enforceability; State Takeover Statutes.
(a) Each of Parent and Merger Sub has all requisite corporate power and authority to execute and deliver this Agreement and the Voting Agreement, to perform and comply with each of its obligations under this Agreement and the Voting Agreement, and to consummate the Merger and the other Transactions. The execution and delivery by each of Parent and Merger Sub of this Agreement and the Voting Agreement, the performance and compliance by Parent and Merger Sub with its obligations herein and therein, and the consummation by
Parent and Merger Sub of the Merger and the other Transactions, have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub. Each of Parent and Merger Sub has duly executed and delivered this Agreement, and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforceability may be limited by the Enforceability Exceptions.
(b) The Board of Directors of Merger Sub, at a meeting duly called and duly held, duly and unanimously adopted resolutions (i) approving this Agreement, the Merger and the other Transactions, (ii) determining that the terms of the Merger and the other Transactions are fair to and in the best interests of Merger Sub and Parent, (iii) recommending that Parent adopt this Agreement, and (iv) declaring that this Agreement is advisable.
(c) The Board of Directors of Parent (the “Parent Board”), at a meeting duly called and held, has duly adopted resolutions (i) approving this Agreement, the Merger and the other Transactions, (ii) determining that the terms of the Merger and the other Transactions are fair to and in the best interests of Parent and its stockholders, and (iii) declaring that this Agreement is advisable, which resolutions have not been withdrawn or modified, after which Parent, in its capacity as sole stockholder of Merger Sub, duly delivered a written consent adopting this Agreement.
Section 4.04 No Conflicts; Consents.
(a) The execution and delivery by each of Parent and Merger Sub hereof do not, and the consummation of the Merger and the other Transactions and compliance with the terms hereof will not, contravene, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any obligation, to a right to challenge the Transactions or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Parent or any Parent Subsidiary under, any provision of (i) the Parent Charter, the ParentBy-laws or the comparable charter or organizational documents of any Parent Subsidiary, (ii) any Contract or Benefit Plan to which Parent or any Parent Subsidiary is a party or by which any of their respective properties or assets is bound or (iii) subject to the filings and other matters referred to inSection 4.04(b), any Judgment or Law applicable to Parent or any Parent Subsidiary or their respective properties or assets, other than, in the case ofclauses (ii) and(iii) of thisSection 4.04(a), any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(b) No Consent of, or material Filing with, any Governmental Entity is required to be obtained or made by or with respect to Parent or any Parent Subsidiary in connection with the execution, delivery and performance hereof or the consummation of the Transactions or the ownership by Parent of the Surviving Corporation following the Closing, other than (i) the filing with the SEC of (A) the Proxy Statement, (B) theS-4 Registration Statement, and (C) such Filings under Sections 13 and 16 of the Exchange Act as may be required in connection with this Agreement, the Voting Agreement, the Merger and the other Transactions, (ii) such Filings and Consents as may be required under the rules and regulations of the NYSE, (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of the other jurisdictions in which the Company is qualified to do business, (iv) such Filings and Consents as may be required in connection with the Taxes described inSection 6.08 (Certain Tax and Structure Matters), (v) such Filings and Consents as may be required solely by reason of the Company’s (as opposed to any other third party’s) participation in the Transactions, and (vi) such other Filings and Consents the failure of which to obtain or make, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Parent Material Adverse Effect.
Section 4.05 SEC Documents; Financial Statements; Internal Controls.
(a) Parent has filed or furnished all reports, schedules, forms, statements and other documents required to be filed by Parent prior to the date hereof with the SEC since the Relevant Date pursuant to Sections 13(a), 14(a)
and 15(d) of the Exchange Act (the “Parent SEC Documents”). As of its respective date, or, if amended, as of the date of the last such amendment, each Parent SEC Document complied in all material respects, and all documents required to be filed or furnished by Parent with the SEC after the date hereof and prior to the Effective Time (the “Subsequent Parent SEC Documents”) will comply in all material respects, with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such Parent SEC Document, subject to the last sentence ofSection 4.06 (Information Supplied) with respect to theS-4 Registration Statement, and none of the Parent SEC Documents contained, and none of the Subsequent Parent SEC Documents will contain, any untrue statement of a material fact or omitted, or will omit, to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, or are to be made, not misleading.
(b) With respect to each annual report onForm 10-K, each quarterly report onForm 10-Q and each amendment of any such report included in the Parent SEC Documents filed since July 1, 2014 or to be included in the Subsequent Parent SEC Documents, the chief executive officer and chief financial officer of Parent have made or will make all certifications required by the Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC and the NYSE, and the statements contained or to be contained in any such certifications are or will be when made complete and correct.
(c) The consolidated financial statements of Parent included in the Parent SEC Documents or to be included in the Subsequent Parent SEC Documents, including the notes thereto and all related compilations, reviews and other reports issued by Parent’s accountants with respect thereto (the “Parent Financial Statements”), complied at the time it was filed, and will comply at the time it is filed in the Subsequent Company SEC Documents, as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. The Parent Financial Statements included in the Parent SEC Documents fairly present in all material respects, and the Parent Financial Statements to be included in the Subsequent Parent SEC Documents will fairly present in all material respects, the financial condition and the results of operations, cash flows and changes in stockholders’ equity of Parent (on a consolidated basis) as of the respective dates of and for the periods referred to in the Parent Financial Statements, all in accordance with GAAP, subject, in the case of interim Parent Financial Statements, to normalyear-end adjustments and the absence of notes.
(d) To the Knowledge of Parent, Parent and the Parent Subsidiaries do not have any liabilities or obligations of a nature required by GAAP to be reflected on a consolidated balance sheet of Parent, except (i) as disclosed, reflected or reserved against in the most recent balance sheet prior to the date of this Agreement included in the Parent Financial Statements or the notes thereto and (ii) for liabilities and obligations incurred in the Ordinary Course of Business since the date of such balance sheet. This representation shall not be deemed breached as a result of changes in GAAP or in Law after the date hereof. There are nooff-balance sheet special purpose entities and financing arrangements of Parent or any Parent Subsidiaries required to be disclosed pursuant to Item 303(a)(4) of RegulationS-K promulgated under the Securities Act that have not been so described in the Parent SEC Documents.
(e) Parent has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, ofRule 13a-15 under the Exchange Act) as required byRule 13a-15 under the Exchange Act. Parent’s disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by Parent in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to Parent’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.
(f) The internal controls over financial reporting of Parent and its Subsidiaries provide reasonable assurance regarding the reliability of the financial reporting of Parent and its Subsidiaries and the preparation of the financial statements of Parent and its Subsidiaries for external purposes in accordance with GAAP.
(g) Parent has disclosed, based on its most recent evaluation prior to the date hereof, to Parent’s auditors and the audit committee of the Parent Board (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect Parent’s ability to record, process, summarize and report financial information, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the internal controls of Parent or the Parent Subsidiaries. Parent has made available to the Company all such disclosures made by management to Parent’s auditors and audit committee of its Board of Directors.
(h) As of the date of this Agreement, there are no outstanding or unresolved comments in comment letters received from the SEC with respect to any Parent SEC Documents. From January 1, 2015 to the date hereof, Parent has not received written notice from the SEC or any other Governmental Entity that any of its accounting policies or practices are or may be the subject of any review, inquiry, investigation or challenge by the SEC or other Governmental Entity. From January 1, 2015 to the date hereof, Parent’s independent public accounting firm has not informed Parent that it has any material questions, challenges or disagreements regarding or pertaining to Parent’s accounting policies or practices. From January 1, 2015 to the date hereof, to the Knowledge of Parent, no officer or director of Parent has received, or is entitled to receive, any material compensation from any entity that has engaged in or is engaging in any material transaction with Parent or any Parent Subsidiary.
(i) The Company is in compliance, in all material respects, with all rules, regulations and requirements of the Sarbanes-Oxley Act and the SEC.
Section 4.06 Information Supplied. None of the information supplied or to be supplied by Parent or Merger Sub for inclusion or incorporation by reference in (a) the Proxy Statement will, at the date it is first mailed to the Company’s stockholders or at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, and (b) theS-4 Registration Statement will, at the time theS-4 Registration Statement is filed with the SEC, or at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, and theS-4 Registration Statement will comply as to form in all material respects with the requirements of the Securities Act and the rules and regulations thereunder. Notwithstanding the foregoing in thisSection 4.06, no representation is made by Parent or Merger Sub with respect to statements made or incorporated by reference in the Proxy Statement and/or theS-4 Registration Statement based on information supplied by the Company or any of its representatives expressly (or conspicuously on its face) for inclusion or incorporation by reference in the Proxy Statement and/or theS-4 Registration Statement.
Section 4.07 Absence of Certain Changes or Events. Except as disclosed in the Filed Parent SEC Documents, from the date of the most recent financial statements included in the Filed Parent SEC Documents to the date hereof, there has not occurred any event, change, effect or development that has had, or is likely to have, individually or in the aggregate, a Parent Material Adverse Effect. Parent acknowledges that there may have been or may be disruption to Parent’s and the Parent Subsidiaries’ business as a result of the intention to buy the Company, and the Company acknowledges that such disruptions do not and shall not constitute a breach of thisSection 4.07. From the date of the most recent financial statements included in the Filed Parent SEC Documents to the date hereof, the business of Parent and the Parent Subsidiaries has been conducted in the Ordinary Course of Business.
Section 4.08 Other Assets. Parent or a Parent Subsidiary has good and valid title to all the material assets reflected on the most recent financial statements included in the Filed Parent SEC Documents prior to the date hereof or thereafter acquired, other than assets disposed of in the Ordinary Course of Business, in each case free
and clear of all Liens other than Permitted Liens, except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.09 Real Property.
(a) With respect to the real property owned by Parent or any Parent Subsidiary (individually, an “Parent Owned Property”), except for matters that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Parent Material Adverse Effect, either Parent or a Parent Subsidiary has good and insurable fee title to such Parent Owned Property, in each case free and clear of all Liens other than Permitted Liens and other conditions, covenants, encroachments, easements, restrictions and other encumbrances that do not materially adversely affect the use of the Parent Owned Property by Parent or a Parent Subsidiary for residential home building.
(b) Except for matters that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Parent Material Adverse Effect, (i) each material lease, sublease, license, easement and other agreement under which Parent or any Parent Subsidiary uses or occupies or has the right to use or occupy any material real property at which the material operations of Parent and the Parent Subsidiaries are conducted (the “Parent Leased Property”; an Parent Owned Property or Parent Leased Property being sometimes referred to herein, individually, as a “Parent Property”), is valid, binding and in full force and effect and (ii) Parent or a Parent Subsidiary has a good and valid leasehold interest, subject to the terms of any lease, sublease or other agreement applicable thereto, in each parcel of Parent Leased Property, in each case free and clear of all Liens other than Permitted Liens and other conditions, covenants, encroachments, easements, restrictions and other encumbrances that do not adversely affect the use of the Parent Leased Property by Parent or a Parent Subsidiary for residential home building.
(c) The occupancies and uses of the Parent Properties, as well as the development, construction, management, maintenance, servicing and operation of the Parent Properties, comply in all material respects with all Laws.
(d) To the Knowledge of Parent, there are no material new (or increases in existing) development fees, impact fees or other fees that will be levied by any Governmental Entity in connection with the development of any Parent Property. To the Knowledge of Parent, none of Parent or the Parent Subsidiaries has received any notice of any material violation of any ordinance, regulation, law, or statute of any Governmental Entity pertaining to any Parent Property.
(e) None of Parent or the Parent Subsidiaries has received any written notice of any condemnation or eminent domain Proceedings relating to any Parent Property, or negotiations for the purchase of any Parent Property in lieu of condemnation, and no condemnation or eminent domain Proceedings or negotiations have been commenced or threatened in connection with any of the foregoing.
Section 4.10 Intellectual Property.
(a) ParentSchedule 4.10(a) contains a complete list of all registered Parent Intellectual Property owned or purported to be owned by Parent or the Parent Subsidiaries as of the date hereof that is material to the business of Parent and its Subsidiaries (collectively, “Parent Registered IP”). Parent or the Parent Subsidiaries owns the Parent Registered IP free and clear of all mortgages, pledges, charges, liens, equities, security interests, or other encumbrances other than Permitted Liens or except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) To the Knowledge of Parent, each item of Parent Registered IP (i) has been duly registered in, filed in, or issued by the appropriate Governmental Entity where such registration, filing or issuance is necessary for the conduct of the business of Parent and the Parent Subsidiaries as presently conducted, and (ii) has been
maintained by Parent or the Parent Subsidiaries, except for such issuances, registrations or applications that (1) Parent or any of its Subsidiaries has permitted to expire or has canceled or abandoned in its reasonable business judgment, or (2) if not maintained would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(c) Since the Relevant Date through the date hereof, none of Parent or the Parent Subsidiaries has received any written communication from any Person asserting any ownership interest in the Parent Intellectual Property.
(d) To the Knowledge of Parent, there is no material infringement by any Person of any of the Parent Intellectual Property in a manner that would have, individually or in the aggregate, a Parent Material Adverse Effect.
(e) To the Knowledge of Parent, the conduct of the business of Parent and the Parent Subsidiaries as presently conducted does not violate, conflict with, or infringe in any material respect the Intellectual Property of any other Person.
(f) Parent and the Parent Subsidiaries have taken reasonable security measures to protect the confidentiality of the Parent Trade Secrets.
(g) Notwithstanding anything to the contrary contained herein, none of the representations or warranties contained elsewhere in thisArticle IV shall relate to intellectual property matters, which are instead the subject of thisSection 4.10 exclusively.
Section 4.11 Information Technology. The software and content forming part of the websites owned and/or operated by Parent or a Parent Subsidiary and the software systems, servers and other information technology hardware or communications systems or services used by Parent or any Parent Subsidiary (collectively, the “Parent IT Systems”) are, to the Knowledge of Parent, owned exclusively by or are licensed or leased to Parent or a Parent Subsidiary, as applicable. All Parent IT Systems are in good working condition to perform, in all material respects, all information technology operations necessary to conduct the business of Parent and the Parent Subsidiaries as presently conducted.
Section 4.12 Contracts.
(a) Parent Schedule 4.12(a) sets forth a list of each Parent Contract that has not been filed as an exhibit to a Parent SEC Document. “Parent Contracts” means the following Contracts to which Parent or any Parent Subsidiary is a party:
(i) any Contract that is a “material contract” (as such term is defined in Item 601(b)(10) ofRegulation S-K of the Exchange Act) required to be filed as an exhibit to a Parent SEC Document;
(ii) any collective bargaining Contract with any labor organization, union or association, except for terms of employment required by Law;
(iii) any change in control, retention, separation or other similar Contract with any officer or employee that may result in material liabilities to Parent, any Parent Subsidiary and/or the Company (as a result of or in connection with the Merger or any of the other Transactions);
(iv) any Contract or covenant not to compete (other than pursuant to any radius restriction contained in any lease, reciprocal easement or development, construction, operating or similar Contract);
(v) any Contract with any Affiliate of Parent (other than a Parent Subsidiary) that will continue in effect after the Closing;
(vi) any Contract under which Parent or a Parent Subsidiary has borrowed any money from any Person (other than Parent or a Parent Subsidiary) or any other note, bond, debenture, guarantee or other evidence of indebtedness for borrowed money of Parent or a Parent Subsidiary (other than in favor of Parent or a Parent Subsidiary) in any such case that, individually, is in excess of $1,000,000;
(vii) any Contract or any form of Contract providing for indemnification by Parent or a Parent Subsidiary of any current or former employee of Parent or any Parent Subsidiary;
(viii) any Contract under which a claim for indemnification has been made by any Person prior to the date hereof;
(ix) any Contract involving payment by Parent or a Parent Subsidiary of more than $500,000 (unless terminable without payment of a material penalty upon no more than 60 days’ notice), other than vendor agreements entered in the Ordinary Course of Business and Contracts for borrowed money not otherwise required to be disclosed pursuant to clause (vi) of thisSection 4.12(a);
(x) any Contract for the sale or purchase of any land asset of Parent or a Parent Subsidiary with a purchase price in excess of $1,000,000 (other than home sales in the Ordinary Course of Business); or
(xi) any Contract for any material joint venture, partnership or similar arrangement.
(b) To the Knowledge of Parent, all Parent Contracts are valid, binding and in full force and effect and are enforceable by Parent or the applicable Parent Subsidiary in accordance with their respective terms, except as limited by Laws affecting the enforcement of creditors’ rights generally or by general equitable principles. To the Knowledge of Parent, Parent or the applicable Parent Subsidiary has performed all material obligations required to be performed by it since the Relevant Date to the date hereof under the Parent Contracts, and it is not (with or without notice or lapse of time, or both) in breach or default in any material respect thereunder and, to the Knowledge of Parent, no other party to any Parent Contract is (with or without notice or lapse of time, or both) in breach or default in any material respect thereunder. To the Knowledge of Parent, since the Relevant Date through the date hereof, (i) none of Parent and the Parent Subsidiaries has received written notice of any material breach of any Parent Contract and (ii) none of Parent and the Parent Subsidiaries has received any written notice of the intention of any party to terminate any Parent Contract. True and complete copies of all Parent Contracts not filed as an exhibit to a Parent SEC Document have been made available to the Company.
Section 4.13 Permits. Parent and each Parent Subsidiary is in possession, and in material compliance with the terms, of all Permits of each Governmental Entity necessary for the conduct of the business of Parent and the Parent Subsidiaries as presently conducted, all such Permits are in full force and effect, and Parent is not in default thereunder and has not received notice of any pending or threatened revocation, modification or suspension thereof, the loss of which, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.
Section 4.14 Insurance. All insurance policies maintained with respect to Parent and the Parent Subsidiaries, their respective assets and properties (including all Parent Owned Properties and Parent Leased Properties), and their directors, officers and employees are in full force and effect, and none of Parent or the Parent Subsidiaries is in default thereunder, all premiums due and payable thereon have been paid (other than retroactive or retrospective premium adjustments that are not yet, but may be, required to be paid with respect to any period ending before the Closing Date), and, except in connection with ordinary renewals, no written notice of cancellation, suspension, denial, limitation of coverage, or termination has been received or threatened with respect to any such policy.
Section 4.15 Taxes.
(a) Parent and each Parent Subsidiary has timely filed, or has caused to be timely filed on its behalf, all material Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate in all material respects. All Taxes shown to be due on such Tax Returns, or material Taxes otherwise owed, have been timely paid.
(b) All material assessments for Taxes due with respect to any completed and settled examinations or any concluded litigation have been fully paid. No deficiency or proposed adjustment with respect to Taxes has been
proposed, asserted or assessed in writing against Parent or any Parent Subsidiary which has not been fully paid or adequately reserved in the Parent Financial Statements, in accordance with GAAP.
(c) Each of Parent and the Parent Subsidiaries has withheld, collected and paid over to the appropriate Governmental Entity all material Taxes required by Law to be withheld or collected.
(d) There are no material Liens for Taxes (other than Permitted Liens) on the assets of Parent or any Parent Subsidiary. None of Parent or the Parent Subsidiaries is a party to any Tax allocation, Tax indemnity, or Tax sharing agreement. No written claim has been made by a Governmental Entity in any jurisdiction where Parent or a Parent Subsidiary does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.
(e) Except for any group of which Parent is the common parent, none of Parent or the Parent Subsidiaries is or has been (i) a member of an affiliated group within the meaning of Section 1504(a) of the Code (or any similar group defined under a similar provision of state, local, or foreign Law), (ii) filing a consolidated U.S. federal income Tax Return with any other Person, or (iii) liable for the Taxes of any Person (other than Parent or Parent Subsidiary) under Treasury RegulationSection 1.1502-6 or any analogous or similar provision of Law, or as a transferee or successor, by Contract, or otherwise.
(f) None of Parent or the Parent Subsidiaries has been notified in writing that it is currently under audit by any Governmental Entity or that any Governmental Entity intends to conduct such an audit, and no material action, suit, investigation, claim, assessment, administrative or other court proceeding is pending or, to the Knowledge of Parent, proposed with respect to any alleged deficiency in Taxes.
(g) None of Parent or the Parent Subsidiaries has waived any statute of limitations in respect of any Taxes or agreed to any extension of time with respect to any material Taxes.
(h) None of Parent or the Parent Subsidiaries has distributed the stock of any corporation in a transaction satisfying the requirements of Section 355 of the Code within the last five (5) years, and none of the Parent Capital Stock or the capital stock of, or equity interests in, any Parent Subsidiary has been distributed in a transaction satisfying the requirements of Section 355 of the Code within the last five (5) years.
(i) None of Parent or the Parent’s Subsidiaries will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) use of an improper method of accounting for a taxable period ending on or prior to the Closing Date, (iii) “closing agreement” as described in Code Section 7121 (or any corresponding or similar provision of state, local, ornon-U.S. Law) executed on or prior to the Closing Date, (iv) intercompany transactions or any excess loss account described in Treasury Regulations under Code Section 1502 (or any similar provision of state or local income Tax Law), (v) installment sale or open transaction entered into on or prior to the Closing Date, (vi) prepaid amounts (including for the avoidance of doubt deferred revenue) received on or prior to the Closing Date, or (vii) election under Code Section 108(i).
(j) None of Parent or the Parent Subsidiaries is or has been a party to any “listed transaction,” as defined in Code Section 6707A(c)(2) and Treasury RegulationSection 1.6011-4(b).
(k) Except as set forth inParent Schedule 4.15(k), each of the Parent Subsidiaries has been, since its formation, treated as a disregarded entity for federal and where applicable, state, income Tax purposes as defined in Treasury RegulationSection 301.7701-3(b).
(l) None of Parent or the Parent Subsidiaries has taken any action or knows of any fact, Contract, plan or other circumstance that would reasonably be expected to prevent the Merger from qualifying for the Intended Tax Treatment.
(m) Notwithstanding anything to the contrary contained herein, none of the representations and warranties contained elsewhere in thisArticle IV shall relate to Tax matters, which are instead the subject of thisSection 4.15 andSection 4.19 exclusively.
Section 4.16 Proceedings. As of the date of this Agreement, there is no Proceeding pending or, to the Knowledge of Parent threatened, against Parent, any Parent Subsidiary, any Parent Owned Property or any Parent Leased Property, nor is there any Judgment outstanding against Parent, any Parent Subsidiary, any Parent Owned Property or any Parent Leased Property, that (a) seeks or imposes any material injunctive or other equitable relief, (b) relates to any of the Transactions, or (c) would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.17 Compliance with Laws. Parent and the Parent Subsidiaries are in compliance with all Laws and Judgments applicable to Parent or any Parent Subsidiary, except for such noncompliance that would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. None of Parent or the Parent Subsidiaries has received any written communication during the two years before the date hereof from a Governmental Entity that alleges that Parent or a Parent Subsidiary is not in compliance in any material respect with any Law. Neither Parent nor any Significant Parent Subsidiary, nor, to the Knowledge of Parent, any of their respective directors, officers, employees or agents or any other Person authorized to act, and acting, on behalf of Parent or any Significant Parent Subsidiary has, directly or indirectly, in connection with the business activities of Parent used any corporate funds for unlawful contributions, gifts, entertainment, or other unlawful expenses relating to political activity to or for the benefit of any government official, candidate for public office, political party or political campaign, for the purpose of (A) influencing any act or decision of such government official, candidate, party or campaign, (B) inducing such government official, candidate, party or campaign to do or omit to do any act in violation of a lawful duty, (C) obtaining or retaining business for or with any Person, (D) expediting or securing the performance of official acts of a routine nature or (E) otherwise securing any improper advantage, in each case in violation of the Foreign Corrupt Practices Act of 1977, 15 U.S.C.§§ 78dd-1, et seq.
Section 4.18 Environmental Matters.
(a) Each of Parent and the Parent Subsidiaries is, and, except with respect to matters that have been fully resolved, has been since June 23, 2014, in compliance in all material respects with all Environmental Laws applicable to their respective operations as currently conducted (including possessing and complying with any required Environmental Permits), and, as of the date hereof, there are no administrative or judicial proceedings pending against Parent or any Parent Subsidiary that allege, and, none of Parent or the Parent Subsidiaries has received any written communication during the past two years from a Governmental Entity that alleges, that Parent or a Parent Subsidiary is not in compliance with or is liable or potentially liable under any Environmental Law, except for any such noncompliance, proceedings or communications that would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Each required Environmental Permit is valid and in effect or has been timelyre-applied for, except for the lack of such Environmental Permits that would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
(b) As of the date hereof, none of Parent or the Parent Subsidiaries has received any written notice, demand, request for information, or claim alleging liability on the part of Parent or any Parent Subsidiary as a result of a Release of Hazardous Materials.
(c) None of Parent or the Parent Subsidiaries has received any written notice or request for information with respect to any Parent Offsite Facility regarding potential or actual liability for cleanup or environmental remediation thereof for which the potential or actual liability of Parent or Parent Subsidiary remains unresolved.
(d) Notwithstanding any other provision of this Agreement to the contrary, the representations and warranties made in thisSection 4.18 andSection 4.05 (SEC Documents; Financial Statements; Internal
Controls) are the sole and exclusive representations and warranties made by Parent in this Agreement with respect to Hazardous Materials, Environmental Laws, Environmental Permits and any other matter related to the environment or the protection of human health or worker safety.
Section 4.19 Employee Benefits.
(a) Parent Schedule 4.19(a) sets forth a list of all “employee pension benefit plans” (as defined in Section 3(2) of ERISA) (“Parent Pension Plans”), “employee welfare benefit plans” (as defined in Section 3(1) of ERISA) and all other material bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical and other plans, arrangements or understandings (collectively, “Parent Benefit Plans”) maintained, or contributed to, by Parent or any Parent ERISA Affiliate for the benefit of any current or former employees, directors, and/or independent contractors of Parent or any Parent Subsidiary. Parent has made available to the Company copies of (i) the most recent version of each Parent Benefit Plan and any amendments made thereto, (ii) the three most recent annual report on Form 5500 filed with the Internal Revenue Service with respect to each Parent Benefit Plan or equivalent filing in any relevant jurisdiction (if any such report was required) and all attachments thereto, (iii) the most recent summary plan description for each Parent Benefit Plan for which such summary plan description is required; (iv) each trust agreement and group annuity contract relating to any Parent Benefit Plan; (v) the nondiscrimination testing results for the last three plan years for each Parent Benefit Plan that is subject to nondiscrimination testing under ERISA and/or the Code; and (vi) the most recent Internal Revenue Service favorable determination or opinion letter for each such Parent Benefit Plan that is intended to qualify under Section 401(a) of the Code.
(b) With respect to each Parent Benefit Plan: (i) each has been administered in compliance, in all material respects, with its terms and with applicable Laws including, without limitation, ERISA and the Code; (ii) no actions, suits, claims, audits, inquiries, reviews, proceedings, claims, or demands are pending or to the Knowledge of Parent, threatened; (ii) all premiums, contributions, or other payments required to have been made by Law or under the terms of any Parent Benefit Plan or any contract or agreement relating thereto as of the Closing Date have been made; and (iv) there have been no acts or omissions by Parent or any Parent ERISA Affiliate that have given or could give rise to any fines, penalties, taxes or related charges under Sections 502 or 4071 of ERISA or Section 511 or Chapter 43 of the Code, or under any other applicable Law.
(c) With respect to the United States of America, all Parent Pension Plans have been the subject of determination or opinion letters from the Internal Revenue Service to the effect that such Parent Pension Plans are qualified and exempt from U.S. federal income Taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such determination letter has been revoked nor, to the Knowledge of Parent, has revocation been threatened.
(d) None of Parent, any Parent Subsidiary, any officer of Parent or any Parent Subsidiary or any of the Parent Benefit Plans that are subject to ERISA, including the Parent Pension Plans, any trusts created thereunder or any trustee or administrator thereof, has engaged in a “prohibited transaction” (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any other breach of fiduciary responsibility that, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.
(e) No Parent Benefit Plan is, and none of Parent or any Parent ERISA Affiliate contributes to, is required to contribute to, or otherwise participates in or in any way has any material liability, directly or indirectly, with respect to (i) any plan subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, (ii) any “multiemployer plan” (within the meaning of Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code), (iii) any single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) that is subject to Sections 4063, 4064 or 4069 of ERISA or Section 413(c) of the Code, that covers or has covered any employee of Parent or any Parent ERISA Affiliate; or (iv) any plan or arrangement that provides for post-
employment medical benefits (other than health continuation coverage required by Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA or otherwise as required by Law.
Section 4.20 Labor. As of the date hereof, no employee of Parent or any of the Parent Subsidiaries is represented by any union or covered by any collective bargaining agreement. As of the date hereof, no labor organization or group of employees of Parent or any of the Parent Subsidiaries has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Knowledge of Parent, threatened to be brought or filed, with the National Labor Relations Board or any other labor relations Governmental Entity.
Section 4.21 Affiliate Transactions.
(a) Except as set forth inParent Schedule 4.21, since January 1, 2014, there has been no transaction, or series of similar transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions, or series of similar transactions, agreements, arrangements or understandings to which Parent or any of Parent Subsidiary was or is to be a party that would be required to be disclosed under Item 404 ofRegulation S-K promulgated under the Securities Act that has not been so disclosed.
(b) There are no loans by Parent or any Parent Subsidiary to any officer of Parent or any officer of any Parent Subsidiary outstanding as of the date hereof.
Section 4.22 Brokers; Fees and Expenses. No broker, investment banker, financial advisor or other Person, other than J.P. Morgan Securities LLC (the “Parent Financial Advisor”), the fees and expenses of which will be paid by Parent, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the Merger and the other Transactions based upon arrangements made by or on behalf of Parent.
Section 4.23 Ownership of Company Common Stock. None of Parent, Merger Sub or any of their “affiliates” or “associates” is, or at any time during the three-year period ending on the date hereof has been, an “interested stockholder” of the Company, in each case as defined in either Section 203 of the DGCL or Article XII of the Company Charter. Except in respect of the Voting Agreement, neither Parent nor Merger Sub beneficially owns (within the meaning of Section 13 of the Exchange Act and the rules and regulations promulgated thereunder), or will at any time prior to the Closing Date beneficially own, any shares of Company Common Stock or other securities convertible into, exchangeable for or exercisable for shares of Company Common Stock or any securities of any Company Subsidiary, or is a party, or will at any time prior to the Closing Date become a party, to any Contract, arrangement or understanding (other than this Agreement and the Voting Agreement) for the purpose of acquiring, holding, voting or disposing of any shares of Company Common Stock or other securities convertible into, or exchangeable or exercisable for, shares of Company Common Stock or any securities of any Company Subsidiary.
Section 4.24 Availability of Funds; Financing. Parent has cash on hand and available borrowing capacity sufficient in the aggregate to fund all of its payment obligations set forth inArticle II, and to pay all fees and expenses payable by it in respect of the Merger and the other Transactions.
Section 4.25 Capitalization and Operation of Merger Sub. The authorized share capital of Merger Sub consists of 1,000 shares, par value $0.01 per share, of which 1,000 shares are validly issued and outstanding. All the issued and outstanding shares of Merger Sub are, and at the Effective Time will be, owned by Parent or a direct or indirect wholly-owned Parent Subsidiary. Merger Sub was formed solely for the purpose of engaging in the Transactions, and it has not conducted any business prior to the date hereof and has no assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement and the Transactions.
Section 4.26 No Additional Representations; ExtrinsicNon-Reliance. Each of Parent and Merger Sub acknowledges that it and its Representatives have been permitted full and complete access to the books and records, facilities, equipment, Tax returns, Contracts, insurance policies (or summaries thereof) and other properties and assets of the Company and the Company Subsidiaries that it and its Representatives have desired or requested to see or review, and that it and its Representatives have had a full opportunity to meet with the officers and employees of the Company and the Company Subsidiaries to discuss the business of the Company and the Company Subsidiaries. Each of Parent and Merger Sub acknowledges that (a) neither the Company nor any other Person has made any representation or warranty, express or implied, as to the Company or any Company Subsidiary or the accuracy or completeness of any information regarding the Company and the Company Subsidiaries furnished or made available to Parent, Merger Sub and their respective Representatives, except as expressly set forth in this Agreement, (b) neither Parent nor Merger Sub has relied on and each of Parent and Merger Sub hereby waives any reliance on any representation or warranty from the Company, any Company Subsidiary or any other Person in determining to enter into this Agreement, except those representations and warranties expressly set forth in this Agreement, and (c) no Person shall have or be subject to any liability to Parent or any other Person resulting from the distribution to Parent or Merger Sub, or Parent’s or Merger Sub’s use, of any such information, including any information, documents or material made available to Parent or Merger Sub in any physical or electronic “data rooms,” management presentations or in any other form in expectation of the Transactions. Without limiting the generality of the foregoing, each of Parent and Merger Sub acknowledges that neither the Company nor any other Person has made any representation or warranty, express or implied, as to the financial projections, forecasts, capital budgets, cost estimates and other predictions relating to the Company and the Company Subsidiaries made available to Parent.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.01 Conduct of Business by the Company. Except for matters set forth inCompany Schedule 5.01 or otherwise contemplated by this Agreement, from the date of this Agreement to the Effective Time, the Company shall, and shall cause each Company Subsidiary to, conduct its business in the Ordinary Course of Business and, to the extent consistent therewith, use all reasonable efforts to preserve intact its current business organization, maintain its rights and Permits, keep available the services of its current officers and employees and keep its relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with them, and maintain its respective properties and assets in their current state of repair, order, functionality and condition, reasonable wear and tear excepted, to the end that its goodwill and ongoing business shall be unimpaired at the Effective Time. In addition, and without limiting the generality of the foregoing, except for matters set forth inCompany Schedule 5.01 or otherwise expressly provided for by this Agreement, from the date of this Agreement to the Effective Time, the Company shall not, and shall not permit any Company Subsidiary to, do any of the following without the prior written consent of Parent, which consent shall not be unreasonably withheld, conditioned or delayed:
(a) (i) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, other than dividends and distributions by a direct or indirect Subsidiary of the Company to its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (iii) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any Company Subsidiary or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities, except for shares of Company Common Stock delivered to the Company to pay the exercise price or tax withholding obligations under any Company Option or Company Restricted Stock Unit award;
(b) issue, deliver, sell or grant (i) any shares of its capital stock, (ii) any Voting Company Debt or other voting securities, or (iii) any securities convertible into or exchangeable for any shares of capital stock of the Company, other than (A) the issuance of Company Common Stock upon the exercise of Company Options outstanding on the date of this Agreement and in accordance with their present terms and (B) the issuance of Company Common Stock upon the Exchange;
(c) amend its certificate of incorporation,by-laws or other comparable charter or organizational documents, except for such amendments to its certificate of incorporation,by-laws and other comparable charter or organizational documents that do not have an adverse effect on the Merger and the other Transactions, or adopt a plan of complete or partial liquidation or resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of the Company;
(d) acquire or agree to acquire (i) by merging or consolidating with, or by purchasing all or substantially all the assets of or all or substantially all the outstanding Equity Interests in, any business or any corporation, partnership, joint venture, limited liability company or other company, association or other business organization or (ii) any assets or real property, in the case of (i) or (ii), which acquisition or acquisitions would be material, individually or in the aggregate, to the Company and the Company Subsidiaries, taken as a whole, except purchases of land in the Ordinary Course of Business (including entering into option contracts to acquire (and purchasing pursuant to the terms of such contracts) land (or an ownership interest in an entity holding land));
(e) except for (1) retention bonus awards and payments to be paid pursuant to the retention plan described inSection 6.04(d), (2) increases in compensation, and/or (3) increases in severance or termination pay, not to exceed $1,000,000 in the aggregate, which in each case shall be subject to prior review and approval (not to be unreasonably withheld, conditioned or delayed) by Parent, (i) grant to any officer or director of the Company or any Company Subsidiary any increase in compensation, except for such increases in compensation that are required under employment Contracts in effect as of the date hereof, (ii) grant to any officer or director of the Company or any Company Subsidiary any increase in severance or termination pay, except for such increases in severance and termination pay that are required under Contracts in effect as of the date hereof, (iii) enter into any severance or termination agreement with any such officer or director, (iv) establish, adopt, extend, renew, enter into or amend in any material respect any collective bargaining agreement or any Company Benefit Plan, or (v) take any action to accelerate any rights or benefits, or make any material determinations under any collective bargaining agreement or Company Benefit Plan in effect as of the date hereof, except as required by the terms of such collective bargaining agreement or Company Benefit Plan;
(f) make any change in accounting methods, principles or practices materially affecting the reported consolidated assets, liabilities or results of operations of the Company, except as may be required by a change in GAAP;
(g) sell, lease (as lessor), license or otherwise dispose of or subject to any Lien any Company Property or any of its land assets with an aggregate valuation in excess of $1,000,000, other than vertical construction financing in the Ordinary Course of Business;
(h) sell, lease (as lessor), license or otherwise dispose of or subject to any Lien any of its properties or assets that are material, individually or in the aggregate, to the Company and the Company Subsidiaries, taken as a whole, except sales of inventory and excess or obsolete assets in the Ordinary Course of Business;
(i) incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any Company Subsidiary or guarantee any debt securities of another Person, except for trade debt, operating liabilities and other similar unsecured, short-term indebtedness incurred in the Ordinary Course of Business;
(j) make or agree to make any new capital expenditure that, individually, is in excess of $500,000, except to the extent provided for in the Company’s budget for 2017 previously made available to Parent;
(k) (i) make (except for elections made in the ordinary course of business) or change any material Tax election, (ii) change any Tax accounting period for purposes of a material Tax or material method of Tax accounting, (iii) file any material amended Tax Return, (iv) settle or compromise any audit or proceeding relating to a material amount of Taxes, except in the ordinary course of business, (v) agree to an extension or waiver of
the statute of limitations with respect to a material amount of Taxes, (vi) enter into any “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of state, local ornon-U.S. Law) with respect to any material Tax, (vii) surrender any right to claim a material Tax refund, or (viii) take any action that would require filing of a “gain recognition agreement” (within the meaning of the Treasury Regulations promulgated under Section 367 of the Code) to avoid current recognition of a material amount of income or gain for U.S. federal income Tax purposes;
(l) make any loan or advance (other than loans or advances that will be repaid before Closing) to any of its Affiliates, officers or directors, other than in the Ordinary Course of Business and except for any advancement obligations under the Company Charter, Company Bylaws or the comparable charter or organizational documents of any Company Subsidiary; or
(m) authorize any of, or resolve, commit or agree to take any of, the foregoing actions.
Section 5.02 No Solicitation; Change of Company Recommendation.
(a) Termination of Existing Discussions. The Company, each of the Company Subsidiaries, and the respective directors, officers, employees and controlled Affiliates of the Company and of each of the Company Subsidiaries shall, and the Company shall instruct each of its Representatives to, cease immediately and cause to be immediately terminated all soliciting activities, discussions and negotiations and access to nonpublic information with, to or by any Person (other than Parent or Merger Sub) regarding any proposal, expression of interest, request for information or other communication that constitutes, or could reasonably be expected to lead to, any Company Takeover Proposal. The Company shall promptly (but not later than one (1) Business Day after the first public announcement of this Agreement) request that each Person (other than Parent and Merger Sub) with which or whom the Company heretofore has entered into a confidentiality, standstill or similar agreement or otherwise has had discussions or negotiations, in each case, regarding any offer, proposal, expression of interest, request for information or other communication that constitutes, constituted, or reasonably could be expected to lead to, any Company Takeover Proposal (any such Persons and their Affiliates and Representatives being referred to as “Prior Company Bidders”), that is in possession of, or was furnished with or provided access to, any Company nonpublic information, immediately return to the Company or destroy (with a certification of such destruction delivered to the Company if such a certification is required by such confidentiality, standstill or similar agreement, or with the Company requesting a certification of such destruction delivered to the Company if such a certification is not required by such confidentiality, standstill or similar agreement) all such nonpublic information, and, to the extent not heretofore terminated, the Company and its Representatives shall immediately terminate all physical and electronic data room access previously granted to any such Prior Company Bidder.
(b) Prohibition on Soliciting Activities. Except as expressly permitted by thisSection 5.02, from the date hereof until the earlier of the Effective Time and the termination of this Agreement in accordance withArticle VIII, the Company shall not, nor shall it authorize any of its Representatives or permit any of its controlled Affiliates to, and the Company shall instruct each of its Representatives not to, on behalf of the Company, directly or indirectly, (i) solicit, initiate, or knowingly encourage or facilitate any inquiries or the making, announcement or submission to the Company of any expression of interest, proposal or offer that constitutes, or reasonably would be expected to lead to, any Company Takeover Proposal, (ii) enter into any agreement (whether binding,non-binding, conditional or otherwise) with respect to any Company Takeover Proposal (other than an Acceptable Confidentiality Agreement entered into in compliance withSection 5.02(c)), (iii) other than with respect to Parent, Merger Sub, the Confidentiality Agreement and the Standstill Agreements, fail to enforce, release any Person from, terminate or waive or render inapplicable, or amend in any manner less favorable to the Company, the provisions of any confidentiality, standstill or other similar agreement currently in effect to which the Company or any of the Company Subsidiaries is a party, with respect to a Company Takeover Proposal, (iv) “opt out” of, waive or amend, or take any action to render inapplicable to any Person (other than Parent and Merger Sub) or to any Company Takeover Proposal (other than the Merger and the other Transactions), the provisions of any Anti-Takeover Laws or of Article XII of the Company Charter, or (v) engage
in, continue, or participate in any discussions or negotiations with, or furnish anynon-public Company information (whether orally or in writing) or access to the business, properties, assets, liabilities, books or records of the Company or any Company Subsidiary to, or otherwise knowingly cooperate with, assist, or participate in any effort by, any Person (or any Representative of any Person) that has made, is seeking to make, has informed the Company or any of its controlled Affiliates of any intention to make, or has publicly announced an intention to make, any proposal that constitutes, or reasonably would be expected to lead to, any Company Takeover Proposal. The Company shall be responsible for any action or inaction taken or omitted to be taken by its or its controlled Affiliates’ Representatives, to the extent acting on its or their behalf or at its or their direction, relating to any matters contemplated by thisSection 5.02(b).
(c) Discussions Permitted in Certain Circumstances. Notwithstanding anything to the contrary contained in this Agreement, includingSection 5.02(b) (Prohibition on Soliciting Activities), if at any time from and after the date hereof and prior to receipt of the Company Stockholder Approval, the Company receives from any Person or group a written Company Takeover Proposal that has not been withdrawn and that the Company Board (which, for purposes of thisSection 5.02, shall be deemed to include any duly authorized committee thereof) determines in good faith, After Consultation, constitutes, or would reasonably be expected to lead to, a Superior Company Proposal that did not result from a breach ofSection 5.02(a) (Termination of Existing Discussions) orSection 5.02(b) (Prohibition on Soliciting Activities), then the Company and any of its Representatives shall , subject to compliance withSection 5.02(f) (Required Notices), be permitted to (A) furnish to such Person or group and its or their Representatives, pursuant to an Acceptable Confidentiality Agreement (a copy of which shall be furnished to Parent within one Business Day of the execution thereof by the Company), information with respect to the Company and the Company Subsidiaries and (B) engage or participate in any discussions or negotiations with such Person, group and its or their Representatives regarding any Company Takeover Proposal; it being hereby acknowledged and agreed that nothing contained in thisSection 5.02(c) shall be deemed to prohibit the Company or its Representatives from contacting any Person who has submitted (not in violation ofSection 5.02(a) orSection 5.02(b)) to the Company or its Representatives a written offer, expression of interest or proposal, which has not been withdrawn, for the sole purpose of ascertaining any necessary clarification of the material terms and conditions thereof (subject to compliance withSection 5.02(f) (Required Notices). The Company shall make available to Parent copies of all materialnon-public information (to the extent such information has not previously been furnished or made available to Parent) that it has furnished or made available to any such Person in accordance with the preceding sentence before or substantially concurrently with the time such information is furnished or made available to such Person. Notwithstanding anything to the contrary in this Agreement, the Confidentiality Agreement or the Standstill Agreements, if any Acceptable Confidentiality Agreement is entered into after the date hereof between the Company and any other Person (to the extent permitted by thisSection 5.02(c)) which contains provisions that are less restrictive on such Person and/or less favorable to the Company than the provisions of the Confidentiality Agreement or the Standstill Agreements are on Parent, such provisions of the Confidentiality Agreement and/or the Standstill Agreements automatically shall be amended and modified without the necessity of further action by any party thereto so that the provisions set forth therein as so amended and modified are no more restrictive as to Parent or less favorable to the Company than the provisions applicable to such Person pursuant to such Acceptable Confidentiality Agreement.
(d) Company Recommendation. Except as expressly permitted bySection 5.02(e) (Change in Recommendation Permitted in Certain Circumstances), neither of the Company Board nor any duly authorized committee thereof shall (i) fail to include in the Proxy Statement the Company Recommendation or otherwise fail to make the Company Recommendation; (ii) change, modify, withhold, qualify or withdraw, or resolve or propose publicly to change, modify, withhold, qualify or withdraw, in each case, in a manner adverse to Parent, the Company Recommendation; (iii) make any recommendation or public announcement in response to a tender or exchange offer commenced by any Person(s), other than an express recommendation (made pursuant toRule 14e-2(a)(1) under the Exchange Act) that the Company’s stockholders reject such tender or exchange offer, or a temporary “stop-look-listen” communication by the Company Board (made pursuant toRule 14d-9(f) under the Exchange Act); (iv) fail to publicly recommend against a Company Takeover Proposal, or fail to publicly
reaffirm the Company Recommendation, in each case, within ten (10) Business Days after any written request by Parent to do so, which is transmitted to the Company subsequent to any public announcement by any Person of a Company Takeover Proposal (provided,however, the Company shall not be obligated to publicly recommend against a Company Takeover Proposal or to publicly reaffirm the Company Recommendation upon such a request by Parent more than once in respect of any publicly announced Company Takeover Proposal, it being acknowledged and agreed that the public announcement of a material modification to such Company Takeover Proposal shall be considered a new Company Takeover Proposal for purposes of this clause (iv)); or (v) enter into, approve, adopt or recommend, or resolve or propose publicly to enter into, approve, adopt or recommend, any Company Takeover Proposal or any letter of intent,agreement-in-principle, expression of interest, term sheet, merger agreement, acquisition or business combination agreement, asset sale or transfer agreement, restructuring, reorganization or recapitalization agreement, option agreement, joint venture agreement, partnership agreement, or other Contract contemplating, or providing for, a Company Takeover Proposal (other than an Acceptable Confidentiality Agreement permitted bySection 5.02(c) (Discussions Permitted in Certain Circumstances)) (any one or more of the foregoing actions enumerated inclauses (i),(ii),(iii) and(iv) of thisSection 5.02(d) constituting, a “Company Recommendation Change”).
(e) Change in Recommendation Permitted in Certain Circumstances. Prior to obtaining the Company Stockholder Approval, the Company Board shall be permitted to make a Company Recommendation Change solely in the manner and to the extent hereafter expressly set forth in thisSection 5.02(e) in response to either (i) a Company Superior Proposal that did not result from a violation in any material respect of thisSection 5.02, or (ii) a Company Intervening Event, in each case only if the Company Board shall have determined in good faith, After Consultation, that a failure to do so would be inconsistent with the fiduciary duties of the Company Board under applicable Law. Notwithstanding any other provision of this Agreement, at no time shall the Company Board be permitted to make a Company Recommendation Change, unless: (A) the Company has given Parent at least four (4) Business Days’ prior written notice that the Company Board intends to make a Company Recommendation Change (a “Company Recommendation Change Notice”), which notice shall include, (1) if Company Recommendation Change is to be made in response to a Superior Company Proposal, the identity of the Person making the Superior Company Proposal, the material terms thereof and a true and complete copy of the proposed agreement or proposal with respect to such Superior Company Proposal (including all proposed material transaction documents in connection therewith and material exhibits and schedules, but redacting, if required by any financing source, the amount of any commitment fee and financing fee information), or (2) if the Company Recommendation Change is to be made in respect of a Company Intervening Event, a reasonable summary of the material underlying facts, conditions and circumstances giving rise to the occurrence and continuing existence of such Company Intervening Event, (B) during the four (4) Business Day period commencing on the date of receipt by Parent of the Company Recommendation Change Notice, the Company and its Representatives shall negotiate in good faith with Parent and its Representatives, to the extent Parent desires to negotiate, so that Parent may propose in writing a binding offer to make such adjustments to the terms and conditions of this Agreement to enable the Company Board to determine that (x) the Superior Company Proposal referred to in the Company Recommendation Change Notice no longer constitutes a Superior Company Proposal or (y) the failure to make a Company Recommendation Change in respect of the Company Intervening Event referred to in the Company Recommendation Change Notice would no longer be inconsistent with the fiduciary duties of the Company Board under applicable Law, and (C) at the end of such four (4) Business Day period, the Company Board shall have considered in good faith and given effect to the terms of such binding offer and shall have determined in good faith, After Consultation, that, (x) the Superior Company Proposal, referred to in the Company Recommendation Change Notice, continues to constitute a Superior Company Proposal or (y) the failure of the Company Board to make a Company Recommendation Change in respect of the Company Intervening Event referred to in the Company Recommendation Change Notice would continue to be inconsistent with the Company Board’s fiduciary duties under applicable Law (it being hereby acknowledged and agreed that that any proposed amendment or modification to the material terms of any Superior Company Proposal submitted to the Company by any Person who previously submitted to the Company a Superior Company Proposal shall require a new written notice to Parent from the Company and a three (3) Business Day notice and negotiation period shall thereupon commence anew under thisSection 5.02(e)). For purposes of
clarification and certainty, under no circumstances shall the Company be permitted to terminate this Agreement in respect of a Superior Company Proposal unless it shall have concurrently complied in all respects with the requirements of thisSection 5.02(e) andSection 8.01(f) (Termination by the Company before Receipt of Company Stockholder Approval), and under no circumstances shall the Company be permitted to terminate this Agreement in respect of, or due to any Company Recommendation Change made by the Company Board solely in response to, a Company Intervening Event. The Company hereby expressly confirms and agrees that the immediately preceding sentence of thisSection 5.02(e), to the extent it relates to a Company Recommendation Change solely in response to or in respect of a Company Intervening Event, has been agreed to by the parties hereto pursuant to Section 146 of the DGCL.
(f) Required Notices. At any time prior to obtaining the Company Stockholder Approval, the Company shall notify Parent or its Representatives in writing promptly (and in any case within one (1) Business Day after knowledge of Parent of the receipt thereof) of its or any of its controlled Affiliates’ receipt of any Company Takeover Proposal, and disclose to Parent the identity of the Person making any such Company Takeover Proposal and the material terms of any such Company Takeover Proposal. The Company shall keep Parent informed on a reasonably timely basis of the status of any such Company Takeover Proposal, including any change to the material terms thereof. The terms and existence of any such Company Takeover Proposal and the identity of such Person (if not publicly disclosed by the Company or such Person), shall be subject to the confidentiality obligations imposed on Parent pursuant to the Confidentiality Agreement.
(g) Disclosures Under Law. Nothing in thisSection 5.02 or elsewhere in this Agreement shall prohibit the Company Board from (i) taking and disclosing to the Company’s stockholders a position contemplated byRule 14e-2(a) orRule 14d-9 under the Exchange Act or Item 1012(a) of RegulationM-A under the Exchange Act, or (ii) making any disclosure to the Company’s stockholders under applicable Law if the Company Board determines in good faith, After Consultation, that the failure to do so would be inconsistent with the fiduciary duties of the Company’s directors under applicable Law or violate other applicable Law;provided,however, that nothing in thisSection 5.02(g) shall, for purposes of this Agreement, permit the Company to make a Company Recommendation Change except in the manner and under the specific circumstances expressly set forth inSection 5.02(e) (Change in Recommendation Permitted in Certain Circumstances), and it is hereby acknowledged and agreed that a factually accurate public statement by the Company that describes only the Company’s receipt of a Company Takeover Proposal and the operation with respect thereto of thisSection 5.02 andSection 8.01(f) (Termination by the Company before Receipt of Company Stockholder Approval) in respect thereof, shall not be deemed a Company Recommendation Change for purposes of this Agreement.
Section 5.03 Conduct of Business by Parent. Except for matters set forth inParent Schedule 5.03 or otherwise contemplated by this Agreement, from the date of this Agreement to the Effective Time, Parent shall, and shall cause each Parent Subsidiary to, conduct its business in the Ordinary Course of Business and, to the extent consistent therewith, use all reasonable efforts to preserve intact its current business organization, maintain its rights and Permits, keep available the services of its current officers and employees and keep its relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with them, and maintain its respective properties and assets in their present state of repair, order, functionality and condition, reasonable wear and tear excepted, to the end that its goodwill and ongoing business shall be unimpaired at the Effective Time. In addition, and without limiting the generality of the foregoing, except for matters set forth inParent Schedule 5.03 or otherwise expressly provided for by this Agreement, from the date of this Agreement to the Effective Time, Parent shall not, and shall not permit any Parent Subsidiary to, do any of the following without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed:
(a) (i) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, other than dividends and distributions by a direct or indirect Subsidiary of Parent to its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (iii) purchase, redeem or otherwise
acquire any shares of capital stock of Parent or any Parent Subsidiary or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities, except for (A) shares of Parent Common Stock delivered to Parent to pay the exercise price or tax withholding obligations under any Parent Option or Parent Restricted Stock award, and (B) shares of Parent Common Stock repurchased by Parent under its stock repurchase program;
(b) issue, deliver, sell or grant (i) any shares of its capital stock, (ii) any Voting Parent Debt or other voting securities or (iii) any securities convertible into or exchangeable for any shares of capital stock of Parent, other than (A) the issuance of Parent Common Stock upon the exercise of Parent Options outstanding on the date of this Agreement and in accordance with their present terms, (B) the issuance of additional Parent Options, shares of Parent Restricted Stock, or Parent Restricted Stock Units pursuant to the Parent Stock Plan in accordance with its present terms and consistent with prior practice, and the issuance of Parent Common Stock upon the exercise of such Parent Options or the settlement of such Parent Restricted Stock Units, and (C) the issuance of Parent Common Stock under its current and future (if any)at-the-market offering programs;
(c) amend its certificate of incorporation,by-laws or other comparable charter or organizational documents, except for such amendments to its certificate of incorporation,by-laws and other comparable charter or organizational documents that do not have an adverse effect on the Merger and the other Transactions, or adopt a plan of complete or partial liquidation or resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Parent;
(d) acquire or agree to acquire (i) by merging or consolidating with, or by purchasing all or substantially all the assets of or all or substantially all the outstanding Equity Interests in, any business or any corporation, partnership, joint venture, limited liability company or other company, association or other business organization or (ii) any assets or real property, in the case of (i) or (ii), which acquisition or acquisitions would be material, individually or in the aggregate, to Parent and the Parent Subsidiaries, taken as a whole, except purchases of land in the Ordinary Course of Business (including entering into option contracts to acquire (and purchasing pursuant to the terms of such contracts) land (or an ownership interest in an entity holding land));
(e) make any change in accounting methods, principles or practices materially affecting the reported consolidated assets, liabilities or results of operations of Parent, except as may be required by a change in GAAP;
(f) sell, lease (as lessor), license or otherwise dispose of or subject to any Lien any Parent Property or any of its land assets with an aggregate valuation in excess of $1,000,000, other than in the Ordinary Course of Business;
(g) sell, lease (as lessor), license or otherwise dispose of or subject to any Lien any of its properties or assets that are material, individually or in the aggregate, to Parent and the Parent Subsidiaries, taken as a whole, except sales of inventory and excess or obsolete assets in the Ordinary Course of Business;
(h) incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of Parent or any Parent Subsidiary or guarantee any debt securities of another Person, except for borrowings incurred in the Ordinary Course of Business and offerings and sales of notes;
(i) make any loan or advance (other than loans or advances that will be repaid before Closing) to any of its Affiliates, officers or directors, other than in the Ordinary Course of Business; or
(j) authorize any of, or resolve, commit or agree to take any of, the foregoing actions.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 Preparation of theS-4 Registration Statement and the Proxy Statement; Stockholders Meeting.
(a) As soon as practicable (but not later than 21 days) following the date of this Agreement, the Company and Parent shall jointly prepare, and Parent shall file with the SEC, theS-4 Registration Statement, in which the Proxy Statement will be included as a prospectus. Each of the Company and Parent shall use all reasonable efforts to (i) cause theS-4 Registration Statement to be declared effective by the SEC under the Securities Act as promptly as practicable after such filing, (ii) ensure that theS-4 Registration Statement complies in all material respects with the applicable provisions of the Exchange Act, and (iii) keep theS-4 Registration Statement effective for as long as necessary to complete the Merger and the issuance of the Stock Consideration in connection therewith. Each of the Company and Parent shall (1) cooperate with each other in the preparation of theS-4 Registration Statement and the Proxy Statement, (2) furnish to the other party all information concerning itself, its Affiliates, and the holders of Company Common Stock and Parent Common Stock (as applicable) that is necessary or appropriate in connection with the preparation of theS-4 Registration Statement and the Proxy Statement, and (3) provide such other assistance as may reasonably be required by such other party in connection with the preparation, filing and distribution of theS-4 Registration Statement and the Proxy Statement.
(b) Each of the Company and Parent shall (i) in advance of any filings with the SEC and written communications to its staff by such party, provide the other party a reasonable opportunity to review and provide to such party its reasonable comments with respect thereto (including the proposed final version of such document or response), (ii) promptly notify the other party of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to theS-4 Registration Statement or the Proxy Statement or for additional information, (iii) supply the other party with copies of all correspondence between such party or any of its Representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to theS-4 Registration Statement, the Proxy Statement or the Merger, and (iv) give the other party an opportunity to participate in any discussions or meetings such party has with the SEC or its staff in connection with theS-4 Registration Statement, the Proxy Statement or the Merger. Each of the Company and Parent shall use all reasonable efforts to respond as promptly as practicable to any comments of the SEC with respect to the Proxy Statement, and Parent shall use all reasonable efforts to respond as promptly as practicable to any comments of the SEC with respect to theS-4 Registration Statement.
(c) If before the Effective Time, any event occurs with respect to the Company, Parent, or any Company Subsidiary or Parent Subsidiary, or any change occurs with respect to other information supplied by the Company or Parent for inclusion in theS-4 Registration Statement or the Proxy Statement, which is required to be described in an amendment of, or a supplement to, theS-4 Registration Statement or the Proxy Statement (including discovery of any document containing any misstatement of a material fact or omission of a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not false or misleading), the Company and Parent shall promptly notify each other of such event and cooperate, in good faith, in the prompt filing with the SEC of any necessary amendment or supplement to theS-4 Registration Statement or the Proxy Statement and, as required by law, in disseminating the information contained in such amendment or supplement to the Company’s stockholders and the Parent’s stockholders.
(d) Notwithstanding any other provision herein to the contrary, no amendment or supplement (including by incorporation by reference) to the Proxy Statement or theS-4 Registration Statement will be made without the approval of both the Company and Parent, which approval will not be unreasonably withheld, conditioned or delayed;provided, however,that with respect to documents filed by a party that are incorporated by reference in theS-4 Registration Statement or the Proxy Statement, this right of approval will apply only with respect to information relating to the other party or its business, financial condition or results of operations, or the combined entity. The Company shall use all reasonable efforts to cause the Proxy Statement to be mailed to its
stockholders entitled to notice of and to vote at the Company Stockholders Meeting as promptly as practicable after theS-4 Registration Statement is declared effective under the Securities Act. Parent shall advise the Company, promptly after receipt of notice thereof, of the time of effectiveness of theS-4 Registration Statement, the issuance of any stop order relating thereto, or the suspension of the qualification of the Parent Common Stock included in the Merger Consideration for offering or sale in any jurisdiction, and Parent shall use all reasonable efforts to have any such stop order or suspension lifted, reversed or otherwise terminated.
(e) Unless this Agreement shall have been terminated in accordance withArticle VIII, the Company shall, as soon as practicable after theS-4 Registration Statement is declared effective under the Securities Act, in accordance with applicable Law and the Company Charter and CompanyBy-laws, establish a record date for, duly call, give notice of, convene and hold a meeting of its stockholders (as it may be adjourned, postponed or rescheduled from time to time, the “Company Stockholders Meeting”) for the purpose of obtaining the Company Stockholder Approval. Without limiting the generality of the foregoing, the Company agrees that its obligations pursuant to thisSection 6.01(e) or otherwise under this Agreement shall not be affected by (i) the receipt by the Company or any of its Representatives, or the commencement, public proposal, public disclosure or other communication to the Company, of any Company Takeover Proposal, or (ii) any Company Recommendation Change (if this Agreement has not been terminated in accordance withSection 8.01(d) (Termination by Parent due to Company Recommendation Change) orSection 8.01(f) (Termination by the Company before Receipt of Company Stockholder Approval). Notwithstanding any provision of this Agreement to the contrary, the Company may, in its sole discretion, adjourn, recess or postpone any then scheduled Company Stockholders Meeting, and may change the record date thereof, if (and only if) (A) the Company Board (or a duly authorized committee thereof) determines in good faith, After Consultation, that such adjournment, recess or postponement is necessary or advisable to ensure that any supplement or amendment to theS-4 Registration Statement or the Proxy Statement is provided to the stockholders of the Company a reasonable amount of time in advance of the Company Stockholders Meeting, (B) as of the time for which any then scheduled Company Stockholders Meeting is scheduled, there are insufficient shares of Company Capital Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Company Stockholders Meeting or to the extent that at such time the Company has not received proxies sufficient to allow the receipt of the Company Stockholder Approval at the Company Stockholders Meeting, or (C) to the extent required by applicable Law. The Company shall permit Representatives of Parent to attend the Company Stockholders Meeting.
(f) The Company shall engage a recognized proxy solicitation firm promptly after the date hereof and shall keep Parent reasonably informed on a current basis of its proxy solicitation efforts and quorum share returns and voting tallies from and after the mailing by the Company of the Proxy Statement, including by permitting Parent and its Representatives to participate (which can be by telephonic means) in any substantive meetings or discussions with the Company’s proxy solicitation firm regarding the Company’s proxy solicitation efforts and strategy for obtaining the Company Stockholder Approval, to the extent practicable;provided,however, that the foregoing right of Parent and its Representatives to participate in such meetings and discussions shall not apply from and after the time the Company Board (or any duly authorized committee thereof) (to the extent expressly permitted bySection 5.02(e) (Change in Recommendation Permitted in Certain Circumstances)) shall have made and publicly announced a Company Recommendation Change (unless any such Company Recommendation Change shall have been subsequently withdrawn by the Company Board (or such committee) and this Agreement shall not theretofore have been terminated).
Section 6.02 Access to Information; Confidentiality.
(a) Upon reasonable notice, the Company shall, and shall cause each Company Subsidiary to, afford to Parent and its Representatives reasonable access, during normal business hours during the period before the earlier of the Effective Time and such time as this Agreement is terminated in accordance with its terms, to all their respective properties, books, contracts, commitments, employees and records and, during such period, the Company shall, and shall cause each Company Subsidiary to, furnish promptly to Parent all information concerning its business, properties and employees as Parent may reasonably request;provided,however, that
such access does not unreasonably disrupt the normal operations of the Company and the Company Subsidiaries. ThisSection 6.02(a) shall not require the Company or any Company Subsidiary to permit any access, or to disclose any information, that relates to the negotiation and execution of this Agreement, any dispute between the Company and Parent, or, subject toSection 5.02, any Company Takeover Proposal, or that in the reasonable judgment of the Company could reasonably be expected to result in (i) the disclosure of any trade secrets of third parties or a violation of any of its obligations with respect to confidentiality, (ii) the risk of loss of attorney-client privilege, or (iii) a Governmental Entity alleging that providing such information violates applicable Law. During any visit to the business or property sites of the Company or any of the Company Subsidiaries, Parent shall, and shall cause its Representatives accessing such properties to, comply with all applicable Laws and all the Company’s and the Company Subsidiaries’ safety and security procedures. Notwithstanding anything to the contrary in thisSection 6.02(a), neither Parent, Merger Sub nor any of their respective Representatives shall conduct, without the prior written consent of the Company, any environmental investigation at any Company Property involving any sampling or other intrusive investigation of air, surface water, groundwater, soil, structures or anything else at or in connection with any Company Property.
(b) Upon reasonable notice, Parent shall, and shall cause each Parent Subsidiary to, afford to the Company and its Representatives reasonable access, during normal business hours during the period before the earlier of the Effective Time and such time as this Agreement is terminated in accordance with its terms, to all their respective properties, books, contracts, commitments, employees and records and, during such period, Parent shall, and shall cause each Parent Subsidiary to, furnish promptly to the Company all information concerning its business, properties and employees as the Company may reasonably request;provided,however, that such access does not unreasonably disrupt the normal operations of Parent and the Parent Subsidiaries. ThisSection 6.02(b) shall not require Parent or any Parent Subsidiaries to permit any access, or to disclose any information, that relates to the negotiation and execution of this Agreement or any dispute between Parent and the Company, or that in the reasonable judgment of Parent could reasonably be expected to result in (i) the disclosure of any trade secrets of third parties or a violation of any of its obligations with respect to confidentiality, (ii) the risk of loss of attorney-client privilege, or (iii) a Governmental Entity alleging that providing such information violates applicable Law. During any visit to the business or property sites of Parent or any of the Parent Subsidiaries, the Company shall, and shall cause its Representatives accessing such properties to, comply with all applicable Laws and all Parent’s and the Parent Subsidiaries’ safety and security procedures. Notwithstanding anything to the contrary in thisSection 6.02(b), none of the Company or its Representatives shall conduct, without the prior written consent of Parent, any environmental investigation at any Parent Property involving any sampling or other intrusive investigation of air, surface water, groundwater, soil, structures or anything else at or in connection with any Parent Property.
(c) All information exchanged pursuant to thisSection 6.02 shall be subject to theNon-Disclosure Agreement, dated March 18, 2016, as amended by the First Amendment toNon-Disclosure Agreement, dated March 14, 2017, each among the Company, Parent, and PICO (as amended, the “Confidentiality Agreement”).
Section 6.03 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this Agreement, and except where a different standard of efforts to be undertaken by the Company or Parent, as applicable, is expressly set forth in another Section or provision of this Agreement, each of Parent, Merger Sub, and the Company shall use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other Transactions, including (i) the obtaining of all necessary actions ornon-actions, Permits, registrations, waivers, consents and approvals from Governmental Entities, the making of all necessary registrations and filings (including filings with Governmental Entities, if any), and the taking of all reasonable steps as may be necessary or desirable to obtain an approval, Permit, registration, or waiver from, or to avoid or terminate a Proceeding by, any Governmental Entity, (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any
Proceedings challenging this Agreement or the consummation of the Merger and the other Transactions, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed, and (iv) the execution and delivery of any additional instruments necessary to consummate the Merger and the other Transactions and to fully carry out the purposes of this Agreement. In connection with and without limiting the foregoing, the Company, the Company Board, Parent, and the Parent Board shall (1) take all action necessary to ensure that no State Anti-Takeover Law or similar statute or regulation is or becomes applicable to this Agreement, the Merger or any other Transaction, and (2) if any State Anti-Takeover Law or similar statute or regulation becomes or may become applicable to this Agreement, the Merger or any other Transaction, take all action necessary to ensure that the Merger and the other Transactions be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such Anti-Takeover Law or similar statute or regulation on this Agreement, the Merger and the other Transactions. Notwithstanding anything to the contrary in thisSection 6.03(a), the Company shall not be prohibited under thisSection 6.03(a) from taking any action permitted bySection 5.02 (No Solicitation; Change of Company Recommendation). Without limiting the generality of the foregoing, Parent shall and shall cause the Parent Subsidiaries to, and the Company shall and shall cause the Company Subsidiaries to, take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the Transactions, and to avoid or eliminate each and every impediment under any Law that may be asserted by any Governmental Entity or Person with respect to the Transactions so as to enable the Closing to occur as soon as reasonably possible (and in any event no later than the Outside Date). Except as otherwise permitted under this Agreement, each of the Company and Parent shall not (and shall cause its respective Subsidiaries and Affiliates not to) take or agree to take any action that would be reasonably likely to prevent or materially delay the Closing.
(b) The Company shall give prompt notice to Parent, and Parent or Merger Sub shall give prompt notice to the Company, of (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement;provided,however, that no such notice (or failure to give any such notice) shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement.
Section 6.04 Employee Benefits.
(a) From the Effective Time, Parent shall continue or cause the Parent Subsidiaries, including the Surviving Corporation, to continue the employment of each individual who is an employee of the Company or any Company Subsidiary immediately prior to the Effective Time (each, a “Company Employee”), subject toSection 6.04(e). From the Effective Time until the first anniversary of the Effective Time (the “Benefit Protection Period”), Parent shall provide or cause its Subsidiaries, including the Surviving Corporation, to provide (i) base salary, wages and commission opportunities to each Company Employee at a rate that is no less favorable than the rate of base salary, wages or commission opportunities provided to such Company Employee immediately prior to the Effective Time, (ii) an annual bonus opportunity to each Company Employee that is not less favorable than the annual bonus opportunity provided to such Company Employee immediately prior to the Effective Time, and (iii) health and welfare benefits under plans and programs maintained or to be maintained by Parent or any of the Parent Subsidiaries that are no less favorable than the health and welfare benefits provided to similarly situated employees of Parent and the Parent Subsidiaries after the Effective Time.
(b) For all purposes (including for purposes of determining eligibility to participate, level of benefits, vesting, and benefit accruals, other than for benefit accrual purposes of any defined benefit pension plan) under any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA, but without regard to whether the applicable plan is subject to ERISA) and any other employee benefit plan, program, policy or arrangement maintained by Parent or any of its Subsidiaries, including the Surviving Corporation (except for any defined
benefit pension plan or equity compensation plan or arrangement), including any vacation, paid time off and severance plans, each Company Employee’s service with or otherwise credited by the Company or any Company Subsidiary shall be treated as service with Parent or any of its Subsidiaries, including the Surviving Corporation;provided,however, that such service need not be recognized to the extent that such recognition would result in any duplication of benefits.
(c) Parent shall or shall cause its Subsidiaries, including the Surviving Corporation, to use all reasonable efforts to waive, or cause to be waived, anypre-existing condition limitations, exclusions,actively-at-work requirements and waiting periods under any welfare benefit plan maintained by Parent or any of its Subsidiaries, including the Surviving Corporation, in which Company Employees (and their eligible dependents) will be eligible to participate from and after the Effective Time, except to the extent that suchpre-existing condition limitations, exclusions,actively-at-work requirements and waiting periods would not have been satisfied or waived under the comparable Company Benefit Plan immediately prior to the Effective Time. Parent shall, or shall cause its Subsidiaries, including the Surviving Corporation, to use all reasonable efforts to recognize, or cause to be recognized, the dollar amount of allco-payments, deductibles and similar expenses incurred by each Company Employee (and his or her eligible dependents) during the calendar year in which the Effective Time occurs for purposes of satisfying such year’s deductible andco-payment limitations under the relevant welfare benefit plans in which such Company Employee (and dependents) will be eligible to participate from and after the Effective Time.
(d) Prior to the Effective Time, the Company may implement a retention plan for the benefit of Company Employees that shall provide for retention benefits or other payments to such Company Employees, as described inSection 5.01(e)(1), in an aggregate amount not to exceed $1,000,000;provided, that (i) the Company shall provide Parent with copies of any documentation of such retention plan and an opportunity to provide reasonable comments thereto prior to such plan being adopted by the Company, and (ii) Parent shall have such prior approval rights as described inSection 5.01(e).
(e) Notwithstanding the foregoing, nothing contained herein shall (i) be treated as an amendment of any Benefit Plan, (ii) give any employee or former employee or any other individual associated therewith or any employee benefit plan or trustee thereof or any other third person any right to enforce the provisions of thisSection 6.04, or (iii) obligate Parent, the Surviving Corporation or any of their Affiliates to (A) maintain any particular benefit plan, except in accordance with the terms of such plan, or (B) retain the employment of any particular employee.
Section 6.05 Indemnification.
(a) After the Effective Time, Parent shall, and shall cause the Surviving Corporation to honor all the Company’s obligations to, exculpate or indemnify, defend and hold harmless (including advancing funds for expenses), to the fullest extent permitted by Law, the current and former directors and officers of the Company and the Company Subsidiaries and any employee of the Company or any of the Company Subsidiaries who acts as a fiduciary under any Company Benefit Plan for acts or omissions by such persons occurring at or before the Effective Time (including acts or omissions relating to this Agreement and the Transactions), and such obligations shall survive the Merger and shall continue in full force and effect in accordance with the terms of the Company Charter, the CompanyBy-laws and any individual indemnity agreements or other applicable documents from the Effective Time until the expiration of the applicable statute of limitations with respect to any claims against such persons arising from, relating to, or otherwise in respect of, such acts or omissions. After the Effective Time, Parent and the Surviving Corporation shall maintain in effect the exculpation, indemnification and advancement of expenses provisions of (i) the Surviving Corporation’s certificate of incorporation as in effect immediately after the Effective Time (the form of which is attached hereto asExhibit A), (ii) the CompanyBy-laws and any Company Subsidiary’s certificates of incorporation andby-laws or similar organizational documents as in effect immediately prior to the Effective Time, and (iii) any indemnification agreements of the Company or the Company Subsidiaries with any of their respective directors, officers or employees as in effect
immediately prior to the Effective Time, and in each case ofclauses (i),(ii) and(iii) above, shall not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any individuals who at the Effective Time were current or former directors, officers or employees of the Company or any of the Company Subsidiaries.
(b) For a period of six years after the Effective Time, Parent shall cause to be maintained in effect the current policies of directors’ and officers’ liability insurance maintained by the Company and the Company Subsidiaries (provided,however, that Parent may substitute therefor policies with reputable and financially sound carriers of at least the same coverage and amounts containing terms and conditions that are no less advantageous) with respect to claims arising from, relating to, or otherwise in respect of, facts or events that occurred at or before the Effective Time;provided,however, that Parent shall not be obligated to make annual premium payments for such insurance to the extent such premiums exceed 300% of the Company’s annual premium therefor paid in the twelve months prior to the date of this Agreement (such amount, the “Maximum Premium”). If such insurance coverage cannot be obtained at all, or can only be obtained at an annual premium in excess of the Maximum Premium, Parent shall maintain the most advantageous policies of directors’ and officers’ insurance obtainable for an annual premium equal to the Maximum Premium. At the Company’s option, the Company may purchase, prior to the Effective Time, asix-year prepaid “tail” policy on terms and conditions providing substantially equivalent benefits as the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by the Company and the Company Subsidiaries with respect to facts or events that occurred at or before the Effective Time, including the Transactions. If such “tail” prepaid policy has been obtained by the Company prior to the Effective Time, Parent shall cause such policy to be maintained in full force and effect, for its full term, and cause the Surviving Corporation to honor all obligations thereunder.
(c) If Parent, the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all its properties and assets, then, and in each case, Parent and the Surviving Corporation shall ensure that such surviving corporation or entity or the transferees of such properties or assets assume the obligations set forth in thisSection 6.05.
Section 6.06 Fees and Expenses.
(a) Except as provided below, all fees and expenses incurred in connection with the Merger and the other Transactions shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated, except that (i) the Company shall bear all fees and expenses incurred in connection with preparing the Proxy Statement, (ii) Parent shall bear all fees and expenses incurred in connection with preparing theS-4 Registration Statement, and (iii) Parent and the Company shall each bear 50% of all fees and expenses incurred in connection with (A) filing (including SEC registration fees), printing and mailing the Proxy Statement and theS-4 Registration Statement, and (B) any regulatory filings, or obtaining any consents or approvals from Governmental Entities or third parties necessary for Closing.
(b) If any action or other Proceeding is brought based upon any party’s breach of this Agreement, the prevailing party, as determined by a court of competent jurisdiction from which no appeal may be taken, shall be entitled to recover fees and expenses in connection with such breach, including attorney’s fees and costs from the other party to the action or other Proceeding.
(c) The Company shall pay or cause to be paid to Parent a nonrefundable cash fee equal to $7,050,000 if: (i) the Company terminates this Agreement pursuant toSection 8.01(f) (Termination by the Company before Receipt of Company Stockholder Approval), (ii) Parent terminates this Agreement pursuant toSection 8.01(d) (Termination by Parent due to Company Recommendation Change), or (iii) (A) a Company Takeover Proposal is made and publicly disclosed (substituting, for purposes of thisSection 6.06(c), “80%” for each reference in the definition of “Company Takeover Proposal” to “20%”) (a “Company Qualifying Transaction”) and not subsequently publicly withdrawn, and thereafter this Agreement is terminated pursuant toSection 8.01(b)(i) (Lapse of OutsideDate),Section 8.01(b)(iv) (Failure of the Company to Obtain Company Stockholder
Approval), orSection 8.01(c) (Company Breach), and (B) within12-months of such termination, the Company enters into a definitive agreement to consummate, or consummates, a Company Qualifying Transaction. Any fee due under thisSection 6.06(c) shall be paid to Parent by wire transfer to the account specified inParent Schedule 6.06(c) ofsame-day funds on the date of termination of this Agreement pursuant toclause (i) of the preceding sentence, within two Business Days after termination of this Agreement by Parent pursuant toclause (ii) of the preceding sentence (in the case of a Company Intervening Event in accordance withSection 5.02(e) (Change in Recommendation Permitted in Certain Circumstances), or on the earlier of the date of (x) execution of such definitive agreement and (y) consummation of such transaction in the case of termination of this Agreement pursuant toclause (iii) of the preceding sentence. In no event shall the Company be required to pay the fee set forth in thisSection 6.06(c) on more than one occasion.
(d) Notwithstanding anything to the contrary contained in this Agreement, but subject to the proviso to this sentence in the case of intentional fraud or willful breach, if this Agreement is terminated and Parent has been paid in full a fee underSection 6.06(c) (Termination Fee to Parent), the payment to Parent of such fee shall be the sole and exclusive remedy of Parent and its Related Persons against the Company or any of its Related Persons, and upon full payment of such fee to Parent, Parent (on its own behalf and on behalf of its Related Persons) hereby agrees that it thereby shall have waived all other remedies against the Company or any of its Related Persons with respect to (i) any failure of the Merger and the other Transactions to be consummated and (ii) any breach, violation ornon-compliance by the Company of any of its obligations to consummate the Merger and the other Transactions or of any representation, warranty, covenant or agreement of the Company set forth herein;provided,however, that the foregoing waiver and election of remedies limitation shall not apply in the case of any intentional fraud or willful breach on the part of the Company or any of its controlled Affiliates. Except as set forth in the proviso to the preceding sentence, upon payment in full by the Company of such fee, none of the Company or its Related Persons shall have any further liability or obligation (under this Agreement or otherwise) relating to or arising out of this Agreement or any of the Transactions, and in no event shall Parent (and Parent shall ensure that its Related Persons do not) seek to recover any money damages or losses, or seek to pursue any other recovery, judgment, damages or remedy (including any equitable remedy underSection 9.10 (Enforcement) or otherwise or any remedy or claim sounding in tort) of any kind, in connection with this Agreement.
(e) The parties hereto agree that the agreements contained in thisSection 6.06 are an integral part of this Agreement and constitute a material inducement for the parties hereto to enter into this Agreement and that the fee payable pursuant to thisSection 6.06 constitutes liquidated damages and not a penalty.
Section 6.07 Public Announcements. Except as provided inSection 5.02, Parent and Merger Sub, on the one hand, and the Company, on the other hand, shall consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the Merger and the other Transactions and shall not issue any such press release or make any such public statement before such consultation, except to the extent required by Law, court process or by obligations pursuant to any listing agreement with any national securities exchange. Parent and the Company agree that the initial press release (or releases) to be issued with respect to the Merger and the other Transactions shall be in the form previously agreed to be the parties (the “Announcement”). Notwithstanding the foregoing, thisSection 6.07 shall not apply to any press release or other public statement made by the Company or Parent (a) which is consistent with the Announcement and the terms of this Agreement and does not contain any information relating to the Company or Parent that has not been previously announced or made public in accordance with the terms of this Agreement or (b) is made in the ordinary course of business and does not relate specifically to the signing of this Agreement, the Merger or the other Transactions.
Section 6.08 Certain Tax and Structure Matters.
(a) All stock transfer, real estate transfer, documentary, stamp, recording and other similar Taxes (including interest, penalties and additions to any such Taxes) (“Transfer Taxes”) incurred in connection with the Transactions, if any, shall be paid by the Surviving Corporation.
(b) Each of Parent, the Company and Merger Sub will use reasonable efforts to cause the Merger to qualify for the Intended Tax Treatment, including considering and negotiating in good faith such amendments to this Agreement as may reasonably be required in order to obtain such qualification (it being understood that no party will be required to agree to any such amendment). Unless otherwise required by applicable Law, Parent, the Company and Merger Sub will report the Merger and the other transactions contemplated by this Agreement, including for U.S. federal income Tax purposes, in a manner consistent with such qualification. No party will take any action or fail to take any action, or allow any Affiliate to take any action or fail to take any action, that would reasonably be expected to prevent any of the foregoing.
(c) Each of Parent and the Company will use reasonable efforts to obtain the Tax opinions described inSection 7.01(f) (Tax Opinion) (collectively, the “Tax Opinions”). The appropriate officers of Parent, the Company and Merger Sub will execute and deliver to Greenberg Traurig, LLP, counsel to Parent, and Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel to the Company, certificates substantially in the forms set forth inParent Schedule 6.08(c) andCompany Schedule 6.08(c) (the “Representation Letters”). Each Representation Letter will be dated on the or before the date of such Tax Opinion and shall not have been withdrawn or modified in any material respect.
Section 6.09 Transaction Litigation. The Company shall control, and shall give Parent prompt notice of, keep Parent promptly and fully informed with respect to, and consult with Parent regarding, any Proceeding commenced or, to the Knowledge of the Company, threatened, against the Company or any of its directors, officers, managers, partners or Affiliates relating to this Agreement, the Merger, or any of the other Transactions (collectively, “Transaction Litigation”). The Company shall consult with Parent regarding the defense or settlement of any Transaction Litigation and will not compromise, settle, reach an arrangement regarding or agree to compromise, settle or reach an arrangement regarding any Transaction Litigation or consent to the same, without the prior written consent of Parent, which consent shall not be unreasonably withheld, conditioned or delayed. In connection with any Transaction Litigation and the parties’ performance of their obligations under thisSection 6.09, the parties will enter into a customary common interest or joint defense agreement or implement such other arrangement as reasonably required to preserve any attorney-client privilege or other applicable legal privilege; except that the Company will not be required to provide information if the Company Board determines in good faith, After Consultation, that doing so would be reasonably likely to cause the risk of loss of any attorney-client privilege or other applicable legal privilege.
Section 6.10 Rule 16b-3. Prior to the Effective Time, the Company shall be permitted to take such steps as may be reasonably necessary or advisable to cause dispositions of Company equity securities (including derivative securities) pursuant to the Transactions by each individual who is a director or officer of the Company to be exempt underRule 16b-3 promulgated under the Exchange Act.
Section 6.11 Exchange of PICO Membership Interests. Prior to the Effective Time, the Company shall take all action as may be necessary on its part for PICO’s exercise of its right (the “Exchange Request”) to exchange the PICO Membership Interests for shares of Company Common Stock on the terms and subject to the conditions of the Exchange Agreement (the “Exchange”) to become effective and irrevocable, for the Exchange to be consummated and, from and after the consummation of the Exchange (and the transactions contemplated thereby), for all issued and outstanding membership interests and other voting and economic interests in and to UCP LLC to be wholly owned by the Company.
Section 6.12 Listing of Shares of Parent Common Stock on the NYSE. Prior to the Effective Time, Parent shall use all reasonable efforts (including paying all applicable listing fees) to cause the shares of Parent
Common Stock to be issued in the Merger to be approved for listing on the NYSE, subject to official notice of issuance. The Company shall cooperate with Parent in connection with the foregoing, including by providing information reasonably requested by Parent in connection therewith.
Section 6.13 Delisting of Shares of Company Common Stock from the NYSE. Each of the parties will cooperate with the other parties in taking, or causing to be taken, all actions necessary to delist the Company Common Stock from the NYSE and terminate the Company’s registration under the Exchange Act, except that such delisting and termination will not be effective until after the Effective Time.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.01 Conditions to Each Party’s Obligation to Effect the Merger. The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver on or before the Closing Date of each of the following conditions:
(a) Company Stockholder Approval. The Company shall have obtained the Company Stockholder Approval at the Company Stockholders Meeting.
(b) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction or other Judgment issued by any court of competent jurisdiction or Law preventing the consummation of the Merger or any of the other Transactions shall be in effect.
(c) Exchange of PICO Membership Interests. The Exchange shall have been consummated and UCP LLC shall be a wholly-owned Subsidiary of the Company.
(d) Effectiveness of theS-4 Registration Statement. TheS-4 Registration Statement shall have been declared effective by the SEC under the Securities Act. No stop order suspending the effectiveness of theS-4 Registration Statement shall have been issued by the SEC, and no proceedings for that purpose shall have been initiated or threatened by the SEC.
(e) NYSE Listing. The shares of Parent Common Stock to be issued to holders of Company Common Stock in the Merger pursuant toSection 2.02(Exchange of Certificates) shall have been approved for listing on the NYSE (or any successor inter-dealer quotation system or stock exchange thereto), subject to official notice of issuance.
(f) Tax Opinion. Each of the Company and Parent shall have received (i) a copy of the opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP, dated as of the Effective Time, to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and (ii) a copy of the opinion of Greenberg Traurig, LLP, dated as of the Effective Time, to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In rendering such opinion, Greenberg Traurig, LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP shall be entitled to rely on the Representation Letters.
Section 7.02 Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger are further subject to the satisfaction or waiver on or before the Closing Date of each of the following conditions:
(a) Company Representations and Warranties. The representations and warranties of the Company in the first, second, sixth, and eighth sentences ofSection 3.02(a) (Capital Stock of the Company and the Company Subsidiaries), except for such inaccuracies that are not reasonably expected to result, individually or in the
aggregate, in additional cost, expense or liability to Parent and Merger Sub, of more than $250,000 (it being hereby acknowledged and agreed that the foregoing $250,000 limitation is not intended to and shall not establish a materiality standard or threshold for any other provision or purpose of this Agreement),Section 3.02(c) (Company’s Economic Interests in UCP LLC),Section 3.03 (Authority; Execution and Delivery; Enforceability; State Takeover Statutes),Section 3.04(a)(i) (No Conflicts with Charter orBy-laws), andSection 3.22 (Brokers; Fees and Expenses) shall be true and correct in all respects as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to another date (in which case such representations and warranties shall be true and correct on and as of such other date). All other representations and warranties of the Company in this Agreement (in each case, without giving effect to any materiality or Material Adverse Effect qualifications therein, or any provisions contained therein relating to preventing or materially delaying the consummation of the Merger or any of the other Transactions) shall be true and correct on the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to another date (in which case such representations and warranties shall be true and correct on and as of such other date), and except for such failures to be true and correct that, individually and in the aggregate, have not had, and would not be likely to have, a Company Material Adverse Effect. Parent shall have received a certificate signed on behalf of the Company by a senior executive officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have performed its obligations inSection 5.02 (No Solicitation; Change of Company Recommendation) (other than suchnon-willful breach andnon-compliance that does not prejudice Parent’s substantive rights and benefits underSection 5.02 (No Solicitation; Change of Company Recommendation)), and the Company shall have performed in all material respects all other obligations required to be performed by it under this Agreement, in each case, at or before the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by a senior executive officer of the Company to such effect.
(c) Absence of Company Material Adverse Effect. Since the date of this Agreement there shall not have been any event, change, effect or development that has had, or is likely to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 7.03 Conditions to Obligation of the Company. The obligation of the Company to effect the Merger is further subject to the satisfaction or waiver on or before the Closing Date of each of the following conditions:
(a) Parent and Merger Sub Representations and Warranties. The representations and warranties of Parent and Merger Sub in the first, second, sixth and eighth sentences ofSection 4.02(a)(Capital Stock of Parent and the Parent Subsidiaries), except for such inaccuracies that are not reasonably expected to result, individually or in the aggregate, in an increase in the number of authorized, issued or outstanding shares of Parent Common Stock or Parent Preferred Stock, on a fully diluted basis, of more than a number of shares equal to the quotient of (x) $250,000 divided by (y) the average closing sale price of a share of Parent Common Stock as reported on the NYSE for the five consecutive trading days ending on the second complete trading day immediately preceding the date hereof (it being hereby acknowledged and agreed that the foregoing $250,000 limitation is not intended to and shall not establish a materiality standard or threshold for any other provision or purpose of this Agreement),Section 4.03(Authority; Execution and Delivery; Enforceability; State Takeover Statutes), andSection 4.04(a)(i) (No Conflicts with Charter orBy-Laws) shall be true and correct in all respects as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to another date (in which case such representations and warranties shall be true and correct on and as of such other date). All other representations and warranties of Parent and Merger Sub in this Agreement (in each case, without giving effect to any materiality or Material Adverse Effect qualifications therein, or any provisions contained therein relating to preventing or materially delaying the consummation of the Merger or any of the other Transactions) shall be true and correct on the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to another date (in which case such
representations and warranties shall be true and correct on and as of such other date), except for such failures to be true and correct that, individually and in the aggregate, have not had, and would not be likely to have, a Parent Material Adverse Effect. The Company shall have received a certificate signed on behalf of Parent by a senior executive officer of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub shall have performed in all material respects all obligations required to be performed by them under this Agreement, in each case, at or before the Closing Date, and the Company shall have received a certificate signed on behalf of Parent by a senior executive officer of Parent to such effect.
(c) Absence of Parent Material Adverse Effect. Since the date of this Agreement there shall not have been any event, change, effect or development that has had, or is likely to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 7.04 Frustration of Closing Conditions. Notwithstanding anything to the contrary set forth in this Agreement, none of the Company, Parent or Merger Sub may rely, either as a basis for not consummating the Merger or the other Transactions or for terminating this Agreement and abandoning the Merger, on the failure of any condition set forth inSection 7.01 (Conditions to Each Party’s Obligation to Effect the Merger),Section 7.02 (Conditions to Obligations of Parent and Merger Sub)orSection 7.03 (Conditions to Obligation of the Company), as the case may be, to be satisfied, if in any such case such party has materially breached any of its representations, warranties, covenants or agreements set forth in this Agreement or has otherwise failed to perform fully its obligations under this Agreement in any manner that shall have proximately caused a failure of any such condition or otherwise have given rise to a right of termination of this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination. This Agreement may be terminated at any time before the Effective Time, whether before or after receipt of the Company Stockholder Approval (except as otherwise expressly provided in thisSection 8.01):
(a) by mutual written consent of Parent, Merger Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger is not consummated on or before October 15, 2017 (the “Outside Date”);
(ii) if any Governmental Entity issues a Judgment permanently enjoining or otherwise permanently prohibiting the Merger and such Judgment shall have become final andnon-appealable;
(iii) if any condition to the obligation of such party to consummate the Merger set forth inSection 7.01 (Conditions to Each Party’s Obligation to Effect the Merger),orSection 7.02 (Conditions to Obligations of Parent and Merger Sub)(in the case of termination by Parent), orSection 7.03 (Conditions to Obligation of the Company) (in the case of termination by the Company), becomes incapable of satisfaction before the Outside Date; or
(iv) if the Company Stockholder Approval is not obtained at the Company Stockholders Meeting.
provided,however, that the right to terminate this Agreement pursuant toclause (i),clause (ii) orclause (iii) of thisSection 8.01(b) shall not be available to any party hereto if such party has breached any provision of this Agreement or has otherwise failed to perform fully its obligations under this Agreement in any manner that shall have caused the issuance of such Judgment or the Merger and the other Transactions not to be consummated by the Outside Date;
(c) by Parent, if the Company breaches or fails to perform any of its representations, warranties or covenants contained in this Agreement, which breach or failure to perform (i) would give rise to the failure of a condition set forth inSection 7.02(a) (Company Representations and Warranties)orSection 7.02(b) (Performance of Obligations of the Company), and (ii) cannot be or, if capable of cure, has not been, cured within 30 days after the giving of written notice to the Company of such breach or failure to perform;provided, that Parent is not then in breach of any representation, warranty or covenant contained in this Agreement;
(d) by Parent, before receipt of the Company Stockholder Approval, if the Company Board (or any duly authorized committee thereof) makes any Company Recommendation Change;provided, that if Parent elects to exercise its right to terminate this Agreement by reason of a Company Recommendation Change made solely in respect of a Company Intervening Event, Parent shall deliver to the Company a notice of termination (in accordance withSection 8.05(Procedure for Termination, Amendment, Extension or Waiver)) not later than five (5) Business Days immediately following the date the Company shall have publicly announced the Company Recommendation Change solely in respect of such Company Intervening Event, but only if at the time Parent delivers such notice, the Company Stockholder Approval shall not have been obtained;
(e) by the Company, if Parent breaches or fails to perform any of its representations, warranties or covenants contained in this Agreement, which breach or failure to perform (i) would give rise to the failure of a condition set forth inSection 7.03(a) (Parent and Merger Sub Representations and Warranties) orSection 7.03(b) (Performance of Obligations of Parent and Merger Sub), and (ii) cannot be or, if capable of cure, has not been, cured within 30 days after the giving of written notice to Parent of such breach or failure to perform;provided, that the Company is not then in breach of any representation, warranty or covenant in this Agreement; or
(f) by the Company, before receipt of the Company Stockholder Approval, if (i) a Superior Company Proposal has been made and received by the Company not in breach ofSection 5.02(b) (Prohibition on Soliciting Activities), (ii) the Company has complied with the first sentence ofSection 5.02(c) (Discussions Permitted in Certain Circumstances) and with the provisions ofSection 5.02(e) (Change in Recommendation Permitted in Certain Circumstances) expressly applicable to a Superior Company Proposal, (iii) the Company is and has been in compliance with the other provisions ofSection 5.02 (No Solicitation; Change of Company Recommendation) (other than suchnon-willful breach andnon-compliance that does not prejudice Parent’s substantive rights and benefits underSection 5.02), (iv) the Company concurrently pays (or causes to be paid) to Parent the fee due underSection 6.06(c)(i) (Fee to Parent upon Termination by the Company before Company Stockholder Approval), and (v) the Company Board concurrently approves, and the Company concurrently enters into, a definitive agreement providing for such Superior Company Proposal. Acceptance by Parent of the fee due underSection 6.06(c) (Fee to Parent) shall constitute acceptance by Parent of the validity of any termination by the Company of this Agreement under thisSection 8.01(f) (Termination by the Company before Receipt of Company Stockholder Approval), subject to the proviso to the first sentence ofSection 6.06(d) (Fee to Parent upon Termination; Exclusive Remedy).
Section 8.02 Effect of Termination. In the event of termination of this Agreement by either the Company or Parent as provided inSection 8.01 (Termination), this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Parent, Merger Sub or the Company, other thanSection 3.25 (No Additional Representations; ExtrinsicNon-Reliance),Section 4.26 (No Additional Representations; ExtrinsicNon-Reliance), the last sentence ofSection 6.02 (Access toInformation; Confidentiality),Section 6.06 (Fees and Expenses), thisSection 8.02 andArticle IX (General Provisions), which provisions shall survive such termination;provided,however, that, except as provided inSection 6.06(d)(Fee to Parent upon Termination; Exclusive Remedy), the termination of this Agreement shall not relieve any party from any liability for intentional fraud or willful breach.
Section 8.03 �� Amendment. This Agreement and the Exhibits and Schedules hereto may be amended by all the parties hereto at any time before or after receipt of the Company Stockholder Approval;provided,however,
that (i) after receipt of the Company Stockholder Approval, there shall be made no amendment that by Law requires further approval by the stockholders of the Company without the further approval of such stockholders, and (ii) no amendment shall be made to this Agreement after the Effective Time. Except as required by Law, no amendment of this Agreement and the Exhibits and Schedules hereto by the Company or Parent shall require the approval of the stockholders of the Company or the stockholders of Parent, respectively. This Agreement and the Exhibits and Schedules hereto may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.
Section 8.04 Extension; Waiver. At any time before the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) waive compliance with any of the agreements or conditions contained in this Agreement. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. For any matter under this Agreement requiring the consent or approval of any party, such consent or approval shall be valid and binding on a party hereto only if such consent or approval is delivered in an instrument in writing signed on behalf of such party.
Section 8.05 Procedure for Termination, Amendment, Extension or Waiver. A termination of this Agreement pursuant toSection 8.01(Termination), an amendment of this Agreement pursuant toSection 8.03 (Amendment) or an extension or waiver pursuant toSection 8.04(Extension; Waiver) shall, in order to be effective, require in the case of Parent, Merger Sub or the Company, action by its Board of Directors or the duly authorized designee of its Board of Directors, together with notice thereof to the other parties hereto as contemplated bySection 9.02(Notices). Termination of this Agreement before the Effective Time shall not require the approval of the stockholders of the Company or the stockholders of Parent.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. ThisSection 9.01 shall not limit any covenant or agreement of the parties that by its terms contemplates performance after the Effective Time.
Section 9.02 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing, shall be sent by facsimile transmission ore-mail of a .pdf attachment (providing confirmation of transmission), by reliable overnight delivery service (with proof of service) or by hand delivery, and shall be deemed given upon receipt by the parties at the following addresses (or at such other address for a party as shall be specified by like notice);provided,however, that any notice received by facsimile ore-mail transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (addressee’s local time) or on a day that is not a Business Day shall be deemed to have been received at 9:00 a.m. (addressee’s local time) on the next Business Day:
Century Communities, Inc.
8390 East Crescent Parkway, Suite 650
Greenwood Village, CO 80111
Attention: Dale Francescon, Chairman of the Board andCo-CEO
Email:DaleF@centurycommunities.com
with copies (which shall not constitute notice under this Section 9.02) to:
Greenberg Traurig, LLP
1840 Century Park East, Suite 1900
Los Angeles, CA 90067
Attention: Mark J. Kelson
Fax:310-586-0556
Email:kelsonm@gtlaw.com
Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, NY 10116
Attention: Clifford E. Neimeth
Fax:212-805-9383
Email:neimethc@gtlaw.com
UCP, Inc.
99 Almaden Boulevard, Suite 400
San Jose, CA 95133
Attention: Dustin L. Bogue, President and Chief Executive Officer
Email: dbogue@unioncommunityllc.com
with a copy (which shall not constitute notice pursuant to this Section 9.02) to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attention: Ross A. Fieldston
Jeffrey D. Marell
Fax: 212-492-0075
212-492-0105
Email: rfieldston@paulweiss.com
jmarell@paulweiss.com
Section 9.03 Definitions. For purposes of this Agreement:
“Acceptable Confidentiality Agreement” means an agreement, between the Company and a Person, that contains confidentiality obligations and covenants of such Person (that has made after the date hereof a Company Takeover Proposal not in breach ofSection 5.02(b) (Prohibition on Soliciting Activities)) that, the Company Board determines in good faith, After Consultation, are no less favorable in the aggregate to the Company than the obligations and covenants of Parent contained in the Confidentiality Agreement.
An “Affiliate” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. “Control” has the meaning specified in Rule 405 under the Securities Act.
“After Consultation” means with respect to any determination of the Company Board (or duly authorized committee thereof) under and in respect of this Agreement, after consultation with each of the Company
Financial Advisor and the Company’s outside legal counsel;provided,however, that if such consultation relates exclusively to matters of Law (including, determinations with respect to the fiduciary duties of the Company’s directors under applicable Law), then “After Consultation” shall mean, with respect to such legal determinations, after consultation exclusively with the Company’s outside legal counsel.
“Business Day” means any day, other than a Saturday or a Sunday, that is neither a legal holiday nor a day on which banking institutions are generally authorized or required by law or regulation to close in the City of New York, New York.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company ERISA Affiliate” means each Company Subsidiary and any other person or entity under common control with the Company or any Company Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations issued thereunder and/or Section 4001(b)(1) of ERISA.
“Company Intellectual Property” means all material Intellectual Property (a) owned by the Company or any Company Subsidiaries, and (b) used by the Company or any Company Subsidiaries in the business of the Company or the Company Subsidiaries as of the date hereof.
“Company Intervening Event” means an event, state of facts, change, discovery, development or circumstance that is material to the Company and its Subsidiaries (and not of a general economic, industry or market nature, except to the extent the Company is affected in a beneficially disproportionate manner compared to other companies that operate in the Company’s industry sector and which other companies conduct substantially the same businesses as the Company and the Company Subsidiaries currently operating), taken as a whole, that was not known or reasonably foreseeable by the Company Board as of or prior to the date of this Agreement, and which event, state of facts, change, discovery, development or circumstance becomes known to the Company Board prior to obtaining the Company Stockholder Approval;provided,however, that in no event shall any of the following constitute a Company Intervening Event: (i) any Company Takeover Proposal or Superior Company Proposal, or any inquiry, offer or proposal that constitutes or that reasonably can be expected to lead to or result in any Company Takeover Proposal or Superior Company Proposal; or (ii) any change in the price or trading volume of the Company Common Stock or the Company’s credit rating (except that thisclause (ii) will not prevent or otherwise affect a determination that any change, effect, event, circumstance, development or occurrence underlying such change has resulted in or contributed to a Company Intervening Event).
“Company Material Adverse Effect” means any effect, or any change, event, development, state of facts or occurrence, individually or in the aggregate, materially adverse on or to the (a) business, assets, liabilities, financial condition or results of operations of the Company and the Company Subsidiaries, taken as a whole, or (b) ability of the Company to consummate the Merger and the other Transactions prior to the Outside Date;provided,however, that none of the following shall be taken into account in determining whether a “Company Material Adverse Effect” has occurred or would be reasonably likely to occur: (i) changes in financial, securities or currency markets, changes in prevailing interest rates or exchange rates, changes in general economic or political conditions, changes in the industry in which the Company or any Company Subsidiary operates, changes in commodity prices, or effects of weather, natural disaster or acts of God, (ii) any attack, outbreak, hostility, terrorist activity, act or declaration of war or act of public enemies or other calamity, crisis or geopolitical event, (iii) changes in Law or in any interpretation of any Law, or changes in regulatory conditions in the jurisdictions in which the Company or any Company Subsidiary operates (including, for avoidance of doubt, if California Assembly Bill No. 199 is enacted into Law), (iv) changes in GAAP or any authoritative interpretation thereof, (v) any failure of the Company to meet its internal or published earnings, revenue, cash flows or EBITDA forecasts, projections, guidance, or estimates or any budgets or financial or operating plans, or any change or prospective change to the Company’s credit ratings (but not the underlying causes of any such failure or change to the extent not otherwise falling within any of the exceptions set forth in clauses (i) through (x) of this definition), (vi) the negotiation, announcement, execution, delivery, consummation or pendency of this
Agreement or of the Transactions (including any effect thereof on the relationships of the Company or any Company Subsidiary with their customers, suppliers, employees or competitors;provided, that the Company complies in all material respects with its covenants and agreements in the first sentence in the prefatory paragraph ofSection 5.01(Conduct of Business by the Company)), (vii) any litigation arising from any alleged breach of fiduciary duty or other violation of Law relating to this Agreement or the Transactions, (viii) any action taken or omission to act by the Company, its controlled Affiliates or any other Person that is expressly contemplated or required by this Agreement or the Exhibits or Schedules hereto, (ix) actions taken or not taken at the request or with the consent of Parent, or (x) any breach, violation ornon-performance by Parent or Merger Sub of any of their obligations under this Agreement;provided,however, that any effects resulting from the matters referred to inclause (i),clause (ii) orclause (iii) above shall not be disregarded and shall be taken into account for purposes of determining whether a Company Material Adverse Effect has occurred or would be reasonably likely to occur, to the extent of any disproportionate impact thereof on the Company and the Company Subsidiaries, taken as a whole, as compared to other companies operating in the Company’s industry and in the same geographic region. Changes in the trading prices or trading volume of Company Common Stock, in and of themselves, shall not constitute or contribute to a “Company Material Adverse Effect,” but the underlying causes thereof may constitute or contribute to a Company Material Adverse Effect to the extent not otherwise excluded from this definition.
“Company Stock Plan” means the UCP, Inc. 2013 Long-Term Incentive Plan, filed on May 12, 2014.
“Company Takeover Proposal” means any offer or proposal made by any Person (other than the Company, any Company Subsidiary, PICO, Parent or Merger Sub) or “group” (within the meaning of Section 13(d) of the Exchange Act), relating to or providing for, in any single transaction or series of related transactions (other than the Merger and the other Transactions), directly or indirectly, any (i) purchase, sale, lease, license, assignment, transfer, exchange or other disposition of assets of the Company or any Company Subsidiary representing 20% or more of the consolidated assets of the Company or to which 20% or more of the Company’s earnings power or revenues are attributable; (ii) acquisition of 20% or more of the aggregate voting power of the then-outstanding shares of Company Capital Stock; (iii) tender or exchange offer that, if consummated, would result in any such Person(s) or group owning 20% or more of the aggregate voting power of the then-outstanding shares of Company Capital Stock; (iv) issuance by the Company or any Company Subsidiary of Equity Interests representing 20% or more of the aggregate voting power of the then-outstanding Company Capital Stock; (v) merger, business combination, consolidation, share exchange, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any Company Subsidiary pursuant to which any Person, group or such Person’s or group’s stockholders (other than the stockholders of the Company (as a group) immediately prior to the consummation of such transaction) would beneficially own 20% or more of the aggregate voting power of the then-outstanding shares of Company Capital Stock or other equity securities of the Company resulting, directly or indirectly, from any such transaction; or (vi) any combination of the foregoing types of transactions if the total percentage of the Company’s consolidated assets, earnings power and/or revenues involved is 20% or more, or if such Person(s) or group (or the stockholders of such Person(s) or group) would acquire beneficial ownership or the right to acquire beneficial ownership of Equity Interests representing 20% or more of the aggregate voting power of the then-outstanding Company Capital Stock.
“Company Trade Secrets” means all rights under applicable US state trade secret laws as are applicable toknow-how and confidential information that are material to the business of the Company or the Company Subsidiaries as presently conducted.
“Environmental Laws” means any and all Laws, Judgments and Permits issued, promulgated or entered into by or with any Governmental Entity, relating to pollution or protection of the environment, the preservation or reclamation of natural resources or to the management, Release or threatened Release of Hazardous Materials.
“Environmental Permits” means any permit, registration, identification number, license and other authorization required under any applicable Environmental Law.
“Equity Interest” means any share, capital stock, partnership, limited liability company, membership, member or similar interest in any Person, and any option, warrant, right or security (including debt securities) convertible, exchangeable or exercisable thereto or therefor.
“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
“Filed Company SEC Documents” means the reports, schedules, forms, statements and other documents (including the exhibits and other information incorporated therein) filed with or furnished to the SEC by the Company and publicly available before the date hereof.
“Filed Parent SEC Documents” means the reports, schedules, forms, statements and other documents (including the exhibits and other information incorporated therein) filed with or furnished to the SEC by Parent and publicly available before the date hereof.
“GAAP” means United States generally accepted accounting principles, as in effect from time to time.
“Hazardous Materials” means (a) any and all radioactive materials or wastes, petroleum (including crude oil or any fraction thereof) or petroleum distillates, asbestos or asbestos containing materials and urea formaldehyde foam, and (b) any other wastes, materials, chemicals or substances regulated pursuant to any Environmental Law.
“Intellectual Property” means (a) patents and patent applications, (b) trade names, logos, slogans, Internet domain names, registered and unregistered trademarks and service marks and related registrations and applications therefor, (c) copyrights in both published and unpublished works, and (d) rights under applicable US state trade secret laws as are applicable toknow-how and confidential information.
“Judgment” means any judgment, order, decree, award, ruling, decision, verdict, subpoena, injunction or settlement entered, issued, made or rendered by any Governmental Entity or other Person (in each case whether temporary, preliminary or permanent).
“Knowledge” when used with respect to (a) the Company, means the actual knowledge (after due inquiry) as of the date hereof of any fact, circumstance or condition of those officers of the Company set forth onExhibit B, and (b) Parent, means the actual knowledge (after due inquiry) as of the date hereof of any fact, circumstance or condition of those officers of Parent and Merger Sub set forth onExhibit C.
“Law” means any federal, state, local, foreign, international or multinational treaty, constitution, statute or other law (including common law), ordinance, rule, or regulation, including the rules and regulations of any national securities exchange on which the Company Common Stock is listed for trading.
“Lien” means any mortgage, lien, security interest, pledge, reservation, equitable interest, charge, easement, lease, sublease, conditional sale or other title retention agreement, right of first refusal, hypothecation, covenant, servitude, right of way, variance, option, warrant, claim, community property interest, restriction (including any restriction on use, voting, transfer, alienation, receipt of income or exercise of any other attribute of ownership) or encumbrance of any kind.
“NYSE” means the New York Stock Exchange, Inc.
“Offsite Facility” means any real property which is not presently owned, leased or occupied by the Company or any Company Subsidiary.
“Parent ERISA Affiliate” means each Parent Subsidiary and any other person or entity under common control with Parent or any Parent Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations issued thereunder and/or Section 4001(b)(i) of ERISA.
“Parent Intellectual Property” means all material Intellectual Property (a) owned by Parent or any Parent Subsidiaries, and (b) used by Parent or any Parent Subsidiaries in the business Parent or the Parent Subsidiaries as of the date hereof.
“Parent Offsite Facility” means any real property which is not presently owned, leased or occupied by Parent or any Parent Subsidiary.
“Parent Trade Secrets” means all rights under applicable US state trade secret laws as are applicable toknow-how and confidential information that are material to the business of Parent or the Parent Subsidiaries as presently conducted.
“Ordinary Course of Business” means, with respect to an action taken by any Person, an action that is consistent with the past practices of such Person or that is otherwise taken in the ordinary course of the normalday-to-day operations of the business of such Person.
“Parent Material Adverse Effect” means any effect, or any change, event, development, state of facts or occurrence, individually or in the aggregate, materially adverse on or to the (a) business, assets, liabilities, financial condition or results of operations of Parent and the Parent Subsidiaries, taken as a whole, or (b) ability of Parent and Merger Sub to consummate the Merger and the other Transactions prior to the Outside Date;provided,however, that none of the following shall be taken into account in determining whether a “Parent Material Adverse Effect” has occurred or would be reasonably likely to occur: (i) changes in financial, securities or currency markets, changes in prevailing interest rates or exchange rates, changes in general economic or political conditions, changes in the industry in which the Company or any Company Subsidiary operates, changes in commodity prices, or effects of weather, natural disaster or acts of God, (ii) any attack, outbreak, hostility, terrorist activity, act or declaration of war or act of public enemies or other calamity, crisis or geopolitical event, (iii) changes in Law or in any interpretation of any Law, or changes in regulatory conditions in the jurisdictions in which the Company or any Company Subsidiary operates (including, for avoidance of doubt, if California Assembly Bill No. 199 is enacted into Law), (iv) changes in GAAP or any authoritative interpretation thereof, (v) any failure of Parent to meet its internal or published earnings, revenue, cash flows or EBITDA forecasts, projections, guidance, or estimates or any budgets or financial or operating plans, or any change or prospective change to the Company’s credit ratings (but not the underlying causes of any such failure or change to the extent not otherwise falling within any of the exceptions set forth in clauses (i) through (x) of this definition), (vi) the negotiation, announcement, execution, delivery, consummation or pendency of this Agreement or of the Transactions (including any effect thereof on the relationships of Parent or any Parent Subsidiary with their customers, suppliers, employees or competitors;provided, that Parent complies in all material respects with its covenants and agreements in the first sentence in the prefatory paragraph ofSection 5.03(Conduct of Business by Parent)), (vii) any litigation arising from any alleged breach of fiduciary duty or other violation of Law relating to this Agreement or the Transactions, (viii) any action taken or omission to act by Parent, its controlled Affiliates or any other Person that is expressly contemplated or required by this Agreement or the Exhibits or Schedules hereto, (ix) actions taken or not taken at the request or with the consent of the Company, or (x) any breach, violation ornon-performance by the Company or any of its controlled Affiliates of any of their obligations under this Agreement;provided,however, that any effects resulting from the matters referred to inclause (i),(ii) or(iii) above shall not be disregarded and shall be taken into account for purposes of determining whether a Parent Material Adverse Effect has occurred or would be reasonably likely to occur, to the extent of any disproportionate impact thereof on Parent and the Parent Subsidiaries, taken as a whole, as compared to other companies operating in Parent’s industry and in the same geographic region. Changes in the trading prices or trading volume of Parent Common Stock, in and of themselves, shall not constitute or contribute to a “Parent Material Adverse Effect,” but the underlying causes thereof may constitute or contribute to a Parent Material Adverse Effect to the extent not otherwise excluded from this definition.
“Parent Options” means any options to purchase shares of Parent Common Stock granted under the Parent Stock Plan.
“Parent Restricted Stock” means any shares of Parent Common Stock, subject to forfeiture restrictions or other restrictions, granted pursuant to the Parent Stock Plan.
“Parent Restricted Stock Unit” means a right to receive one share of Parent Common Stock or, in lieu thereof, the fair market value of such share of Parent Common Stock in cash, which may be subject to forfeiture restrictions or other restrictions, granted pursuant to the Parent Stock Plan.
“Parent Stock Plan” means the Century Communities, Inc. First Amended & Restated 2013 Long-Term Incentive Plan, filed as Exhibit 10.1 to Amendment No. 2 to the Registration Statement onForm S-1 of Parent (FileNo. 333-195678) filed with the SEC on May 30, 2014.
“Parent Stock Value” means the average closing sale price of a share of Parent Common Stock as reported on the NYSE for the five consecutive trading days ending on and including the second complete trading day immediately preceding the Closing Date.
“Permitted Lien” means (a) such Liens as are set forth inCompany Schedule 3.08 orCompany Schedule 3.09(a), (b) mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the Ordinary Course of Business, Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the Ordinary Course of Business and Liens for Taxes that are not due and payable or which are being contested in good faith through (if then appropriate) appropriate proceedings and in respect of which adequate reserves have been set aside in accordance with GAAP or that may hereafter be paid without penalty, (c) Liens that secure obligations reflected on the most recent balance sheet included in the Company Financial Statements or Liens the existence of which is referred to in the notes to the most recent balance sheet included in the Company Financial Statements and Liens incurred in the Ordinary Course of Business since the date of the most recent such Company Financial Statements, (d) easements, covenants,rights-of-way and other similar restrictions of record, (e) any conditions that may be shown by a current, accurate survey or physical inspection of any Company Property made before the Closing, (f) (i) zoning, building and other similar restrictions, (ii) Liens that have been placed by any developer, landlord or other third party on property over which the Company or any Company Subsidiary has easement rights or on any Leased Property and subordination or similar agreements relating thereto, and (iii) unrecorded easements, covenants,rights-of-way and other similar restrictions,(g) non-exclusive licenses of Intellectual Property entered into in the Ordinary Course of Business, and (h) imperfections of title or encumbrances that, individually or in the aggregate, do not impair materially the use of the assets to which they relate in the conduct of the business of the Company and the Company Subsidiaries as presently conducted.
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other entity.
“PICO Membership Interests” means the Series A Units held by PICO as designated in the UCP LLC Agreement.
“Proceeding” means any suit, arbitration, action, investigation, inquiry or proceeding commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity.
“Proxy Statement” means the Proxy statement of the Company filed with the SEC and mailed to the holders of Company Common Stock relating to the adoption, by the Company’s stockholders at the Company Stockholders Meeting, of this Agreement.
“Related Person” means, with respect to any Person, (a) the former, current and future stockholders, Representatives, Affiliates and assignees of such Person; and (b) any former, current or future stockholder, Representative, Affiliate or assignee of any Person described inclause (a).
“Release” means any spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, dumping, pouring or emanation of any Hazardous Material in, into, onto or through the environment (including ambient air, surface water, ground water, soils, land surface or subsurface strata).
“Representative” means, with respect to any Person, any direct or indirect Subsidiary of such Person, or any officer, director, employee, controlled Affiliate, investment banker, attorney, accountant or other agent, consultant, advisor or representative of such Person or any direct or indirect Subsidiary of such Person.
“S-4 Registration Statement” means Parent’s Registration Statement onForm S-4, including any amendments and/or supplements thereto, filed by Parent with the SEC to register under the Securities Act the offering, sale, and issuance, to the holders of Company Common Stock in the Merger, of shares of Parent Common Stock.
“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended.
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the United States Securities Act of 1933, as amended.
“Standstill Agreements” means, together, (a) the letter agreement, dated March 17, 2015, as amended by the Amendment No. 1 to March 2015 Standstill Agreement, dated March 14, 2017, each by and among the Company, UCP LLC, and Parent, and (b) the letter agreement, dated October 16, 2015, as amended by the Amendment No. 1 to October 2015 Standstill Agreement, dated March 14, 2017, each by and among Parent, the Company, and PICO.
A “Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, a majority of the Equity Interests of which) is owned directly or indirectly by such first Person;provided,however, that for the avoidance of doubt, UCP, LLC shall be deemed to be a Subsidiary of the Company.
“Superior Company Proposal” means a bona fide, written Company Takeover Proposal (except that references in the definition of “Company Takeover Proposal” to “20% or more” shall be replaced by “80%” for purposes of this definition) made by any Person(s) or “group” (within the meaning of Section 13(d) of the Exchange Act) that the Company Board determines in good faith, After Consultation, and after (i) taking into account all legal, regulatory and other aspects of such proposal (including anybreak-up and expense reimbursement fees, conditions to consummation, and whether the transactions contemplated by the proposal are reasonably capable of being consummated on a timely basis in accordance with their terms) and (ii) giving effect to any binding proposal made by Parent and considered and negotiated in good faith by the Company as required bySection 5.02(e)(C)(x) (Change in Recommendation Permitted in Certain Circumstances), is more favorable to the holders of Company Common Stock, from a financial point of view, than the Merger and the other Transactions contemplated by this Agreement, and for which , in the case of any cash consideration, all requisite cash funds are or will be immediately available or will be committed by identified financing sources at the time of signing a definitive transaction agreement.
“Tax” or “Taxes” means, however denominated, any and all taxes, assessments, customs, duties, levies, fees, tariffs, imposts, deficiencies and other governmental charges of any kind whatsoever (including, but not limited to, taxes on or with respect to net or gross income, franchise, profits, gross receipts, capital, sales, use, ad valorem, value added, transfer, real property transfer, transfer gains, transfer taxes, inventory, escheats, unclaimed property, capital stock, license, payroll, employment, social security, unemployment, severance, occupation, real or personal property, estimated taxes, rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative minimum, doing business, withholding and stamp and taxes arising under Treasury
RegulationSection 1.1502-6 (or any comparable state or local Law) as a transferee or successor, by contract, or otherwise), together with any interest thereon, penalties, fines, damages costs, fees, additions to tax or additional amounts with respect thereto, imposed by any federal, state or local taxing authority of any jurisdiction.
“Tax Return” means all federal, state, local, provincial and foreign Tax returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax return relating to Taxes, including any attachment thereto.
“UCP LLC Agreement” means the Second Amended and Restated Limited Liability Company Operating Agreement of UCP LLC, dated as of July 23, 2013.
“willful breach” means a material breach of this Agreement that is the consequence of an act or omission by a party with the actual knowledge or intention that the taking of such act or failure to take such action would, or would reasonably be expected to, cause a material breach of this Agreement.
Section 9.04 Interpretation. When a reference is made in this Agreement to an Article, Section, or Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limiting the generality of the foregoing.” The words “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. When used in this Agreement, the term “or” shall be construed in the inclusive sense of “and/or.” The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase will not simply mean “if.” References to a Person are also to its permitted successors and assigns. All terms defined in this Agreement will have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise specifically indicated, all references to “dollars” and “$” will be deemed references to the lawful money of the United States of America. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as, from time to time, amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to statutes will include all regulations promulgated thereunder and references to statutes or regulations will be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation, including by succession of comparable successor statutes. Any disclosure set forth in any Company Schedule or Parent Schedule shall be deemed set forth for purposes of any other Company Schedule or Parent Schedule, as the case may be, to which such disclosure is relevant, to the extent that it is reasonably apparent that such disclosure is relevant to such other Schedule. All representations and warranties set forth in this Agreement are contractual in nature only and subject to the sole and exclusive remedies set forth herein. Any document, list or other item shall be deemed to have been “made available” to Parent or the Company, as applicable, for all purposes of this Agreement if such document, list or other item was posted in the electronic data room established by the Company or Parent, as applicable, in connection with the Transactions, or was set forth in a Filed Company SEC Document or Filed Parent SEC Document, as applicable, or a physical or electronic copy thereof was delivered or otherwise made available to the Company or Parent, as applicable, or their respective Representatives. Whenever a consent or approval of the Company or Parent is required under this Agreement, such consent or approval may be executed and delivered only by an executive officer of such party duly authorized to so act by resolution of the board of directors of such party.
Section 9.05 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that Transactions are fulfilled to the extent possible.
Section 9.06 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.
Section 9.07 Entire Agreement; No Third-Party Beneficiaries; Etc. This Agreement, the Exhibits and Schedules hereto, the Confidentiality Agreement and the Standstill Agreements, constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement, including the Merger and the other Transactions. Except forSection 6.05 (Indemnification), as to which the rights to indemnification and other covenants expressed therein shall inure to the benefit of the persons to or in favor of whom such rights and covenants are granted or made, as applicable (such persons, the “Indemnified Parties”) and shall be enforceable by such Indemnified Parties, nothing contained in this Agreement or the Exhibits and Schedules hereto is intended to confer upon any Person, other than Parent, Merger Sub, and the Company, any rights or remedies. Notwithstanding the preceding sentence, following the Effective Time, the provisions ofSections 2.01 (Effect on Capital Stock) and2.02 (Exchange of Certificates) shall be enforceable by holders of Certificates, and the provisions ofSection 2.03 (Treatment of Company Options, Company Restricted Stock Units and Equity Plans) shall be enforceable by holders of Company Options and Company Restricted Stock Units. The parties hereto have voluntarily agreed to define their rights, liabilities and obligations respecting the acquisition of the Company exclusively in contract pursuant to the express terms and provisions of this Agreement; and the parties hereto expressly disclaim that they are owed any duties or are entitled to any remedies not expressly set forth in this Agreement. Furthermore, the parties each hereby acknowledge that this Agreement embodies the justifiable expectations of sophisticated parties derived fromarm’s-length negotiations. All parties to this Agreement specifically acknowledge that no party has any special relationship with another party that would justify any expectation beyond that of an ordinary strategic business combination partner in anarm’s-length transaction. The sole and exclusive remedies for any breach of the terms and provisions of this Agreement (including any representations and warranties set forth herein, made in connection herewith or as an inducement to enter into this Agreement) or any claim or cause of action otherwise arising out of or related to the acquisition of the Company or the other Transactions or this Agreement shall be those remedies available at law or in equity for breach of contract only (as such contractual remedies have been further expanded, limited or excluded pursuant to the express terms of this Agreement). The parties hereby agree that no party hereto shall have any remedy or cause of action (whether in contract or in tort) for any statements, communications, disclosures, failures to disclose, representations or warranties not expressly set forth in this Agreement.
Section 9.08 Governing Law. THIS AGREEMENT, AND ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN CONTRACT, TORT OR OTHERWISE) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO THIS AGREEMENT, OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS AGREEMENT (INCLUDING ANY CLAIM OR CAUSE OF ACTION BASED UPON, ARISING OUT OF OR RELATED TO ANY REPRESENTATION OR WARRANTY MADE IN OR IN CONNECTION WITH THIS AGREEMENT OR AS AN INDUCEMENT OR CONDITION TO ENTER INTO THIS AGREEMENT), SHALL BE GOVERNED BY THE INTERNAL SUBSTANTIVE AND PROCEDURAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE.
Section 9.09 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, except that Merger Sub may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to Parent or to any direct or indirect wholly-owned Subsidiary of Parent, but no such assignment shall relieve Merger Sub of any of its obligations under this Agreement. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
Section 9.10 Enforcement. Notwithstanding anything to the contrary in this Agreement, but except as set forth inSection 6.06(d) (Fee to Parent upon Termination; Exclusive Remedy), the parties agree that irreparable damage may occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, and that monetary damages, even if available, may not be an adequate remedy therefor. It is accordingly agreed that, except as set forth inSection 6.06(d), the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court specified inSection 9.11 (Venue; Waiver of Trial by Jury; Etc.), without any proof of actual damages (and each of Parent, Merger Sub, and the Company hereby waives any requirement for the securing or posting of any bond or surety in connection with such remedy), this being in addition to any other remedy to which Parent, Merger Sub, or the Company may be entitled under the Agreement, at law or in equity.
Section 9.11 Venue; Waiver of Trial by Jury; Etc.
(a) Each of the parties (i) irrevocably submits itself to the personal jurisdiction of all state and federal courts sitting in the State of Delaware, including to the jurisdiction of all courts to which an appeal may be taken from such courts, in any Proceeding arising out of or relating to this Agreement, any of the Transactions or any facts and circumstances leading to its execution or performance, (ii) agrees that all claims in respect of any such Proceeding must be brought, heard and determined exclusively in the Court of Chancery of the State of Delaware (provided that, in the event subject matter jurisdiction is declined by or unavailable in the Court of Chancery, then such Proceeding will be heard and determined exclusively in any other state or federal court sitting in the State of Delaware), (iii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from such courts, (iv) agrees not to bring any Proceeding against any other party arising out of or relating to this Agreement, any of the Transactions or any facts and circumstances leading to its execution or performance in any other court and (v) waives any defense of inconvenient forum to the maintenance of any Proceeding so brought. The parties agree that a final judgment in any such Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law. Each of the parties agrees to waive any bond, surety or other security that might be required of any other party with respect to any such Proceeding, including any appeal thereof.
(b) Each of the parties agrees that service of any process, summons, notice or document in accordance withSection 9.02(Notices) or in any other manner permitted by applicable Law will be effective service of process for any Proceeding brought against it by the other party in connection withSection 9.11(a) (Personal Jurisdiction; Venue);provided, however, that nothing contained herein will affect the right of any party to serve legal process in any other manner permitted by applicable Law. Notwithstanding the foregoing, the consents to jurisdiction set forth in thisSection 9.11 will not constitute general consents to service of process in the State of Delaware and shall have no effect for any purpose except as provided in thisSection 9.11 and will not be deemed to confer rights on any Person other than the parties.
(c) EACH OF THE PARTIES HERETO HEREBY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE TRANSACTIONS OR THE FACTS OR CIRCUMSTANCES LEADING TO ITS EXECUTION OR PERFORMANCE. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO PARTY OR REPRESENTATIVE OR AFFILIATE THEREOF HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER KNOWINGLY AND VOLUNTARILY AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS PARAGRAPH.
[Signature Page Follows]
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have duly executed this Agreement, all as of the date first written above.
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[Signature Page to Agreement and Plan of Merger]
EXHIBIT A
FORM OF
CERTIFICATE OF INCORPORATION
OF
SURVIVING CORPORATION
CERTIFICATEOF INCORPORATION
OF
CASA ACQUISITION CORP.
I, the undersigned, for the purposes of incorporating and organizing a corporation under the General Corporation Law of the State of Delaware, do execute this certificate of incorporation and do hereby certify as follows:
FIRST. The name of the corporation is Casa Acquisition Corp.
SECOND. The address of the corporation’s registered office in the State of Delaware is c/o National Corporate Research, Ltd., 850 New Burton Road, Suite 201, in the city of Dover, County of Kent, 19904. The name of the registered agent at such address upon whom process against the corporation may be served is National Corporate Research, Ltd.
THIRD. The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of stock which the corporation shall have authority to issue is 1,000. All such shares are to be Common Stock, par value of $0.01 per share, and are to be of one class.
FIFTH. The incorporator of the corporation is Barbara J. Cowell c/o Greenberg Traurig, LLP, whose mailing address is 1840 Century Park East, Suite 1900, Los Angeles, California 90067.
SIXTH. Unless and except to the extent that the bylaws of the corporation shall so require, the election of directors of the corporation need not be by written ballot.
SEVENTH. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors of the corporation is expressly authorized to make, alter and repeal the bylaws of the corporation, subject to the power of the stockholders of the corporation to alter or repeal any bylaw whether adopted by them or otherwise.
EIGHTH. A director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director of the corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.
A-A-1
NINTH. The corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this certificate of incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this certificate of incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this Article Ninth.
TENTH. The powers of the incorporator are to terminate upon the filing of this certificate of incorporation with the Secretary of State of the State of Delaware. The name and mailing address of the persons who are to serve as the initial directors of the corporation until the first annual meeting of stockholders of the corporation and until such directors’ successors are duly elected and qualified or until such directors’ earlier deaths, resignations or removals, are:
Dale Francescon
c/o Century Communities, Inc.
8390 East Crescent Parkway, Suite 650
Greenwood Village, Colorado 80111
Robert J. Francescon
c/o Century Communities, Inc.
8390 East Crescent Parkway, Suite 650
Greenwood Village, Colorado 80111
David L. Messenger
c/o Century Communities, Inc.
8390 East Crescent Parkway, Suite 650
Greenwood Village, Colorado 80111
The undersigned incorporator hereby acknowledges that the foregoing certificate of incorporation is his act and deed on this the 7th day of April, 2017.
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A-A-2
EXHIBIT B
Company Knowledge Group
A-B-1
EXHIBIT C
Parent Knowledge Group
A-C-1
VOTING SUPPORTAND TRANSFER RESTRICTION AGREEMENT
VOTING SUPPORT AND TRANSFER RESTRICTION AGREEMENT (this “Agreement”), dated April 10, 2017, by and among Century Communities, Inc., a Delaware corporation (“Parent”), Casa Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“Merger Sub”), PICO Holdings, Inc., a California corporation (“PICO”), for the purpose ofSections 1(g) and 6(m) hereof only, UCP, Inc., a Delaware corporation (the “Company”), and for the purpose ofSection 1(g) hereof only, UCP, LLC, a Delaware limited liability company.
WHEREAS, concurrently with the execution of this Agreement, Parent, Merger Sub, and the Company, are entering into an Agreement and Plan of Merger of even date herewith (the “Merger Agreement”), providing for the Merger and the other Transactions upon the terms and subject to the conditions prescribed in the Merger Agreement;
WHEREAS, all capitalized terms used but not defined in this Agreement have the respective meanings ascribed thereto in the Merger Agreement;
WHEREAS, as of the date hereof, PICO is the beneficial owner and holder of record of 100 shares of Class B Stock, representing approximately 57% of the aggregate voting power attributable to all outstanding shares of Company Capital Stock (such shares, together with all other shares of Company Capital Stock acquired by PICO and its Affiliates from and after the date hereof, being collectively referred to herein as the “PICO Shares”); and
WHEREAS, as a material inducement and condition to their willingness to enter into the Merger Agreement, Parent and Merger Sub have requested that PICO enter into this Agreement and, in order to satisfy such condition and induce Parent and Merger Sub to enter into the Merger Agreement, PICO desires and has agreed to enter into this Agreement.
WHEREAS, the Company Board, After Consultation, having determined and resolved in good faith that the Merger Agreement is advisable, fair to and in the best interest of the Company and its stockholders and having approved the Merger Agreement, has approved this Agreement and the transactions contemplated hereby for all purposes of Article XII of the Company Charter and has taken all other action necessary to render inapplicable to Parent, Merger Sub, PICO, and this Agreement (and the transactions contemplated hereby), any Anti-Takeover Law.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Agreements of PICO.
(a) Voting. From the date hereof until the termination of this Agreement in accordance with its terms, at each and every meeting of the Company’s stockholders, however called and convened (including each meeting convened or reconvened pursuant to any previous adjournment, recess or postponement thereof), and in connection with any action taken and effected by the written consent of the Company’s stockholders (in lieu of any such meeting of the Company’s stockholders in accordance with the Section 228 of the DGCL and/or the Company Charter), PICO hereby agrees (i) to appear and be present at all meetings of the Company’s stockholders and otherwise cause all of the PICO Shares to be counted for purposes of determining a quorum, and (ii) to (A) affirmatively vote and cause to be voted all PICO Shares in favor of (“for”), or, if action is to be taken by written consent in lieu of a meeting of the Company’s stockholders, deliver to the Company a duly executed affirmative written consent in favor of (“for”), the adoption of the Merger Agreement by the Company’s stockholders and approval of the Merger and the other Transactions, and (B) vote and cause to be
voted all PICO Shares against, and not provide any written consent with respect to or for, the adoption or approval of (1) any Company Takeover Proposal (and the transactions contemplated thereby), (2) any action or agreement (including, without limitation, any amendment of any agreement to which the Company or any Company Subsidiary is a party or to which any assets or properties of the Company or any Company Subsidiary is subject or bound) that PICO knows, or would reasonably be expected to know, would result in (x) a breach or violation of, ornon-compliance with, any representation, warranty, covenant, agreement or other obligation of the Company or any Company Subsidiary or Affiliate of the Company set forth in the Merger Agreement, or (y) the failure of any of the conditions to the obligations of Parent or Merger Sub to consummate the Merger and the other Transactions set forth in Sections 7.01 and 7.02 of the Merger Agreement, (3) any change in the size, term in office, or composition of the Board of Directors of the Company, and (4) any agreement (including, without limitation, any amendment, waiver, release from, ornon-enforcement of any agreement), any amendment or restatement of the Company Charter or the CompanyBy-laws, or any other action (or failure to act) that is intended or would reasonably be expected to prevent, interfere with, or materially impair or delay, the consummation of the Merger or any of the other Transactions in accordance with their terms. PICO shall not enter into or propose to enter into any agreement, plan, commitment or understanding with any Person the effect of which would be inconsistent with or violate the provisions and agreements contained in thisSection 1(a).
(b) Grant of Irrevocable Proxy in the Case of PICO Default. As security for and in furtherance of the agreements contained inSection 1(a) hereof, and subject to each of the third sentence and the last sentence of thisSection 1(b), PICO hereby irrevocably grants to, constitutes and appoints Parent and each of the executive officers of Parent, in their respective capacities as executive officers of Parent, as the case may be, and any individual who hereafter shall succeed to any such executive office of Parent, and each of them individually, as PICO’s proxy andattorney-in-fact (with full power of substitution), for and in the name, place and stead of PICO, to vote all the PICO Shares that are owned beneficially and/or held of record by PICO and its Affiliates on the date hereof and, from time to time, with full and unconditional authority to grant or withhold a consent or approval in respect of such PICO Shares and to execute and deliver a proxy (or proxies) to vote such PICO Shares (this “Proxy”) at each meeting of the holders of Company Capital Stock convened in respect of the matters set forth inSection 1(a) hereof. This Proxy shall be deemed to be a proxy coupled with an interest, is (subject to the last sentence of thisSection 1(b)) irrevocable, and shall not be terminated by operation of Law or upon the occurrence of any other event. This Proxy shall become immediately exercisable by Parent, and the proxies andattorneys-in-fact named and appointed herein, if (and only if) and to the extent that PICO shall have failed, in any respect, after 24 hours prior written notice from Parent to PICO, to comply with any of its voting and other obligations set forth inSection 1(a) hereof (with Parent’s good faith determination of any such failure by PICO to so comply being conclusive, final and binding). PICO represents and warrants to Parent that any and all proxies heretofore given in respect of the PICO Shares are not irrevocable and that all such proxies (if any) have been properly revoked or are no longer in effect as of the date hereof. PICO hereby affirms that this Proxy is hereby given by PICO in connection with, and in consideration of and as a material inducement to, Parent entering into this Agreement and the Merger Agreement and that this Proxy is hereby given to secure the obligations of PICO underSection 1(a) hereof. Parent covenants and agrees with PICO that Parent will exercise the Proxy, if applicable, solely with respect to the matters set forth inSection 1(a) hereof. During the term of this Agreement, PICO shall not take any action that would render invalid the exercise of the Proxy in accordance with its terms by Parent and the proxies andattorneys-in-fact named herein. Notwithstanding any of the foregoing, this Proxy shall terminate automatically, without any action required by PICO, Parent or otherwise, simultaneously upon the termination of this Agreement in accordance withSection 5 hereof.
(c) Other Voting Matters. PICO shall retain at all times the right to vote all PICO Shares in its sole discretion and without any other limitation on such matters, other than those matters set forth inSection 1(a) hereof that are at any time, or from time to time, presented for consideration to the Company’s stockholders generally.
(d) Appraisal Rights. PICO hereby irrevocably and unconditionally waives, and agrees not to exercise or assert, in respect of any shares of Company Capital Stock it beneficially owns and/or holds of record,
any appraisal, dissenter’s or similar rights under Section 262 or other applicable Law in connection with the Merger and the other Transactions.
(e) Restriction on Transfer; Proxies;Non-Interference; etc. Except as expressly contemplated by this Agreement or the Merger Agreement, from the date hereof until the termination of this Agreement in accordance with its terms, PICO shall not, directly or indirectly, whether in a single transaction or series of transactions, (i) sell, transfer (including by operation of Law), gift, pledge, hypothecate, encumber, assign or otherwise dispose of (including, without limitation, any Constructive Disposition (as hereinafter defined)), or enter into any contract, agreement, plan, commitment, arrangement, or understanding with respect to the sale, transfer, gift, pledge, hypothecation, encumbrance, assignment or other disposition (including, without limitation, any Constructive Disposition) of, any PICO Shares (or any right, title or interest thereto or therein) (each of the foregoing transactions referred to in this clause (i) of thisSection 1(e) being hereafter referred to as, a “Transfer”), (ii) deposit any PICO Shares into a voting trust or grant any proxies or enter into a voting agreement, power of attorney or voting trust with respect to any PICO Shares, (iii) take any action that would make any representation or warranty of PICO set forth in this Agreement untrue or incorrect or have the effect of preventing, disabling or delaying PICO from performing any of its obligations under this Agreement, or (iv) agree (whether or not in writing) to take any of the actions referred to in the foregoing clauses (i), (ii) or (iii) of thisSection 1(e).
As used herein, the term “Constructive Disposition” means, with respect to any PICO Shares, a short sale with respect to such security, entering into or acquiring a derivative contract with respect to such security, entering into or acquiring a futures or forward contract to deliver such security or entering into any other hedging or other derivative, swap,“put-call,” margin, securities lending or other transaction that has or reasonably would be expected to have the effect of changing, limiting, arbitraging or reallocating the economic benefits and risks of ownership.
(f) Exchange of PICO Membership Interests. Prior to the Effective Time, PICO shall affirmatively exercise its right to exchange and shall exchange the PICO Membership Interests for shares of Company Common Stock upon the terms and subject to the conditions of the Exchange Agreement (the “Exchange”), whereby the Exchange shall have become effective and irrevocable subject to and contingent upon the occurrence of the Effective Time, and, from and after consummation of the Exchange (and the transactions contemplated thereby), all issued and outstanding membership interests and other voting and economic interests in and to UCP, LLC shall be wholly owned by the Company.
(g) Termination of Related Party Agreements. Each of PICO, the Company, and UCP, LLC, as applicable, hereby irrevocably terminate, effective as of the Effective Time, the following agreements (without any payments or other obligations due or owing from, or any cost or expense to, the Company, Parent, Merger Sub or the Surviving Corporation), in each case subject to and contingent upon the occurrence of the Effective Time: (i) the Exchange Agreement, (ii) the Tax Receivable Agreement, dated as of July 23, 2013, by and among the Company, UCP, LLC, and PICO, (iii) the Transition Services Agreement, dated as of July 23, 2013, by and between PICO and the Company, and (iv) the Registration Rights Agreement, dated July 23, 2013, by and between the Company and PICO.
(h) No Solicitation; Obligations to Inform Parent. Solely in its capacity as a beneficial owner and holder of record of Company Common Stock and subject in all events toSection 6(b), from the date hereof until the termination of this Agreement in accordance with its terms, PICO (i) shall terminate all soliciting activities, discussions and negotiations with any Person (other than the Company, Parent, Merger Sub or their respective Representatives) regarding any proposal, expression of interest, request for information, or other communication that constitutes, or could reasonably be expected to lead to, a Company Takeover Proposal; (ii) shall not, and shall cause its controlled Affiliates and each of its and its controlled Affiliates’ Representatives not to, directly or indirectly, (A) propose, make, submit or announce a Company Takeover Proposal, (B) solicit, initiate, or knowingly encourage or facilitate (including by means of furnishing any information or responding to any
communication), any inquiries or the making, announcement or submission of any proposal or offer that constitutes, or could reasonably be expected to lead to, any Company Takeover Proposal, (C) enter into any agreement (whether binding,non-binding, conditional or otherwise) with respect to a Company Takeover Proposal (other than an Acceptable Confidentiality Agreement), (D) knowingly cooperate with, assist, or participate in any effort by, any Person (or any Representative of a Person) that has made, is seeking to make, has informed the Company or PICO of any intention to make, or has publicly announced an intention to make, any proposal that constitutes, or could reasonably be expected to lead to, any Company Takeover Proposal, or (E) otherwise knowingly facilitate a Company Takeover Proposal; (iii) shall promptly (and in any case within one Business Day) notify Parent or its Representatives in writing of its receipt of any Company Takeover Proposal or any inquiry constituting, with respect to, or that could reasonably be expected to lead to, any Company Takeover Proposal or inquiry, and the material terms of any such Company Takeover Proposal or inquiry, and (iv) shall keep Parent informed on a prompt and current basis of the status of any such Company Takeover Proposal or inquiry received by PICO (including the content and status of all material discussions and communications in respect thereof and any change or proposed change to the terms thereof);provided,however, that none of the foregoing restrictions shall prohibit PICO from taking any action that is concurrently taken by the Company and the Company Board pursuant to Section 5.02(c) of the Merger Agreement under the circumstances in which the Company is permitted to take such actions pursuant to Section 5.02(c) of the Merger Agreement.
(i) Publication. PICO consents to the publication and disclosure in the Proxy Statement andS-4 Registration Statement of PICO’s identity and ownership of PICO Shares and the nature of PICO’s commitments, arrangements and understandings under this Agreement. Parent agrees to provide PICO reasonable advance opportunity to review and comment on such disclosure in theS-4 Registration Statement and will reasonably consider any such comments provided by PICO. PICO shall not issue any press release or make any other public statement with respect to this Agreement, the Merger Agreement or the Transactions without the prior written consent of Parent, except for filings required under the Exchange Act or as may be required by applicable Law.
(j) Restrictions on Transfer of Parent Common Stock Received in the Merger. For the60-day period immediately following the Effective Time, none of PICO or its Affiliates shall, without Parent’s prior written consent (which may be withheld by Parent in its sole discretion), Transfer (including any Constructive Disposition) any shares of Parent Common Stock that PICO receives in the Merger (or any right, title or interest therein or thereto), and after such initial60-day period until the 210th day following the Effective Time, PICO shall not, in any of the next three50-day periods, agree to or consummate any Transfer (including any Constructive Disposition) in respect of its and/or its Affiliates shares of Parent Common Stock if such Transfer relates to more than 5% of the aggregate then-outstanding shares of Parent Common Stock during any such50-day period. From and after the 210th day following the Effective Time, PICO and its Affiliates will not be restricted in respect of any Transfer of Parent Common Stock held by it.
(k) Restriction on Beneficial Ownership of Parent Common Stock; Voting of Parent Common Stock on Certain Matters. PICO confirms and acknowledges that it is a party to the standstill letter agreement, dated October 16, 2015, as amended by the Amendment No. 1 to October 2015 Standstill Agreement, dated March 14, 2017, each among Parent, the Company and PICO (as amended, the “Standstill Agreement”), and agrees to continue to observe and comply with all the terms and provisions of the Standstill Agreement until the earlier of (i) 18 months following the date hereof, and (ii) such time as PICO no longer beneficially owns or holds of record any shares of Parent Common Stock (the date of such earlier event, the “Fallaway Date”). PICO and Parent, concurrently with the execution of this Agreement, have entered into an amendment to the Standstill Agreement to reflect the provisions of thisSection 1(k). Without limiting the generality of the foregoing sentence of thisSection 1(k) and without limiting anything contained in the Standstill Agreement as amended on the date hereof, until the Fallaway Date, PICO shall, and shall cause its controlled Affiliates to, affirmatively vote and cause to be voted all shares of Parent Common Stock it (or any of its controlled Affiliates), directly or indirectly, so owns, holds or controls at each and every meeting of Parent’s stockholders, however called or convened
(including each meeting convened or reconvened pursuant to any previous adjournment, recess or postponement thereof), and to furnish a written consent in the case of any action taken or effected by written consent of Parent’s stockholders (in lieu of any such meeting of Parent’s stockholders in accordance with Section 228 of the DGCL or the Parent Charter), in each case in favor of (“for”) all proposals made, proposed and recommended by the Parent Board (including, without limitation, the election of Parent’s directors and any other business submitted to Parent’s stockholders for their consideration and vote or written consent);provided,however, that nothing herein shall require PICO (or any of its controlled Affiliates) to vote in favor of any proposal made, proposed or recommended by the Parent Board with respect to any merger, business combination, acquisition of material assets, businesses or securities, or other similar extraordinary corporate transaction involving Parent so long as PICO otherwise complies with and observes in all respects the provisions of the Standstill Agreement as amended on the date hereof.
(l) Further Assurances. From time to time, at the request of Parent and without further consideration, prior to the termination of this Agreement, PICO shall execute and deliver such additional documents and instruments and take all such further action as may be reasonably required to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by this Agreement.
2. Post-Effective Time Covenants of Parent.
(a) Reasonable Post-Effective Time Access. Parent agrees for a period of 12 months following the Effective Time, upon the reasonable request of PICO, from time to time, during such period, to reasonably cooperate, and to cause the Surviving Corporation to reasonably cooperate, with PICO and its internal accounting personnel and external auditor, at PICO’s sole expense, with respect to the preparation of PICO’s statements of results of operations, cash flows and financial condition (and any review and attestation thereof by PICO’s external auditor) for PICO’s fiscal year ending December 31, 2017 and for any of PICO’s quarterly fiscal periods from and after the Effective Time through December 31, 2017, and further to enable the appropriate executive officers of PICO to certify that during such periods appropriate internal controls and disclosure controls were maintained by the Company. To facilitate the foregoing, Parent agrees to provide PICO’s internal accounting personnel and external auditor reasonable access during regular business hours to relevant financial and other information relating to the Company for the aforementioned periods, and access to accounting personnel of the Surviving Corporation having knowledge of such financial and other information.
(b) ReasonableNon-Monetary Cooperation with Share Disposition. For a period of 12 months following the Effective Time, in the event PICO seeks to Transfer any shares of Parent Common Stock that PICO receives in the Merger (such shares, “PICO’s Parent Shares”) in a marketed offering, “block trade,” or other transaction not involving the sale of such shares in the ordinary course on the open market (subject in each case to any applicable restrictions on transfer set forth inSection 1(j) hereof), upon the reasonable request of PICO, from time to time, during such12-month period, Parent shall reasonably cooperate, and shall cause the Surviving Corporation to reasonably cooperate, with PICO by making available to PICO the executive officers of Parent to participate in any “road show” presentations or similar investor meetings held in connection with any such Transfer or attempted Transfer by PICO;provided,however, that the provisions of thisSection 2(b) are not to intended, and shall not create any obligation on the part of Parent, the Surviving Corporation, or the Company, to (i) pay, or reimburse PICO, for any fees, costs or other expenses incurred or to be incurred by PICO in respect of any Transfer or attempted Transfer by PICO of any of PICO’s Parent Shares (including, without limitation, the fees, costs and expenses of any placement agents, underwriters or brokers engaged by PICO to conduct any marketed offering, “block trade,” or other transaction not involving an open market Transfer or attempted Transfer by PICO of PICO’s Parent Shares), or (ii) prepare any confidential or other information or placement memoranda.
(c) Tax Obligations. Following the Effective Time, Parent shall cause the Surviving Corporation, in its capacity as the Managing Member of UCP, LLC, to continue to comply with, or cause UCP, LLC to continue to comply with, UCP, LLC’s obligations under Sections 5.6(b)(ii), 6.6, 6.7 and 6.8 of the Second Amended and Restated Limited Liability Company Operating Agreement of UCP, LLC dated July 23, 2013 (the “Operating
Agreement”), with respect to taxable periods ending on or prior to the Effective Time;provided,however, that no payment of any interest shall be made with respect to any Tax Distribution. Such obligations shall include, without limitation, (i) promptly following the Effective Time, making any Tax Distributions (as defined in the Operating Agreement) to PICO that remain outstanding or are due for completed 2016 and 2017 quarterly periods ended prior to the Effective Time, (ii) following the filing by UCP, LLC of its annual federal income tax return for the year ended December 31, 2016, making an additional Tax Distribution to PICO in an amount equal to PICO’sTrue-Up Amount (as defined in the Operating Agreement) for such year, if suchTrue-Up Amount is negative, (iii) at least 10 days prior to the due date (without extensions) for PICO of its estimated tax for the partial quarter ending on the date of the Effective Time, determining and making a Tax Distribution to PICO for such partial quarter, (iv) following the filing by UCP, LLC of its federal income tax return for the partial year ending on the date of the Effective Time, making an additional Tax Distribution to PICO in an amount equal to PICO‘sTrue-Up Amount (as defined in the Operating Agreement) for such partial year, if suchTrue-Up Amount is negative, (v) delivering to PICO draft ScheduleK-1s and the draft federal income tax return of UCP, LLC for the tax year of UCP, LLC ending on the date of the Effective Time in accordance with the30-day timelines in Section 6.6(b) of the Operating Agreement, and (vi) without the prior written consent of PICO, which consent shall not be unreasonably withheld or delayed, taking any of the following actions in respect of a taxable period of UCP, LLC ending on or prior to the date of the Effective Time: (x) filing a federal partnership income tax return of UCP, LLC or ScheduleK-1s, (y) agreeing to any extension, filing any petition or complaint, filing a request for administrative adjustment, or entering into a settlement agreement, in each case as more fully described in Section 6.7 of the Operating Agreement, or (z) making any tax election. If PICO’s True-Up Amount (as defined in the Operating Agreement) is positive for the year ended December 31, 2016, PICO shall, within 10 days of the filing by UCP, LLC of its annual federal income tax return, deliver to UCP, LLC, the amount of the positive True-Up Amount. Within 10 days following the filing by UCP, LLC of its federal income tax return for the partial year ending on the date of the Effective Time, if the True-Up Amount for such partial year is positive, PICO shall pay to UCP, LLC an amount equal to PICO’s positive True-Up Amount for such partial year. The Parties agree that any gain realized in connection with the exchange of PICO Membership Interests for shares of Company Common Stock will not be treated as income of UCP, LLC for purposes of Tax Distributions. The obligations in this Section 2(c) shall survive any liquidation or dissolution of UCP, LLC.
3. Representations and Warranties of Parent and Merger Sub. Parent and Merger Sub each hereby jointly and severally represents and warrants to PICO as follows:
(a) Organization; Authority. Each of Parent and Merger Sub is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware. Each of Parent and Merger Sub has full power and authority to execute and deliver this Agreement, and to perform and comply with each of its obligations under this Agreement. The execution and delivery by each of Parent and Merger Sub of this Agreement, and the performance and compliance by Parent and Merger Sub with its obligations herein, have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub. Each of Parent and Merger Sub has duly executed and delivered this Agreement, and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as may be limited by Laws affecting the enforcement of creditors’ rights generally or by general equitable principles.
4. Representations and Warranties of PICO. PICO hereby represents and warrants to Parent and Merger Sub as follows:
(a) Organization; Authority. PICO is duly organized, validly existing and in good standing under the Laws of the State of California. PICO has full power and authority to execute and deliver this Agreement, and to perform and comply with each of its obligations under this Agreement. The execution and delivery by PICO of this Agreement, and the performance and compliance by PICO with each of its obligations herein, have been duly authorized by all necessary corporate action on the part of PICO. PICO has duly executed and delivered this Agreement, and this Agreement constitutes the legal, valid and binding obligation of PICO, enforceable against PICO in accordance with its terms, except as may be limited by Laws affecting the enforcement of creditors’ rights generally or by general equitable principles.
(b) Consents and Approvals; No Violations. No Consents or Filings with, any Governmental Entity or third party are necessary for the performance by PICO of its obligations under this Agreement, except for filings required under the Exchange Act with respect to PICO’s beneficial ownership of PICO Shares. Neither the execution and delivery of this Agreement by PICO, nor the performance by PICO with its obligations under this Agreement, will (i) conflict with or violate any provision of the organizational documents of PICO or (ii) (x) violate any Law, judgment, writ or injunction of any Governmental Entity applicable to PICO or any of its subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in the loss of any material benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of, PICO or any of its Affiliates under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, permit, lease, agreement or other instrument or obligation to which PICO or any of its Affiliates is a party, or by which they or any of their respective properties or assets may be bound or affected, except, in the case of clause (ii) of thisSection 4(b), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens as would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the performance by PICO of any of its obligations under this Agreement.
(c) Ownership of Shares. PICO owns, beneficially, and is the record holder of, all of the PICO Shares. PICO owns all of the PICO Shares free and clear of any proxy, voting restriction, adverse claim or other Lien (other than (i) as set forth in the Related Party Agreements or (ii) proxies and restrictions in favor of Parent and Merger Sub expressly arising pursuant to this Agreement, and except for such transfer restrictions of general applicability as may be provided under the Securities Act and/or the “blue sky” Laws of the various states of the United States). Without limiting the foregoing, except for proxies and restrictions in favor of Parent and Merger Sub expressly arising pursuant to this Agreement, except as described in a Schedule 13D or Schedule 13G filed with the SEC prior to the date hereof (which filing is true and complete), and (i) other than as set forth in the Related Party Agreements and (ii) except for such transfer restrictions of general applicability as may be provided under the Securities Act and/or the “blue sky” Laws of the various states of the United States, PICO has sole voting power and sole power of disposition with respect to all PICO Shares, with no restrictions on PICO’s rights of voting or disposition pertaining thereto and no Person other than PICO has any right to direct or approve the voting or disposition of any PICO Shares. As of the date hereof, except as disclosed in the Company SEC Documents, PICO does not own, beneficially or of record, any securities of the Company other than the PICO Shares.
(d) Absence of Litigation. As of the date hereof, there is no Proceeding pending against, or, to the knowledge of PICO, threatened against or affecting, PICO or any of the PICO Shares that could reasonably be expected to impair the ability of PICO to perform fully its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
(e) Opportunity to Review; Reliance. PICO has had the opportunity to review this Agreement and the Merger Agreement with counsel of its own choosing. PICO understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon PICO’s execution, delivery and performance of this Agreement.
(f) Brokers. No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission that is payable by the Company, Parent or any of their respective subsidiaries in connection with the Transactions based upon arrangements made by or on behalf of PICO.
5. Termination. This Agreement shall terminate automatically, without any further action of the parties hereto on the first to occur of (a) the termination of the Merger Agreement in accordance with its terms (including in accordance with Section 8.01(h) of the Merger Agreement), and (b) the Effective Time. Notwithstanding the foregoing, (A) nothing herein shall relieve any party from liability for its breach of any of the provisions this Agreement, (B) if the Merger is consummated, the provisions ofSections 1(j),1(k) and2
hereof shall survive and continue in force and effect from and after the Effective Time for the periods set forth in such Sections, and (C) the provisions of thisSection 5 andSection 6 hereof shall survive the termination of this Agreement. Without limiting the generality of this Section 5, if a Company Recommendation Change is made by the Company Board in response to an Intervening Event (to the extent permitted by and in accordance with Section 5.02(e) of the Merger Agreement) and in respect of such Company Recommendation Change Parent does not exercise its unilateral right to terminate the Merger Agreement in accordance with Section 8.01(d) of the Merger Agreement, PICO’s voting agreement and obligations under Section 1(a)(ii)(a) of this Agreement and the Proxy granted by Peak pursuant to Section 1(b) of this Agreement shall no longer be in respect of all Shares then owned by Peak, but in lieu and stead thereof, Peak’s voting agreement and obligations under Section 1(a)(ii)(a) of this Agreement and the Proxy granted by Peak pursuant to Section 1(b) of this Agreement shall be in respect of that number of Shares owned by Peak as shall equal 28% of the aggregate voting power attributable to all outstanding shares of Company Capital Stock.
6. Miscellaneous.
(a) Additional Shares. Until the termination of this Agreement in accordance with its terms, PICO shall promptly notify Parent of the number of additional shares of Company Capital Stock, if any, as to which PICO acquires record or beneficial ownership after the date hereof. Any such shares as to which PICO acquires record or beneficial ownership after the date hereof and prior to termination of this Agreement shall be PICO Shares for purposes of this Agreement. Without limiting the foregoing, in the event of any stock split, reclassification, subdivision, recapitalization, stock dividend or other change in the capital structure of the Company affecting the Company Capital Stock, the number of shares of Company Capital Stock constituting PICO Shares shall be adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Company Capital Stock or other voting securities of the Company issued to PICO in connection therewith.
(b) PICO Acting in its Stockholder Capacity Only. The parties acknowledge and agree that this Agreement is entered into by PICO solely in its capacity as beneficial owner and record holder of the PICO Shares and that nothing in this Agreement is intended to or shall, to the extent that PICO has designees or nominees that serve as directors of the Company, in any way affect or limit the ability of any such director of the Company to act in his or her capacity as a director of the Company.
(c) Expenses. All costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.
(d) Definition of “Beneficial Ownership”. For purposes of this Agreement, “beneficial ownership” with respect to (or to “own beneficially”) any securities shall mean having “beneficial ownership” of such securities (as determined pursuant to Rule13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing.
(e) Entire Agreement; No Third Party Beneficiaries. This Agreement constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement is not intended to and shall not confer upon any Person other than the parties hereto any rights hereunder.
(f) Assignment; Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties, except that (i) Merger Sub may assign its rights and interests hereunder to Parent or to any wholly-owned subsidiary of Parent if such assignment would not cause a delay in the consummation of any of the Transactions, provided that no such assignment shall relieve Merger Sub of its obligations hereunder if such assignee does not perform such obligations, and (ii) PICO may assign its rights and interests hereunder by operation of law to a successor Delaware corporation in connection with PICO’s proposed reincorporation in the State of Delaware, if such reincorporation is approved by the requisite stockholder vote at
PICO’s 2017 Annual Meeting of Shareholders. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this Section shall be null and void.
(g) Amendments; Waiver. This Agreement may not be amended or supplemented, except by a written agreement executed by the parties hereto. Any party to this Agreement may (i) waive any inaccuracies in the representations and warranties of any other party hereto or extend the time for the performance of any of the obligations or acts of any other party hereto, or (ii) waive compliance by the other party with any of the agreements contained herein. Notwithstanding the foregoing, no failure or delay by Parent or Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
(h) Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable Law and public policy in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
(i) Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by the other parties hereto.
(j) Descriptive Headings. Headings of Sections and subsections of this Agreement are for convenience of the parties only, and shall be given no substantive or interpretive effect whatsoever.
(k) Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given,
if to Parent or Merger Sub, to
Century Communities, Inc.
8390 East Crescent Parkway, Suite 650
Greenwood Village, CO 80111
Fax:303-770-8320
with copies (which shall not constitute notice) to:
Greenberg Traurig, LLP
1840 Century Park East, Suite 1900
Los Angeles, CA 90067
Attention: Mark J. Kelson, Esq.
Fax:310-586-0556
Email:kelsonm@gtlaw.com
Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, NY 10116
Attention: Clifford E. Neimeth, Esq.
Fax:212-805-9383
Email:neimethc@gtlaw.com
if to PICO, to:
PICO Holdings, Inc.
7979 Ivanhoe Avenue, Suite 300
La Jolla, CA 92037
Attention: Chief Executive Officer
Fax:858-652-4131
Email: mwebb@picoholdings.com
with copies (which shall not constitute notice) to:
Cooley LLP
4401 Eastgate Mall
San Diego, CA 92121
Attention: Jason L. Kent, Esq.
Fax:858-550-6420
Email:jkent@cooley.com
or such other address, fax number or email address as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 P.M. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
(l) Governing Law; Enforcement; Jurisdiction; Waiver of Jury Trial.
(i) This Agreement shall be governed by, and construed in accordance with, the internal procedural and substantive Laws of the State of Delaware, without regard to the choice of law rules thereof.
(ii) All actions and proceedings arising out of or relating to this Agreement shall be exclusively heard and determined in the Chancery Court of the State of Delaware or any federal court sitting in the State of Delaware, and the parties hereto hereby irrevocably submit to the exclusive jurisdiction of such courts (and, in the case of appeals, appropriate appellate courts therefrom) in any such action or proceeding and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding. The consents to jurisdiction set forth in this paragraph shall not constitute general consents to service of process in the State of Delaware and shall have no effect for any purpose except as provided in this paragraph and shall not be deemed to confer rights on any Person other than the parties hereto. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law.
(iii) Each of the parties hereto hereby irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or related to this Agreement.
(iv) The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not timely performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek and obtain and injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in the Chancery Court of the State of Delaware or any federal court sitting in the State of Delaware, this being in addition to any other remedy to which they are entitled at Law or in equity.
(m) Company Acknowledgement and Agreements. The Company hereby represents to Parent that (i) this Agreement and the transactions contemplated hereby have been approved by all requisite corporate and other action of the Company and the Company Board for purposes of Article XII of the Company Charter, and (ii) all such other corporate action has been taken to render inapplicable to Parent, Merger Sub, PICO, the Merger Agreement, this Agreement, the Merger and each of the other Transactions, the provisions of any Anti-Takeover Law. The Company Board (or other appropriate authorized officials of the Company) have notified the Company’s transfer agent as to the provisions ofSection 1(e) hereof and have instructed the Company’s transfer agent, in writing, not to honor, record, give effect to or respect any Transfer of PICO Shares in violation of this Agreement.
[Signature page follows]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written.
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Solely, for the purpose ofSections 1(g) and6(m) of this Agreement,
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Solely, for the purpose ofSection 1(g)of this Agreement,
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Opinion of Citigroup Global Markets Inc.
April 10, 2017
The Board of Directors
UCP, Inc.
99 Almaden Boulevard, Suite 400
San Jose, California 95113
The Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of Class A common stock of UCP, Inc. (“UCP”), other than PICO Holdings, Inc. (“PICO”) and its affiliates, of the Merger Consideration (defined below) provided for pursuant to the terms and subject to the conditions set forth in an Agreement and Plan of Merger (the “Agreement”) proposed to be entered into among UCP, Century Communities, Inc. (“Century”), and Casa Acquisition Corp., a wholly owned subsidiary of Century (“Merger Sub”). As more fully described in the Agreement, (i) UCP will be merged with and into Merger Sub (the “Merger”), with Merger Sub as the surviving corporation, and (ii) each outstanding share of Class A common stock, par value $0.01 per share, of UCP (“UCP Class A Common Stock”) will be converted into the right to receive (a) $5.32 in cash (the “Cash Consideration”) and (b) 0.2309 of a share of the common stock, par value $0.01 per share, of Century (“Century Common Stock” and, such number of shares of Century Common Stock issuable in the Merger, together with the Cash Consideration, the “Merger Consideration”). The terms and conditions of the Merger are more fully set forth in the Agreement.
In arriving at our opinion, we reviewed an execution version, provided to us on April 10, 2017, of the Agreement and held discussions with certain senior officers, directors and other representatives and advisors of UCP and certain senior officers and other representatives and advisors of Century concerning the businesses, operations and prospects of UCP and Century. We reviewed certain publicly available and other business and financial information relating to UCP and Century provided to or discussed with us by the managements of UCP and Century, including certain internal financial forecasts and other information and data relating to UCP reflecting, for fiscal years 2020 and 2021, alternative home delivery and leverage scenarios for UCP and certain internal financial forecasts and other information and data relating to Century, and discussed with the management of UCP the potential strategic implications and financial and operational benefits anticipated by the management of UCP to result from the Merger. We reviewed the financial terms of the Merger as set forth in the Agreement in relation to, among other things: current and historical market prices and trading volumes of UCP Class A Common Stock and current and historical market prices and trading volumes of Century Common Stock; historical and projected operating data of UCP and Century; and the capitalization and financial condition of UCP and Century. We analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations we considered relevant in evaluating those of UCP and Century and we considered, to the extent publicly available, the financial terms of certain other transactions which we considered relevant in evaluating the Merger. We also evaluated certain potential pro forma financial effects of the Merger on Century utilizing the internal financial forecasts and other information and data relating to UCP, Century and the Merger referred to above. In addition to the foregoing, we conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as we deemed appropriate in arriving at our opinion. In connection with our engagement and at your direction, we held discussions with selected third parties regarding their potential interest in a possible acquisition transaction involving UCP. The issuance of our opinion has been authorized by our fairness opinion committee.
In rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise
The Board of Directors
UCP, Inc.
April 10, 2017
Page 2
reviewed by or discussed with us and upon the assurances of the managements and other representatives of UCP and Century that they are not aware of any relevant information that has been omitted or that remains undisclosed to us. With respect to the financial forecasts and other information and data relating to UCP that we have been directed to utilize in our analyses (including, without limitation, as to tax attributes expected by the management of UCP to be utilized by UCP on a standalone basis), we have been advised by the management of UCP and we have assumed, with your consent, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of UCP as to, and are a reasonable basis upon which to evaluate, the future financial performance of UCP under the alternative scenarios reflected therein and the other matters covered thereby. With respect to the financial forecasts and other information and data relating to Century that we have been directed to utilize in our analyses, we have been advised by the management of Century and we have assumed, with your consent, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Century as to, and are a reasonable basis upon which to evaluate, the future financial performance of Century and the other matters covered thereby. We have relied, at your direction, upon the assessments of the managements of UCP and Century as to, among other things, (i) the potential impact on UCP and Century of certain market, competitive, cyclical, seasonal and other trends and developments in and prospects for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the real estate and residential homebuilding industries and related credit and financial markets, including with respect to the housing markets in which UCP and Century operate, (ii) existing and future relationships, agreements and arrangements with, and the ability to attract, retain and/or replace, key employees, suppliers and other commercial relationships of UCP and Century and (iii) the ability to integrate the businesses of UCP and Century. We have assumed, with your consent, that there will be no developments with respect to any such matters that would have an adverse effect on UCP, Century or the Merger or that otherwise would be meaningful in any respect to our analyses or opinion.
We have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent, derivative, off-balance sheet, accrued or otherwise) of UCP, Century or any other entity nor have we made any physical inspection of the properties or assets of UCP, Century or any other entity. We also have not made any analysis of, nor do we express any opinion or view as to, the adequacy or sufficiency of reserves for warranty or other claims with respect to home sales or any other matters, and we have assumed, with your consent, that such reserves are, and on a pro forma basis will be, in the aggregate appropriate to cover such warranty and other claims. We have assumed, with your consent, that the Merger will be consummated in accordance with its terms (including, without limitation, with respect to the exchange by PICO of membership interests in a subsidiary of UCP for shares of UCP Class A Common Stock) and in compliance with all applicable laws, documents and other requirements, without waiver, modification or amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases, waivers and agreements for the Merger, no delay, limitation, restriction or condition, including any divestiture or other requirements, amendments or modifications, will be imposed or occur that would have an adverse effect on UCP, Century or the Merger or that otherwise would be meaningful in any respect to our analyses or opinion. We also have assumed, with your consent, that the Merger will qualify for the intended tax treatment contemplated by the Agreement. We are not expressing any opinion or view as to the actual value of Century Common Stock when issued in the Merger or the prices at which Century Common Stock (or any other securities of or relating to Century) or UCP Class A Common Stock (or any other securities of or relating to UCP) will trade or otherwise be transferable at any time. Representatives of UCP have advised us, and we also have assumed, that the final terms of the Agreement will not vary materially from those set forth in the execution version reviewed by us. We are not expressing any opinion or view with respect to tax,
The Board of Directors
UCP, Inc.
April 10, 2017
Page 3
accounting, regulatory, legal or similar matters, including tax or other consequences of the Merger, and we have relied, with your consent, upon the assessments of representatives of UCP as to such matters.
Our opinion addresses only the fairness, from a financial point of view and as of the date hereof, of the Merger Consideration (to the extent expressly specified herein), without regard to individual circumstances of specific holders of, or any rights, preferences, restrictions or limitations that may be attributable to, shares of UCP Class A Common Stock or other securities of UCP or its affiliates. Our opinion does not address any other terms, aspects or implications of the Merger, including, without limitation, the form of the Merger Consideration, the form or structure of the Merger, any exchange agreement, voting support and transfer restriction agreement, tax receivable agreement or any other agreement, arrangement or understanding to be entered into in connection with or contemplated by the Merger or otherwise. We express no view as to, and our opinion does not address, the underlying business decision of UCP to effect or enter into the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for UCP or the effect of any other transaction which UCP might engage in or consider. We also express no view as to, and our opinion does not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation or other payments to any officers, directors or employees of any parties to the Merger or any affiliates of such parties, or any class of such persons, relative to the Merger Consideration or otherwise. Our opinion is necessarily based upon information available, and financial, stock market and other conditions and circumstances existing and disclosed, to us as of the date hereof. Although subsequent developments may affect our opinion, we have no obligation to update, revise or reaffirm our opinion. As you are aware, the credit, financial and stock markets, and the regional housing markets and industries in which UCP and Century operate, have experienced and continue to experience volatility and we express no opinion or view as to any potential effects of such volatility on UCP or Century (or their respective businesses) or the Merger.
Citigroup Global Markets Inc. has acted as financial advisor to UCP in connection with the proposed Merger and will receive a fee for such services, the principal portion of which is contingent upon consummation of the Merger. We also will receive a fee in connection with the delivery of this opinion. In addition, UCP has agreed to reimburse our expenses and to indemnify us against certain liabilities arising out of our engagement. As you are aware, we and our affiliates in the past have provided and currently and in the future may provide investment banking, commercial banking and/or other similar financial services to UCP and its affiliates unrelated to the Merger, for which services we and our affiliates have received and would expect to receive compensation, including, during the past two years, having assisted UCP in connection with share repurchases under UCP’s stock repurchase program. As you also are aware, we and our affiliates in the past have provided, currently are providing and in the future may provide investment banking, commercial banking and/or other similar financial services to Century and its affiliates, for which services we and our affiliates have received and expect to receive compensation, including, during the past two years, having acted or acting as (i) an initial purchaser for a private placement of senior notes of Century, (ii) a sales agent for an at-the-market offering program of Century and (iii) a lender under a revolving credit facility of Century. Although we and our affiliates have not provided investment banking, commercial banking or other similar financial services to PICO in the past two years for which we and our affiliates received compensation, we and our affiliates in the future may provide such services to PICO and/or its affiliates, for which services we and our affiliates would expect to receive compensation. In the ordinary course of business, we and our affiliates may actively trade or hold the securities of UCP, Century, PICO and their respective affiliates for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. In addition, we and our affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with UCP, Century, PICO and their respective affiliates.
The Board of Directors
UCP, Inc.
April 10, 2017
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Our advisory services and the opinion expressed herein are provided for the information of the Board of Directors of UCP (in its capacity as such) in its evaluation of the proposed Merger. Our opinion is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed Merger or otherwise.
Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the Merger Consideration to be received by holders of UCP Class A Common Stock (other than PICO and its affiliates) pursuant to the Agreement is fair, from a financial point of view, to such holders.
Very truly yours,
CITIGROUP GLOBAL MARKETS INC.
Section 262 of the DGCL
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
| Item 20. | Indemnification of Directors and Officers. |
Delaware Corporate Registrants
General Corporation Law of the State of Delaware.Under Section 145 of the General Corporation Law of the State of Delaware (which we refer to as the “DGCL”), a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding (i) if such person acted in good faith and in a manner that person reasonably believed to be in or not opposed to the best interests of the corporation, and (ii) with respect to any criminal action or proceeding, if he or she had no reasonable cause to believe such conduct was unlawful. In actions brought by or in the right of the corporation, a corporation may indemnify such person against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner that person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which that person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which the Court of Chancery or other such court shall deem proper. To the extent that such person has been successful on the merits or otherwise in defending any such action, suit or proceeding referred to above or any claim, issue or matter therein, he or she is entitled to indemnification for expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith. The indemnification and advancement of expenses provided for or granted pursuant to Section 145 of the DGCL is not exclusive of any other rights of indemnification or advancement of expenses to which those seeking indemnification or advancement of expenses may be entitled, and a corporation may purchase and maintain insurance against liabilities asserted against any former or current director, officer, employee or agent of the corporation, or a person who is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, whether or not the power to indemnify is provided by the statute.
Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for any breach of the director’s duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or for any transaction from which the director derived an improper personal benefit. Century Communities’The Company’s certificate of incorporation as amended (which we refer to as the “Century Communities Charter”Company’s “charter”) provides for such limitation of liability.
Century Communities Charter and Bylaws of Century Communities, Inc. . Each of Article EIGHTH of the Century Communities Charter,Company’s charter, and Article VI of Century Communities’the Company’s bylaws as amended (which we refer to as the “Century Communities Bylaws”Company’s “bylaws”), provides that Century Communitiesthe Company shall indemnify and hold harmless, to the fullest extent permitted by the DGCL, as it presently exists or may hereafter be amended, any person (which we refer to as a “Covered Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (which we refer to as a “proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or
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officer of Century Communitiesthe Company or, while a director or officer of Century Communities,the Company, is or was serving at the request of Century Communitiesthe Company as a director, officer, employee or agent of another corporation or of a partnership,
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limited liability company, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person. Notwithstanding the foregoing, subject to certain exceptions, Century Communitiesthe Company will be required to indemnify a Covered Person in connection with a proceeding (or part thereof) commenced by such Covered Person only if the commencement of such proceeding (or part thereof) by the Covered Person was authorized in the specific case by Century Communities’the Company’s board of directors. Century CommunitiesThe Company may, by action of Century Communities’the Company’s board of directors, provide indemnification to such employees and agents of Century Communitiesthe Company to such extent and to such effect as Century Communities’the Company’s board of directors shall determine to be appropriate and authorized by Delaware law.
Indemnification Agreements of Century Communities, Inc. . In addition to the provisions of the Century Communities CharterCompany’s charter and Century Communities Bylawsbylaws described above, Century Communitiesthe Company has entered into an indemnification agreement with each of its officers and directors. These agreements require Century Communitiesthe Company to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to Century Communities,the Company, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.
Insurance. of Century Communities, Inc. The Company maintains standard policies of insurance that provide coverage (i) to its directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act, and (ii) to it with respect to indemnification payments that Century Communitiesthe Company may make to such directors and officers.
Charter and Bylaws of Casa Acquisition Corp. Article EIGHTH of the Certificate of Incorporation of Casa Acquisition Corp. provides that a director of Casa Acquisition Corp. shall not be liable to it or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL. Article VI of the Bylaws of Casa Acquisition Corp. provides that Casa Acquisition Corp. shall indemnify and hold harmless, to the fullest extent permitted by applicable law, any person (which we refer to as a “Covered Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (which we refer to as a “proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of Casa Acquisition Corp. or, while a director or officer of Casa Acquisition Corp., is or was serving at the request of Casa Acquisition Corp. as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person. Notwithstanding the foregoing, subject to certain exceptions, Casa Acquisition Corp. will be required to indemnify a Covered Person in connection with a proceeding (or part thereof) commenced by such Covered Person only if the commencement of such proceeding (or part thereof) by the Covered Person was authorized in the specific case by Casa Acquisition Corp.’s board of directors. Casa Acquisition Corp. will, to the fullest extent not prohibited by applicable law, pay the expenses (including attorneys’ fees) incurred by a Covered Person in defending any proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the proceeding will be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified by Casa Acquisition Corp. or otherwise. Article VI of the Bylaws of Casa Acquisition Corp. expressly provides that Article VI of the Bylaws shall not limit the right of Casa Acquisition Corp., to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.
Delaware Limited Liability Company Registrants
Section 18-108 of the Delaware Limited Liability Company Act provides that subject to such standards and restrictions, if any, as are set forth in its limited liability company agreement, a limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever.
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None of the Certificates of Formation of Benchmark Communities, LLC, BMC East Garrison, LLC, BMC EG Bluffs, LLC, BMC EG Bungalow, LLC, BMC EG Garden, LLC, BMC EG Grove, LLC, BMC EG Towns, LLC, BMC EG Village, LLC, BMC Meadowood II, LLC, BMC Red Hawk, LLC, BMC Touchstone, LLC, BMCH California, LLC, BMCH North Carolina, LLC, BMCH Tennessee, LLC, BMCH Washington, LLC, Century Communities of California, LLC, Century Communities of Nevada, LLC, Century Communities of North Carolina, LLC, Century Communities of South Carolina, LLC, Century Communities of Tennessee, LLC, Century Communities of Washington, LLC, Century Rhodes Ranch GC, LLC, Century Tuscany GC, LLC, Neighborhood Associations Group, LLC, UCP, LLC, UCP Barclay III, LLC, UCP East Garrison, LLC, UCP Kerman, LLC, UCP Meadowood III, LLC, UCP Sagewood, LLC, UCP Soledad, LLC, UCP Tapestry, LLC, and WJH LLC specifies the extent to which such company may indemnify any member, manager, or other person.
Each of the Operating Agreements for Century Communities of Nevada, LLC, Century Rhodes Ranch GC, LLC, Century Tuscany GC, LLC, and Neighborhood Associations Group, LLC provides that such company shall indemnify and hold harmless its member and its officers, members, managers, agents and successors from and against, and shall advance expenses to such persons with respect to, any and all costs, losses, liabilities, claims, damages and expenses paid or accrued by such person in connection with any action or inaction related to the business of such company, to the fullest extent permitted by the Delaware Limited Liability Company Act, provided that (i) the action or inaction did not constitute gross negligence or willful misconduct on the part of such member, its affiliates or any of their respective officers, members, managers, agents and successors or a breach of such Operating Agreement or any other agreement with such company by such member or its affiliate, and (ii) to the extent any such affiliate is indemnified pursuant to the terms of any other agreement between such affiliate, on the one hand, and such company, on the other hand (including, if applicable, any management agreement, development agreement or leasing agreement), the foregoing indemnity provisions will not apply to such affiliate, and such company shall only indemnify such affiliate to the extent set forth in such other agreement. Any indemnification obligation will be paid from, and only to the extent of, available assets of such company, and such member will have no personal liability on account thereof.
The Operating Agreement of UCP, LLC provides that UCP, LLC shall indemnify and hold harmless its sole member and its officers, members, managers, agents and successors from and against, and shall advance expenses to such persons with respect to, any and all costs, losses, liabilities, claims, damages and expenses paid or accrued by such person in connection with any action or inaction related to business of UCP, LLC, to the fullest extent permitted by the Delaware Limited Liability Company Act, provided that (i) the action or inaction did not constitute gross negligence or willful misconduct on the part of its sole member, its affiliates or any of their respective officers, members, managers, agents and successors, or a breach of the Operating Agreement or any other agreement with UCP, LLC by its sole member or any such affiliate, and (b) to the extent any such affiliate is indemnified pursuant to the terms of any other agreement between such affiliate, on the one hand, and UCP, LLC, on the other hand (including, if applicable, any management agreement, development agreement or leasing agreement), the indemnity provisions of the Operating Agreement shall not apply to such affiliate, and UCP, LLC shall only indemnify such affiliate to the extent set forth in such other agreement.
The Operating Agreement of UCP Kerman, LLC provides that such company shall indemnify its sole member, and those authorized officers, agents, and employees identified in writing by its sole member as entitled to be indemnified, for all costs, losses, liabilities and damages paid or accrued by its sole member (as the member or as an officer, agent, or employee) or any such officer, agent or employee in connection with the business of such company, except to the extent prohibited by the laws of the State of Delaware. In addition, such company may advance costs of defense of any proceeding to its sole member or any such officer, agent, or employee upon receipt by such company of an undertaking by or on behalf of such person to repay such amount if it is ultimately determined that the person is not entitled to be indemnified by such company.
Each of the Operating Agreements of Benchmark Communities, LLC, BMC East Garrison, LLC, BMC EG Bluffs, LLC, BMC EG Bungalow, LLC, BMC EG Garden, LLC, BMC EG Grove, LLC, BMC EG Towns, LLC, BMC EG Village, LLC, BMC Meadowood II, LLC, BMC Red Hawk, LLC, BMC Touchstone, LLC, BMCH California, LLC, BMCH North Carolina, LLC, BMCH Tennessee, LLC, BMCH Washington, LLC, UCP Barclay
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III, LLC, UCP East Garrison, LLC, UCP Meadowood III, LLC, UCP Sagewood, LLC, UCP Soledad, LLC, and UCP Tapestry, LLC provides that such company shall indemnify and hold harmless, to the fullest extent permitted by applicable law, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (which we refer to as a “proceeding”) by reason of the fact that he, or a person for whom he is the legal representative, is or was a manager or officer of such company or is or was serving at the request of such company as a director, officer, employee, duly authorized attorney-in-fact, or agent of another entity, including any corporation, limited liability company, partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such person. Such company will be required to indemnify a person in connection with a proceeding (or part thereof) initiated by such person only if the proceeding (or part thereof) was authorized by the Board of Managers of such company. Such company will pay the expenses (including attorneys’ fees) incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a manager or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by such manager or officer to repay all amounts advanced if it should be ultimately determined that such manager or officer is not entitled to be indemnified under the Operating Agreement or otherwise. Such company may maintain insurance, at its expense, to protect itself and any manager, officer, employee or agent of such company, or such person who is or was serving at the request of such company as a director, officer, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not such company would have the power to indemnify such person against such expense, liability or loss under Delaware law.
None of the Limited Liability Company Agreements of Century Communities of California, LLC, Century Communities of North Carolina, LLC, Century Communities of South Carolina, LLC, Century Communities of Tennessee, LLC, Century Communities of Washington, LLC, and WJH LLC specifies the extent to which such company may indemnify any member, manager, or other person.
California Corporation Registrant
Section 317 of the General Corporation Law of the State of California (which we refer to as the “CGCL”) allows a corporation, in certain circumstances, to indemnify its directors and officers against certain expenses (including attorneys’ fees and certain expenses of establishing a right to indemnification), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with threatened, pending or completed civil, criminal, administrative or investigative actions, suits or proceedings (other than an action by or in the right of the corporation), in which such persons were or are parties, or are threatened to be made parties, by reason of the fact that they were or are directors or officers of the corporation, if such persons acted in good faith and in a manner they reasonably believed to be in the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. In addition, a corporation is, in certain circumstances, permitted to indemnify its directors and officers against certain expenses incurred in connection with the defense or settlement of a threatened, pending or completed action by or in the right of the corporation, and against amounts paid in settlement of any such action, if such persons acted in good faith and in a manner they believed to be in the best interests of the corporation and its shareholders, provided that the specified court approval is obtained. Furthermore, a corporation may purchase and maintain insurance on behalf of any agent of the corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agent’s status as such, whether or not the corporation would have the power to indemnify the agent against such liability under California law.
Section 204(a)(10) of the CGCL allows a corporation to include a provision in its articles of incorporation eliminating or limiting the personal liability of a director for monetary damages in an action brought by or in the right of the corporation for breach of the director’s duties to the corporation and its shareholders, except for the liability of a director resulting from (i) acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) acts or omissions that a director believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence of good faith on the part of the director, (iii) any
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transaction from which a director derived an improper personal benefit, (iv) acts or omissions that show a reckless disregard for the director’s duty to the corporation or its shareholders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing his or her duties, of a risk of serious injury to the corporation or its shareholders, (v) acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director’s duty to the corporation or its shareholders, (vi) liability under California law relating to related party transactions, or (vii) the making of an illegal distribution or loan to shareholders.
Neither the Articles of Incorporation nor the Bylaws of BMC Realty Advisors, Inc specifies the extent to which it may indemnify any director, officer, or other person.
Colorado Limited Liability Company Registrants
Section 7-80-104(1)(k) of the Colorado Limited Liability Company Act permits a company to indemnify a member or manager or former member or manager of the limited liability company as provided in section 7-80-407. Under Section 7-80-407, a limited liability company shall reimburse a person who is or was a member or manager for payments made, and indemnify a person who is or was a member or manager for liabilities incurred by the person, in the ordinary course of the business of the limited liability company or for the preservation of its business or property, if such payments were made or liabilities incurred without violation of the person’s duties to the limited liability company.
Section 7-80-407 of the Colorado Limited Liability Company Act provides that a limited liability company shall reimburse a person who is or was a member or manager for payments made, and indemnify a person who is or was a person or manager for liabilities incurred by the person, in the ordinary course of business of the limited liability company or for the preservation of its business or property, if such payments were made or liabilities incurred without violation of the person’s duties to the limited liability company.
None of the Articles of Organization of, or Operating Agreements for, Augusta Pointe, LLC, Avalon at Inverness, LLC, AVR A, LLC, AVR B, LLC, AVR C, LLC, Beacon Pointe, LLC, Belvedere at Ridgegate, LLC, Blackstone Homes, LLC, Bluffmont Estates, LLC, Bradburn Village Homes, LLC, CC Communities, LLC, CCC Holdings, LLC, CCH Homes, LLC, Centennial Holding Company LLC, Central Park Rowhomes, LLC, Century at Anthology, LLC, Century at Ash Meadows, LLC, Century at Autumn Valley Ranch, LLC, Century at Beacon Pointe, LLC, Century at Belleview Place, LLC, Century at Caley, LLC, Century at Candelas, LLC, Century at Carousel Farms, LLC, Century at Castle Pines Town Center, LLC, Century at Claremont Ranch, LLC, Century at Colliers Hill, LLC, Century at Compark Village North, LLC, Century at Compark Village South LLC, Century at Coyote Creek, LLC, Century at Forest Meadows, LLC, Century at Harvest Meadows, LLC, Century at Landmark, LLC, Century at Littleton Village, LLC, Century at Littleton Village II, LLC, Century at LOR, LLC, Century at Lowry, LLC, Century at Marvella, LLC, Century at Mayfield, LLC, Century at Meadowbrook, LLC, Century at Midtown, LLC, Century at Millennium, LLC, Century at Murphy Creek, LLC, Century at Oak Street, LLC, Century at Observatory Heights, LLC, Century at Outlook, LLC, Century at Pearson Grove, LLC, Century at Salisbury Heights, LLC, Century at Shalom Park, LLC, Century at Southshore, LLC, Century at Spring Valley Ranch, LLC, Century at Sterling Ranch, LLC, Century at Tanglewood, LLC, Century at Terrain, LLC, Century at The Grove, LLC, Century at the Heights, LLC, Century at The Meadows, LLC, Century at Vista Ridge, LLC, Century at Wildgrass, LLC, Century at Wolf Ranch, LLC, Century at Wyndham Hill, LLC, Century City, LLC, Century Communities of Georgia, LLC, Century Communities Southeast, LLC, Century Group LLC, Century Land Holdings, LLC, Century Land Holdings II, LLC, Century Land Holdings of Texas, LLC, Century Townhomes at Candelas, LLC, Cherry Hill Park, LLC, Cottages at Willow Park, LLC, Crown Hill, LLC, Enclave at Boyd Ponds, LLC, Enclave at Cherry Creek, LLC, Enclave at Pine Grove, LLC, Estates at Chatfield Farms, LLC, Hearth at Oak Meadows, LLC, Highlands at Westbury, LLC, Hometown, LLC, Hometown South, LLC, Horizon Building Services, LLC, Ladera, LLC, Lakeview Fort Collins, LLC, Lincoln Park at Ridgegate, LLC, Madison Estates, LLC, Meridian Ranch, LLC, Montecito at Ridgegate, LLC, Park 5th Avenue Development Co., LLC, Parkwood Estates, LLC, Peninsula Villas, LLC, Preserve at Briargate, LLC, Red Rocks Pointe, LLC, Renaissance at Ridgegate, LLC, Reserve at Highpointe Estates, LLC, Reserve at The Meadows,
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LLC, Saddle Rock Golf, LLC, Saddleback Heights, LLC, SAH Holdings, LLC, Sawgrass at Plum Creek, LLC, Sawgrass at Plum Creek II, LLC, Stetson Ridge Homes, LLC, Stonybridge Villas, LLC, Summerlane Village, LLC, The Overlook at Tallyn’s Reach, LLC, The Retreat at Ridgegate, LLC, The Veranda, LLC, The Vistas at Nor’wood, LLC, The Wheatlands, LLC, Venue at Arista, LLC, Verona Estates, LLC, Villas at Highland Park, LLC, Villas at Murphy Creek, LLC, Waterside at Highland Park, LLC, Westown Condominiums, LLC, Westown Townhomes, LLC, and Wildgrass, LLC specifies the extent to which such company may indemnify any member, manager, or other person.
Georgia Limited Liability Company Registrants
Section 14-11-306 of the Georgia Limited Liability Company Act (which we refer to as the “GLLCA”) provides that a limited liability company may, and has the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever arising in connection with the limited liability company, subject to such standards and restrictions, if any, as set forth in the articles of organization or a written operating agreement. However, no limited liability company may indemnify any member or manager for (i) the liability of a member or manager for intentional misconduct or a knowing violation of law, or (ii) any transaction for which the person received a personal benefit in violation or breach of any provision of a written operating agreement.
Section 14-11-305 of the GLLCA provides that a member’s or manager’s duties and liabilities may be expanded, restricted, or eliminated by provisions in the articles of organization or a written operating agreement; provided, however, that no such provision shall eliminate or limit the liability of a member or manager (i) for intentional misconduct or a knowing violation of law, or (ii) for any transaction for which the person received a personal benefit in violation or breach of any provision of a written operating agreement.
Neither of the Articles of Organization of CCG Constructors LLC and CCG Realty Group LLC specifies the extent to which such company may indemnify any member, manager, or other person. Each of the Operating Agreements of CCG Constructors LLC and CCG Realty Group LLC provides that such company shall indemnify its member and manager for all costs, losses, liabilities, and damages paid or accrued by the member or manager in connection with the business of such company to the fullest extent provided for or allowed by the GLLCA.
Nevada Limited Liability Company Registrant
Section 86.371 of the Nevada Revised Statutes (which we refer to as the “NRS”) provides that unless otherwise provided in the articles of organization or an agreement signed by the member or manager to be charged, no member or manager of any limited liability company is individually liable for the debts or liabilities of the company.
Section 86.411 of the NRS provides that a limited liability company may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the company, by reason of the fact that the person is or was a manager, member, employee or agent of the company, or is or was serving at the request of the company as a manager, member, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorney’s fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit or proceeding if the person acted in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful.
Section 86.421 of the NRS provides that a limited liability company may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the company to procure a judgment in its favor by reason of the fact that the person is or was a manager,
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member, employee or agent of the company, or is or was serving at the request of the company as a manager, member, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by the person in connection with the defense or settlement of the action or suit if the person acted in good faith and in a manner in which he or she reasonably believed to be in or not opposed to the best interests of the company. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the company or for amounts paid in settlement to the company, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
Section 86.431 of the NRS provides that to the extent that a manager, member, employee or agent of a limited-liability company has been successful in defense of any action, suit or proceeding described in the preceding two paragraphs, or in defense of any claim, issue or matter therein, the company must indemnify such person against expenses, including attorney’s fees, actually and reasonably incurred by such person in connection with the defense. Any indemnification under the preceding two paragraphs, unless ordered by a court or advanced pursuant to the procedures of the paragraph below, may be made only as authorized in the specific case upon a valid determination that indemnification is proper in the circumstances.
Section 86.441 of the NRS states that the articles of organization, the operating agreement or a separate agreement may provide that the limited liability company must pay the expenses of members and managers incurred in defending a civil or criminal action, suit or proceeding, as they are incurred and in advance of the final disposition of the action, upon receipt of an undertaking by or on behalf of the manager or member to repay the amount if it is ultimately determined by a court of competent jurisdiction that the member or manager is not entitled to be indemnified.
Section 86.451 of the NRS provides that the indemnification or advancement of expenses discussed above (1) does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of organization or any operating agreement, vote of members or disinterested managers, if any, or otherwise, for an action in the person’s official capacity or an action in another capacity while holding office, except that indemnification, unless ordered by a court pursuant to Section 86.421 of the NRS or for the advancement of expenses made pursuant to Section 86.441 of the NRS, may not be made to or on behalf of any member or manager if a final adjudication establishes that the member’s or the manager’s acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action; and (2) continues for a person who has ceased to be a member, manager, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person.
Section 86.461 of the NRS permits a limited liability company to purchase and maintain insurance or make other financial arrangements on behalf of any current or former member, manager, employee or agent of the company, or any person who is or was serving at the request of the company as a manager, member, employee or agent of another corporation, limited-liability company, partnership, joint venture, trust or other enterprise, for any liability asserted against the person and liability and expenses incurred by the person in his or her capacity as a manager, member, employee or agent, or arising out of his or her status as such, whether or not the company has the authority to indemnify such a person against such liability and expenses.
Neither the Articles of Organization of, nor the Operating Agreement for, Century Communities of Nevada Realty, LLC specifies the extent to which it may indemnify any member, manager, or other person.
North Carolina Limited Liability Company Registrants
Section 57D-3-31 of the North Carolina Limited Liability Company Act provides that, with certain exceptions, (i) a limited liability company shall indemnify a person who is wholly successful on the merits or
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otherwise in the defense of any proceeding to which such person was a party because such person is or was a member, a manager, or other company official, if such person also is or was an interest owner at the time to which the claim relates, acting within such person’s scope of authority as a manager, member, or other company official against expenses incurred by such person in connection with the proceeding, and (ii) a limited liability company shall reimburse a person who is or was a member for any payment made and indemnify such person for any obligation, including any judgment, settlement, penalty, fine, or other cost, incurred or borne in the authorized conduct of the company’s business or preservation of the company’s business or property, whether acting in the capacity of a manager, member, or other company official.
None of the Articles of Organization of, or Operating Agreements for, CC Southeast Constructors, LLC and CCNC Realty Group, LLC specifies the extent to which it may indemnify any member, manager, or other person.
South Carolina Limited Liability Company Registrant
Section 33-44-403 of the South Carolina Uniform Limited Liability Company Act of 1996 provides that, except as otherwise provided in a limited liability company’s articles of organization, the debts, obligations, and liabilities of a limited liability company, whether arising in contract, tort, or otherwise, are solely the debts, obligations, and liabilities of such limited liability company, and a member or manager is not personally liable for a debt, obligation, or liability of such limited liability company solely by reason of being or acting as a member or manager.
Neither the Articles of Organization of, nor the Operating Agreement for, CCSC Realty Group, LLC specifies the extent to which it may indemnify any member, manager, or other person.
Utah Limited Liability Company Registrants
Section 408(2) of the Revised Uniform Limited Liability Company Act (which we refer to as the “RULLCA”), provides that a limited liability company must indemnify and hold harmless a person with respect to any claim or demand against the person and any debt, obligation, or other liability incurred by the person by reason of the person’s former or present capacity as a member or manager, if the claim, demand, debt, obligation, or other liability does not arise from the person’s: (i) improper distribution as further defined in Section 405 of the RULLCA; (ii) failure to comply with the management requirements for the limited liability company as further defined in Section 407 of the RULLCA; (iii) breach of the duties of loyalty and care to the limited liability company or its members; or (iv) failure to conduct any membership duties consistently with the operating agreement and in good faith and fair dealing.
Section 408(3) of the RULLCA provides that in the ordinary course of affairs, a limited liability company may reimburse a person made a party to a proceeding because that person is or was a manager for reasonable expenses, if that person promises to repay the limited liability company if the person ultimately is determined not to be entitled to indemnification.
Section 408(4) of the RULLCA provides that a limited liability company may purchase and maintain insurance on behalf of a member or manager of the limited liability company against liability asserted against or incurred by the member or manager in that capacity or arising from that status even if the operating agreement does not eliminate or limit that person’s liability to the limited liability company by reason of bad faith, willful misconduct, or recklessness.
None of the Certificates of Organization of Century Communities of Utah, LLC, Century Communities Realty of Utah, LLC, and Century Land Holdings of Utah, LLC specifies the extent to which such company may indemnify any member, manager, or other person. The Operating Agreement of Century Communities of Utah, LLC provides that it shall indemnify its member and manager to the fullest extent permitted by law. None of the Operating Agreements for Century Land Holdings of Utah, LLC and Century Communities Realty of Utah, LLC specifies the extent to which it may indemnify any member, manager, or other person.
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| Item 21. | Exhibits. |
A following is a list of exhibits filed with this registration statement on Form S-4.
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| * | Previously filed as part of |
| Item 22. | Undertakings. |
(a) The undersigned registrantregistrants (which we refer to as the “Registrant”“Registrants”) hereby undertake:
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the U.S. Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement. |
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
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| (4) | That, for the purpose of determining liability under the Securities Act of 1933, as amended, to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
| (5) | That, for the purpose of determining liability of the |
| (i) | Any preliminary prospectus or prospectus of the |
| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the |
| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the |
| (iv) | Any other communication that is an offer in the offering made by the |
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(b) The Registrants hereby undertake as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the Registrants undertake that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form.
(c) The Registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to this Registration Statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the RegistrantRegistrants pursuant to the foregoing provisions, or otherwise, the Registrant hasRegistrants have been advised that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the RegistrantRegistrants of expenses incurred or paid by a director, officer or controlling person of the RegistrantRegistrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
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controlling person in connection with the securities being registered, the RegistrantRegistrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(e) The Registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of this Registration Statement through the date of responding to the request.
(f) The Registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this Registration Statement when it became effective.
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Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on May 5, 2017.December 31, 2019.
| CENTURY COMMUNITIES, INC. | ||
| By: | /s/ Dale Francescon | |
Dale Francescon Chairman of the Board of Directors and Co-Chief Executive Officer | ||
| By: | /s/ Robert J. Francescon | |
Robert J. Francescon Co-Chief Executive Officer and President | ||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dale Francescon and Robert J. Francescon, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution for him in any and all capacities, to sign (i) any and all amendments (including post-effective amendments) to this Registration Statement and (ii) any registration statement or post-effective amendment thereto to be filed with the U.S. Securities and Exchange Commission pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Dale Francescon Dale Francescon | Chairman of the Board of Directors and Co-Chief Executive Officer (Co-Principal Executive Officer) | |||
/s/ Robert J. Francescon Robert J. Francescon | Co-Chief Executive Officer, President and Director (Co-Principal Executive Officer) | |||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer (Principal Financial Officer) | |||
/s/ J. Scott Dixon J. Scott Dixon | Chief Accounting Officer (Principal Accounting Officer) | |||
* James M. Lippman | Director | December 31, 2019 | ||
* Keith R. Guericke | Director | December 31, 2019 | ||
* John P. Box | Director | December 31, 2019 | ||
| * By: | /s/ Dale Francescon | |
| Dale Francescon, Attorney-In-Fact |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
| EACHOFTHECO-REGISTRANTSLISTEDON SCHEDULE ITOTHE SIGNATURE PAGES | ||||
| By: | Century Communities, Inc. its Manager and Sole Member | |||
| By: | /s/ Dale Francescon | |||
Dale Francescon Chairman of the Board of Directors and Co-Chief Executive Officer | ||||
| By: | /s/ Robert J. Francescon | |||
Robert J. Francescon Co-Chief Executive Officer and President | ||||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/
| Chairman of the Board of Directors and Co-Chief Executive Officer of Century Communities, Inc., as the Manager and Sole Member of the co-Registrant (Co-Principal Executive Officer) | |||
/s/
| Co-Chief Executive Officer, President and Director of Century Communities, Inc., as the Manager and Sole Member of the co-Registrant (Co-Principal Executive Officer) | |||
/s/ David L. Messenger | Chief Financial Officer of Century Communities, Inc., as the Manager and Sole Member of the co-Registrant (Principal Financial Officer) | December 31, 2019 | ||
/s/ J. Scott Dixon J. Scott Dixon | Chief Accounting Officer of Century Communities, Inc., as the Manager and Sole Member of the co-Registrant (Principal Accounting Officer) | December 31, 2019 | ||
* James M. Lippman | Director of Century Communities, Inc., as the Manager and Sole Member of the co-Registrant | December 31, 2019 | ||
Signature | Title | Date | ||
* Keith R. Guericke | Director of Century Communities, Inc., as the Manager and Sole Member of the co-Registrant | December 31, 2019 | ||
* John P. Box | Director of Century Communities, Inc., as the Manager and Sole Member of the co-Registrant | |||
EXHIBIT INDEX
| * By: |
| |
| Dale Francescon, Attorney-In-Fact |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
| EACHOFTHECO-REGISTRANTSLISTEDON SCHEDULE IITOTHE SIGNATURE PAGES | ||||
| By: | Century Communities, Inc.
| |||
| By: | /s/ Dale Francescon | |||
Dale Francescon Chairman of the Board of Directors and Co-Chief Executive Officer | ||||
| By: | /s/ Robert J. Francescon | |||
Robert J. Francescon Co-Chief Executive Officer and President | ||||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature |
| Date | ||
/s/ Dale Francescon Dale Francescon | Chairman of the Board of Directors and Co-Chief Executive Officer of Century Communities, Inc., as the Sole Managing Member of the co-Registrant (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ Robert J. Francescon Robert J. Francescon | Co-Chief Executive Officer, President and Director of Century Communities, Inc., as the Sole Managing Member of the co-Registrant (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer of Century Communities, Inc., as the Sole Managing Member of the co-Registrant (Principal Financial Officer) | December 31, 2019 | ||
/s/ J. Scott Dixon J. Scott Dixon | Chief Accounting Officer of Century Communities, Inc., as the Sole Managing Member of the co-Registrant (Principal Accounting Officer) | December 31, 2019 | ||
* James M. Lippman | Director of Century Communities, Inc., as the Sole Managing Member of the co-Registrant | December 31, 2019 | ||
Signature | Title | Date | ||
* Keith R. Guericke | Director of Century Communities, Inc., as the Sole Managing Member of the co-Registrant | December 31, 2019 | ||
* John P. Box | Director of Century Communities, Inc., as the Sole Managing Member of the co-Registrant | December 31, 2019 | ||
| * By: | /s/ Dale Francescon | |
| Dale Francescon, Attorney-In-Fact |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
| EACHOFTHECO-REGISTRANTSLISTEDON SCHEDULE IIITOTHE SIGNATURE PAGES | ||||||
| By: | Century Communities of Georgia, LLC, its Manager and Sole Member | |||||
| By: | Century Communities, Inc. | |||||
| its Manager and Sole Member | ||||||
| By: | /s/ Dale Francescon | |||||
Dale Francescon Chairman of the Board of Directors and Co-Chief Executive Officer | ||||||
| By: | /s/ Robert J. Francescon | |||||
Robert J. Francescon Co-Chief Executive Officer and President | ||||||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Dale Francescon Dale Francescon | Chairman of the Board of Directors and Co-Chief Executive Officer of Century Communities, Inc., as the Manager and Sole Member of Century Communities of Georgia, LLC, as the Manager and Sole Member of the co-Registrant (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ Robert J. Francescon Robert J. Francescon | Co-Chief Executive Officer, President and Director of Century Communities, Inc., as the Manager and Sole Member of Century Communities of Georgia, LLC, as the Manager and Sole Member of the co-Registrant (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer of Century Communities, Inc., as the Manager and Sole Member of Century Communities of Georgia, LLC, as the Manager and Sole Member of the co-Registrant (Principal Financial Officer) | December 31, 2019 | ||
Signature | Title | Date | ||
/s/ J. Scott Dixon J. Scott Dixon | Chief Accounting Officer of Century Communities, Inc., as the Manager and Sole Member of Century Communities of Georgia, LLC, as the Manager and Sole Member of the co-Registrant (Principal Accounting Officer) | December 31, 2019 | ||
* James M. Lippman | Director of Century Communities, Inc., as the Manager and Sole Member of Century Communities of Georgia, LLC, as the Manager and Sole Member of the co-Registrant | December 31, 2019 | ||
* Keith R. Guericke | Director of Century Communities, Inc., as the Manager and Sole Member of Century Communities of Georgia, LLC, as the Manager and Sole Member of the co-Registrant | December 31, 2019 | ||
* John P. Box | Director of Century Communities, Inc., as the Manager and Sole Member of Century Communities of Georgia, LLC, as the Manager and Sole Member of the co-Registrant | December 31, 2019 | ||
| * By: | /s/ Dale Francescon | |
| Dale Francescon, Attorney-In-Fact |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
| EACHOFTHECO-REGISTRANTSLISTEDON SCHEDULE IVTOTHE SIGNATURE PAGES | ||||||
| By: | Century Communities of Nevada, LLC, its Sole Managing Member | |||||
| By: | Century Communities, Inc. | |||||
| its Sole Managing Member | ||||||
| By: | /s/ Dale Francescon | |||||
Dale Francescon Chairman of the Board of Directors and Co-Chief Executive Officer | ||||||
| By: | /s/ Robert J. Francescon | |||||
Robert J. Francescon Co-Chief Executive Officer and President | ||||||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Dale Francescon Dale Francescon | Chairman of the Board of Directors and Co-Chief Executive Officer of Century Communities, Inc., as the Sole Managing Member of Century Communities of Nevada, LLC, as the Sole Managing Member of the co-Registrant (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ Robert J. Francescon Robert J. Francescon | Co-Chief Executive Officer, President and Director of Century Communities, Inc., as the Sole Managing Member of Century Communities of Nevada, LLC, as the Sole Managing Member of the co-Registrant (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer of Century Communities, Inc., as the Sole Managing Member of Century Communities of Nevada, LLC, as the Sole Managing Member of the co-Registrant (Principal Financial Officer) | December 31, 2019 | ||
Signature | Title | Date | ||
/s/ J. Scott Dixon J. Scott Dixon | Chief Accounting Officer of Century Communities, Inc., as the Sole Managing Member of Century Communities of Nevada, LLC, as the Sole Managing Member of the co-Registrant (Principal Accounting Officer) | December 31, 2019 | ||
* James M. Lippman | Director of Century Communities, Inc., as the Sole Managing Member of Century Communities of Nevada, LLC, as the Sole Managing Member of the co-Registrant | December 31, 2019 | ||
* Keith R. Guericke | Director of Century Communities, Inc., as the Sole Managing Member of Century Communities of Nevada, LLC, as the Sole Managing Member of the co-Registrant | December 31, 2019 | ||
* John P. Box | Director of Century Communities, Inc., as the Sole Managing Member of Century Communities of Nevada, LLC, as the Sole Managing Member of the co-Registrant | December 31, 2019 | ||
| * By: | /s/ Dale Francescon | |
| Dale Francescon, Attorney-In-Fact |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
| CENTURY LAND HOLDINGS, LLC | ||||||
| By: | CCC Holdings, LLC | |||||
| its Manager | ||||||
| By: | Century Communities, Inc. | |||||
| its Manager and Sole Member | ||||||
| By: | /s/ Dale Francescon | |||||
Dale Francescon Chairman of the Board of Directors and Co-Chief Executive Officer | ||||||
| By: | /s/ Robert J. Francescon | |||||
Robert J. Francescon Co-Chief Executive Officer and President | ||||||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Dale Francescon Dale Francescon | Chairman of the Board of Directors and Co-Chief Executive Officer of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of the co-Registrant (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ Robert J. Francescon Robert J. Francescon | Co-Chief Executive Officer, President and Director of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of the co-Registrant (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of the co-Registrant (Principal Financial Officer) | December 31, 2019 | ||
/s/ J. Scott Dixon J. Scott Dixon | Chief Accounting Officer of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of the co-Registrant (Principal Accounting Officer) | December 31, 2019 | ||
Signature | Title | Date | ||
* James M. Lippman | Director of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of the co-Registrant | December 31, 2019 | ||
* Keith R. Guericke | Director of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of the co-Registrant | December 31, 2019 | ||
* John P. Box | Director of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of the co-Registrant | December 31, 2019 | ||
| * By: | /s/ Dale Francescon | |
| Dale Francescon, Attorney-In-Fact |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
EACHOFTHECO-REGISTRANTSLISTEDON SCHEDULE VTOTHE SIGNATURE PAGES | ||||||||
| its Managing Member | ||||||||
| CCC Holdings, LLC | ||||||||
| its Manager | ||||||||
| By: | Century Communities, Inc. | |||||||
| its Manager and Sole Member | ||||||||
| By: | /s/ Dale Francescon | |||||||
Dale Francescon Chairman of | ||||||||
| By: | /s/ Robert J. Francescon | |||||||
Robert J. Francescon Co-Chief Executive Officer and President | ||||||||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Dale Francescon Dale Francescon | Chairman of the Board of Directors and Co-Chief Executive Officer of Century Communities, Inc., as (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ Robert J. Francescon Robert J. Francescon | Co-Chief Executive Officer, President and Director of Century Communities, Inc. (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of Century Land Holdings, LLC, as the Managing Member of the co-Registrant (Principal Financial Officer) | December 31, 2019 | ||
Signature | Title | Date | ||
/s/ J. Scott Dixon J. Scott Dixon | Chief Accounting Officer of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of Century Land Holdings, LLC, as the Managing Member of the co-Registrant (Principal Accounting Officer) | December 31, 2019 | ||
* James M. Lippman | Director of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of Century Land Holdings, LLC, as the Managing Member of the co-Registrant | December 31, 2019 | ||
* Keith R. Guericke | Director of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of Century Land Holdings, LLC, as the Managing Member of the co-Registrant | December 31, 2019 | ||
* John P. Box | Director of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of Century Land Holdings, LLC, as the Managing Member of the co-Registrant | December 31, 2019 | ||
| * By: | /s/ Dale Francescon | |
| Dale Francescon, Attorney-In-Fact |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
| EACHOFTHECO-REGISTRANTSLISTEDON SCHEDULE VITOTHE SIGNATURE PAGES | ||||||||||
By: | Horizon Building Services, LLC, its Manager | |||||||||
| By: | Century Land Holdings, LLC its Managing Member | |||||||||
| By: | CCC Holdings, LLC its Manager | |||||||||
| By: | Century Communities, Inc. its Manager and Sole Member | |||||||||
| By: | /s/ Dale Francescon | |||||||||
Dale Francescon Chairman of the Board of Directors and Co-Chief Executive Officer | ||||||||||
| By: | /s/ Robert J. Francescon | |||||||||
Robert J. Francescon Co-Chief Executive Officer and President | ||||||||||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Dale Francescon Dale Francescon | Chairman of the Board of Directors and Co-Chief Executive Officer of Century Communities, Inc. (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ Robert J. Francescon Robert J. Francescon | Co-Chief Executive Officer, President and Director of Century Communities, Inc. (Co-Principal Executive Officer) | December 31, 2019 | ||
Signature | Title | Date | ||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of Century Land Holdings, LLC, as the Managing Member of Horizon Building Services, LLC, as the Manager of the co-Registrant (Principal Financial Officer) | December 31, 2019 | ||
/s/ J. Scott Dixon J. Scott Dixon | Chief Accounting Officer of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of Century Land Holdings, LLC, as the Managing Member of Horizon Building Services, LLC, as the Manager of the co-Registrant (Principal Accounting Officer) | December 31, 2019 | ||
* James M. Lippman | Director of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of Century Land Holdings, LLC, as the Managing Member of Horizon Building Services, LLC, as the Manager of the co-Registrant | December 31, 2019 | ||
* Keith R. Guericke | Director of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of Century Land Holdings, LLC, as the Managing Member of Horizon Building Services, LLC, as the Manager of the co-Registrant | December 31, 2019 | ||
* John P. Box | Director of Century Communities, Inc., as the Manager and Sole Member of CCC Holdings, LLC, as the Manager of Century Land Holdings, LLC, as the Managing Member of Horizon Building Services, LLC, as the Manager of the co-Registrant | December 31, 2019 | ||
| * By: | /s/ Dale Francescon | |
| Dale Francescon, Attorney-In-Fact |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
| BMC REALTY ADVISORS, INC | ||
/s/ David L. Messenger | ||
David L. Messenger Chief Financial Officer | ||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 Registration Statement has been signed by the following person in the capacity and on the date indicated.
Signature | Title | Date | ||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer and (Principal Executive Officer and Principal Financial and Accounting Officer) | December 31, 2019 | ||
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
CASA ACQUISITION CORP. | ||
By: | /s/ Robert J. Francescon | |
Robert J. Francescon Chief Executive Officer | ||
By: | /s/ Dale Francescon | |
Dale Francescon President | ||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Robert J. Francescon Robert J. Francescon | Chief Executive Officer and Director (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ Dale Francescon Dale Francescon | President and Director (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer, Secretary and Director (Principal Financial and Accounting Officer) | December 31, 2019 | ||
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
| UCP, LLC | ||||
Casa Acquisition Corp. its sole Member | ||||
| By: | /s/ Robert J. Francescon | |||
Robert J. Francescon Chief Executive Officer | ||||
| By: | /s/ Dale Francescon | |||
Dale Francescon President | ||||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Robert J. Francescon Robert J. Francescon | Chief Executive Officer and Director of (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ Dale Francescon Dale Francescon | President and Director of Casa Acquisition Corp., as the sole Member of the co-Registrant (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer, Secretary and Director of Casa Acquisition Corp., as the sole Member of the co-Registrant (Principal Financial and Accounting Officer) | December 31, 2019 | ||
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
UCP KERMAN, LLC | ||||||
By: | ||||||
| its sole Managing Member | ||||||
| By: | Casa Acquisition Corp. | |||||
| its sole Member | ||||||
| By: | /s/ Robert J. Francescon | |||||
Robert J. Francescon Chief Executive Officer | ||||||
| By: | /s/ Dale Francescon | |||||
Dale Francescon President | ||||||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Robert J. Francescon Robert J. Francescon | Chief Executive Officer and (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ Dale Francescon Dale Francescon | President and (Co-Principal Executive Officer) | December 31, 2019 | ||
/s/ David L. Messenger David L. Messenger | Chief Financial Officer, Secretary and Director of Casa Acquisition Corp., as the sole Member of UCP, LLC, as the sole Member of the co-Registrant (Principal Financial and Accounting Officer) | December 31, 2019 | ||
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the co-Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Greenwood Village, State of Colorado, on December 31, 2019.
| EACHOFTHECO-REGISTRANTSLISTEDON SCHEDULE VIITOTHE SIGNATURE PAGES | ||
/s/ David L. Messenger | ||
David L. Messenger Sole Manager | ||
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following person in the capacity and on the date indicated.
Signature | Title | Date | ||
/s/ David L. Messenger David L. Messenger | ||||
Chief Financial Officer and Sole Manager (Principal Executive Officer and Principal Financial and Accounting Officer) | December 31, 2019 | |||
Schedule I—co-Registrants:
CCC HOLDINGS, LLC | ||
CENTURY COMMUNITIESOF GEORGIA, LLC |
CENTURY COMMUNITIESOF UTAH, LLC |
| • | CENTURY COMMUNITIES REALTYOF UTAH, LLC |
| • | CENTURY COMMUNITIES SOUTHEAST, LLC |
| • | CENTURY GROUP LLC |
| • | HOMETOWN SOUTH, LLC |
| • | WESTOWN CONDOMINIUMS, LLC |
| • | WESTOWN TOWNHOMES, LLC |
WJH LLC
Schedule II—co-Registrants:
| • | CC SOUTHEAST CONSTRUCTORS, LLC |
| • | CCNC REALTY GROUP, LLC |
| • | CCSC REALTY GROUP, LLC |
| • | CENTURY COMMUNITIESOF CALIFORNIA, LLC |
| • | CENTURY COMMUNITIESOF NEVADA, LLC |
| • | CENTURY COMMUNITIESOF NORTH CAROLINA, LLC |
| • | CENTURY COMMUNITIESOF SOUTH CAROLINA, LLC |
| • | CENTURY COMMUNITIESOF TENNESSEE, LLC |
| • | CENTURY LAND HOLDINGSOF TEXAS, LLC |
| • | CENTURY LAND HOLDINGSOF UTAH, LLC |
| • | CENTURY COMMUNITIESOF WASHINGTON, LLC |
| • | PARK 5TH AVENUE DEVELOPMENT CO., LLC |
| • | CENTENNIAL HOLDING COMPANY LLC |
Schedule III—co-Registrants:
| • | CCG CONSTRUCTORS LLC |
| • | CCG REALTY GROUP LLC |
Schedule IV—co-Registrants:
| • | CENTURY COMMUNITIESOF NEVADA REALTY, LLC |
| • | CENTURY RHODES RANCH GC, LLC |
| • | CENTURY TUSCANY GC, LLC |
| • | NEIGHBORHOOD ASSOCIATIONSGROUP, LLC |
Schedule V—co-Registrants:
| • | CC COMMUNITIES, LLC |
| • | HORIZON BUILDING SERVICES, LLC |
Schedule VI—co-Registrants:
| • | AUGUSTA POINTE, LLC |
| • | AVALONAT INVERNESS, LLC |
| • | BEACON POINTE, LLC |
| • | BELVEDEREAT RIDGEGATE, LLC |
| • | BLACKSTONE HOMES, LLC |
| • | BLUFFMONT ESTATES, LLC |
| • | BRADBURN VILLAGE HOMES, LLC |
| • | CCH HOMES, LLC |
| • | CENTRAL PARK ROWHOMES, LLC |
| • | CENTURYAT ANTHOLOGY, LLC |
| • | CENTURYAT ASH MEADOWS, LLC |
| • | CENTURYAT AUTUMN VALLEY RANCH, LLC |
| • | CENTURYAT BEACON POINTE, LLC |
| • | CENTURYAT BELLEVIEW PLACE, LLC |
| • | CENTURYAT CALEY, LLC |
| • | CENTURYAT CANDELAS, LLC |
| • | CENTURYAT CAROUSEL FARMS, LLC |
| • | CENTURYAT CASTLE PINES TOWN CENTER, LLC |
| • | CENTURYAT CLAREMONT RANCH, LLC |
| • | CENTURYAT COLLIERS HILL, LLC |
| • | CENTURYAT COMPARK VILLAGE NORTH, LLC |
| • | CENTURYAT COMPARK VILLAGE SOUTH, LLC |
| • | CENTURYAT COYOTE CREEK, LLC |
| • | CENTURYAT FOREST MEADOWS, LLC |
| • | CENTURYAT HARVEST MEADOWS, LLC |
| • | CENTURYAT LANDMARK, LLC |
| • | CENTURYAT LITTLETON VILLAGE, LLC |
| • | CENTURYAT LITTLETON VILLAGE II, LLC |
| • | CENTURYAT LOR, LLC |
| • | CENTURYAT LOWRY, LLC |
| • | CENTURYAT MARVELLA, LLC |
| • | CENTURYAT MAYFIELD, LLC |
| • | CENTURYAT MEADOWBROOK, LLC |
| • | CENTURYAT MIDTOWN, LLC |
| • | CENTURYAT MILLENNIUM, LLC |
| • | CENTURYAT MURPHY CREEK, LLC |
| • | CENTURYAT OAK STREET, LLC |
| • | CENTURYAT OBSERVATORY HEIGHTS, LLC |
| • | CENTURYAT OUTLOOK, LLC |
| • | CENTURYAT PEARSON GROVE, LLC |
| • | CENTURYAT SALISBURY HEIGHTS, LLC |
| • | CENTURYAT SHALOM PARK, LLC |
| • | CENTURYAT SOUTHSHORE, LLC |
| • | CENTURYAT SPRING VALLEY RANCH, LLC |
| • | CENTURYAT STERLING RANCH, LLC |
| • | CENTURYAT TANGLEWOOD, LLC |
| • | CENTURYAT TERRAIN, LLC |
| • | CENTURYAT THE GROVE, LLC |
| • | CENTURYAT THE HEIGHTS, LLC |
| • | CENTURYAT THE MEADOWS, LLC |
| • | CENTURYAT VISTA RIDGE, LLC |
| • | CENTURYAT WILDGRASS, LLC |
| • | CENTURYAT WOLF RANCH, LLC |
| • | CENTURYAT WYNDHAM HILL, LLC |
| • | CENTURY CITY, LLC |
| • | CENTURY LAND HOLDINGS II, LLC |
| • | CENTURY TOWNHOMESAT CANDELAS, LLC |
| • | CHERRY HILL PARK, LLC |
| • | COTTAGESAT WILLOW PARK, LLC |
| • | CROWN HILL, LLC |
| • | ENCLAVEAT BOYD PONDS, LLC |
| • | ENCLAVEAT CHERRY CREEK, LLC |
| • | ENCLAVEAT PINE GROVE, LLC |
| • | ESTATESAT CHATFIELD FARMS, LLC |
| • | HEARTHAT OAK MEADOWS, LLC |
| • | HIGHLANDSAT WESTBURY, LLC |
| • | HOMETOWN, LLC |
| • | LADERA, LLC |
| • | LAKEVIEW FORT COLLINS, LLC |
| • | LINCOLN PARKAT RIDGEGATE, LLC |
| • | MADISON ESTATES, LLC |
| • | MERIDIAN RANCH, LLC |
| • | MONTECITOAT RIDGEGATE, LLC |
| • | PARKWOOD ESTATES, LLC |
| • | PENINSULA VILLAS, LLC |
| • | PRESERVEAT BRIARGATE, LLC |
| • | RED ROCKS POINTE, LLC |
| • | RENAISSANCEAT RIDGEGATE, LLC |
| • | RESERVEAT HIGHPOINTE ESTATES, LLC |
| • | RESERVEAT THE MEADOWS, LLC |
| • | SADDLE ROCK GOLF, LLC |
| • | SADDLEBACK HEIGHTS, LLC |
| • | SAH HOLDINGS, LLC |
| • | SAWGRASSAT PLUM CREEK, LLC |
| • | SAWGRASSAT PLUM CREEK II, LLC |
| • | STETSON RIDGE HOMES, LLC |
| • | STONYBRIDGE VILLAS, LLC |
| • | SUMMERLANE VILLAGE, LLC |
| • | THE OVERLOOKAT TALLYN’S REACH, LLC |
| • | THE RETREATAT RIDGEGATE, LLC |
| • | THE VERANDA, LLC |
| • | THE VISTASAT NOR’WOOD, LLC |
| • | THE WHEATLANDS, LLC |
| • | VENUEAT ARISTA, LLC |
| • | VERONA ESTATES, LLC |
| • | VILLAS AT HIGHLAND PARK, LLC |
| • | VILLASAT MURPHY CREEK, LLC |
| • | WATERSIDEAT HIGHLAND PARK, LLC |
| • | WILDGRASS, LLC |
Schedule VII—co-Registrants:
| • | BENCHMARK COMMUNITIES, LLC |
| • | BMC EAST GARRISON, LLC |
| • | BMC EG BLUFFS, LLC |
| • | BMC EG BUNGALOW, LLC |
| • | BMC EG GARDEN, LLC |
| • | BMC EG GROVE, LLC |
| • | BMC EG TOWNS, LLC |
| • | BMC EG VILLAGE, LLC |
| • | BMC MEADOWOOD II, LLC |
| • | BMC RED HAWK, LLC |
| • | BMC TOUCHSTONE, LLC |
| • | BMCH CALIFORNIA, LLC |
| • | BMCH NORTH CAROLINA, LLC |
| • | BMCH TENNESSEE, LLC |
| • | BMCH WASHINGTON, LLC |
| • | UCP BARCLAY III, LLC |
| • | UCP EAST GARRISON, LLC |
| • | UCP MEADOWOOD III, LLC |
| • | UCP SAGEWOOD, LLC |
| • | UCP SOLEDAD, LLC |
| • | UCP TAPESTRY, LLC |