Item 1.01
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Entry into a Material Definitive Agreement.
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Agreement and Plan of Merger
On April 10, 2017, UCP, Inc., a Delaware corporation (the
Company
), Century Communities, Inc., a Delaware
corporation (
Parent
), and Casa Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent (
Merger Sub
), entered into an Agreement and Plan of Merger (the
Merger
Agreement
), pursuant to which the Company will be merged with and into Merger Sub (the
Merger
), with Merger Sub continuing as the surviving entity in the Merger. The Board of Directors of the Company (the
Board
) has
unanimously
approved and declared advisable the Merger Agreement and the transactions contemplated thereby and resolved to recommend that the stockholders of the Company vote to adopt the Merger
Agreement and approve the Merger.
Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the
Merger (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
) (excluding any shares
(i) owned by the Company, Parent, Merger Sub or any of their respective wholly-owned subsidiaries or (ii) held by any stockholder who properly demands and perfects his, her or its appraisal rights with respect to such shares) will 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
share of common stock, par value $0.01 per share, of Parent (
Parent Common Stock
) (the
Stock Consideration
and, together with the Cash Consideration, the
Merger
Consideration
). No fractional shares of Parent Common Stock will be issued in the Merger, and Company stockholders will receive cash in lieu of any fractional shares.
The Merger Agreement provides that, at the Effective Time, each option to purchase shares of Company Common Stock (a
Company
Option
) will be converted into an option (an
Adjusted Option
) to purchase shares of Parent Common Stock on the same terms and conditions (including vesting terms, conditions and schedules), with the number of
such shares of Parent Common Stock equal to the product of (i) the total number of shares of Company Common Stock underlying such Company Option, multiplied by (ii) the Equity Award Exchange Ratio (as defined in the Merger Agreement and
below), and with the exercise price of such Adjusted Option equal to the quotient obtained by dividing (i) the exercise price per share applicable to such Company Option, by (ii) the Equity Award Exchange Ratio. Additionally, at the
Effective Time, each restricted stock unit with respect to a share of Company Common Stock (a
Company Restricted Stock Unit
) will be converted into a restricted stock unit with respect to a share of Parent Common Stock on
the same terms and conditions (including vesting terms, conditions and schedules), and relating to a 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, multiplied by (ii) the Equity Award Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares of Parent Common Stock. As defined in the Merger Agreement, the term
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 average closing sale price of a share of Parent Common Stock
as reported on the New York Stock Exchange (the
NYSE
) for the five consecutive trading days ending on and including the second complete trading day immediately preceding the closing of the Merger, rounded to the nearest
ten-thousandth.
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The Company and Parent will jointly prepare, and Parent will file with the U.S. Securities and
Exchange Commission (the
SEC
), a registration statement on Form
S-4
(the
Form
S-4
) in connection with the issuance of
shares of Parent Common Stock in the Merger, which will include as a prospectus a proxy statement relating to the meeting of the Companys stockholders to be held to vote on the adoption of the Merger Agreement and approval of the Merger.
The completion of the Merger is subject to the satisfaction or waiver of certain customary conditions, including (i) the adoption of the
Agreement by the Companys stockholders, (ii) the absence of any law or order prohibiting the Merger, (iii) the effectiveness of the Form
S-4
and the approval for listing on the NYSE of the
Parent Common Stock to be issued pursuant to the Merger, (iv) the receipt of certain tax opinions, (v) the absence of a material adverse effect on the Company or Parent and (vi) certain other customary conditions relating to the
parties representations and warranties in the Merger Agreement and the performance of their respective obligations. The Merger is further subject to the consummation of the exchange (the
Exchange
) immediately prior to
the Effective Time by PICO Holdings, Inc., a California corporation and the Companys majority stockholder (
PICO
), of all of its Series A Units of UCP, LLC, a Delaware limited liability company and subsidiary of the
Company (
UCP LLC
), for shares of Company Common Stock pursuant to and in accordance with the terms of the Exchange Agreement, dated as of July 23, 2013 (the
Exchange Agreement
), by and among
the Company, UCP LLC and PICO, with UCP LLC thereafter becoming a wholly-owned subsidiary of the Company. The Merger is not subject to approval by the stockholders of Parent or to any financing condition, and Parent represents and warrants in the
Merger Agreement that it has cash on hand and available borrowing capacity sufficient in the aggregate to fund all of its payment obligations under the Merger Agreement and in connection with the transactions contemplated thereby, including the
Merger.
The Merger Agreement contains customary representations and warranties made by each of the Company and Parent, and also contains
customary
pre-closing
covenants, including covenants, among others, (i) by the Company to operate its businesses in the ordinary course consistent with past practice and to refrain from taking certain
actions without Parents consent, (ii) by the Company not to solicit, initiate, or knowingly encourage or facilitate and, subject to certain exceptions, not to participate in any discussions or negotiations with, or otherwise knowingly
cooperate with, assist, or participate in any effort by, any person (other than Parent and Merger Sub) regarding any proposal of an alternative transaction, (iii) by the Company to call and hold a special stockholders meeting and, subject to
certain exceptions, require the Board to recommend to the Companys stockholders that they vote in favor of the adoption of the Merger Agreement and approval of the Merger and (iv) by each of Parent, Merger Sub and the Company to use all
reasonable efforts to obtain governmental, regulatory and third party approvals.
The Merger Agreement contains certain termination rights
for each of the Company and Parent, including in the event that (i) the parties mutually agree to termination, (ii) the Merger is not consummated on or before October 15, 2017 (the
Outside Date
), (iii) any
law or order permanently prohibits consummation of the Merger, (iv) any condition to the obligation of either
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party to consummate the Merger becomes incapable of satisfaction before the Outside Date, (v) the requisite approval of the Companys stockholders is not obtained, (vi) either
party is in breach of its respective representations and warranties or covenants under the Merger Agreement such that a closing condition is not satisfied (subject to notice and cure and other customary exceptions), (vii) the Board changes its
recommendation to the Companys stockholders or (viii) the Company enters into an agreement providing for a superior alternative transaction.
Upon termination of the Merger Agreement under specified circumstances, including a change in the recommendation of the Board or a termination
of the Merger Agreement by the Company to enter into an agreement providing for a superior alternative transaction, the Company will be required to pay Parent a termination fee equal to $7,050,000 in cash.
The foregoing description of the Merger Agreement is only a summary, does not purport to be complete and is qualified in its entirety by
reference to the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and incorporated herein by reference. The Merger Agreement has been attached to provide investors with information regarding its terms. It is not
intended to provide any other factual information about the Company or Parent. In particular, the assertions embodied in the representations and warranties contained in the Merger Agreement are qualified by information in confidential disclosure
schedules provided by each of the Company and Parent in connection with the signing of the Merger Agreement. These confidential disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and
warranties and certain covenants set forth in the Merger Agreement. Moreover, certain representations and warranties in the Merger Agreement were used for the purpose of allocating risk between the Company and Parent rather than establishing matters
as facts. Accordingly, the representations and warranties in the Merger Agreement should not be relied upon as characterizations of the actual state of facts about the Company or Parent.
Voting Agreement
Concurrently
with the execution and delivery of the Merger Agreement, on April 10, 2017, Parent, Merger Sub, PICO, the Company and UCP LLC entered into a voting support and transfer restriction agreement (the
Voting Agreement
).
Pursuant to the terms of the Voting Agreement, PICO agreed, among other things, to vote all outstanding shares of Company Common Stock and Class B common stock, par value $0.01 per share, of the Company currently held or thereafter acquired by
PICO (the
PICO Shares
) in favor of the adoption of the Merger Agreement and against any proposal by third parties to acquire the Company, and to take certain other actions in furtherance of the transactions contemplated by
the Merger Agreement, including the Exchange, in each case subject to the limitations set forth in the Voting Agreement. Among other such limitations, PICOs obligation to vote in favor of the adoption of the Merger Agreement will be reduced to
such number of PICO Shares as is equal to 28% of the aggregate outstanding voting power of the Company if the Board changes its recommendation in respect of an Intervening Event (as defined in the Merger Agreement), and the Voting Agreement
automatically terminates if the Merger Agreement is terminated (including if the Company terminates the Merger Agreement to accept a superior proposal).
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Subject to certain exceptions, the Voting Agreement prohibits transfers by PICO of any of the
PICO Shares and certain other actions that would impair the ability of PICO to fulfill its obligations under the Voting Agreement. The Voting Agreement also contains
non-solicitation
covenants with respect to
alternative transactions generally similar to those contained in the Merger Agreement with respect to the Company, including similar exceptions to those covenants permitting PICO to take any action, including holding discussions with third parties
in respect of potential alternative transactions, concurrently taken by the Company and the Board under the circumstances in which the Company is permitted to take such actions under the Merger Agreement.
Parent and PICO also agreed in the Voting Agreement to certain post-closing covenants if the Merger is consummated, including with respect to
PICOs ability to transfer the shares of Parent Common Stock it receives as Stock Consideration in the Merger or to acquire addition shares of Parent Common Stock and with respect to certain tax matters under UCP LLCs operating agreement
relating to time periods prior to the consummation of the Exchange.
Under the Voting Agreement, each of PICO, the Company and UCP LLC, as
applicable, irrevocably agreed to terminate (without any payments from, or any cost or expense to, the Company, Parent or Merger Sub) the following agreements, 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.
The
Voting Agreement will terminate automatically on the first to occur of (i) the termination of the Merger Agreement and (ii) the Effective Time.
The foregoing description of the Voting Agreement is only a summary, does not purport to be complete and is qualified in its entirety by
reference to the full text of the Voting Agreement, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Agreement
to Exchange
Concurrently with the execution and delivery of the Merger Agreement, on April 10, 2017, the Company, UCP LLC and
PICO entered into an agreement to exchange (the
Agreement to Exchange
), pursuant to which PICO exercised its right under the Exchange Agreement to effect the Exchange. Under the Agreement to Exchange, the Exchange will
occur immediately prior to, and remain subject to the consummation immediately thereafter of, the Merger.
The foregoing description of
the Agreement to Exchange is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement to Exchange, which is attached hereto as Exhibit 10.2 and incorporated herein by reference.
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